TaxTMI 
TaxTMI 
TaxTMI 
2020 (5) TMI 360
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....issioner of Income Tax ("PCIT") under section 263 of the Income-tax Act, 1961 ('the Act') is beyond jurisdiction, illegal and bad in law and is liable to be quashed. 2. That the Pr. CIT erred in initiating proceedings under section 263 of the Act on the basis of an draft order which was passed in contravention of the mandate as per the High Court direction vide order dated 06.12.2016 and hence was void ab initio and as such no proceedings could have been initiated on the basis of an invalid/illegal order. 3. That on the facts and circumstances of the case and in law, the order passed by the PCIT u/s 263 of the Act is a premature order, in as much was is no order capable of being revised. 4. That without prejudice to the above grounds the AO ought to have considered that once a reference u/s 92CA(1) of the Act was made in the original proceedings to the Transfer Pricing Officer, it was incumbent upon him to pass a draft assessment order instead of passing a final assessment order dated 30.03.2019 failing which the entire assessment proceedings and all consequential proceedings are invalid, non-est and void ab initio. 5. That on the facts and circumstances of the case and in ....
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....were disposed of by issuing direction u/s 144C (5) of The Income Tax Act 1961 on 31/12/2013. Final order u/s 144C read with section 143 (3) of the act was passed on 16/1/2014 with an assessed income of INR 13221335445/-. 04 Subsequently, reasons were recorded by the learned Assistant Commissioner of Income Tax, Circle - 1, Gurgaon and case was reopened. Assessee sought reasons recorded. Same were provided on 29/6/2016.Against which assessee filed an objection on 19/8/2016. Objections were disposed of on 25/11/2016. Assessee aggrieved with the initiation of reassessment proceedings filed the petition before Honourable Punjab and Haryana High Court in civil writ petition number 25150/2016. Per order, honourable High Court held that reassessment proceedings may continue and if the order passed by the assessing officer is adverse to the petitioner, it shall not be implemented till further orders. Honourable High Court clarified that passing of the order would not prejudice the maintainability of petition including any of the contentions raised therein. 05 Based on this, learned assessing officer passed an order u/s 143 (3) read with section 147 of The Act on 30/12/2016 determining th....
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....initiated under section 263 of the act are without jurisdiction, illegal and bad in law. Since the reassessment proceedings under section 147 of the Act itself are only without jurisdiction, illegal and bad in law, the consequential revision of the proceedings under section 263 of the act is also without jurisdiction, illegal and bad in law. It was further stated that since the reassessment order under section 147 sought to be revised, itself is pending before Punjab and Haryana High Court for adjudication and as per the interim order of the honourable High Court the same should not be 'implemented'. Therefore, the order which cannot be implemented cannot be held to erroneous and prejudicial to the interest of revenue as it does not exist at all. 08 Thereafter, on 30 March 2019, the learned Principle Commissioner Of Income Tax passed order under Section 263 of the Income Tax, 1961, as under: "Order under section 263 of the Income Tax Act, 1961 In this case, the assessee furnished its return for the A.Y.2009-10, and completed at an income of Rs. l592,51,32,093/-. The case was selected for scrutiny through CASS. Assessment in this case was completed under section 143(3) r.w.s. 1....
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....care. In the reply, it is also submitted that the assessment order is neither erroneous nor prejudicial to the interest of revenue and therefore the notice is invalid, illegal. The reply also contains various case laws, which have been considered carefully, it is found that the facts of the case laws are not exactly same as that of the instant case. Hence, having considered the case laws; reply of the assessee and having gone through the record of the assessee regarding the legal and factual contentions on the validity of taking action u/s 263 of the Income Tax Act, 1961. In this regard, it is pertinent to keep in view the following issues and observation on the basis of which findings are being made. On going through the provisions of section 263(1) of the Income Tax Act, 1961, It is clear that any order passed by the Assessing Officer can be revised if it is found to be erroneous in so far as it is prejudicial to the interest of revenue. It is, therefore, clear that the provisions of the Income Tax Act. 1961 gives authority u/s 263 of the Income lax Ac. 1961 to revise any order passed by the Assessing Officer. With regard to the issue of examining of records, on the basis....
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....nuine. In this regard, it may also be noted that the Hon'ble Delhi High Court in Gee Vee Enterprises v. Addl. CIT [1975] 99ITR 375 (Delhi) has observed as under:- "The reason is obvious. The position and function of the Income-lax Officer is very different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a civil court in the absence of un\ rebuttal The civil court is neutral It simply gives decision on the basis of the pleading and evidence which comes before it. The Income-tax Officer is not only an adjudicator hut also an investigator. He cannot remain passive in the face of a ret inn which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts slated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to he given to the word "erroneous" in section 263 emerges out of this context. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when.circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to ma....
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....he act on 30.12.2016. He submitted that reassessment proceedings were initiated for separate reasons. He referred to the reasons recorded under Section 148 of the Act dated 29.06.2016 and submitted that the claim of deduction u/s 80IA and 80IB which talks that captive power plant does not qualify as an 'industrial undertaking.'Further, no separate books of accounts were maintained. He, therefore, submitted that reopening of the assessment was made for these purposes, whereas the revision is proposed of the reassessment order on altogether different grounds, which were not part of the reasons for reopening of the assessment. He submitted that as the issues on which revision is sought were not at all the reasons for which assessment was reopened. Therefore limitation for passing order u/s 263 of the act on the issues which were not part of reassessment proceedings, should run from the original order passed u/s 143 (3) of the act dated 31- 12-2013. He submitted that the above issue is squarely covered by the decision of the Hon'ble Supreme Court in CIT V AlagendranFinance Ltd[293 ITR 1]. He further relied upon the decision of the honourable Delhi High Court in case of CIT versus Bhara....
