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TMI Blog2021 (10) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the AO u/s. 153A/143(3) dated 29.03.2016 is neither erroneous nor prejudicial to the interest of the revenue and therefore, Ld. Pr. CIT erred in exercising his revisional jurisdiction u/s. 263 and therefore, we are of the view that he invoked revisional jurisdiction without satisfying the essential pre-condition as stipulated in sec. 263 - Decided in favour of assessee. - I.T.A. No. 140/Kol/2021 - - - Dated:- 30-9-2021 - Shri P. M. Jagtap, Vice President (KZ) And Shri A. T. Varkey, Judicial Member For the Appellant : Shri S. K. Tulsiyan, Adovate, Smt. Puja Somani, CA For the Respondent : Shri Devi Sharan Singh, CIT ORDER PER SHRI A. T. VARKEY, JM: This is an appeal filed by the Assessee company against the order of Ld. PCIT, Central-1, Kolkata dated 25.03.2021 passed u/s 263 of Income Tax Act, 1961 ( hereinafter referred to as the Act) for Assessment year 2014-15. 2. At the outset, the Ld. A.R. of the assessee Shri S.K. Tulsiyan, Advocate submitted that he is assailing the decision of the Ld. PCIT-1, Kolkata to have invoked the revisional jurisdiction u/s 263 of the Act without satisfying the condition precedent as prescribed by the Statute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear because on the date of search [8th November, 2016], this assessment year was not pending before the AO; and therefore in the absence of any incriminating material unearthed during search qua the assessee qua the assessment year under consideration, as per the settled position of law, no addition/disallowance was legally permissible and so, the action of AO in not making any addition in this assessment year, cannot be held to be erroneous and therefore the Ld PCIT s impugned action of invoking jurisdiction u/s 263 of the Act, was without jurisdiction. 5. Accordingly to Ld. A.R Shri S.K. Tulsiyan the AO rightly did not make any addition in the light of the well settled position of law that in proceeding under section 153A of the Act, in an unabated assessment, the AO can make the addition/disallowance only on the strength /aid of incriminating material seized during search proceedings as held by the Hon ble Delhi High Court in the case of CIT vs.. Kabul Chawla reported in 380 ITR 573 (Del) which decision has not been disturbed by the Hon ble Supreme Court and the SLP preferred by the revenue has been dismissed. Therefore according to Ld. A.R, when the AO could not have mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia) vs. ACIT reported in 259 CTR 281 (Raj) and the decision of Hon ble Kerala High Court in the case of CIT vs. Paul John, Delicious Cashew Co. reported in 200 Taxman 154 (Ker) and the decision of the Hon ble Delhi High Court in CIT vs. Software Consultants, reported in 341 ITR 240 (Del). Thus according to Ld AR, when the AO has taken the same view which were up-held by the aforesaid binding judicial precedents, the Ld. PCIT could not have invoked his revisional jurisdiction without validly holding that the AO s order as erroneous as well as prejudicial to the revenue. And according to him, even if the Ld. PCIT had different view he could not have exercised his revisional jurisdiction unless he could hold on the facts of the case that the AO s order is unsustainable in law . Therefore, according to Ld AR, since the Ld. PCIT could not hold so in the impugned order, he could not have exercised the revisional jurisdiction and therefore the impugned order passed by the Ld. PCIT is without jurisdiction and therefore need to be quashed. 6. Per contra, the Ld. CITDR Devi Saran Singh vehemently opposed the plea of the Ld. A.R and submitted that the statute does not impose such conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as that of an adjudicator ] then in aforesaid any event, the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. prejudicial to the interest of the revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e indirectly, what the AO could not do directly in an assessment order framed u/s 153A of the Act. However, the Ld. PCIT not satisfied with the contention of the assessee, went ahead and was pleased to set aside the order of the AO passed u/s 153A/143(3) dated 29.6.2018 and directed the AO to frame fresh assessment after giving opportunity of hearing to the assessee. This impugned action of Ld PCIT is under challenge before us on the legal issue that Ld PCIT without making out a valid ground that AO s order framed u/s 143A/143(3) of the Act dated 29.6.2018, was erroneous as well as prejudicial to the Revenue, could not have invoked revisional jurisdiction u/s 263 of the Act, and therefore his action is abinitio void. 9. We note that the search was conducted on the assessee on 8th November, 2016. It is an admitted facts that the original scrutiny assessment in respect of assessee for AY 2014-15 was framed on 3rdSeptember, 2016, which means the assessment in respect of the assessee for AY 2014-15 was not pending before the AO on the date of search (8th November, 2016). The settled position of law is that when an assessment pertaining to an assessment year which falls in the ken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the Assessing Officer which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material. Obviously, an assessment has to be made under this section only on the basis of the seized material. (v) In the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word assess in section 153A is relatable to abated proceedings (i.e., those pending on the date of search) and the word reassess to the completed assessment proceedings. (vi) In so far as the pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under section 153A merges into one. Only one assessment shall be made separately for each assessment year on the basis of the findings of the search and any other material existing or brought on the record of the Assessing Officer. (vii) Completed