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TMI Blog2021 (10) TMI 912X X X X Extracts X X X X X X X X Extracts X X X X ..... une of ₹ 8.34 crores which fact was found by Ld. PCIT to be absent. So, the AO s belief of escapement of income was on wrong assumption of facts and so invocation of reopening jurisdiction by issue of notice u/s 148 of the Act is bad in law and, therefore, the consequent re-assessment order dated 29.12.2017 of the AO is a nullity and, therefore, the order of the Ld. Pr. CIT to interfere in the order of the AO dated 29.12.2017 u/s. 144/147 of the Act is also a nullity and, therefore, the action of the Ld. Pr. CIT to invoke his jurisdiction u/s. 263 of the Act itself was without jurisdiction - Decided in favour of assessee. - I.T.A. No. 174/Kol/2021 - - - Dated:- 13-10-2021 - Hon ble Shri A. T. Varkey, JM And Shri Manish Borad, AM For the Appellant : Shri Anil Kochar, Advocate For the Respondent : Shri Sandeep Chaube, CIT, DR ORDER PER SHRI A. T. VARKEY, JM: This is an appeal filed by the Assessee against the order of Ld. Pr. CIT-3, Kolkata dated 10.08.2020 passed u/s 263 of Income Tax Act, 1961 (hereinafter referred to as the Act ) for Assessment year 2010-11. 2. The assessee s appeal is time barred by 210 days and a petition seeking condon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning this ground, the Ld. AR submitted that the Ld. Pr. CIT has interdicted the order of the AO passed u/s. 144/147 of the Act dated 29.12.2017 which order itself of the AO is bad in the eyes of law, so according to him it is a nullity. Explaining further on this contention as to how the order of AO u/s 144/147 dated 29.12.2007 which has been interdicted by the Ld. PCIT u/s 263 of the Act is bad in law, the Ld. A.R. pointed out that the AO had reopened the original assessment for AY 2010-11 on the reason that he had received information from authentic source that one company named M/s. Miracle Commodities Pvt. Ltd. (hereinafter referred to as M/s. Miracle ) got high value deposits frequently in their bank account and thereafter it made immediate transaction to some third party account and it revealed from investigation that large value of amount has been routed to the assessee i.e. M/s. Concord Infra Projects Pvt. Ltd. implying that the assessee has routed this money in the form of share on high premium to the tune of ₹ 8.34 crores. According to Ld. A.R. based on this factual information the AO formed his reason to believe escapement of income as stipulated u/s 147 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with premium, which fact has been held by the Ld PCIT in his impugned order as wrong/erroneous. So, according to Ld. A.R., the very reopening of the assessment by the AO for the assessment year 2010-11 was on wrong assumption of facts or in other words, the reopening of assessment was an erroneous act for want of jurisdiction and so is a nullity. According to the Ld. AR, since this order of AO dated 29.12.2017 was itself a nullity, therefore, this nullity order of AO which has been interdicted by the Ld. Pr. CIT by passing the impugned order dated 10.08.2020 is also a nullity. Consequently according to Ld.. A.R, when the reasons recorded for reopening of assessment for AY 2010-11 was itself was on wrong assumption of fact, so the action of AO to initiate reassessment proceedings by issue of notice u/s 148 of the Act, was, itself therefore, an act without jurisdiction; Ergo the Re-assessment order of AO dated 29.12.2017 is non-est in the eyes of law, so accordingly to Ld. A.R, the Ld. PCIT could not have interdicted a nonest order, so the impugned order of Ld. PCIT is also a nullity or non-est in the eyes of law. 5. Per contra, the Ld. CIT, DR vehemently opposing the contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us (as held by Ld. PCIT in his impugned order itself). So the action of AO can be challenged in collateral proceedings u/s 263 of the Act as held by the Tribunal in which several decision of Hon ble Supreme Court has been taken note and relied on the following decision of the Tribunal as under: Supersonic Technologies (P) Ltd. vs. PCIT in ITA No. 2269/D/2017 dated 10.12.2018 (ITAT, Delhi Bench) ITA. No.3009 to 3012/DEL/2017 6.1 .It is well settled Law that assessee can challenge the validity of the reassessment proceedings in the collateral proceedings (relating to examination of validity of Order passed) under section 263 of the I.T. Act. We rely upon the Order of ITAT, Mumbai Bench in the case of Westlife Development Ltd., vs. PCIT 49 ITR (Tribu.) 406 in which it was held allowing the appeal (i) that jurisdiction aspect of the Order passed in the primary proceedings can be examined in collateral proceedings also. Thus, the assessee could be permitted to challenge the validity of the Order passed under section 263 on the ground that the assessment order was non-est. Since the reassessment order itself is bad in law, therefore, Learned Counsel for the Assessee, right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that when an Assessment order passed u/s 147 of the Act was without jurisdiction, the Ld. PCIT cannot invoke the jurisdiction u/s 263 of the Act against such void or non-est order. In the second decision cited the Mumbai bench of the Tribunal has specifically framed the following questions :- 1. Whether the assessee can challenge the validity of an assessment order during the appellate proceedings pertaining to examination of validity of order passed u/s 263? 2. Whether the impugned assessment order passed u/s 143(3) dated 24-10-2013 was valid in the eyes of law or a nullity as has been claimed by the assessee? 