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Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad
Before: Shri Rama Kanta Panda & Shri K.Narasimha Chary
O R D E R Per Shri Rama Kanta Panda (A.M.): This appeal filed by the assessee is directed against the order dated 16.03.2021 passed u/s. 263 by the Learned Principal Commissioner of Income Tax -2, Hyderabad relating to A Y 2012-13.
Facts of the case, in brief, are that the assessee is a domestic company engaged in the business of Retails & manufacturing of jewelry. It filed its return of income declaring total income of Rs. 49,97,390/- on 08.09.2012 which was processed u/s 143(1) on 21.02.2013. Subsequently, the AO reopened the assessment by recording reasons as per provisions of section 147. The reasons to believe which was put up before the Ld.PCIT-2 for approval and which has been reproduced by the AO in the body of the assessment order read as under:-
2 JVR Retails Pvt.Ltd. “ Information was received from the Asst.Director of Income- tax(Inv), Unit-2(3), Kolkata that M/s. Balmiki Suppliers, a proprietor ship firm maintain current account number 4002201100172. Bank of India with Bhovanipur Branch, Kolkata, M/s.Radhe Hardware, a sole proprietor ship firm maintain current account number 401320110000133, Bank of India with Manicktolla Branch, Kolkata and M/s. Airobic Distributors a proprietor ship firm maintain current account number 40022011000177. Bank of India with Bhovanipur Branch, Kolkata. These bank accounts are deposited with cash below threshold limit of Rs.10 lakhs frequently. The cash so deposited are immediately transferred through layers of bank accounts of shell companies to the beneficiary entities or directly to the entities. One of the beneficiary identified is M/s. JVR Retails Pvt.Ltd. which has taken benefit of Rs.1,65,00,000/- through bank accounts by routing money. The modus operandi is that the aforesaid beneficiary have brought unaccounted money in the books via money laundering through banking channel. The information received has been analysed and the fund trail reveals that beneficiaries are routing their cash through layers of bank accounts into their books of account One of the beneficiary for Rs.1,65,00,000/- is M/s. JVR Retails Pvt.Ltd., being assessed with this Circle. On verification of record, it is seen that the assessee has filed Return of Income for the assessment year 2012-13 on 08.09.2012 and processed u/s. 143(1) dtd. 21.02.2013. Thus, the issue has not been verified in any subsequent proceedings. As discussed in the preceding paras, the assessee has routed its cash of Rs.1,65,00,000/-through different bank accounts of entry operators/shell companies and brought the same into its books of account. Therefore, I have reason to believe that an amount of Rs.1,65,00,000/- has escaped assessment within the meaning of sec 147(b) of the I.T.Act, 1961 The information vital for the determination of total income/loss was not furnished by the assessee which resulted in failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Therefore, there is escapement of income due to failure on the part of the assessee within the purview of provision of section 147 of the I.T.Act. I have therefore, reason to believe that an amount of Rs.1,65,00,000/- has escaped assessment within the meaning of section 147(b) of the I.T.Act. In this case more than four years have lapsed from the end of assessment year under consideration. However, this case is within six years from the end of the assessment year under consideration. Hence, proposal is put up for the approval of the Pr.CIT-2, Hyderabad.”
3 JVR Retails Pvt.Ltd. 3. The ld.PCIT vide his letter No.Pr.CIT-2/148/2018-19 dated 29.03.2019 gave his approval. Accordingly, notice u/s. 148 was issued on 29.03.2019. The assessee filed the return of income declaring total income of Rs.49,97,389. The AO completed the assessment u/s. 143(3)/147 on 27.06.2019 determining the total income of the assessee at Rs.2,14,97,390/- by making addition of Rs.1,65,00,000/- as unexplained investment u/s. 68 of the I.T.Act.
