2022 (8) TMI 675 - AT - Income Tax

Assessment Order Finality: Invalid Commissioner Action

M/s. Salarpuria Properties Pvt. Limited, C/o. M/s. Salarpuria Jajodia Versus Principal Commissioner of Income Tax, Central -2, Kolkata

The Tribunal concluded that the assessment order under section 143(3) had attained finality and could not be reopened without incriminating material found ... Revision u/s 263 by CIT - Whether valid assessment order is existed? - HELD THAT:- The assessment order passed under section 143(3) dated 26.03.2013 attained finality. No seized material was found during the course of search with respect to 2010-11. Hence, ITAT has held that in the absence of any seized material, the assessment order passed on 26.03.2013 would not abate. The income of the assessee could be re-examined qua those aspects for which incriminating material was found and seized. Since there was no material with respect to this year, the same item of income cannot be re-appreciated. ITAT has quashed the assessment. We have reproduced the finding recorded by the Tribunal in the appeal against the assessment order passed under section 153A read with section 143(3). The action under section 263 can only be taken if a valid assessment order is existed. Once the foundation has extinguished, there cannot be any order on the basis of assessment proceeding. Therefore, we allow this appeal and quash the impugned order passed by the ld. Commissioner. Decided in favour of assessee. Issues Involved:1. Validity of the assessment order under section 143(3) in light of section 263 of the Income Tax Act.2. Requirement of incriminating material for reassessment under section 153A post-search.3. Jurisdiction of the Commissioner under section 263 following the quashing of the assessment order by ITAT.Issue-Wise Detailed Analysis:1. Validity of the assessment order under section 143(3) in light of section 263 of the Income Tax Act:The assessee filed its return of income for the assessment year 2010-11 under section 139(1) and revised it later. The assessment order under section 143(3) was passed on 26.03.2013. A search was conducted on 15.03.2016, and a notice under section 153A was issued. The assessee filed a return electronically, and the Assessing Officer determined the taxable income at Rs. 55,13,56,830/-. The assessee appealed against this determination, which ultimately reached the Tribunal. The Commissioner, upon reviewing the records, opined that the deduction under section 80IB was allowed without proper enquiry and deemed the assessment order erroneous and prejudicial to the revenue's interest, thus invoking section 263.2. Requirement of incriminating material for reassessment under section 153A post-search:The Tribunal noted that the assessment for the year 2010-11 had attained finality on 26.03.2013, making it an unabated assessment on the date of search. According to established legal positions, additions in an unabated assessment require incriminating material found during the search. The Tribunal found no reference to any incriminating material in the assessment order, and the additions were based on the Assessing Officer's observations during the search. The Tribunal cited several judicial decisions supporting this view and concluded that the additions made without incriminating material could not be sustained. Consequently, the legal and jurisdictional grounds raised by the assessee were allowed.3. Jurisdiction of the Commissioner under section 263 following the quashing of the assessment order by ITAT:The assessee argued that since the assessment order was quashed, the Commissioner had no foundation to assume jurisdiction under section 263. The Tribunal examined section 263, which allows the Commissioner to revise an order if it is erroneous and prejudicial to the revenue's interest. However, it was emphasized that the Commissioner could only act if a valid assessment order existed. Since the ITAT had quashed the assessment order due to the absence of incriminating material, the foundation for the Commissioner's action under section 263 was extinguished. Therefore, the Tribunal concluded that the impugned order by the Commissioner could not stand and allowed the assessee's appeal, quashing the Commissioner's order.Conclusion:The Tribunal's comprehensive analysis determined that the assessment order under section 143(3) had attained finality and could not be reopened without incriminating material found during the search. The Commissioner's action under section 263 was invalidated as it was based on a quashed assessment order, leading to the allowance of the assessee's appeal and the quashing of the Commissioner's order.