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TMI Blog2025 (4) TMI 1039X X X X Extracts X X X X X X X X Extracts X X X X ..... .10.2018 u/s 263(1) of the Act primarily on the basis that there was over assessment of loss by allowing a deduction of Rs. 58,90,372/- u/s 36(1)(iii) of the Act since there was a debit balance of capital in the transport business of Rs. 5,14,12,855/- on account of withdrawals of Rs. 4,90,86,440/- and despite thereof, assessee had claimed deduction of Rs. 72,11,728/- on loans. 3. The assessee in reply contended that no disallowance was called for u/s 36(1)(iii) of the Act. It was submitted that assessee had non-interest bearing funds of Rs. 5,10,09,587.77/- in the shape of unsecured loans amounting to Rs. 49,00,000/- and Rs. 4,61,09,587.77/- as withdrawals from his other proprietorship/partnership business which are almost sufficient to cover negative balance of capital of the assessee amounting to Rs. 5,14,12,855.58. Apart from the above, it was contended that even otherwise, since AO did not make any addition on the issue which was the basis for opening/reopening of the case u/s 147, the assessment becomes null and void, hence, revisionary proceedings on other issues may not be initiated. It was also contended that proceedings u/s 263 of the Act is based on audit objection raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt." 5. He further held that there is no bar in initiation of proceedings u/s 263 on the basis of observations by audit party. Further as far as submission of ld. AR that if the AO did not make any addition on issue which was the basis for opening/reopening of the case u/s 147, the assessment becomes null and void was rejected by relying upon on the judgment of Jurisdictional High Court in the case of Majinder Singh Kang reported in 344 ITR 358 and CIT v. Mehak Finvest (P) Ltd reported in 367 ITR 769. 6. Aggrieved, the assessee is in appeal before us raising following grounds of appeal :- "1 That notice u/s 148 of the Act was illegal and without jurisdiction therefore both the order of assessment dated 26.l0.2016 u/s 147/143(3) of the Act and also the impugned order are consequently void-ab-initio. 1.1 That since the notice u/s 148 of the Act had been issued mechanically without application of mind much less independent application of mind and without having any tangible, relevant credible material to form a reason to believe that income of the appellant has escaped assessment therefore the order of assessment u/s 147/143(3) of the Act was without jurisdiction and as such the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is misconceived, misplaced and untenable. 7.1 That impugned order is based on premeditated and preconceived supposition assumption and perception and not on objective appreciation of facts and evidence gathered during the course of revision and hence the illegal action be held to be vitiated and coloured by an arbitrary approach which finds no sanction in law. 7.2 That the learned Principal Commissioner of Income Tax has failed to appreciate that' once the learned Assessing Officer on examination of the facts on record and after making all possible and, relevant enquiries had accepted claim of the appellant then such an order of assessment could not be regarded as erroneous in as much as prejudicial to the interest of revenue merely because the learned Commissioner of Income Tax had a different opinion in respect of an altogether difference issue and that too, without having established in any manner that, view adopted by the learned Assessing Officer was an impossible view. Prayer : It is therefore prayed that, impugned order made under section 263 of the Act dated 30.3.2019 be held to be without jurisdiction and, therefore be quashed and appeal of the appellant be allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has not disclosed all the material facts/above transactions to the department, the source of the above investment of Rs. 53,85,000/- remains unexplained which exceeded the maximum amount which is not chargeable to tax......" 11. The case of the assessee was reopened on the ground that the assessee has deposited, during the financial year 2008-09, the amount of Rs. 53,85,000/- in cash into his saving account maintained with HDFC Bank Ltd., despite the fact that the assessee had filed return of income on 30.09.2009 for the impugned assessment year which stood accepted as such. It is thus evident that the Assessing Officer re-opened the case only for the purpose of verification of the source of deposits in the bank account. It is now well settled that no re-assessment can be done to make an enquiry or verification of the deposits in the bank account. The Nagpur Bench in the case of Vijaya Vinod Duragkarin in ITA No. 339/Nag/2023 dated 18:11.2024 for Assessment year 2015-16 has held as under: "15. Here, as is evident, the re-opening was done only for the purpose of verification of the source of investment in the property, which is also evident from the reasons so recorded by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y are subject to judicial review. The ITO in his affidavit has merely stated his belief but has not set out any material on the basis of which he formed such belief. There is nothing in the affidavit to suggest that the ITO had any material before him that would warrant a belief that a part of the income of the petitioner had escaped assessment by reason of his failure to make a true and full disclosure of the material facts. (See ITO Vs. Madnai Engineering Works Ltd (1979) 118 ITR 1 (SC)]" [Emphasis Supplied] 14. Further, the objection of the ld. DR that validity of action u/s 147 of the Act cannot be raised in present proceedings has been considered and decided by the Mumbai Bench of ITAT in the case of M/s. Westlife Development Ltd. v. Pr. CIT as reported in 49 ITR (T) 406 by observing as under :- "8. Challenging the jurisdictional defects of assessment order for assailing the jurisdictional validity of the revision order passed u/s 263: The first issue that arises for our consideration is - whether the assessee can challenge the jurisdictional validity of order passed u/s 143(3) in the appellate proceedings taken up for challenging the order passed u/s 263? If we analyse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subsequent stages, only for the limited purpose of examining whether the collateral (subsequent) proceedings have been initiated on a valid legal platform or not and for examining the validity of assumption of jurisdiction to initiate the collateral proceedings. If it is not so allowed, then, it may so happen that though order passed in the original proceedings was illegal and thus order passed in the subsequent proceedings in turn would also be illegal, but in absence of a remedy to contest the same, it may give rise to an 'enforceable' tax liability without authority of law. Therefore, the Courts have taken this view that jurisdictional aspects of the order passed in the primary proceedings can be examined in the collateral proceedings also. This issue is not res integra. This issue has been decided in many judgments by various courts, and some of them have been discussed by us in followings paragraphs. 8.10 Thus, on the basis of aforesaid discussion we can safely hold that as per law, the assessee should be permitted to challenge the validity of order passed u/s. 263 on the ground that the impugned assessment order was non est and we hold accordingly. [Emphasis su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 29.12.2019. We order accordingly." 31. In the result the appeal of the assessee in ITA No. 1132/DEL/2022 is allowed." 18. The Hon'ble Bombay High Court in the case of CIT v. Maharashtra Hybrid Seeds Co. Ltd. reported in 102 taxmann.com 48 held as under:- "9. As rightly held by the Tribunal, this note firstly shows that all the explanations and arguments of the Assessee have been considered by the Assessing Officer and secondly that the action taken under Section 263 is only on the basis of the audit party's note or report, who it would appear, ultimately did not approve of the Assessing Officer's view regarding the allowability of the deduction. Admittedly, the CIT has not referred to any audit objection but in the light of the note, the Tribunal held that it would be a fair inference that his action under Section 263 was consequent upon the audit objection. Be that as it may, this office note clearly shows that the Assessing Officer had taken all explanations and arguments of the Assessee into consideration before allowing deduction. This being the case, the CIT could not have merely substituted his own views for that of the Assessing Officer by invoking Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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