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Income Tax Appellate Tribunal, “RANCHI” BENCH: RANCHI
Before: Shri Rajesh Kumar & Shri Sonjoy Sarma]
Per Rajesh Kumar, AM: These are the appeals preferred by the assessee against the separate orders of the Ld. Principal Commissioner of Income Tax, Central-Patna[hereinafter referred to as ‘ Ld. PCIT’] even dated 8.2.2021 passed u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as the Act) for the assessment year 2010-11 and 2011-12.
First we will adjudicate in AY 2010-11. The only issue raised in the various grounds of appeal by the assessee is against the revisionary jurisdiction exercised u/s 263 of the Act by the ld. PCIT revising assessment framed u/s 153A read with Section 143(3) dated 28.12.2017 which was an unabated
Facts in brief are that an assessment u/s 143(3) read with 153A of the Act was framed on 28.12.2017 accepting the returned income after a search operation u/s 132(1) of the Act on the assessee was conducted on 20.11.2015. The above being an unabated assessment year and there being no incriminating materials found and seized during the course of search, the returned income was accepted and assessment was framed accordingly. The Ld. PCIT, upon perusal of assessment records and other documents relating to the said group of assesse, observed that the assessee had received share application money of Rs.4,40,00,000/- from two companies namely M/s kalakunj Tradecom (P) Ltd. and M/s Sutanuti Vyapaar (P) Ltd. during the financial year relevant to AY 2010-11. The Ld. PCIT observed that the assessee was in receipt of bogus share application money and share premium from the said two companies as per the facts available on the assessment record. According to Ld. PCIT, the AO has failed to examine the investment and issue of share capital and share premium and thus has not verified the identity, creditworthiness of the investors and genuineness of the transactions which has rendered the said assessment order prima facie erroneous insofar as prejudicial to the interest of the revenue. Accordingly a notice u/s 263 of the Act was issued on 26.11.2020 calling upon the assessee to show cause as to why the assessment so framed should not be set aside and revised which was duly replied by the assessee. Finally the Ld. PCIT after rejecting the reply of the assessee wherein the assessee submitted that the assessment so framed u/s 153A read with Section 143(3) of the Act , the issue of share application/share premium were duly examined by the AO, however since there was no incriminating material found during the course of search operation and this being an unabated assessment on the date of search, therefore the AO did not have the occasion to make the addition on account of share premium/ share application money as it is settled legal position that in case of unabated assessment year , the addition can only be made on the basis of incriminating material found during the course of search. The reply of the assessee did not find favour with the AO and ld PCIT finally revised the assessment by asking the AO to frame the assessment
3 & 21/Ran/2019 AYs: 2010-11 & 2011-12 Sriram Power & Steel Pvt. Ltd. afresh after examining the said issues and recompute the income of the assessee after making necessary enquiry, vide order dated 8.12.2021 passed u/s 263 of the Act.
The Ld. A.R vehemently submitted before us that it is not in dispute that assessment in the instant year was unabated on the date of search as time limit for issuing notice u/s 143(2) has expired and the AO framed the assessment u/s 143(3) vide order dated 28.12.2017 in accordance with the provision of Section 153A accepting the returned income as there was no incriminating material found during the course of search. The Ld. A.R argued that if any addition has to be made that could only have been made on the basis of incriminating material seized during the course of search and not otherwise. However since there was no seized material and therefore in an abated assessment year no addition was made by the AO. Therefore the assessment framed by the AO is neither erroneous nor prejudicial to the interest of the revenue. The Ld. Counsel for the assessee submitted that in order to invoke the jurisdiction u/s 263 of the Act the assessment framed by the AO has to be erroneous as well as prejudicial to the interest of the revenue and in absence of non-satisfaction of even one of the two conditions the Ld. PCIT cannot invoke the jurisdiction u/s 263 of the Act. The ld AR, if defense of his arguments, relied on the decision of Hon’ble Supreme court in the case of Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83 (SC). The Ld. A.R submitted that even in the assessment framed u/s 143(3) read with 153A where the AO has limited jurisdiction to make addition based on incriminating material it is not shown by the Ld. PCIT as to how it is erroneous and prejudicial to the interest of the revenue while exercising the revisionary jurisdiction cancelling the said assessment. The Ld. A.R in defense of his arguments referred and relied on the decision of the co-ordinate Bench in the case of Shri Satendra Kumar Jalan & Ors vs. PCIT in & 15/Ran/2021 for AY 2012-13 dated 30.08.2022 wherein the similar issue has been decided in favour of the assessee by quashing the revisionary order passed u/ s 263 of the Act. The Ld. A.R therefore prayed that following the said ratio laid down by the co-ordinate bench, the order passed by the Ld. PCIT may kindly be quashed by allowing the appeal of the assessee.
4 & 21/Ran/2019 AYs: 2010-11 & 2011-12 Sriram Power & Steel Pvt. Ltd.