3. If the impugned assessment order passed u/s 143(3) was illegal or nullity in the eyes of law, then, whether the CIT had a valid jurisdiction to pass the impugned order u/s 263 to revise the non est assessment order? 8. On question no. 1 and 3 which is relevant to the present case the Mumbai bench of the Tribunal in the aforesaid case of M/s Westlife Development Ltd. (supra) has taken the view that when the original assessment proceedings are null and void in the eyes of law for want of assumption of jurisdiction, then such validity can be challenged even i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, the decision of Hon ble Madras High Court in the case of CIT Vs. Gitsons Engineering Co. 370 ITR 87 (Mad) clearly holds that the objection in relation to non service of notice could be raised for the first time before the Tribunal as the same was legal, which went to the root of the matter. 19. While exercising powers u/s 263 Id. Commissioner cannot revise an assessment order which is non est in the eye of law because it would prejudice the right of assessee which has accrued in favour of assessee on account of its income being determined. If Id. Commissioner revises such an assessment order, then it would imply extending/ granting fresh limitation for passing fresh assessment order. It is settled law that by the action of the authorities the limitation cannot be extended. Because the provisions of limitation are provided in the same 20. In view of above discussion ground no.3 is allowed and revision order passed u/s 263 is quashed. After having considered the judicial precedent on the issue we are of the view that the validity of the order passed by the AO which is being interdicted by the Ld. PCIT in the impugned order assailed before us, can be examined as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 29.12.2017). 10. Now for examining this legal issue we need to examine whether the jurisdictional fact and pre-conditions for re-opening an assessment as stipulated u/s 147 of the Act was present/satisfied before the AO issued notice for re-opening dated 17.03.2017. Before we do the factual analysis in respect of this legal issue, let us have a look at the scheme of the Income Tax Act which gives power to the Income Tax Authorities as per Section 116 of the Act who are appointed by the Central Government u/s 117 of the Act. The Act/Statute vest power on certain Income Tax Authorities assigned as Assessing Officer (hereinafter the AO) to assess/ascertain the income of the a subject/assessee and to determine the tax payable by that subject/assessee by framing an assessment order for an Assessment year. The concept of assessment is governed by the time barring rule and an assessee acquires a right as to the finality of proceedings. Queitus of the completed assessment can be disturbed only when there is information or evidence regarding undisclosed income or AO had information in his possession showing escapement of income. So when an AO receives an information regardin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the Hon'ble jurisdictional High Court as well as other Hon'ble High Courts have already held in plethora of cases the test of a prudent person instructed in law in understanding jurisdictional fact and law (mixed question of fact and law) the reason to believe escapement of income (supra). 12. So the condition precedent as discussed above is the jurisdictional fact law, which is sine qua non for the AO to successfully usurp the jurisdiction u/s. 147 of the Act and it has to be also kept in mind that the jurisdictional fact (mixed question of fact and law) referred to in section 147 of the Act i.e Reason to believe escapement of income should be that of AO and not that of any other authority, because then it will be against one of the basic feature of the Constitution of India ie, the Rule of Law, wherein the Parliament has empowered this reopening jurisdiction only to that of Assessing Officer and that is why if the reason to believe escapement of income is not that of AO, the assumption of jurisdiction to re-open, has been held to be vitiated and resultantly bad in law, since it will be on the basis of borrowed satisfaction. 13. Now coming back to the present a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of income was that the department received an authentic information that huge value of deposits were made in the bank account of one company called M/s. Miracle and thereafter the money was transferred to some third party account and that further investigation had revealed that large amount of money was routed to the assessee company i.e. M/s. Concord Infra Projects Pvt. Ltd. According to the Ld. AR, this foundational fact on the basis of which the AO had based his reason to believe escapement of income is factually wrong/erroneous since the foundation fact has been found to be absent, which fact is evident from the factual findings of the Ld. PCIT in the impugned order wherein he has made a specific finding of fact in his conclusion recorded at page 40 of the impugned order wherein he concludes in his own words in conclusion the relevant fact which constitute the present case are that the alleged large transaction of M/s. Miracle have not been reached directly/indirectly to the assessee company as evident from bank account of the assessee company nor through share subscriber companies (shareholders) to whom the assessee company has allotted shares. Therefore, according t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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