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

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 assessment lacking jurisdiction. The AO had failed to verify share purchase/sale records and demat entries underpinning alleged bogus LTCG, yet accepted the returned income in the reassessment order. Because the reassessment itself was invalid, the Pr. CIT had no power under s.263 to revise or validate it. The revisional order was set aside and the assessee's appeal allowed.

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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 Case
The 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 Jurisdiction
The 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.

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