The ld.PCIT on examination of the assessment records of the company noted that during the course of assessment proceedings, the AO made addition of Rs.1,65,00,000/- which was brought into the books of accounts of the company in the form of preference share capital in the name of Skylark Commodeal Pvt.Ltd, a Kolkata based shell company, on the ground that the assessee failed to prove the creditworthiness of the loan creditor and genuineness of the transaction. However, as per the balance sheet for the FY 2011-12, the share capital of the company has increased from Rs. 3,42,070/- to Rs.4,85,67,070/. He observed from the Notes to the balance sheet of V.R.Sareeniketan Silks & Jewels Pvt.Ltd., which is the earlier name of the assessee company, that Skylark Commodeal Pvt.Ltd had been allotted preference share capital in the assessee company to the extent of Rs.4,82,25,000/- (4,82,250 shares of Rs.100 each). Thus, the actual amount flown into the company is Rs.4,82,25,000/- and not Rs.1,65,00,000/-. The information forwarded by ADIT, Kolkata is a piece of information indicating accommodation entries taken by the assessee company through bogus transactions. According to the PCIT, the AO should have enquired into the entire preference share capital of Rs.4,82,25,000/- during the assessment proceedings u/s. 147. Since Skylark Commodeal Pvt.Ltd was found to be a shell company lacking credible sources, therefore, the entire preference
4 JVR Retails Pvt.Ltd. share capital of Rs.4,82,25,000/- should have been brought to tax as unexplained cash credits u/s. 68 of the I.T.Act.
He, therefore, was of the opinion that the assessment order dated 27.06.2019 passed by the AO u/s 147/143(3) of the Act is erroneous in so far as it is prejudicial to the interest of the revenue since the AO has completed the assessment without application of mind and proper appreciation of facts available on record. He, therefore issued a show cause notice u/s. 263 of the I.T.Act asking the assessee to explain as to why the order passed by the AO should not be set aside or revised.
5.1 The assessee in response to the same submitted that since the AO has already taken a view, the ld.PCIT/CIT cannot revise the order u/s. 263 by taking another view. Further, the assessment was reopened only for the purpose of verification of Rs.1,65,00,000/- and the amount of Rs. 4,82,25,000/- was not a subject matter of reassessment before the AO. Therefore, on this issue also, the ld.PCIT cannot invoke jurisdiction u/s. 263 of the I.T.Act. For the above proposition, the assessee relied on various decisions.
5.2 On merit, it was argued that the assessee company has received money from Skylark Commodeal Pvt.Ltd. through bank account towards the allotment of preference shares for which Skylark Commodeal Pvt.Ltd has made application for private placement on 29.03.2012 and subsequent to the receipt of money through banking channels and application of private placement, shares of the assessee company have been allotted to the Skylark Commodeal Pvt.Ltd. The assessee submitted the Return of Allotment in Form 2 submitted before Ministry of Corporate Affairs and requested to accept the same and drop the proceedings.
5 JVR Retails Pvt.Ltd.
However, the ld.PCIT was not satisfied with the arguments advanced by the assessee. He observed that during the financial year, relevant to A.Y. in question, the assessee allotted preferential shares to the extent of 4,82,250 @ Rs.100/- per share on private placement by receiving an amount of Rs.4,82,25,000/-. The Investigation Wing, Kolkata have made extensive enquiries in respect of financial transactions made through M/s Skylark Commodeal Pvt. Ltd, which revealed amounts from various companies which are treated as Shell Companies. It also concluded that the assessee-company is the ultimate beneficiary and received the amounts in the guise of share capital. During the assessment proceedings, the AO has concluded that the transactions between the assessee-company & M/s Skylark Commodeal Pvt. Ltd have failed the test of probability and affirmed that mere documenting the transaction will not render it genuine since they are established to be make-believe. Thus, the AO while completing the assessment concluded that the fund has been sourced from different accounts of shell companies to the account of Skylark Commodeal Pvt. Ltd to give the transaction a colour of genuineness in the form of share capital and treated the share capital received as unexplained income u/s 68 of the Income tax Act. However, while doing so, the AO has erroneously treated only the share capital amount at Rs.1 ,65,00,000/- as non-genuine instead of Rs.4,82,25,000/- as pointed out above. Since the AO has omitted to apply the facts of his findings to the correct amount of Rs.4,82,25,000/- instead of only Rs.1,65,00,000/- during the re-assessment proceedings, therefore, he held that the order passed u/s 143(3) r.w.s. 147 by the AO is erroneous and prejudicial to the interests of revenue. Accordingly, he set aside the assessment order passed for A Y 2012-13 with a direction to the AO to pass the assessment order afresh in accordance with law after taking into account his
6 JVR Retails Pvt.Ltd. observations and after giving an opportunity of being heard to the assessee.
Aggrieved with such order of the ld.PCIT, the assessee is in appeal before the Tribunal by raising the following grounds.
