2022 (2) TMI 397 - HC - Income Tax

High Court Condoned Delay, Tribunal Rejects PCIT's Revisionary Power, Rules in Favor of Assessee

Principal Commissioner Of Income Tax, Central –2, Kolkata Versus M/s. Anindita Steels Ltd.

The High Court of Calcutta condoned a delay of 299 days in filing an appeal, accepting the reasons provided. The Tribunal held that the Principal ... Revision u/s 263 by CIT - Tribunal considered the factual issue and more particularly the fact that on the very same issue the assessment was reopened u/s147 of the Act and after discussing the case and conducting an enquiry relief was granted to the assessee - HELD THAT:- Tribunal rightly took note of the law laid down by the Hon’ble Supreme Court in Malabar Industrial Company Ltd. [2000 (2) TMI 10 - SUPREME COURT] and allowed the appeal filed by the assessee. In the said decision the Hon’ble Supreme Court pointed out that the phrase “prejudicial to the interest of revenue” occurring in Section 263 has to be read in conjunction with the expression “erroneous” order passed by the assessing officer. Further every loss of revenue as a consequence of an order of the assessing officer cannot be treated as prejudicial to the interest of the revenue. In the case at hand the Tribunal rightly pointed out that the ground on which notice under Section 263 of the Act was issued was identical to the reason for reopening the assessment earlier. Furthermore, the Tribunal noted that no independent enquiry was conducted by the PCIT to justify assumption of jurisdiction under Section 263 of the Act. It is settled legal principle that the PCIT cannot substitute its opinion to that of the assessing officer on the same material which was noted by the assessing officer in the reassessment proceeding. - Decided in favour of assessee. Issues:1. Condonation of delay in filing the appeal.2. Interpretation of Section 263 of the Income Tax Act.3. Justification of invoking power under Section 263 by the Principal Commissioner of Income Tax.4. Comparison of reasons for reopening assessment and initiating proceedings under Section 263.5. Application of legal principles in determining if an order is erroneous and prejudicial to the interest of revenue.Condonation of Delay:The High Court of Calcutta considered a delay of 299 days in filing an appeal and accepted the reasons provided in the affidavit for condonation of delay. The delay was condoned, and the petition for condonation of delay was allowed.Interpretation of Section 263:The appeal was filed against an order passed by the Income Tax Appellate Tribunal, questioning the correctness of the order by the Principal Commissioner of Income Tax under Section 263 of the Income Tax Act. The key issue was whether the PCIT was justified in invoking its power under Section 263. The Tribunal analyzed the facts, emphasizing that the same issue had been addressed during a reassessment under Section 147, where relief was granted to the assessee. The Tribunal highlighted that inadequate inquiry cannot be a ground for exercising revisionary power under Section 263. It was noted that the PCIT did not conduct independent verification or investigation before concluding that the assessing officer's order was erroneous and prejudicial to revenue.Justification of Invoking Power under Section 263:The Tribunal found that the reasons for reopening the assessment and initiating proceedings under Section 263 were the same and based on identical material. It was emphasized that the PCIT cannot substitute its opinion for that of the assessing officer without conducting independent verification. The Tribunal referred to legal precedent, including the Malabar Industrial Company Ltd. case, which clarified that not every loss of revenue due to an assessing officer's order can be deemed prejudicial to revenue. Ultimately, the Tribunal granted relief to the assessee, holding that the PCIT did not have sufficient grounds to revise the reassessment order.Comparison of Reasons for Reopening Assessment and Section 263 Proceedings:The Tribunal highlighted that the grounds for issuing a notice under Section 263 were identical to the reasons for reopening the assessment earlier. It was noted that no independent inquiry was conducted by the PCIT to justify assuming jurisdiction under Section 263. The Tribunal reiterated that the PCIT cannot substitute its opinion for that of the assessing officer based on the same material considered during reassessment.Application of Legal Principles:Based on the legal principles established, the Tribunal concluded that the PCIT did not have a valid basis to revise the reassessment order. The appeal was dismissed, and the substantial questions of law were answered against the revenue, affirming the relief granted to the assessee.