2023 (6) TMI 919 - AT - Income Tax

Tribunal restores assessment order, finds jurisdiction assumption erroneous

Shri Jagdeep Bhargava Versus The Pr. C.I.T. Hisar

The Tribunal set aside the Principal Commissioner of Income Tax's assumption of jurisdiction under section 263 of the Income-tax Act, 1961, and restored ... Revision u/s 263 - assessment order framed u/s 143(3) r.w.s 147 as erroneous and prejudicial to the interest of the revenue - HELD THAT:- Assessment was reopened and reasons for reopening the assessment mentioned elsewhere were thoroughly scrutinised and examined by the AO while framing the impugned assessment order. Therefore, the observations of the PCIT that AO passed assessment order without conducting proper enquiry/verifying the facts is baseless and deserves to be set aside. By 'erroneous' is meant contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Where there are two possible views and the AO has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry. Our view is fortified by the decision of CIT vs. Nirav Modi [2016 (6) TMI 1004 - BOMBAY HIGH COURT]. We set aside the order of the PCIT and restore that of the Assessing Officer framed under section 143(3)/147. Decided in favour of assessee. Issues Involved:1. Assumption of jurisdiction under section 263 of the Income-tax Act, 1961.2. Validity of the assessment order dated 29.12.2017 framed under section 143(3) r.w.s 147 of the Act.Summary:1. Assumption of jurisdiction under section 263 of the Income-tax Act, 1961:The appellant challenged the Principal Commissioner of Income Tax (PCIT) for assuming jurisdiction under section 263 of the Act, arguing that the assessment order dated 29.12.2017 was neither erroneous nor prejudicial to the interest of the revenue. The PCIT issued a notice u/s 263, stating that the assessee took accommodation entries amounting to Rs. 1,25,00,000/- and paid a commission of 2.5%. The PCIT contended that the Assessing Officer (AO) did not properly verify these entries, making the assessment order erroneous and prejudicial to the revenue.2. Validity of the assessment order dated 29.12.2017 framed under section 143(3) r.w.s 147 of the Act:The Tribunal examined whether the AO had conducted adequate inquiries and applied his mind while framing the assessment order. The AO had reopened the assessment based on information about accommodation entries and had made specific queries to which the assessee responded with documentary evidence. The Tribunal referred to judicial precedents, including the Hon'ble Supreme Court's decision in Malabar Industrial Co. Ltd., and the Hon'ble Bombay High Court's decision in Gabriel India Ltd., which clarified that an order cannot be termed erroneous unless it is not in accordance with law. The Tribunal concluded that the AO had conducted proper inquiries and that the PCIT's assumption of jurisdiction under section 263 was not justified.Conclusion:The Tribunal set aside the order of the PCIT and restored the assessment order dated 29.12.2017 framed under section 143(3)/147 of the Act, allowing the appeal filed by the assessee. The Tribunal emphasized that the power under section 263 can only be exercised if the assessment order is both erroneous and prejudicial to the interests of the revenue, which was not the case here. The order was pronounced in the open court on 09.06.2023.