The order u/s. 263 of the Income Tax Act, 1961(hereinafter referred to as ‘the Act’) passed by the Ld.Pr.Commissioner of Income Tax, Hyderabad- 2(hereinafter referred to as (’the Ld.Pr.CIT’) is erroneous both on facts and in law.
2. The ld.Pr.CIT has grossly erred in passing the revisionary order without satisfying the twin conditions that the order should be both erroneous and prejudicial to the interest of the revenue. 3. The ld.Pr.CIT ought to have well appreciated that the issue was already examined by the AO thoroughly in the course of reassessment proceedings u/s. 143(3) r.w.s. 147 and has not meddled with the above issue as he was fully satisfied with the details furnished as available with him. So, the Ld.Pr.CIT cannot direct the Ld.AO us/. 263 of the Act to re-examine the same issue or conduct further enquiries on the issue already considered by the AO. 4. The Ld.Pr.CIT ought to have appreciated that the fact that the AO has issued notice u/s. 142(1) of the Act along with questionnaires on 13.05.2019 and 17.05.2019 and assessee has submitted financials in replies wherein details of allotment of 4,82,250 shares was available. 5. The Ld.Pr.CIT ought to have appreciated the fact that the AO has reopened the assessment u/s. 147 of the Act with prior approval of Pr.CIT and passed order under 143(2) r.w.s 147, wherein only part of the allotment of shares was disallowed after examining the balance sheet and investment, and now a different stand cannot be taken by stating that part enquiry was done by the AO and thereby directing to make further enquiry. 6. The ld.Pr.CIT himself agreed in the 263 that money came from Skylark Commodeal Pvt.Ltd and a single allotment was made and that the AO made part of addition while completing assessment u/s. 147 which itself is self- explanatory that the AO has examined the issue and therefore, Pr.CIT cannot revise under 263 to do further enquiry. 7. The ld.Pr.CIT ought to have appreciated that the AO has verified the fact that the allotment has been made in a single point by way of one allotment and Form 2 was also filed for an amount of Rs.4,82,25,000/- and the AO after due verification of details of total allotment of preference 7 JVR Retails Pvt.Ltd. shares of Rs.4,82,25,000/- to skylark Commodeal Pvt.Ltd submitted by the assessee has restricted the disallowance to the extent of Rs. 1,65,00,000/- 8. the Ld.Pr.CIT erred in issuing 263 order on the issues other than those which are subject matter of notice issued u/s. 148 of the Act and accordingly the proceedings ought to be annulled.
9. The Ld.Pr.CIT erred in issuing 263 order on an assessment u/s. 143(3) r.w.s. 147 of the Act which was reopened after 4 years without there being no failure on the part of the assessee as the information was disclosed in the annual report filed by the assessee.
The same Ld.Pr.CIT has approved the reopening of assessment u/s. 147, which is 263 order stated that the piece of information on basis of which reopening was made itself is not legal.
11. The Ld.Pr.CIT mentioned in order u/s. 263 that the AO got more scope and power under 147 of the Act due to amendment which will not be the scope of section 263 the Act.
12. The appellant may add or alter or amend or modify or substitute or delete and/or rescind all or any of the grounds of appeal at any time before or at the time of hearing of appeal”.
The ld.counsel for the assessee strongly challenged the order of the ld.PCIT in invoking jurisdiction u/s 263 of the I.T.Act. He submitted that the AO in the instant case, on the basis of the report of the Investigation Wing, has considered that the income to the tune of Rs.1,65,00,000/- has escaped assessment for which he, after recording reasons, had reopened the assessment and completed the assessment u/s. 147/143(3) by making addition of Rs.1,65,00,000/-. The said reopening was approved u/s. 151 of the I.T.Act by the ld.PCIT after detailed examination. Therefore, the same ld.PCIT again cannot initiate revisional proceedings u/s. 263 of the I.T.Act based on the very same information at the same bank account.
