2017 (1) TMI 1387 - AT - Income Tax

Tribunal quashes order, citing assessing officer's limited jurisdiction under Income Tax Act

Hanspro. com Pvt. Ltd. Versus Pr. Commissioner of Income-Tax, Central-7, Mumbai

The Tribunal quashed the order under Section 263 of the Income Tax Act, emphasizing the assessing officer's limited jurisdiction and lack of grounds to ... Revision u/s 263 - AO failed to examine the amount of loan from the sister concern - Held that:- It is noted that original order u/s 153C dated 28-2-2014 was passed in pursuance to search in the office of M/s Convention Hotels Pvt Ltd. Perusal of the assessment order reveals that the proceedings u/s 153C were initiated upon the assessee in relation to some documents seized from the office premises of M/s Convention Hotels Pvt Ltd. Details mentioned in the assessment order shows that the seized material pertained to the transactions that took place between the assessee and said company, M/s Convention Hotels Pvt Ltd. Under these circumstances, the jurisdiction of the AO in the proceedings u/s 153C was confined to the seized material on the basis of which impugned proceedings u/s 153C were initiated. Thus, the Ld.AO had no jurisdiction to examine the loan of ₹ 35 lakhs received by the assessee from M/s STI Products Pvt Ltd. Thus when the AO himself did not have the jurisdiction to examine the said loan, then how the Ld. Principal CIT can take a view that non examination of loan by the AO made the assessment order as erroneous and prejudicial to the interest of Revenue. - Decided in favour of assessee. Issues:1. Invocation of Section 263 of the Income Tax Act, 1961 by the Principal Commissioner.2. Alleged under assessment of income due to a discrepancy in the books of account.3. Jurisdiction of the Assessing Officer to examine a specific loan amount.4. Whether the assessment order was erroneous or prejudicial to the interest of Revenue.5. Applicability of legal precedents in similar cases.Issue 1: Invocation of Section 263The appeal was filed against the order of the Principal Commissioner invoking Section 263 of the Income Tax Act, 1961. The appellant argued that the assessment under Section 143(3) had been completed by another assessing officer after duly examining the facts. The appellant contended that the Principal Commissioner erred in raising new issues and making inquiries under Section 263 without proper examination. The order under Section 263 was criticized for lacking a conclusion and unjustly setting aside the assessment without due consideration of the documents and explanations provided during the proceedings.Issue 2: Alleged Under AssessmentThe Principal Commissioner raised concerns about an alleged under assessment of income due to a discrepancy in the books of account regarding a specific amount. The appellant explained that the discrepancy arose from a mistake in the books of another company, which incorrectly transferred the amount to the appellant's ledger. The appellant argued that the Principal Commissioner failed to consider the explanations and supporting documents provided, leading to an unjustified setting aside of the assessment order.Issue 3: Jurisdiction of the Assessing OfficerDuring the hearing, it was revealed that the original assessment was conducted under Section 153C read with Section 143(3). The Principal Commissioner issued a notice under Section 263 regarding a loan amount from a sister concern. The appellant provided evidence to substantiate the loan, emphasizing that the assessing officer did not have jurisdiction to examine this specific loan amount. Legal precedents were cited to support the argument that the assessing officer's jurisdiction was limited to the seized material, and thus, the order under Section 263 was deemed inappropriate.Issue 4: Erroneous Assessment OrderThe Tribunal analyzed the original assessment order under Section 153C and concluded that the assessing officer did not have the jurisdiction to examine the specific loan amount in question. Citing legal precedents, the Tribunal emphasized that the assessing officer's jurisdiction was confined to the seized material. Therefore, the Tribunal found that the order under Section 263 was contrary to law and facts, leading to the quashing of the order.Issue 5: Applicability of Legal PrecedentsThe Tribunal referred to various judgments to support the argument that the assessing officer's jurisdiction was limited to seized material and that the assessment order could not be deemed erroneous based on issues beyond the scope of the seized material. The Tribunal highlighted the legal position established by the Bombay High Court and the Delhi High Court in similar cases. By applying these legal precedents, the Tribunal concluded that the assessment order could not be considered erroneous or prejudicial to the interest of Revenue, ultimately allowing the appeal filed by the assessee.In conclusion, the Tribunal quashed the order under Section 263, emphasizing the limited jurisdiction of the assessing officer and the lack of grounds to consider the assessment order as erroneous or prejudicial to the interest of Revenue. The legal analysis and application of precedents played a crucial role in the Tribunal's decision to allow the appeal.