Loading judgment…
Facts
The assessee received share premium and project advances. The AO treated the share premium as an accommodation entry and unexplained cash credit. The PCIT initiated revision proceedings u/s 263 against the assessment order while the appeal was pending before the CIT(A).
Held
The Tribunal held that the PCIT's invocation of revision jurisdiction u/s 263 of the Act was illegal and bad in law, as the matter was already pending before the CIT(A). However, the Tribunal found that the PCIT was justified in invoking revision u/s 263 for the loan received from Aloke Bhatnagar due to inadequate inquiry by the AO.
Key Issues
Whether the Principal Commissioner of Income Tax was justified in invoking revisionary powers u/s 263 when the appeal was pending before the CIT(A)? Whether the AO conducted adequate inquiry regarding the loan from Aloke Bhatnagar?
Sections Cited
143(3), 68, 263, 133(6), 131, 54F, 54
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, DELHI BENCH “B”: NEW DELHI
Before: SHRI M. BALAGANESH
O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in AY 2012-13, arises out of the order of the Pr. Commissioner of Income Tax (Appeals), New Delhi [hereinafter referred to as ‘ld. Pr. CIT(A)’, in short] dated 27.03.2017 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 26.03.2015 by the Assessing Officer, ITO, Ward-5(3), New Delhi (hereinafter referred to as ‘ld. AO’).
The only effective issue to be decided in this appeal is as to whether the ld PCIT was justified in invoking revision jurisdiction u/s 263 of the Act both on law and on merits in the facts and circumstances of the instant case.
We have heard the rival submissions and perused the material available on record. The return of income for AY 2012-13 was electronically Page | 1 filed by the assessee company on 27.09.2012 declaring total income of Rs. 9,010/-. The ld AO in the scrutiny assessment noted that a sum of Rs. 1,08,00,000/- was received by the assessee company during the year under consideration from 3 parties on account of share premium. The assessee furnished the basic preliminary documents of all the investors before the ld AO. In order to verify the genuineness of the transaction, notice u/s 133(6) of the Act was issued by the ld AO on 10.02.2015 to all the 3 investors. Since, no replies were filed by those companies, summons were issued u/s 131 of the Act to those investors. One investor M/s White Collar Management Services Pvt. Ltd responded to the notice issued u/s 133(6) of the Act by furnishing the requisite details. On perusal of those details, the ld AO noted that the creditworthiness of the that entity was not satisfactory. Thereafter, the assessee was directed to produce the Directors of the investors company which stood un-complied by the assessee. Accordingly, the ld AO proceeded to treat the receipt of share premium from 3 investors in the total sum of Rs. 1,08,00,000/- as accommodation entries and treated the same as unexplained cash credit u/s 68 of the Act in the hands of the assessee while completing the assessment framed u/s 143(3) of the Act on 26.03.2015. The assessee preferred an appeal before the ld CIT(A) on 27.04.2015. The assessee furnished further documents before the ld CIT(A). A remand report was called for by the ld CIT(A) from the ld AO. On 11.11.2016, the ld AO furnished the remand report and sought an enhancement of income for adding the share capital on account of amounts received along with share premium. The ld CIT(A) rejected the proposal of enhancement from the ld AO and did not proceed to make any addition on account of share capital received by the assessee from the very same 3 investors. \
When the appeal of the assessee was pending before the ld CIT(A), the ld PCIT assumed revision jurisdiction and issued show cause notice u/s 263 of the Act on 08.12.2017 to the assessee for treating the order of the ld AO as erroneous inasmuch as it is prejudicial to the interest of the revenue. The assessee gave its reply but the ld PCIT directed the ld AO to add the receipt of share capital taken earlier from the three investors as unexplained cash credit u/s 68 of the Act since share premium alone was added by the ld AO.
At the outset, we find that the issue of addition made on account of share premium was pending before the ld CIT(A). Since, the very same issue was pending, the same could be subject matter of enhancement by the ld CIT(A) suo moto. When the issue was pending before the ld CIT(A), the ld PCIT cannot invoke revision jurisdiction u/s 263 of the Act to address the very same issue. This has been adjudicated by the Hon’ble Madras High Court in the case of Smt. Renuka Philip Vs. ITO reported in 409 ITR 567 (Mad). In that case also, show cause notice u/s 263 of the Act was issued by the Administrative Commissioner when the appeal was pending before the CIT(A). The same is the case before us herein. The relevant operative portion of the order of Hon’ble Madras High court is reproduced herein:-
“21. With regard to the merits of the case, the learned counsel for the assessee referred to a decision of the Division Bench of this Court in Dr.P.K.Vasanthi Rangarajan v. Commissioner of Income Tax [(2012) 252 CTR 0336], wherein, the Hon'ble Division Bench held that there is no inhibition in the assessee claiming the benefit of investment made in four flats thereby gaining the benefit under Section 54F of the Act. The Court took note of the decision in TCA No. 656 of 2005 dated 04.01.2012. However, we are not examining the merits of the matter at this juncture since, we are only called upon to answer the Substantial Question of Law with regard to the assumption of jurisdiction of the Commissioner under Section 263 of the Act. The power under Section 263 of the Act is not exercisable under certain http://www.judis.nic.in circumstances. In this regard, we refer to Section 263(1) explanation 1(c), which reads as follows: “Revision of orders prejudicial to revenue 263(1)... (a)...