8.1 In his next plank of argument, he submitted that if the order of the ld.PCIT is held to be valid then the reasons for reopening are incorrect and non-existent and therefore, the 8 JVR Retails Pvt.Ltd. approval given by the ld.PCIT u/s 151 of the I.T.Act was also in a mechanical manner without due application of mind. Thus, the AO has reopened the assessment by recording incorrect reasons and the ld.PCIT has given his approval in a mechanical manner to such incorrect reasons. Thus, the entire re-assessment proceedings become null and void and therefore, the subsequent proceedings u/s. 263 of the I.T.Act also become null and void. He submitted that there was no new fact or other material available on record except the information received from the investigation wing with the ld.PCIT while invoking jurisdiction u/s. 263 of the I.T.Act. Thus, the reassessment order could not be treated as erroneous. For the above proposition, he relied on the decision of the Delhi Bench of the Tribunal in the case of M/s. SPJ Hotels Pvt.Ltd. vs. PCIT vide ITA No.2857/De;/2017.
In his yet another plank of argument, the ld.counsel for the assessee submitted that the scope of revision u/s. 263 of the I.T.Act cannot go beyond the reasons for which the case was reopened u/s. 147 of the I.T.Act. He submitted that the ld.PCIT cannot exercise his powers u/s. 263 of the I.T.Act to revise reassessment order u/s. 147 of the I.T.Act to bring certain items liable to tax which do not form part of the reasons for reopening of the assessment. He reiterated that the verification of Rs.4,85,00,000/- was never a part of the reasons recorded by the AO at the time of issuing notice u/s. 148 of the I.T.Act and therefore, the ld.PCIT could not have gone beyond the reasons recorded by the AO u/s. 147 of the I.T.Act to invoke his jurisdictional power u/s. 263 of the I.T.Act. For the above proposition, he relied on the following decisions: a) Pr.CIT vs Indo Enterprise Pvt.Ltd. in ITA No.751/Pun/2019(Pun.Trib) b) CIT vs. Alagendran Finance Ltd. 162 taxman 465(SC) c) ACIT vs. Louis Berger Group Inc 51 taxman 121 9 JVR Retails Pvt.Ltd.
10. The ld.counsel for the assessee submitted that Explanation 2 of Proviso to section 263 introduced by the Finance Act, 2015 w.e.f. 01.06.2015 does not have retrospective effect. He submitted that the AO in the instant case during the re- assessment proceedings had called for information which was submitted by the assessee from time to time and after making detailed enquiry, the AO had made addition of Rs. 1,65,00,000/- which is a subject matter of appeal before the ld.CIT(A). The ld.CIT(A) has the powers to enhance the income. Therefore, the ld.PCIT could not have invoked proviso of section 263 of the I.T.Act by stating that the order passed by the AO is erroneous and prejudicial to the interest of the revenue. For the above proposition, he relied on the following decisions:
a. Brahma Center Development Pvt.Ltd vs. PCIT in & 4342/Del/2019 (Del.Trib) b. Aruna Kumar Gard HUF vs. PCIT in ITA No.3391/Del/2018(Del.Trib)
The ld.counsel for the assessee relying on various other decisions submitted that the order passed by the AO does not suffer from any infirmity and is not erroneous although, it may be prejudicial to the interest of the revenue. He submitted that for invoking the jurisdiction u/s. 263 of the I.T.Act, the twin conditions namely the order is erroneous and the order is prejudicial to the interest of the revenue must be satisfied. However, the order passed by the AO in the instant case may be prejudicial to the interest of the revenue but cannot be termed as erroneous. Therefore, in absence of satisfaction of the twin conditions, the ld.PCIT could not have invoked jurisdiction u/s. 263 of the I.T.Act. The ld.counsel for the assessee also relied on the following decisions: a) M/s. Fortaleza Developers vs. CIT vide in (Mum.Trib)
