TaxTMI 
TaxTMI 
2022 (7) TMI 991
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....ting that the twin conditions precedent for invoking Section 263, namely the impugned assessment order must be erroneous and that error must be prejudicial to the interest of the revenue, were not fulfilled in the appellant's case. Further, that the AO either examined the issue at the original assessment stage or his view was one of the possible views and therefore there was no error in the impugned assessment order so as to justify action u/s 263 of the Act. Under the circumstances, the very assumption of power u/s 263 of the Act is unjustified and bad in law and the order passed in pursuance thereof is unjustified and bad in law and the same deserves to be quashed. (3) That on the facts and circumstances of the case and in law, the Ld. PCIT has erred in not appreciating the fact that the AO had passed the assessment order u/s 143(3) of the Act, after verifying, examining and critically & legally analyzing the facts of the appellant's case and the written submissions filed by the appellant along with documentary evidences in support thereof. Thus, the act of the Ld. PCIT c considering the assessment order as erroneous and prejudicial to the interest of the revenue is nothing bu....
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.... u/s 143(3) of the Act. 3. Brief facts of the case are that the assessee is a Private Limited Company engaged in the business of investment in shares, Mutual Fund and financing. The return of income was electronically filed by the assessee on 26.09.2015 for the assessment year 2015-16 declaring total loss at Rs.1,29,496/- The case was selected for scrutiny. Accordingly notices under section 143(2) of the Act dated 23.06.2016 and under section 142(1) dated 20.03.2017 were served upon the assessee. The Assessing Officer during the course of assessment proceedings examined the transactions carried out by the assessee-company for issuing 76,923 numbers of equity shares of Rs.10/- each alongwith share premium of Rs.81/- per share. The Assessing Officer carried out the necessary examination of documents as well as certificate issued by the Chartered Accountant and came to the conclusion that the addition of Rs.50,769/- is called for under the provisions of section 56(2)(viib) of the Act for the excess share issue price received by the assessee and assessed the loss at Rs.78,727/-. 4. Subsequently Ld. Principal Commissioner of Income Tax (in short 'PCIT') examined the assessment record....
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.... of short term loans and advances." 5. During the revisionary proceedings under section 263 of the Act, the assessee filed detailed submissions exhibiting that complete inquiry has been conducted by the ld. Assessing Officer with respect to the alleged issue of share capital. Reliance placed on plethora of judgments wherein it has been held that where the issue raised in show-cause notices has been examined by the Assessing Officer in the light of the relevant facts and circumstances and taken a view permissible under the law, ld. PCIT/CIT cannot assume jurisdiction under section 263 of the Act. 6. However, Ld. PCIT was not satisfied with the submissions made by the assessee. He was of the view that when the assessment order passed by the Assessing Officer is on incorrect assumption of facts and incorrect application of law, a detailed inquiry ought to have been made by the Assessing Officer. Accordingly assessment order dated 14.09.2017 was set aside denovo by the ld. PCIT observing as follows:- "8. I have carefully considered and perused the material available on record and submission made during this proceedings and found that the issue pointed out in the show-cause needs v....
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....r Industrial Co, Ltd. Vs. CIT, 243 ITR 83 (S.C.); (vii) CIT Vs, Hindustan Coca Cola Beverages (P) Ltd. 331 ITR 192(Del.); (viii) CIT Vs. International Travel House Ltd., 194 Taxman 324; (ix) CIT Vs. DLF Power Ltd., 329 ITR 289(Del.); (x) CIT Vs. Eicher Ltd., 294 ITR 310 (De!.); (xi) CIT Vs. Ashish Rajpal, 320 ITR 674 (Del.); (xii) CIT Vs. Rohit Anand, 327 ITR 445 (Del); (xiii)CIT Vs. Gopal Purohit, 228 CTR 582(Bom.); (xiv) CIT Vs. PNB Finance & Industries Ltd, 236 CTR 1 (Delhi)". 9. Per contra, ld. D.R. vehemently argued supporting the detailed finding of the ld. PCIT and the decisions relied therein. It is also contended that the Assessing Officer should have increased the scope of inquiry so as to examine the identity and creditworthiness of the shareholders and genuineness of the transactions. 10. We have heard the arguments of both the sides and also perused the relevant material available on record. In the impugned order under section 263 of the Act, the only issue raised in the show-cause notice is that the Assessing Officer has not conducted detailed inquiry about the transactions of issuing 76923 equity shares of face value at Rs.10/- each and sha....
