2022 (12) TMI 441 - AT - Income Tax

Tribunal quashes tax authority's order for exceeding jurisdiction, emphasizes AO's authority

The tribunal held that the Principal Commissioner of Income Tax (PCIT) exceeded jurisdiction under Section 263 of the Income Tax Act, 1961, by quashing ... Revision u/s 263 - As per CIT, AO has failed to examine and verify the brought forwarded loss - HELD THAT:- From the papers on record, it is clear that AO had conducted enquiries with the assessee in respect of alleged brought forward loss. PCIT cannot substitute his opinion for that of the AO. It is also seen that ld. PCIT has not conducted any re-verification or prima facie investigation on his own to come to a conclusion that the order passed by the AO is erroneous to the interest of revenue. He also failed to notice that enquiries were made by the AO. The law on this issue is clear. See M/S. ANINDITA STEELS LTD. [2022 (2) TMI 397 - CALCUTTA HIGH COURT] We hold that the order passed u/s 263 is bad in law. Therefore, we quash the order passed by the ld. PCIT u/s 263 of the Act as bad in law and allow the appeal of the assessee. Issues Involved:1. Jurisdiction of the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, 1961.2. Validity of the reassessment proceedings initiated under Section 148 of the Income Tax Act, 1961.3. Examination and verification by the Assessing Officer (AO) during reassessment.4. Adequacy of enquiry by the AO and the PCIT's authority to revise the AO's order.5. Procedural correctness and factual basis of the PCIT's order under Section 263.Detailed Analysis:1. Jurisdiction of the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, 1961:The appellant contested that the PCIT's order dated 16th March 2020, passed under Section 263 of the Income Tax Act, 1961, was without jurisdiction, against law and facts of the case, and therefore liable to be quashed. The tribunal observed that the PCIT's order was based on the same reasons as the reassessment initiated under Section 148, which had already been examined by the AO. The tribunal held that the PCIT cannot substitute his opinion for that of the AO when the AO had conducted adequate enquiries.2. Validity of the reassessment proceedings initiated under Section 148 of the Income Tax Act, 1961:The appellant argued that the reassessment proceedings initiated under Section 148 and the resultant order passed under Section 143(3)/147 were based on non-existing and unlawful grounds. The tribunal noted that the reasons recorded for reopening the assessment and the reasons for initiating proceedings under Section 263 were the same. The tribunal found that the AO had conducted enquiries and obtained relevant documents before completing the reassessment, making the reassessment valid.3. Examination and verification by the Assessing Officer (AO) during reassessment:The appellant claimed that the AO had examined the issues by specifically calling for information from the assessee during the reassessment. The tribunal confirmed that the AO had indeed conducted enquiries and obtained relevant documents, as evidenced by the reasons recorded under Section 148(2) of the Act. The AO had not made any addition in the reassessment order, indicating that the AO had applied his mind and conducted adequate enquiries.4. Adequacy of enquiry by the AO and the PCIT's authority to revise the AO's order:The appellant argued that the AO had made adequate enquiries and that the PCIT could not revise the AO's order on the ground of inadequate enquiries. The tribunal agreed, stating that inadequate enquiry cannot be a ground for exercising revisionary power under Section 263. The tribunal cited the Hon'ble Jurisdictional High Court's decision in PCIT vs Anindita Steels Ltd., which held that the PCIT cannot substitute his opinion for that of the AO and must conduct independent verification or investigation to justify the revision.5. Procedural correctness and factual basis of the PCIT's order under Section 263:The appellant contended that the PCIT's order was based on factually incorrect allegations and that no independent enquiry was conducted by the PCIT. The tribunal found that the PCIT had not conducted any re-verification or prima facie investigation to conclude that the AO's order was erroneous and prejudicial to the interest of revenue. The tribunal held that the PCIT's order was bad in law and quashed it.Conclusion:The tribunal concluded that the PCIT's order under Section 263 was bad in law and quashed it. The appeal of the assessee was allowed, and the tribunal pronounced the order in the open court on 30.11.2022.