2022 (5) TMI 356 - AT - Income Tax

Tribunal quashes order lacking jurisdiction under Section 263 - Assessee prevails

Goodpoint Stockist Pvt. Ltd. Versus PCIT-4, Kolkata

The Tribunal found that the Second Assessing Officer (AO) had conducted a proper enquiry as directed by the First Principal Commissioner of Income Tax ... Revision u/s 263 - Addition u/s 68 - Pursuant to the 1st revisionary order passed by the Ld. Pr. CIT in the second-round of reassessment, the 2nd AO framed the re-assessment order dated 19.08.2016 by accepting the returned income under section 143(3) /263 - 2nd Pr. CIT jurisdiction to interfere with the order of the AO even if it happens to be second assessment order or 3rd assessment order - whether the Second Ld Pr. CIT can again interfere in the re-assessment order framed by the AO which was pursuant to the first revisional order passed by the First Ld. Pr. CIT u/s. 263 of the Act, when the subject matter was the same and the re-assessment order of the second AO has merged with the First Revisional order of First Ld. Pr. CIT? - HELD THAT:- We find that the first AO has issued notice u/s 133(6) of the Act pursuant to which all the seven (7) share subscribers have replied along with all documents requisitioned by him which was found by the Ld. First PCIT in the assessment folder. So we safely presume that all the seven (7) share subscribers having replied to the notice of AO u/s. 133(6) of the Act to discharge the proof of identity, genuineness of the transaction. In the second round, the AO had acknowledged to have gone through the ITR, audited accounts, details of directions, share trading registered office, details of increase of share capital, Form 2 & Form 5, shareholders list, bank a/c details and stated to have examined the same. Thereafter, the second AO has clearly stated that he has verified the documents and verified the documents submitted by them to prove their respective identity, creditworthiness & genuineness of the share capital & premium. We are of the considered opinion that the AO after verification of their PAN/CIN/ITR, has not drawn any adverse opinion or doubted the identity of the share applicants which view of AO is a possible view in the light of the documents referred to and also by applying the presumption in section 114 of Indian Evidence Act 1872, we presume that the quasi-judicial act of the second AO have been regularly performed. Second AO has conducted enquiry in respect of subject matter i.e. share capital and premium collected by the assessee-company. Therefore, the finding of Second Pr. CIT that the Second AO has not conducted enquiry is incorrect and is flowing from suspicion only. We note that the assessee has discharged its onus, as required by the law in force in this AY 2012-13, then if the Ld. Pr. CIT was not satisfied with the enquiry conducted by second AO, then he ought to have called for whatever additional documents/materials or issued summons or issued notices and collected those facts which according to Second Ld. Pr. CIT, the AO omitted to collect and then demonstrated that those actions/documents which he collected in that process gave result to a different finding of fact which will turn upside down the claim of the assessee and thus able to show that the actions/omission of AO in conducting the investigation was erroneous, which unfortunately is not the case before us. Since the assessee company has discharged its onus as discussed supra, and still if the Second Pr. CIT had to find the order of Second AO erroneous for lack of enquiry or for not collecting the entire facts, then the Second Pr. CIT ought to have called for the additional facts which he thinks that the Second AO has not collected from the assessee or the shareholders and then explained in his impugned order as to what effect those additional documents would have made on the second assessment order/reassessment order or in other words the impact on the decision making process of framing the second assessment order due to the failure of second AO’s omission to collect the additional documents. However, we note that the Second Pr. CIT has not carried out any such exercise or even spelled out in his impugned order, which all documents the second AO failed to collect for considering the total facts; and even if we presume he has conducted such an exercise, then he has not been able to bring out any adverse factual finding to upset the view of Second AO. So we find no merit in the vague allegation of second Pr. CIT that the second AO has not collected the full facts necessary to decide the issue of share capital & premium. The second Ld. Pr.CIT, again cannot rake-up the same subject matter without the second Ld. Pr.CIT in the second revisional order spells out where the error happened to second AO as