On the other hand the Ld. D.R relied on the order of Ld. PCIT by submitting that it was apparent from the assessment records that the assessee has received share application money to the tune of Rs. 4,40,00,000/- which has remained unverified due to the lapse on the part of the AO thereby rendering the assessment framed u/s 143(3) read with 153A of the Act as erroneous insofar as prejudicial to the interest of the revenue. The Ld. D.R therefore prayed that the revisionary jurisdiction was correctly exercised by the ld. PCIT and may kindly be upheld by dismissing the appeal of the assessee.
We have heard the rival submissions and perusing the material on record. The undisputed facts are that a search action u/s 132(1) of the Act was conducted on Devkabai Velji group of cases in Ranchi on 20.11.2015 and the assessee was also covered under search being part of the said group. Accordingly notice u/s 153A of the Act was issued on 01.03.2017 calling upon the assessee to furnish various details and information. It is also undisputed that this is an unabated assessment year which has attained finality and there was no incriminating material found during the course of search relating to the instant assessment year. Accordingly the AO computed the assessment and framed the assessment u/s 143(3) read with 153A vide order dated 28.12.2017 accepting the returned income. Therefore, in our considered view, there is no infirmity/mistake/error in the assessment framed neither the assessment is prejudicial to the interest of the revenue. The Ld. PCIT has invoked the jurisdiction u/s 263 in a mechanical manner without application of mind by not appreciating the fact that what the AO could not do under the Act , that can not be done by the ld PCIT. We failed to understand as to why the Ld. PCIT invoked the jurisdiction u/s 263 of the Act to set aside the assessment in respect of those items which the AO could not have added to the income of the assessee in absence of any incriminating material. In other words, if the AO has no jurisdiction to make any addition then the Ld. PCIT also in the revisional exercise of power cannot direct the AO to examine the said item of income. In our opinion, the assessment framed by the AO is in accordance with the provisions of the Act considering the fact that it is an unabated assessment year. The case of the assessee is squarely covered by the decision of Co-ordinate Bench in the case of Satendra Kumar Jalan & Ors. (supra) wherein the similar issue has been decided in Satendra Kumar Jalan & Ors. (supra) wherein the similar issue has been decided in Satendra Kumar Jalan & Ors. (supra) wherein the similar issue has been decided in favour of the assessee. The operative part is reproduced as under: The operative part is reproduced as under:
“8. After hearing the rival parties and perusing the material available on record, the he rival parties and perusing the material available on record, the he rival parties and perusing the material available on record, the undisputed facts as coming out of the records are that the assessee was subjected to search on undisputed facts as coming out of the records are that the assessee was subjected to search on undisputed facts as coming out of the records are that the assessee was subjected to search on 22.07.2015. Simultaneously Sahu Group of companies at Ranchi was also subjected to search 22.07.2015. Simultaneously Sahu Group of companies at Ranchi was also subjected to search 22.07.2015. Simultaneously Sahu Group of companies at Ranchi was also subjected to search u/s 132(1) of the Act. The assessment was framed u/s 153A read with Section 143(3) of the s 132(1) of the Act. The assessment was framed u/s 153A read with Section 143(3) of the s 132(1) of the Act. The assessment was framed u/s 153A read with Section 143(3) of the Act vide order dated 22.12.2017 in the case of the assessee accepting the return by AO as Act vide order dated 22.12.2017 in the case of the assessee accepting the return by AO as Act vide order dated 22.12.2017 in the case of the assessee accepting the return by AO as there was no incriminating material found during the course of search in the there was no incriminating material found during the course of search in the there was no incriminating material found during the course of search in the light of the fact that this being an unabated assessment year. We note that the audit party from A.G. Office that this being an unabated assessment year. We note that the audit party from A.G. Office that this being an unabated assessment year. We note that the audit party from A.G. Office raised audit objection that there were unexplained investments to the tune of Rs. raised audit objection that there were unexplained investments to the tune of Rs. raised audit objection that there were unexplained investments to the tune of Rs. 1,06,25,000/- which are not recorded in the books of accounts of which are not recorded in the books of accounts of the e and are taxable u/s 69 the e and are taxable u/s 69 of the Act. The audit party noted from the examination of balance sheet as on 31.03.2011 of of the Act. The audit party noted from the examination of balance sheet as on 31.03.2011 of of the Act. The audit party noted from the examination of balance sheet as on 31.03.2011 of M/s Krishna Nutrition (I) Pvt. Ltd. PAN No. AAOCS9282P which belonged to Sahu group of M/s Krishna Nutrition (I) Pvt. Ltd. PAN No. AAOCS9282P which belonged to Sahu group of M/s Krishna Nutrition (I) Pvt. Ltd. PAN No. AAOCS9282P which belonged to Sahu group of cases that investment of Rs. 1,06,50,000/ cases that investment of Rs. 1,06,50,000/- was made by the assessee by purchasing made by the assessee by purchasing 10,65,000/- equity shares whereas investment shown by the assessee in its books of accounts equity shares whereas investment shown by the assessee in its books of accounts equity