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....i. giving it a reasonable opportunity of hearing or iii. to produce evidence in their defense or iv. to cross examine witnesses before the commission or v. put forth the representation of the assessee. Therefore, the Commissions violated the principles of natural justice. For this proposition he referred to the decision of the honourable High Court in order dated 9/7/2019 in case of Sesa Sterlite Ltd versus ACIT where a similar position has been taken and held that issuance of notice under section 147 read with section 148 on the basis of the Shah Commission report is illegal. VII. Even otherwise, he submitted that the notice issued by the learned Principal Commissioner of Income Tax did not grant proper opportunity of hearing to the assessee. He stated that notices were issued on 27/2/2019 which was revised on 8/3/2019, for which the time limit was expiring on 31/3/2019, where the assessee was asked to furnish its reply by 6/3/2018. He submitted that while passing the order under section 263 of The Income Tax Act there is no reference on the issue raised by The Principal Commissioner of Income Tax while issuing the revision proceedings order. VIII. He further referred ....
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....nquiry report recommendations the order so passed by the AO has been erroneous and prejudicial to the interest of the revenue. iv. He submitted though in certain paragraph there are certain references which do not relate to the case of the assessee but that does not invalidate the order passed by the learned principal Commissioner of income tax. He submitted that there may be some typographical errors, but clear-cut finding in the order about lack of inquiry by AO shows that there is proper application of mind by PCIT. v. He further referred to the introduction of explanation[2] in section 263 of the income tax act with effect from 1 June 2015 wherein it has been held that when an order is passed without making enquiries or verification which should have been made is an order erroneous insofar as it is prejudicial to the interest of the revenue. He therefore submitted that in the present case there is no enquiry made by the learned assessing officer on the commission's report and therefore there is no infirmity in the order of the learned principal Commissioner of income tax and revising that order. vi. With respect to the issue not raised in 147 proceedings, he submitted tha....
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....rved that the assessee company has claimed deduction u/s 801A of the Income Act, 1961 to the extent of Rs. 419,30,71,772/- and u/s 80IA of the Income Tax Act, 1961 to the extent of Rs. 16,16,10,227/-. In the assessment order U/s 144C r.w.s. 143(3) of the Income Tax Act, 1961 was passed on 16/1/2014 the claim of deduction has been allowed to the extent of Rs. 270,37,96,655/-. However, during assessment proceedings for A.Y. 2011-12 the Assessing Officer found that the Assessee does not qualify for deduction u/s 801A and 801B of the Income Tax Act, 1961. Similarly during proceedings U/s 263, the Commissioner of Income Tax Act, Hisar also noted that on merits the assessee company-does not qualify for deduction u/s 80IA and 801B of the Income Tax Act, 1961. 3. During the assessment proceedings for AY 2011-12, it has been noticed that the assessee owns a captive power plant at Raigarh. This captive power plant has been established for sole purpose of un-interrupted supply of electricity to the other manufacturing units. There has been no intention of earning profits from the captive power plant. This fact has been ascertained from the applications filed by the assessee to the Chhatisga....
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.... the rest of the units. 6. It is worth mentioning that the Commissioner of Income Tax, Hissar and the A.O. in A.Y. 2005-06 and A.. 2011-12, respectively, conducted detailed enquiries and reached the conclusion that the assessee is not entitled to deduction u/s 801A and 801B of the Income Tax Act, 1961. 7. In view of the factual position deduction u/.s 801A 801B of the I.T. Act is not allowable to the assessee in this year also. Excess claim of deduction u/s 801A and 801B of the I.T. act has been wrongly claimed and allowed. Hence I have reason to believe that the income of the assessee to the extent of Rs. 270,37,96,648/- chargeable to tax has escaped assessment because of the failure on the part of the assessee do disclose its fully and truly and al the material facts necessary for its assessment. Notice U/s 148 of the I.T. Act is required to be issued. Sd/- (Zahid Parvez) Asstt. Commissioner of Income Tax Circle-1, Gurgaon 13 Consequently, the ld AO passed order u/s 147 rws 143(3) of the act dated 30-12-2016. The impugned order passed by the ld AO was subject to revision in order passed by the ld PCIT dated 30-3-2019 u/s 263 of the act. 14 Admittedly in the present case....
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....:- "15. We, therefore, are clearly of the opinion that keeping in view the facts and circumstances of this case and, in particular, having regard to the fact that the CIT exercising its revisional jurisdiction reopened the order of assessment only in relation to lease equalization fund which being not the subject of the reassessment proceedings, the period of limitation provided for under sub-s. (2) of s. 263 of the Act would begin to run from the date of the order of assessment and not from the order of reassessment. The revision jurisdiction having, thus, been invoked by the CIT beyond the period of limitation, it was wholly without jurisdiction rendering the entire proceeding a nullity." 17 Recently Hon madras High court in INDIRA INUDSTRIES vs. PRINCIPAL COMMISSIONER OF INCOME TAX( 2018) 102 CCH 0078 ( ChenHC) (2018) 169 DTR 0171 (Mad), (2018) 305 CTR 0314 (Mad) has also held that when the reopened assessment was for the disallowance of diversion of interest and subsequent revision proposed is for other issues such as bad debts written off to the tune of Rs. 33.06 lakhs and administrative, selling and distribution expenses claimed by the Assessee to the tune of Rs. 3.23 cror....