assessments can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he A.O. to disallow and to bring to tax expenditure wrongly claimed by the assessee and allowed in original assessment. The said departmental appeal was dismissed on the proposition that the bar which applies to the assessing officer equally applies to the CIT, for the purposes of section 263 of the Act. The Hon ble Delhi High Court in the case of CIT vs. Software Consultants reported in (2012) 341ITR 240 (Del) held the following: In this case, the AO initiated proceedings u/s 147 on the issue of taxability of certain FDRs, which were found in possession of a director of the company. However, the director claimed that the FDRs, in her name, actually belonged to the assessee. This stand was accepted by CIT(A) in the appeal filed by the said director. Thereafter, the AO in the case of the assessee issued notice u/s 148 of the Act and passed assessment order accepting that the assessee had established and proved the source and their capacity to invest ₹ 20 lacs and, accordingly, no addition was made on this count. The return filed by the assessee, showing loss of ₹ 1,02,756/- was accepted. Subsequently, the Ld. CIT vide order u/s 263 directed the AO to conduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO has a dual role to dispense with i.e. he is an investigator as well as an adjudicator; therefore, if he fails in any one of the role as afore-stated, his order will be termed as erroneous. We note that in this case since there was no incriminating material unearthed during the search, the Assessing Officer has not made any additions in his assessment order dated 31.03.2016, based on incriminating material since there was none unearthed. We take note that it is not the case of Id. Principal CIT that AO failed to make any additions/disallowances based on incriminating material seized/unearthed during search. On this finding of fact by us, we cannot term the assessment order passed by the AO u/s 153A/143(3) dated 31.03.2016 as erroneous. It is important here to note that revision u/s 263 of the Income Tax Act, 1961 has to be made within well-defined limits subject to satisfaction of pre- conditions, as explained by us above, and therefore, similar limitation may have to be read in the instant provision. In relation to the years whose assessment is completed, it is laid down by law that in such situations of completed assessment, assessment u/s 153A of the Income Tax Act, 1961 howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the order of the AO to be erroneous, the Ld. Principal C1T lacks jurisdiction to usurp the revisional jurisdiction u/s. 263 of the Act. 65. In any event, we note that the Assessing Officer has adopted one of the courses permissible in law and even if it has resulted in loss to the revenue, the said decision of the Assessing Officer cannot be treated as erroneous and prejudicial to the interest of the revenue as held by Hon ble Supreme Court in Malabar Industries Ltd. vs. CIT (supra). Since the order of the Assessing Officer cannot be held to be erroneous as well as prejudicial to, the interest of the revenue, in the facts and circumstances narrated above, the usurpation of jurisdiction exercising revisional jurisdiction by the Principal CIT is null in the eyes of law and, therefore, we are inclined to quash the very assumption of jurisdiction to invoke revisional jurisdiction u/s. 263 by the Principal CIT. Therefore, we quash all the orders of the Principal CIT dated 15/03/2017 being ab initio void (iii) M/s.Ujjal Transport Agency Vs CIT , Central-II , ITA(SS) No.58/Kol/2013, dated 19-10-2016: In the said case, this Tribunal held as under : 16. Having hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.l53A of the Act. Consequently, the CIT in exercise of his powers u/s.263 of the Act ought not to have or could not have directed examination of the said issue afresh by the AO. Thus ground No.I raised by the Assessee is allowed. The proceedings u/s.263 of the Act is accordingly quashed. In view of the above conclusion, the other ground of appeal raised by the Assessee does not require any consideration. 18. In the result, appeal of the assessee is allowed. 12. In the case of PCIT vs. Salasar Stock Broking Ltd. in GA NO. 1929 of 2016 /ITAT No. 264 of 2016 the Hon ble Calcutta High Court held as under: Subject matter of challenge is a judgment and order dated 18th December, 2015 by which the learned Tribunal dismissed an appeal preferred by the Revenue registered as ITA N0.1775/K0I/2012 and allowed a cross-objection registered as CO-30/K0I/2013 both pertaining to the assessment year 2005-06. The learned Tribunal was of the opinion that the Assessing Officer had no jurisdiction under Section 153A of the Income Tax Act to reopen the concluded cases when the search and seizure did not disclose any incriminating material. In taking the aforesaid view, the learned Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in Kabul Chawla (supra) wherein the Hon ble High Court held at para 37 (vii) Completed assessments can be interfered with by the Assessing Officer while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. This decision of the Hon ble Delhi High Court was challenged by the Revenue before the Hon ble Supreme Court by preferring an SLP, which was dismissed. Further, we note that the view of the Hon ble Delhi High Court has been approved by the jurisdictional High court in the case of M/s. Salasar Stock Broking Ltd. (supra). Therefore, the view taken by the AO in the assessment framed u/s. 153A/143(3) dated 29.06.2016 is a view taken in consonance with the decision of the Hon ble Delhi High Court in Kabul Chawla which has been approved by the Hon ble Calcutta High Court (supra). Therefore, this order cannot be branded by the Ld. Pr. CIT as erroneous as well as prejudicial to the interest of revenue. We furt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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