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TMI Blog2024 (10) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... ere in this case, one important aspect which needs to be kept in mind that the reopening has been done within four years from the end of the relevant assessment year. Thus, the law contained in proviso to section 147 of the Act will not apply whereby ascribing of failure on part of the assessee by the AO is sine-qua-non to acquire the jurisdiction beyond the period of 4 years. It is nowhere borne out from the record of the reopened assessment proceedings that the AO has properly verified the genuineness of the issues/transactions referred by the Ld. PCIT in the impugned order. There is no categorical rebuttal of the observation of the Ld. Pr. CIT. First contention raised is in respect of non-application of mind on the part of the Ld. PCIT - The record shows that the impugned order is in respect of the reopened assessment order passed u/s 147 r.w.s. 144B - The final show-cause notice and the impugned order passed u/s 263 show correct and complete factual details and there is no discrepancy crept therein. We find that there were some factual errors in the initial notice issued under section 263 of the Act, which got revised/rectified in the subsequent notice. It shows that the revise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his case, the order passed under section 147 r.w.s. 144B of the Act in this case has become erroneous and prejudicial to the interest of the Revenue. Appeal of the assessee is dismissed. - Shri Kul Bharat, Judicial Member And Shri Avdhesh Kumar Mishra, Accountant Member For the Appellant : Shri C.S. Agarwal, Sr. Advocate, Shri D.B. Jain, CA And Shri Uma Shanker, Advocate For the Respondent : Shri Dh arm Veer Singh, CIT-DR ORDER PER AVDHESH KUMAR MISHRA, AM This appeal filed by the assessee for the Assessment Year (hereinafter, the AY ) 2016-17 is directed against the order dated 28.03.2024 passed by the Principal Commissioner of Income Tax-7, New Delhi [hereinafter, the PCIT ]. 2. Following grounds are raised in this appeal:- 1. That the learned Pr.CIT, Delhi -7, has erred both on facts and in law in holding the order of assessment dated 30.03.2022 as being erroneous and prejudicial to the interest of revenue. 2. That the learned Pr. CIT has erred both on facts and in law in setting aside the said order with a direction to pass a fresh order, despite the fact there was no error in the said order. The order dated 30.03.2022 could not have been held by the learned Pr. CIT being err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver that the transaction entered by the assessee (which was not even the subject matter of initiation of proceedings u/s 147 of the Act) had resulted into an escapement of income and as such the said order of assessment could not have been held to be erroneous and prejudicial to the interest of revenue. 7. That learned Pr.CIT has passed the order u/s 263 of the Act on misconceived facts and unwarranted assumptions had been made without any material. 8. That the learned Pr.CIT exceeded in her jurisdiction both in initiating the proceedings u/s 263 of the Act and holding the order of assessment made being erroneous and prejudicial to the interest of revenue and as such, such an order is liable to be set aside and quashed. 2.1 In nutshell, we are tasked to decide that whether the order of the PCIT passed under section 263 of the Income Tax Act, 1961 (hereinafter 'the Act') is justified. 3. Briefly, the relevant facts giving rise to this appeal are that the appellant/assessee, builder and developer, filed its Income Tax Return (hereinafter, the ITR ) on 11.10.2016 declaring income of Rs. 49,81,950/-. The ITR was processed on 14.08.2017 under section 143(1) of the Act accepting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther submitted that the AO had not made any addition on the basis of reasons recorded for initiating proceedings under section 148 of the Act. The reasoning on which the Ld. PCIT initiated the proceedings under section 263 of the Act was wholly unconnected which had led the proceedings under section 148 of the Act. It was further contended that the case was reopened, vide notice issued under section 148 of the Act, by the ITO who had no jurisdiction over the appellant/assessee s case as the returned income was beyond the upper threshold limit for prescribed for the assessment jurisdiction of any ITO, in general as per the CBDT Instruction No. 1/2011 [F.No. 187/12/2010- IT (A-I)] dated 31.01.2011. Therefore, the initiation of the proceedings under section 263 of the Act by the Ld. PCIT could not be termed justified. To buttress his argument, the Ld. Sr. Counsel placed reliance of the decision of the Hon ble Delhi High Court in the case of Software Consultants; 341 ITR 240, wherein it was held as under: - One of the contentions, which has been accepted by the Tribunal is that the order of the Assessing Officer cannot be regarded as erroneous even if the Assessing Officer had failed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant/assessee had made an investment in debentures and earned Rs. 50 Lakhs on the redemption of the said debentures. The initial investment in this regard was Rs. 1045 Crores which resulted an income of Rs. 50 Lakhs. This income of Rs. 50 Lakhs could not be declared as interest income because it was in the nature of Capital Gains and not in the nature of income from other sources. The Ld. PCIT failed to make any inquiry from Antonious Developers Pvt. Ltd. who was holding those debentures before the sale to the appellant/assessee. The Ld. Sr. Counsel contended that the inference drawn by the Ld. PCIT that the AO had not examined the transactions of Rs. 1045 Crores, which resulted taxable income not offered for tax was not based on any facts emerged from the assessment record(s). Hence, it was contended that the basis of initiation of proceedings under section 263 of the Act was on surmises conjecture and thus, deserved quashing of the same. 4.4 The Ld. SR. Counsel, placing reliance on the decision of the Hon ble Supreme Court