SHRI FATEH CHAND CHINDALIA,KOLKATA vs. ITO, WARD 40(1), KOLKATA

1. For that the ld. PCIT erred in invoking the provisions of section 263 when the assessment completed u/s 143(3)/147 on 26.12.2018 was neither erroneous nor prejudicial to the interest of revenue.

For that the assessment for the impugned assessment year which was completed u/s 143(3)/147 on 26.12.2018 was reopened for specific reasons which were explained to the AO and therefore the provisions of section 263 were not applicable to the said assessment.

The brief facts of the case are that the original assessment proceedings were completed in the case of the assessee by way of scrutiny assessment u/s 143(3) of the Act vide order dated 26.02.2014. Thereafter, the assessment was reopened u/s 147 read with section 148 of the Act on the report of the investigation wing that the assessee has made investment in penny stock shares of Global Capital Markets Ltd. on 18.11.2010 for a total consideration amounting to Rs.7,50,000/-. The said investment was not reflected in the return of income and that prima facie, this amount was treated as unexplained investment. During the reassessment proceedings, the assessee explained the source of the aforesaid investment in the shares and the Assessing Officer accepted the explanation that the source of the investment in the said shares was from the bank account of the assessee. Therefore, the Assessing Officer completed the reassessment u/s 147 read with section 143(3) of the Act vide order dated 28.12.2018. Thereafter, the ld. PCIT invoked his revision jurisdiction u/s 263 of the Act and held that apart from the investment in Global Capital Markets Ltd., the assessee during the year Assessment year: 2011-12 Shri Fateh Chand Chindalia had shown capital gains from the sale of shares of M/s Tuni Textiles Ltd. also, which the Assessing Officer did not examine during the original assessment proceedings u/s 143(3) of the Act and further that the same was not subject matter of investigation under the reassessment proceedings u/s 147 of the Act. The ld. PCIT, therefore, held the order dated 28.12.2018 passed u/s 147/143(3) of the Act was erroneous and prejudicial to the interest of revenue and the Assessing Officer has failed to examine the transaction relating to capital gains in the scrip of M/s Tuni Textiles Ltd.

Being aggrieved by the said order of the PCIT, the assessee has come in appeal before us. 5. We have heard the rival contentions and gone through the record. At the outset, the ld. counsel for the assessee has submitted that firstly the reassessment order passed u/s 147 of the Act was itself bad in law as the reopening in this case was done after four years from the end of the relevant assessment year. That since the original assessment was carried out u/s 143(3) of the Act, the reopening could not have been done by the Assessing Officer in the absence of any failure on the part of the assessee to disclose fully and truly of material facts necessary for assessment. That in this case, all the investments made by the assessee in the Global Capital Markets Ltd. were duly disclosed by the assessee and there was not any failure on the part of the assessee to fully and truly disclose all the material particulars, therefore, the reopening itself was bad in law. However, during the reassessment proceedings, the assessee duly furnished the source of investment in the said Global Capital Markets Ltd., and hence, the Assessing Officer did not make any Assessment year: 2011-12 Shri Fateh Chand Chindalia addition in this respect. The ld. counsel has further relied upon the decision of the Hon’ble Bombay High Court in the case of ‘CIT vs. Jet Airways Ltd. 331 ITR 236 (Bom)’, wherein, the Hon’ble High Court has held that where income originally believed by the Assessing Officer to have escaped assessment, but ultimately found to not to have escaped assessment, then it is not open to the Assessing Officer to independently assess other incomes. Therefore, even otherwise, reassessment order of the Assessing Officer cannot be held to be erroneous on the ground that the Assessing Officer did not examine the other income relating to the capital gains in the scrip of M/s Tuni Textiles Ltd. when the Assessing Officer did not make any addition in respect of reason/subject-matter for which the reopening was done in the case of the assessee.

Further, in this regard, the ld. CIT-DR has produced on record the comments of the ld. PCIT dated 13.07.2022, whereby, the ld. PCIT has recorded that there was a revenue audit objection that the transaction made by the assessee in respect of shares of M/s Tuni Textiles Ltd. were not duly examined in the assessment carried out u/s 143(3) vide order dated 26.02.2014 and further that this transaction was not part of the reasons recorded in the reopened assessment proceedings.

The aforesaid comments of the PCIT vide letter dated 13.07.2022 itself reveals that the PCIT has not applied his independent mind rather the impugned revision proceedings have been initiated on the basis of revenue audit objection. In our view, the audit party has no right to interfere in the quasi-judicial proceedings to make an objection as to in what mode or manner, the Assessing Officer should pass an assessment order and what examination ought to be carried out by him in the Assessment year: 2011-12 Shri Fateh Chand Chindalia