shares whereas investment shown by the assessee in its books of accounts as on 31.03.2011 was only to the extent of Rs. 25,000/ as on 31.03.2011 was only to the extent of Rs. 25,000/-. The Audit party further noted that the . The Audit party further noted that the assessee has furnished the bank a assessee has furnished the bank account for the period commencing from 08.09.2011 to ccount for the period commencing from 08.09.2011 to 31.03.2012 with opening balance of Zero and closing balance as on 28.03.2012 of Rs. 31.03.2012 with opening balance of Zero and closing balance as on 28.03.2012 of Rs. 31.03.2012 with opening balance of Zero and closing balance as on 28.03.2012 of Rs. 10,767.50/-. The said audit objection was found to be incorrect by the AO who happened to be . The said audit objection was found to be incorrect by the AO who happened to be . The said audit objection was found to be incorrect by the AO who happened to be Assistant Commissioner of Assistant Commissioner of Income Tax, Central Circle-2, Ranchi and he addressed two 2, Ranchi and he addressed two letters dated 30.01.2018 and letter dated 02.08.2019 to Deputy Director (Audit) explaining letters dated 30.01.2018 and letter dated 02.08.2019 to Deputy Director (Audit) explaining letters dated 30.01.2018 and letter dated 02.08.2019 to Deputy Director (Audit) explaining investments of Rs. 1,06,25,000/ investments of Rs. 1,06,25,000/- were fully accounted for in the books of accounts and the were fully accounted for in the books of accounts and the said objection by the audit party is based upon the incorrect appreciation of facts on record. n by the audit party is based upon the incorrect appreciation of facts on record. n by the audit party is based upon the incorrect appreciation of facts on record. For the sake ready reference the copies of the said letters are extracted below: For the sake ready reference the copies of the said letters are extracted below: For the sake ready reference the copies of the said letters are extracted below:
We note that the ld. PCIT invoked the jurisdiction u/s 263 of the Act by holding t We note that the ld. PCIT invoked the jurisdiction u/s 263 of the Act by holding t We note that the ld. PCIT invoked the jurisdiction u/s 263 of the Act by holding the assessment framed by the AO u/s 153A read with Section 143(3) of the Act was erroneous assessment framed by the AO u/s 153A read with Section 143(3) of the Act was erroneous assessment framed by the AO u/s 153A read with Section 143(3) of the Act was erroneous based on the audit objection on the ground that the investments to the tune of Rs. based on the audit objection on the ground that the investments to the tune of Rs. based on the audit objection on the ground that the investments to the tune of Rs. 1,06,25,000/- remained unexplained and unverified whereas the facts on record testi remained unexplained and unverified whereas the facts on record testi remained unexplained and unverified whereas the facts on record testifies to the contrary. We have examined the documents/records and found that there is no mistake in contrary. We have examined the documents/records and found that there is no mistake in contrary. We have examined the documents/records and found that there is no mistake in assessment order as framed by the AO u/s 153A read with Section 143(3) of the Act and assessment order as framed by the AO u/s 153A read with Section 143(3) of the Act and assessment order as framed by the AO u/s 153A read with Section 143(3) of the Act and 9 & 21/Ran/2019 AYs: 2010-11 & 2011-12 Sriram Power & Steel Pvt. Ltd. exercise of jurisdiction u/s 263 by PCIT is done in a mechanical manner without application of mind. So on this score only, the order passed u/s 263 of the Act is not sustainable. Even considering the fact of present assessment year as unabated on the date of search, the there was no incriminating material found against the assessee during the course of search, there is not mistake in the order. We do not find any reason as to how the assessment framed by the AO u/s 153A read with 143(3) of the Act is erroneous and prejudicial to the interest of the revenue. In our opinion, the assessment has been framed by the AO strictly in accordance with the provisions of the Act with respect to unabated assessment years where no incriminating material found during the course of search as noted above. We are of the considered view that no addition could be made in an unabated assessment year unless the incriminating material is found during the course of search. The case of the assessee find support from the following cases namely PCIT vs. Meeta Gutgutia (2018) 96 taxmann.com 478 (SC), CIT vs. Gurinder Singh Bawa (2017) 79 taxmann.com 398 (Bombay), CIT vs. Deepak Kumar Agarwal (2017) 86 taxmann.com 3 (Bombay) and CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 58 taxmann.com 78 (Bombay).In view of these facts and decisions as cited above, we hold that the assessment framed by the AO is correct and is in consonance with the provisions of Act and ld. PCIT has exercised jurisdiction invalidly u/s 263 of the Act. Accordingly we quash the order u/s 263 of the Act and restore the assessment framed by the AO. The appeal of the assessee is allowed.” In view of the present facts and circumstances and the decision of the Co-ordinate Bench has extracted above, we are inclined to quash the revisionary order passed by the Ld. PCIT by allowing the appeal of the assessee.
ITA No. 21/Ran/2021 for AY 2011-12.
Issue raised in this appeal is similar to one as decided by us in . Accordingly our decision in would, mutatis mutandis, apply to this appeal as well and consequently the appeal of the assessee is allowed by quashing the revisionary order passed u/s 263 of the Act.
In the result, both the appeals of the assessee are allowed.
Order is pronounced in the open court on 31st March, 2023