10 JVR Retails Pvt.Ltd. b) Smt.Renuka Philip vs. ITO reported in [2019]101 taxmann.com 119 (Madras.HC) c) M/s.US Technology International Pvt.Ltd. vs. ACIT vide in (Coch.Trib) d) Indira Industries vs.PCIT reported in [2018] 95 taxmann.com 103 (Madras.HC) e) CIT vs. Gangandeep Infrastructure(P.) Ltd. reported in [2017] 80 taxmann.com 272. f) PCIT vs. Apeak Infotech reported in [2017] 88 taxmann.com 695(Bomb.HC) g) CIT vs. Veedhata Tower Pvt.Ltd vide in ITA No.819/2015 (bom.hc) h) DCIT vs. JR Seamless Pvt.Ltd. reported in ITA No.35- 39/Hyd/2017(Hyd.Trib) i) Smt.Surinder Kaur Brar vs. ITO reported in ITA No.204 to 205/Asr/2017(Amrt.Trib) j) M/s. Indus Best Hospitality & Realtors Pvt.Ltd. vs. PCIT reported in ITA No.3125/Mum/2017(Mum.Trib) k) Malabar Industiral co Ltd. vs. CIT reported in 243 ITR 83 (SC) l) Pricewater house Coopers LLP USA vs CIT reported in 91 taxmann.com 444(Kol.Trib) m) Spectra Shares & Scrips (P) Ltd. vs. CIT reported in 36 taxmann.com 348(Hyd.Trib) n) Sanspareils Greenlands(P.) Ltd. vs. CIT reported in 99 taxmann.com 222(Del.Trib) o) CIT vs. Mehrotra Brothers reported in 270 ITR 157 (MP.HC) p) CIT vs.Srinivasa Hatcheries (P.) Ltd.vs DCIT reported in [2002] 81 ITD 36(Hyd) (Hyd.Trib) q) Development Credit Bank Ltd. reported in [2011] 196 taxmann 329
The ld.DR on the other hand strongly supported the order of the ld.PCIT. He submitted that a perusal of the balance sheet of the assessee company shows that during the FY 2011-12, the share capital of the company was increased from Rs.
11 JVR Retails Pvt.Ltd. 3,42,070/- to Rs. 4,85,67,070/-. The notes to accounts also give certain details regarding the allotment of preference share capital to the extent of Rs.4,82,25,000/- and not Rs.1,65,00,000/-. The information forwarded by the ADIT, Kolkata is a piece of information indicating accommodation entries taken by the assessee company through bogus entry operators. Therefore, the AO should have verified the entire preference share capital of Rs.4,82,25,000/- during the re-assessment proceedings u/s. 147 of the I.T.Act. Since the AO has failed to do the enquiry which he was supposed to do before finalizing the assessment, therefore, the ld.PCIT was fully justified in invoking jurisdiction u/s.263 of the I.T.Act. He accordingly submitted that the order of the ld.PCIT passed u/s. 263 of the I.T.Act should be upheld and the grounds raised by the assessee should be dismissed.
We have heard the rival arguments made by both the sides, perused the orders of the AO and the ld.PCIT and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the AO in the instant case, on the basis of information available from the investigation wing of Kolkata that assessee has received accommodation entries of Rs. 1,65,00,000/-, reopened the assessment after obtaining necessary approval from the ld.PCIT u/s. 151 of the I.T.Act, 1961. We find the Assessing Officer, in the order passed u/s. 147/143(3) of the Act, made addition of the same u/s. 68 of the I.T.Act, on the ground that the assessee failed to satisfy the ingredients of section 68 of the I.T.Act. We find the ld.PCIT initiated proceedings u/s. 263 of the I.T.Act on the ground that during the FY 2011-12, the share capital of the company has increased from Rs. 3,42,070/- to Rs. 4,85,67,070/- thereby increase in the share capital of the assessee company by Rs. 4,82,25,000/- and not Rs. 1,65,00,000/-. Since the AO has confined his assessment to the verification of Rs. 1,65,00,000/-
12 JVR Retails Pvt.Ltd. only instead of Rs. 4,82,25,000/-, he held that the order passed by the AO has become erroneous and prejudicial to the interest of the revenue for which he set aside the assessment with the direction to the AO to pass the assessment order afresh in accordance with law.