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....(1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation- In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded." 2. On a bare perusal of the sub section-1 would reveal that powers of revision granted by section 263 to the learned Commissioner have four compartments. In the first place, the learned Commissioner may call for and examine the records of any proceedings under this Act. For calling of the record and examination, the learned Commissioner was not required to show any reason. It is a part of his adminis....
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....dopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue - Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC)".[Emphasis Supplied] 4. Hon'ble Apex Court in the case of CIT vs. Max India Limited as reported in 295 ITR 0282 has held that: " 2. At this stage we may clarify that under para 10 of the judgment in the case of Malabar Industrial Co. Ltd. (supra) this Court has taken the view that the phrase "prejudicial to the interest of the Revenue" under s. 263 has to be read in conjunction with the expression "erroneous" order passed by the AO. Every loss of revenue as a consequence of an or....
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....odged the order of the CIT. [Emphasis supplied] 6. In the light of the provisions of section 263 of the Act and a settled position of law, powers u/s 263 of the Act can be exercised by the Pr. Commissioner/Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and also prejudicial to the interest of the Revenue. 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 Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the Assessing Officer 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 judgment of Hon'ble High Court of Bombay in the case of CIT vs. Nirav Modi, [2016] 71 taxmann.com 272 (Bombay). 7. This view is further supported by the....
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.... CIT still feels that the order is erroneous and prejudicial to the interest of the Revenue, the CIT may pass revisional orders. If, on the other hand, the CIT is satisfied, after hearing the assessee, that the orders are not erroneous and prejudicial to the interest of the Revenue, he may choose not to exercise his power of revision. This is for the reason that if a query is raised during the course of scrutiny by the AO, which was answered to the satisfaction of the AO, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the AO called for interference and revision. In the instant case, for example, the CIT has observed in the order passed by him that the assessee has not filed certain documents on the record at the time of assessment. Assuming it to be so, in our opinion, this does not justify the conclusion arrived at by the CIT that the AO had shirked his responsibility of examining and investigating the case. More so, in view of the fact that the assessee explained that the capital investment made by the partners, which had been called into question by the CIT was duly reflected in the r....
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....e accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power under s 263 is not permitted to substitute his estimate of income in place of the income estimated by the AO. (vii) The AO exercises quasi-judicial power vested in his and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not fee stratified with the conclusion. (viii) The CIT, before exercising his jurisdiction under s. 263 must have material on record to arrive at a satisfaction. (ix) If the AO has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows the claim on being satisfied with the explanation of the assessee, the decision of the AO cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard." 10. Apart from above stated broader principles, one more principle needs to be added in view of the judgment of Hon'ble Delhi High Court in the case of ....
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....rom the available records:- (a) On selection of the assessee's case for scrutiny, notice under section 142(1) dated 04.08.2017 issued and through Point No. 4, the assessee was specifically required to file financial statement, details of receiving large share premium during the year and to furnish party-wise details of share premium providing details of names, addresses, PAN, incometax Ward where shareholders are assessed, number of shares subscribed, face-value, share premium and full particulars of receipts. (b) In the notice under section 142(1) of the Act, the Assessing Officer also asked the assessee to prove the identity, creditworthiness and genuineness of the shareholders and also to furnish market value of the shares applying the method as per the provisions of Rules 11UA of the Income Tax Rules, 1962. (c) Assessing Officer also issued notice under section 133(6) of the Act to the alleged shareholder companies on 23.08.2017 and the same were replied by few shareholders through letter dated 05.09.2017 directly to the Assessing Officer. (d) On 22.08.2017, the assessee filed the reply to the Assessing Officer as called for in the notice issued under section 142(1) of ....