(b)... (c)Where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal [filed on or before or after the 1st day of June, 1988], the powers of the Commissioner under this Sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal.”
The above explanation makes it clear that when the appeal is pending before the Commissioner, the exercise of jurisdiction under Section 263 of the Act is barred. The Commissioner in the order dated 14.03.2012 states that the appeal pertains to the claim made by the assessee under Section 54 of the Act and it has got nothing to do with the order passed by the Assessing Officer under Section 54F of the Act. The said finding rendered by the Commissioner is wholly unsustainable, since the assessee went on appeal against the re-assessment order dated 31.12.2009 stating that his claim for deduction under Section 54 http://www.judis.nic.in of the Act should be accepted.
Therefore, in the process of considering as to what relief the assessee is entitled to, the Assessing Officer held that the assessee is entitled to claim deduction under Section 54F of the Act and assigned certain reasons for that. Therefore, the larger issue was pending before the Commissioner of Appeals, and in such circumstances, the Commissioner could not exercise power under Section 263 of the Act on account of the statutory bar. Therefore, on this ground also, the assumption of jurisdiction under Section 263 of the Act was wholly erroneous.”
Similar was the view taken by the Hon’ble Allahabad High Court in the case of CIT Vs. Vam Resorts and Hotels Pvt. Ltd reported in 418 ITR 723 (All).
Respectfully following the aforesaid judicial precedents, we hold that invocation of revision jurisdiction u/s 263 of the Act by the ld PCIT by adding share capital receipt from 3 investors is unsustainable in the eyes of law and is hereby quashed.
With regard to loan received from Aloke Bhatnagar amounting to Rs. 19,82,176/-, the ld PCIT observed that the ld AO had not examined the veracity of the said loan in the course of assessment proceedings, thereby making his order erroneous inasmuch as it is prejudicial to the interest of the revenue warranting invocation of revision jurisdiction u/s 263 of the Act. In this regard, the ld AR before us drew our attention to page 49 of the Paper Book being the letter dated 15.01.2015 filed before the ld AO during the course of scrutiny assessment proceedings wherein, the complete details of secured loan together with their confirmation was duly filed before the ld AO. This goes to prove that enquiries were made by the ld AO qua this transaction. However, the ld PCIT in page 4 para 6 of his order had stated that the confirmation had not been signed by the lender which fact has been ignored by the ld AO. Ld PCIT also observed that the lender had shown income of Rs. 6,69,180/- in its return filed for AY 2012- 13 and hence, no proper enquiry was made by the ld AO in this regard. The fact that the confirmation furnished by the assessee before the ld AO and the same not being signed by the lender which has been noticed by the ld PCIT in page 4 para 6 of his order, could not be controverted by the ld AR before us by producing contrary evidence. Even though the ld AO had indeed sought to effect an enquiry with regard to loan from Aloke Bhatnagar during the course of assessment proceedings, he had indeed overlooked the fact that confirmation furnished by the assessee did not bear the signature of the lender. This goes to prove that the ld AO had merely accepted the details furnished by the assessee without carrying out any examination/ investigation on the documents furnished by the assessee which makes his order erroneous inasmuch as it is prejudicial to the interest of the revenue. This is where the provisions of Explanation 2 to Section 263 of the Act kicks in. Hence, in our considered opinion, we hold that ld PCIT was duly justified in invocation of revision jurisdiction u/s 263 of the Act qua the issue for loan receipt from Aloke Bhatnagar. The ld PCIT had merely treated the order of the ld AO as erroneous and prejudicial to the interest of the revenue to this effect and had directed the ld AO to make proper enquiries and verification with regard to the said party. We do not find any infirmity in the order of the ld PCIT in this regard. Accordingly, the plea of the assessee in this regard is hereby dismissed.
With regard to project advance of Rs. 1,16,19,000/- reflected in the balance sheet of the assessee under the head ‘other current liabilities’, ld AO vide order sheet entry dated 27.02.2015 raised query in the course of scrutiny assessment proceedings seeking details and confirmations of current liabilities from the assessee. The assessee filed confirmation as sought for before the ld AO. The parties from whom project advance have been received are duly assessed to income tax and the money received through regular banking channels. The ld AO on being satisfied with the reply given by the assessee had taken one of the possible view in the matter and accepted to the contentions of the assessee by not making any addition thereon in the assessment. This has been sought to be revised by the ld PCIT by invoking revision jurisdiction u/s 263 of the Act. In fact, the very same confirmations were even filed by the assessee before the ld PCIT. The ld PCIT noted in para 7 of his order that no enquiry or whatsoever were made by the ld AO with regard to project advance is factually incorrect as is evident from the order sheet dated 27.02.2015. It is a fact that enquiries were indeed made by the ld AO in this regard and it is also a fact that assessee had furnished the details together with the confirmation from the parties. These confirmations as stated earlier were even furnished before the ld PCIT. Hence, we have no hesitation to hold that the ld PCIT had not bothered to look into the confirmation furnished by the assessee which is part of the records and erred in stating factually incorrect statement that no enquiries were made by the ld AO in this regard. Accordingly, we hold that invocation of revision jurisdiction u/s 263 of the Act by ld PCIT qua this issue is illegal and quashed.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 16/07/2025.