in the case of Kiran Singh and Ors 1 SCR 117 (1955), submitted that the validity of the order dated 30.03.2022 passed under section 147 r.w.s. 144B o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w.s. 144B of the Act and not the processing, dated 14.08.2017, under section 143(1) of the Act. The Ld. PCIT had rightly mentioned the order dated 30.03.2022 passed under section 147 r.w.s. 144B of the Act in the order passed under section 263 of the Act. 5.2 The Ld. CIT-DR drew our attention to the Explanation of Section 147 of the Act and submitted that the AO had all the powers to examine and to make any addition even other than the reasoning recorded for reopening the assessment. In this regard, the Ld. CIT-DR placed reliance on the decisions of the Hon ble Punjab Haryana High Court in the cases of Mehak Finvest Pvt. Ltd., 367 ITR 769 (SLP file against this order was dismissed by the Hon ble Supreme Court) Majinder Singh Kang, 25 taxman.com 124 and decision in the case of N. Govind Raju 60 taxman.com 333 (Kar). 5.3 The Ld. DR also submitted that the order dated 30.03.2022 passed under section 147 r.w.s. 144B of the Act did not become non-est/invalid just because no addition was made to the returned income. The order dated 30.03.2022 passed under section 147 r.w.s. 144B of the Act was valid order and the AO had all the power to investigate and make addition in the returned incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi 5.5 The Ld, CIT-DR drew our attention to the Explanation 3 to section 147 of the Act [w.e.f. 01.04.1989 vide Finance(No.2) Act, 2009], to submit that the AO is required to make addition on any other issue other than that/those for which the case was reopened. To augment his contentions, the Ld. CIT-DR placed reliance on following decisions: - 1) Mehak Finvest P.Ltd.. 367 ITR 769 (P H). SLP filed against this decision has been dismissed by the Hon ble Supreme Court. 2) N. Govind Raju 60 taxmann.com 333 (Kar) 3) Majinder Singh Kang 25 Taxmann.com124 (P H) 6. We have heard both the parties and have perused the material available on the record. We also perused the above referred case laws. The relevant part of the section 263 of the Act is extracted hereunder: - Explanation 2 For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner, (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in four years from the end of the relevant assessment year. Thus, the law contained in proviso to section 147 of the Act will not apply whereby ascribing of failure on part of the assessee by the AO is sine-qua-non to acquire the jurisdiction beyond the period of 4 years. It is nowhere borne out from the record of the reopened assessment proceedings that the AO has properly verified the genuineness of the issues/transactions referred by the Ld. PCIT in the impugned order. There is no categorical rebuttal of the observation of the Ld. Pr. CIT. 9. The first contention raised by the Ld. Sr. Counsel is in respect of non-application of mind on the part of the Ld. PCIT. The record shows that the impugned order is in respect of the reopened assessment order dated 30.03.2022 passed under section 147 r.w.s. 144B of the Act. The final show-cause notice and the impugned order passed under section 263 of the Act show correct and complete factual details and there is no discrepancy crept therein. We find that there were some factual errors in the initial notice dated 04.01.2024 issued under section 263 of the Act, which got revised/rectified in the subsequent notice dated 18.03.2024. It shows t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. Sr. Counsel is accepted on this score, then a very peculiar situation will arise against the intent of amendment brought into the section 263 of the Act. Take a case, where the AO has not carried out any investigation or improper investigation and has accepted the returned income in the scrutiny assessment; then the PCIT/CIT cannot invoke her/his revisionary power under section 263 of the Act. Thus, in such situation as contemplated by the Ld. Counsel, the AO by not carrying out the investigation will have upper hand on the revisionary power under section 263 of the Act. Definitely, this is not the intent of the Parliament amending the section 263 of the Act in 2015. In other words, in the instant case, the proceedings under section 147 of the Act does not get vitiated at any stage. Thus, the AO is under legal obligation to examine those issues which warranted such examination in light of the facts of the instant case, irrespective of the fact that whether any addition was going to be made on issues concerning reasons for reopening or not. 12. The order dated 30.03.2022 passed under section 147 r.w.s. 144B of the Act is a valid order as per law even if no addition has been mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sdiction raised by the Ld. Sr. Counsel, it is submitted that no such challenge was ever made before the AO during the course of reopened assessment proceedings under section 147 of the Act. In view of the facts of the case highlighted above and in light of the decisions of the Hon ble Supreme Court in the case of Rai Bahadur Seth Teomal 36 ITR 9. the Hon ble P H High Court in the cases of Jaswinder Kaur Kooner, 291 ITR 80, Subhash Chander 166 Taxmann 307 Siri Paul Oswal 293 ITR 273 and the Hon ble Jurisdictional Delhi High Court in the cases of Mega Corporation Ltd; ITA No.128/2016 and Abhishek Jain [2018] 94 taxmann.com 355, we are of the view that the objection to call in question the jurisdiction of AO is to be made before the AO within 124(3) time and it can never be challenged for the first time in appeal. 15. The Hon ble Delhi High Court, in the case of Mega Corporation Ltd; ITA No.128/2016, has held that the ITAT fell into error in interpretation of provisions of Section 124(3)(a) and holding that the ACIT could not have completed the assessment by virtue of Section 120(4)(b). The assessee could have raised objection to jurisdiction only within a month. In the case of Abhish ..... X X X X Extracts X X X X X X X X Extracts X X X X
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