ITAT quashes CIT revision under section 263 for invalid reassessment without proper statutory notice

ITAT Kolkata quashed CIT's revision proceedings under section 263 against reassessment order. The tribunal held reassessment proceedings were invalid as statutory notice under section 143(2) was not served to assessee, making revision proceedings legally untenable. Additionally, ITAT found AO conducted extensive inquiry into share capital and premium transactions, applied proper mind, and adopted permissible legal view supported by documentary evidence and judicial precedents. Since AO properly examined the issues, CIT lacked jurisdiction to revise on same grounds. Appeal allowed.

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Issues Involved:
1. Validity of notice under section 263 of the Income Tax Act, 1961.
2. Jurisdiction of the Commissioner of Income Tax (CIT) under section 263.
3. Adequacy of inquiries conducted by the Assessing Officer (AO).
4. Application of section 68 of the Income Tax Act, 1961.
5. Whether the assessment order was erroneous and prejudicial to the interest of revenue.

Summary:

Issue 1: Validity of Notice under Section 263
The assessee contended that the notice issued under section 263 was without jurisdiction due to the lack of proper notice and opportunity. The Tribunal noted that the reassessment proceedings were bad-in-law and non-est since the statutory notice under section 143(2) was not issued and served upon the assessee. The Tribunal relied on multiple judicial pronouncements to conclude that the absence of notice under section 143(2) renders the assessment order non-est, and thus, revisionary proceedings under section 263 cannot be based on such an invalid assessment.

Issue 2: Jurisdiction of the CIT under Section 263
The Tribunal examined whether the CIT had the jurisdiction to invoke section 263. It was argued that the CIT cannot assume jurisdiction over proceedings that do not exist in the eyes of the law. The Tribunal quashed the revisionary proceedings on the ground that the reassessment order was non-est due to the lack of a valid notice under section 143(2).

Issue 3: Adequacy of Inquiries Conducted by the AO
The assessee argued that extensive inquiries and investigations were conducted by the AO, including issuing notices under section 133(6) and deputing an Inspector to verify the claims. The Tribunal found that the AO had conducted a thorough inquiry and had taken one of the possible views based on the evidence provided. The Tribunal held that jurisdiction under section 263 cannot be assumed merely because the CIT believes that further inquiries should have been conducted.

Issue 4: Application of Section 68 of the Income Tax Act, 1961
The Tribunal noted that the CIT failed to appreciate that the AO had examined the identity and creditworthiness of the shareholders and the genuineness of the transactions. The Tribunal emphasized that the AO had verified the financials, bank statements, and other relevant documents of the subscriber companies. The Tribunal also noted that the CIT's reliance on the amended provisions of section 68, which were not applicable for the assessment year in question, was misplaced.

Issue 5: Whether the Assessment Order was Erroneous and Prejudicial to the Interest of Revenue
The Tribunal concluded that the assessment order was neither erroneous nor prejudicial to the interest of revenue. The AO had adopted a permissible view in law after conducting sufficient inquiries. The Tribunal relied on the principle that when two views are possible, and the AO has taken one view, the order cannot be deemed erroneous merely because the CIT disagrees.

Conclusion:
The Tribunal quashed the revisionary proceedings under section 263 of the Act, allowing all the grounds of appeal raised by the assessee. The appeal filed by the assessee was allowed, and the order was pronounced in the open Court on 1st May, 2023.

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