TaxTMI 
TaxTMI 
2021 (11) TMI 498
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....ed to pass the assessment order de novo after making enquiries on the points set out in the notice which was already examined and considered during the original assessment proceedings concerning AY 2016-17. The assessee has challenged the assumption of jurisdiction by the PCIT under Section 263 of the Act on the ground that the Assessment Order under revision is neither erroneous nor prejudicial to the interest of the revenue. 3. Briefly stated, the assessment in the instant case was framed under Section 143(3) of the Act vide order dated 28.12.2018 by the Assessing Officer whereby the total income of the assessee was assessed at Rs. 8,96,515/-. Thereafter, in exercise of jurisdiction under Section 263 of the Act, the case record of the assessment so made was called by the Revisional Commissioner. On its appraisal, the PCIT observed that the impugned assessment order is erroneous insofar as it is prejudicial to the interest of the Revenue. A show-cause notice dated 08.03.2021 (signed on 09.03.2021) was issued to the assessee in this regard seeking compliance through e-mail inexplicably on or before 17.02.2021, i.e. prior to the issuance of notice itself. The personal hearing was....
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....Tribunal. 6. While the Revenue has supported the revisional action in the absence of adequate enquiries on the points recorded by the PCIT, the learned Counsel for the assessee made extensive submissions and assailed the revisional action of the PCIT assertively. The Ld. Counsel submitted that the revisional order passed by the PCIT suffers from the vice of arbitrariness and lack of application of mind on the oral and written submissions putforth & evidences adduced in its rebuttal. It was alleged that directions were given summarily. It was further contended that the order of the PCIT also suffers from lack of proper opportunity deserved in this regard as can be seen from the date of issue and time made available to assessee for compliance thereon. On a broader reckoning, the learned Counsel claimed that the revisional directions are bad in law in the absence of any perceptible error shown in the assessment order sought to be revised, which may cause prejudice to the interest of the revenue. We shall deal with the issue based submissions advanced before us at the appropriate place hereinafter. 7. We have carefully considered the rival submissions and perused the revisional o....
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....ther case of the assessee in the alternative that the revisionary powers have been exercised by PCIT only on the basis of the lender company being classified by the SEBI as a shell company coupled with some adversarial statement of one Shri Amit Kumar Kedia. It is vociferously contended that both these facts which are the foundation for entertainment of adverse beliefs were not made available on the record at the time of assessment, but appears to have come on record afterwards. The PCIT purportedly in possession of such so called information, has neither provided the information received from SEBI nor the statement of Shri Amit Kumar Kedia. The Assessee was denied the valuable rights of ascertaining the objectivity and correctness of the so called information. The valuable right of cross-examination of such a third party was thus naturally denied despite requests. It was thus contended that in the absence of the assessee being privy to such adverse material, the action against the assessee cannot be invoked under any circumstances. As further submitted, the lender is a closely held co. and not listed and it is a matter of examination to understand as to how the SEBI has implicated....
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.... extra-ordinary nature and inherently subjective, are outside the scope of revisional proceedings and may, at best, arise only at the time of assessment. 8.5 It was next submitted that, the direction no. 4 although vague like other former directions, the repayment of loans and interest is sought to be verified under S. 69C of the Act. In this regard it was contended that it is difficult to visualize as to how the repayment of existing loans which is normal incidence has caused prejudice to the revenue. It was further contended that where the repayment of loans and interest exp thereon are already recorded in the books, S. 69C is non-starter and can not be invoked. 8.6 It was submitted that all the 4 vague and non-descript directions of the PCIT in relation to transaction with GTPL suffers of vice of lack of application of mind and wholly wrong appreciation of facts and law. The directions given to AO to reframe the assessment these counts are inherently and patently opposed to mandate of provisions of S. 263 of the Act. 9. As evident, the facts narrated on behalf of the assessee speak for itself and does not require any serious elaboration. It is trite that section 68 cann....
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....d no perceptible occasion to examine the entries relating to other year having no bearing on the assessment of this year. It thus cannot be said that the Assessing Officer lacked in pragmatism and reasonableness of a prudent person instructed in law in conducting enquiry on facts which he was neither privy to nor had any impact on the assessment of the year in question. 12. At this juncture, a pertinent legal question also has cropped up on interpretation of mandate available under S. 263 read with Explanation 1 & Explanation 2 appended thereto. The interplay and inter-connect between these Explanations have been examined in assessee's own case in ITA No. 21/RPR /2021 order dt.22/10/2021 concerning AY 2015-16 in identical factual matrix. The relevant para is extracted there-from for ready reference. 13.1 To begin with, Explanation 2 deems the order passed by the AO to be erroneous in so far as prejudicial to the interest of revenue in certain situations noted therein. We are presently concerned with clause (a) thereto. Clause (a) to Explanation (2 ) confers powers on the revisional authority under Section 263 where the order is passed without making inquiries or verific....
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....y in terms of Explanation 2 or (ii) where revisional authority discovers fresh incriminating material after the subject order is passed even without attributing delinquency on the part of AO owing expanded meaning assigned to the expression ' record' in Explanation 1. 13.3 In our opinion, a subtle but real distinction between the manner of exercise of revisional powers arise here. Whereas, the template of Explanation- 2 itself have been read down and sweeping remit to the AO for fresh enquiries in an unbridled exercise have been discouraged by the Courts, without revisional authority himself undertaking some basic and minimal enquiries; the second situation, in our view, calls for even greater degree of circumspection. In the instance case, where the failure to make deeper enquiries are not attributable to AO per se having regard to the fact that so called adverse material has come to the light only after the completion of the assessment order, it is ostensible that the sacrosanct principles of natural justice in relation to such new adverse material has not been observed at the stage of framing the assessment order. Thus an obvious incidental question would arise towards ....
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.... exercise of powers in a nonchalant and routine manner. The reasons are not far to seek. The issues raised in the show- cause notice are understood to be ' rebuttable' and thus the order of the revision without considering the counter- explanation of the assessee could not be validated. Conceivably, the burden on revisional authority with reference to some fresh information surfacing after passing of an order is relatively far greater. 14. In the background of nuanced understanding of law codified in S. 263, we observe that the Assessee has vociferously pleaded before PCIT in the first instance that the so called l ist of shell co. by SEBI implicating lender (a privately held group co.), statement of some third party witness alleging such a privately managed company to be a shell company and all other material coming to the notice of deptt., which is basis for allegation of order being erroneous, must be confronted and made available to Assessee. Such material were admittedly never confronted to the assessee despite specific request. 14.1 Pertinent here to observe that while it is fairly settled that substantive power enshrined in the Act cannot be ordinarily held....
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....e capacity of a revisional authority qua the new material but was required to perform the task of AO in tandem and discharge quasi-judicial function independently. The PCIT has failed to do so. Neither the purported evidence collected from SEBI were confronted nor the cross examination of adversarial statement was provided. The opportunity contemplated under S. 263 is thus rendered illusory and merely an empty formality resulting in miscarriage of justice in contravention of expresses intendment of law. 13. Looking from any angle, the directions towards verification of loan transactions are unsustainable in law and deserve to be quashed. The directions no. 1-4 are thus set aside. 14. Point no.5 of the directions concern applicability of Section 43CA in respect of sale deed alleged to be executed below stamp duty value. It is the case of the assessee that.. (a) the case was properly examined by the AO and the facts relating to transactions were duly reported in the Tax Audit Report; (b) In page no. 119 of the paper-book, the assessee has given the details of transactions covered by Section 43CA and the cases where the difference is more than 10% in the value ....