2023 (2) TMI 743 - AT - Income Tax

Invalid Invocation of Revisionary Jurisdiction under Income Tax Act: Precedents Upheld, Order Quashed

The tribunal found that the Principal Commissioner invalidly invoked revisionary jurisdiction under section 263 of the Income Tax Act. Citing legal ... Revisionary jurisdiction under section 263 of the Income tax Act - assessment framed under section 143(3)/147 following verification - acceptance of transactions after due verification based on responses to notices under section 133(6) - where Assessing Officer adopts one of the courses permissible in law revision under section 263 is impermissible - prohibition on fishing and roving enquiriesRevisionary jurisdiction under section 263 of the Income tax Act - assessment framed under section 143(3)/147 following verification - acceptance of transactions after due verification based on responses to notices under section 133(6) - where Assessing Officer adopts one of the courses permissible in law revision under section 263 is impermissible - prohibition on fishing and roving enquiries - Validity of invocation of revisionary jurisdiction under section 263 in respect of share subscription of Rs.10,00,000/- received from M/s. Hemlata Creation Pvt. Ltd. - HELD THAT: - The Tribunal found that the Assessing Officer had examined the receipt of share capital by issuing notices and obtaining responses from the assessee and other parties under section 133(6), and subsequently framed the assessment under section 143(3)/147 accepting the genuineness of the share subscription. The Principal Commissioner invoked section 263 on the ground that a notice to one investor was returned unserved, but the assessment record shows that the issue was examined and accepted by the AO after verification. Applying the settled principle that where an Assessing Officer has adopted one of the courses permissible in law (and two views are possible) the order cannot be treated as erroneous and prejudicial to the revenue merely because the Commissioner disagrees, and that revision cannot be used to initiate fishing and roving enquiries, the Tribunal held the revisionary exercise to be invalid. Reliance was placed on the lines of authority that mandate sustaining an AO's permissible view unless it is unsustainable in law, and on the safeguard against using section 263 to reopen concluded inquiries without legal basis. [Paras 6, 7, 8]Revision under section 263 quashed as invalid in respect of the share subscription; assessment upheld as not being erroneous and prejudicial to the interest of revenue.Final Conclusion: The order passed by the Principal Commissioner under section 263 was quashed and the assessee's appeal allowed, the Tribunal holding that the Assessing Officer had adopted a permissible view after due verification and that revision could not be invoked to reopen or to conduct fishing enquiries. Issues:Invalid exercise of revisionary jurisdiction by the Principal Commissioner under section 263 of the Income Tax Act.Analysis:The appeal challenged the order of the Principal Commissioner of Income Tax under section 263 of the Income Tax Act for the Assessment Year 2010-11. The appeal was initially considered time-barred, but due to a Supreme Court decision during the COVID-19 pandemic, the appeal was treated as filed within the limitation period. The only issue raised by the assessee was against the invalid exercise of revisionary jurisdiction by the Principal Commissioner under section 263 of the Act without fulfilling the conditions as envisaged. The facts revealed that the assessment was reopened under section 147 of the Act, focusing on a beneficiary amount received from a company. The Assessing Officer conducted detailed examinations and accepted the genuineness of share capital transactions. However, the Principal Commissioner revised the assessment only concerning the share capital received from one company, citing non-verification due to an unserved notice. The argument presented by the assessee highlighted the evidence provided during the assessment and the failure of the Principal Commissioner to demonstrate inaccuracies in the submitted information. The case involved a thorough examination of the assessment records and the jurisdiction exercised by the Principal Commissioner.Decision:After considering the arguments and legal precedents cited, the tribunal found that the revisionary jurisdiction was invalidly invoked by the Principal Commissioner. The tribunal referenced various decisions, including the Malabar Industries Co. Ltd. case and the Max India Ltd. case, to support the conclusion that the assessment order could not be deemed erroneous unless the view taken by the Assessing Officer was unsustainable in law. Additionally, the tribunal emphasized that the Principal Commissioner cannot initiate proceedings for fishing and roving enquiries in concluded matters. Consequently, the tribunal quashed the order passed under section 263 of the Act, allowing the appeal of the assessee. The judgment was pronounced on 16th December 2022 in Kolkata.