2024 (3) TMI 883 - AT - Income Tax

PCIT cannot exercise revision jurisdiction under Section 263 twice on same issue after reassessment accepts assessee's claim

The ITAT Kolkata held that PCIT cannot exercise revision jurisdiction u/s 263 for a second time on the same issue merely because the reassessment resulted ... Revisionary jurisdiction under section 263 - Erroneous and prejudicial to the interests of revenue - Duty to make or cause to be made such enquiry under section 263 - Deeming fiction in Explanation 2(c) to section 263 - Finality of assessment and doctrine of merger - Requirement of specific and demonstrable defects before exercising revisionRevisionary jurisdiction under section 263 - Duty to make or cause to be made such enquiry under section 263 - Requirement of specific and demonstrable defects before exercising revision - Finality of assessment and doctrine of merger - Erroneous and prejudicial to the interests of revenue - Validity of the second revisional order passed by the subsequently posted Principal Commissioner under section 263 setting aside the reassessment order dated 19.08.2016 - HELD THAT: - The Tribunal held that the second exercise of revisionary jurisdiction was not justified. The first revisional order had set aside the original assessment for de novo enquiry and the Assessing Officer, in the subsequent assessment dated 19.08.2016, examined the evidence called for by the Assessing Officer (ITRs, audited accounts, bank statements, Form-2/Form-5, shareholders' details and a write-up justifying large share premium) and recorded verification of books and bank statements. Once the assessee had furnished point wise replies and documentary evidence, the Principal Commissioner was obliged, before cancelling or modifying assessment, to examine those replies and form a prima facie objective opinion; he could not rest on a general view that 'more enquiries' ought to have been made without specifying defects in the evidence or demonstrating how additional enquiries would have altered the result. The Tribunal emphasised that section 263 casts a duty to 'make or cause to make such enquiry as he deems necessary' which means enquiries necessary to form the opinion, not a carte blanche to reopen concluded enquiries on the basis of subjective dissatisfaction. The deeming provision in Explanation 2(c) to section 263 (as amended w.e.f. 01.06.2015) was held inapplicable to the assessment year in question, and in any event the impugned order did not identify any non compliance with Board directions or specific infirmity in the material on record. The Tribunal further observed that revisional jurisdiction cannot be exercised repeatedly on the same subject matter simply because a later assessment accepts the assessee's claim; allowing such practice would defeat finality of assessment and run counter to the doctrine of merger where directions of the first revising authority had been complied with. In the absence of specific and strong grounds pointing out what enquiries were lacking and how those lacunae would have changed the finding, the second revisional order was held to be vitiated for want of application of mind and failure to satisfy the condition precedent for invoking section 263. [Paras 13, 17, 18, 20]Second revisional order setting aside the assessment dated 19.08.2016 quashed; appeal allowed.Final Conclusion: The Tribunal allowed the appeal, quashed the impugned second revisionary order under section 263 insofar as it set aside the reassessment dated 19.08.2016, and held that the Principal Commissioner had not satisfied the condition precedent for exercise of revisional jurisdiction; the assessment stands restored. Issues Involved:1. Condonation of Delay2. Validity of Revision Order u/s 2633. Examination of Share Capital and Premium4. Jurisdiction of PCIT in Second RevisionCondonation of Delay:The appeal was time-barred by 1722 days. The assessee explained that the impugned order dated 12.03.2019 was not served upon them, and they only became aware of it after receiving a subsequent assessment order. The delay was further justified by the Covid Pandemic. Considering these submissions, the delay in filing the present appeal was condoned.Validity of Revision Order u/s 263:The assessee contested the validity of the revision order passed by the PCIT. The original assessment u/s 143(3) was framed by the Assessing Officer (AO) on 24.03.2015, making an addition of Rs. 14,26,00,000/- under section 68 as unexplained income. The PCIT observed that the AO made this addition without examining the evidence provided by the assessee. Consequently, the PCIT set aside the original assessment order for de novo assessment, directing the AO to specifically examine the source of share application money, identity of investors, and genuineness of the transaction.Examination of Share Capital and Premium:The AO, following the PCIT's direction, re-examined the details and evidences furnished by the assessee and concluded that the assessee had successfully discharged its onus. However, the second PCIT again set aside the second assessment order, holding that the AO failed to make proper and independent enquiries. The PCIT emphasized that any order subsequent to u/s 263 must favor the revenue, either by enhancing the assessed income or maintaining it with enhanced enquiries.Jurisdiction of PCIT in Second Revision:The Tribunal found that the exercise of second revision jurisdiction by the PCIT on the same issue was not justified. The Tribunal noted that the original scrutiny assessment was carried out on the issue of 'large share premium received,' and the AO had verified the necessary details and evidences furnished by the assessee. The Tribunal emphasized that merely because the assessment resulted in acceptance of the assessee's claim, it cannot be a ground for exercising revision jurisdiction for the second time. The Tribunal held that there must be finality to the proceedings, and the assessment cannot be kept open in perpetuity.Conclusion:The Tribunal quashed the impugned order of the PCIT, holding that the second revision jurisdiction was exercised without justification. The appeal of the assessee was allowed.