2022 (4) TMI 456 - AT - Income Tax

Reassessment under s.147 r.w.s.143(3) invalid for lack of verification of share records; s.263 revision set aside

Pradeep Dattatraya Banginwar Versus The Pr. Commissioner of Income Tax-II, Nagpur.

ITAT Nagpur held that the reassessment framed by the AO under s.147 r.w.s.143(3) was founded on misconceived reasons and thus amounted to a non-est ... Revision u/s 263 by CIT - reassessment order u/s. 147 - Bogus LTCG - Assessing Officer in the course of assessment proceedings had not verified the details of purchase and sale of shares, numbers of shares, copy of demat account which would have revealed the date on which shares were received by the assessee in his de-mat account, as well as not examined as to whether or not the assessee had regular dealings with the broker and the source of purchase of shares in question etc - HELD THAT:- Observing, that the “reason to believe” on the basis of which the case of the assessee was reopened was factually incorrect, the Assessing Officer, had therein vide his order passed under Sec. 147 r.w.s 143(3), dated 01.12.2018 accepted the returned income of the assessee as such. At this stage, we may herein observe, that though the reopening of the assesse’s case on the basis of misconceived and fallacious “reasons to believe” would be fatal to the very existence of the order of reassessment that was passed by the AO under Sec. 143(3) r.w.s.147 of the Act, dated 01.12.2018, however, as the income of the assessee as was originally returned by him was accepted by the AO vide his reassessment order, therefore, most probably for the said reason the assessee had not challenged the validity of the same by carrying the matter any further in appeal. Be that as it may, as the reassessment order passed by the AO under Sec. 143(3) r.w.s 147 of the Act, dated 01.12.2018 is in itself based on invalid assumption of jurisdiction by the AO, therefore, the said material fact had rightly been pressed into service by the ld. AR for impressing upon us that a non-est assessment i.e, an assessment which has no sanctity of law could not have been revised by the Pr. CIT vide his order passed under Sec. 263. Now when the very foundation of the impugned revisional proceedings i.e, the reassessment order passed by the AO under Sec. 143(3) r.w.s.147 of the Act, dated 01.12.2018 is in itself based on an invalid assumption of jurisdiction by the AO and thus, not sustainable in the eyes of law, therefore, the Pr. CIT could not have assumed jurisdiction u/s 263 and validated the said reassessment order by restoring the same to the file of the AO with a direction to reassess the income of the assessee afresh, therefore, set-aside the order passed by the Pr. CIT passed u/s.263 - Appeal of assessee allowed. Issues Involved:Appeal against order passed by Principal Commissioner of Income Tax under Sec. 263 of the Income-tax Act, 1961 for assessment year 2011-12.Analysis:Issue 1: Validity of the Jurisdiction for Reopening the CaseThe assessee filed the return of income for the assessment year 2011-12, declaring an income. The Assessing Officer reopened the case under Sec. 147 based on information about a claimed Long Term Capital Gain (LTCG) from the sale of shares. The Assessing Officer accepted the returned income without making any additions. The Principal Commissioner of Income Tax (Pr. CIT) later found the assessment order erroneous and prejudicial to revenue, citing lack of verification of share transactions. The Pr. CIT set aside the assessment order for reassessment. The Tribunal held that the basis for reopening the case was misconceived as the assessee had disclosed Short Term Capital Gain (STCG) and not LTCG. The Tribunal concluded that the reassessment order was invalid, and the Pr. CIT could not revise it under Sec. 263.Issue 2: Pr. CIT's Revisional JurisdictionThe Tribunal found that the Pr. CIT's revisional jurisdiction under Sec. 263 was not applicable as the reassessment order was based on an incorrect assumption of jurisdiction. The Tribunal referred to precedents and held that an invalid reassessment order cannot be revised. The Tribunal allowed the appeal, quashing the Pr. CIT's order under Sec. 263.Conclusion:The Tribunal allowed the appeal, stating that the reassessment order was based on an invalid assumption of jurisdiction, rendering the Pr. CIT's revision under Sec. 263 unsustainable. The Tribunal set aside the Pr. CIT's order and did not delve into other contentions raised by the assessee, dismissing a general ground of appeal.