Tribunal quashes order lacking jurisdiction under Section 263 - Assessee prevails

The Tribunal found that the Second Assessing Officer (AO) had conducted a proper enquiry as directed by the First Principal Commissioner of Income Tax (Pr. CIT). The Tribunal held that the Second Pr. CIT's order lacked jurisdiction as it did not meet the conditions precedent under Section 263 of the Income Tax Act. Therefore, the Tribunal quashed the Second Pr. CIT's order and ruled in favor of the assessee.

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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.

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