an investigator or adjudicator, which exercise the Second Ld. Pr.CIT has not done. So the second Ld. Pr. CIT cannot be permitted to again ask the AO to start the investigation in the way he thinks it proper on the very same subject on which merger has taken place by virtue of the order of First Ld. Pr. CIT. And if this practice is allowed, then there will be no end to the assessment proceedings meaning no finality to assessment proceedings and that is exactly why the Parliament in its wisdom has brought in safe-guards, restrictions & conditions precedent to be satisfied strictly before assumption of revisional jurisdiction. Be that as it may be, as discussed above, we find that the Second Ld. Pr. CIT without satisfying the condition precedent u/s 263 of the Act has invoked the revisional jurisdiction (second time), so all his actions are ab initio void. Ld. CIT(A) has made a bald statement that the AO’s assessment order attracts Explanation 2(c) u/s. 263 of the Act. However, he failed to spell out in his impugned order how the action of AO while framing the assessment order is not in accordance to any order, direction or instruction issued by the Board under section 119 of the Act. So, the deeming fiction as envisaged in Explanation (2) u/s. 263 of the Act cannot be used to interfere with the order of AO. This action of Ld. Pr. CIT is bad for non-application of mind. - Decided in favour of assessee. Issues Involved:1. Jurisdiction of the Principal Commissioner of Income Tax (Pr. CIT) under Section 263 of the Income Tax Act.2. Validity of the reassessment order passed by the Assessing Officer (AO) under Section 143(3)/263.3. Compliance with the directions given in the first revisional order.4. Examination of share capital and premium received by the assessee.5. Application of Explanation 2(c) to Section 263(1) of the Income Tax Act.Detailed Analysis:1. Jurisdiction of the Principal Commissioner of Income Tax (Pr. CIT) under Section 263 of the Income Tax Act:The main grievance of the assessee is against the action of the Second Pr. CIT invoking his revisional jurisdiction under Section 263 of the Act. The assessee contends that the Second Pr. CIT did not satisfy the requisite conditional precedent as stipulated under Section 263 and therefore acted without jurisdiction, rendering the order bad in law.2. Validity of the reassessment order passed by the Assessing Officer (AO) under Section 143(3)/263:The reassessment order dated 19.08.2016 passed by the Second AO was pursuant to the first revisional order dated 03.06.2016. The Second AO accepted the returned income after verifying the identity, creditworthiness, and genuineness of the share subscribers. The Second Pr. CIT, however, found this order to be erroneous and prejudicial to the interest of revenue due to a lack of enquiry.3. Compliance with the directions given in the first revisional order:The First Pr. CIT in his order dated 03.06.2016 directed the AO to carry out a proper examination of the books of account and bank accounts of the assessee and the investors and to examine the source of share application, identity of the investor, and its genuineness. The Second AO complied with these directions by issuing statutory notices and verifying the documents submitted by the assessee and the share subscribers.4. Examination of share capital and premium received by the assessee:The Second AO verified the identity, creditworthiness, and genuineness of the share subscribers by examining the documents such as PAN details, CIN details, audited annual reports, ITR acknowledgments, and bank statements. The Second AO did not draw any adverse inference against the share capital and premium collected by the assessee. The Second Pr. CIT, however, concluded that there was a lack of enquiry by the Second AO without bringing any material to rebut the findings of the Second AO.5. Application of Explanation 2(c) to Section 263(1) of the Income Tax Act:The Second Pr. CIT invoked Explanation 2(c) to Section 263(1) of the Act, which deems an order to be erroneous if it is not made in accordance with any order, direction, or instruction issued by the Board under Section 119. However, the Second Pr. CIT did not specify how the AO's assessment order was not in accordance with any such order, direction, or instruction issued by the Board.Conclusion:The Tribunal concluded that the Second AO had conducted the necessary enquiry and verification as directed by the First Pr. CIT. The Second AO's view was a plausible one and in line with judicial precedents. The Second Pr. CIT's order was found to be without jurisdiction as it did not satisfy the conditions precedent under Section 263 of the Act. Consequently, the Tribunal quashed the impugned order of the Second Pr. CIT and allowed the appeal of the assessee.