14. It is the submission of the ld.counsel for the assessee that the case was reopened for verification of receipt of Rs. 1,65,00,000/- by the assessee on the basis of information received from the Investigation Wing, Kolkata and the AO after detailed enquiry has made addition of the same u/s. 68 of the I.T.Act. According to him, the ld.PCIT, who had earlier given his approval u/s. 151 of the I.T.Act. for reopening, could not have initiated revisionary proceedings u/s. 263 of the I.T.Act since he cannot go beyond the reasons for which the case of the assessee was reopened. It is also his submission that when the PCIT had accorded approval u/s 151 of the I.T. Act, 1961 on the basis of reasons recorded by the AO after detailed examination of the very same bank account, the same ld.PCIT again could not have initiated the revisionary proceedings u/s. 263 of the I.T.Act based on the very same information i.e. the same bank account and not any other information which the AO failed to verify. It is also his argument that when the issue is subject matter of appeal before the ld.CIT(A) who has the power of enhancement, the ld.PCIT could not have invoked the revisionary powers u/s. 263 of the I.T.Act,1961 and that the scope of revision cannot go beyond the reasons for which the case of the assessee was reopened.
We find some force in the above argument of the ld.counsel for the assessee. We find the reassessment proceedings were initiated for verification of the amount of Rs.1,65,00,000/- from M/s. Skylark Commodeal Pvt.Ltd on the basis of information obtained from the investigation wing of Kolkata. When the 13 JVR Retails Pvt.Ltd. proposal was sent to the ld.PCIT for his approval u/s. 151(1)(a) of the Act, he had given his approval after verifying the relevant details. Therefore, we find merit in the submission of the ld.counsel for the assessee that if the reopening was made on the basis of information obtained from investigation wing to the extent of Rs.1,65,00,000/- which was approved by the ld.PCIT u/s. 151(1)(a) of the Act for giving his approval for the reopening and the assessment is accordingly made then if the plea of the ld.PCIT that the order has become erroneous and prejudicial to the interest of the revenue is accepted then in that case, the reasons recorded were incomplete and that the approval given was in a mechanical manner by the ld.PCIT. Under these circumstances, the reassessment proceedings are to be held as null and void since the same is not based on proper verification of facts.
We find an identical issue has been decided by the Delhi Bench of the Tribunal in the case of M/s. SPJ Hotels Pvt.Ltd. in dated 10.12.2018 where it has been observed as under:- 13.1 In the aforesaid reasons for reopening of the assessment, it is mentioned that assessee company received share capital on account of accommodation entries of Rs.5 lakhs each from M/s. Hillridge Investment Pvt. Ltd., and Mis. Vogue Leasing & Finance Pvt. Ltd., based on information and seized material received from Investigation Wing. However, the assessee explained before A.O. that amount in question is Rs.20 lakhs from four parties. The A.O. in the re-assessment order made addition of Rs.20 lakhs on account of unexplained credit on account of accommodation entries received from four parties and also made addition of Rs.40,000/- on account of Commission paid to entry operators. On the basis of the same material, the Pr. CIT initiated the proceedings under section 263 of the I.T. Act on the reasons that amount in question is not Rs.10 lakhs received from these two companies, but it is Rs.50 lakhs each i.e., Rs.1 crore. Thus, the facts mentioned in the reasons for reopening of the assessment are incorrect and non-existent. The Hon'ble Punjab & Haryana High Court in the case of CIT vs. Atlas Cycle Industries (1989) 180 ITR 319 (P & H) held as under : “Held (i) that the Tribunal was right in cancelling the reassessment as both the grounds on which the 14 JVR Retails Pvt.Ltd. reassessment notice was issued were not found to exist) and) therefore) the Income-tax Officer did not get jurisdiction to make a reassessment." 13.2. Since the facts are totally different as A.O. had reason to believe that Rs.10 lakhs has escaped assessment on account of Rs.5 lakhs received from two companies referred to above, which was ultimately found to be incorrect and nonexistent, therefore, there may not be any application of mind on the part of the A.O. to proceed to initiate the re- assessment proceedings. There is no other material available on record except the information received from the Investigation Wing. The A.O on the basis of the information and material received from Investigation Wing has recorded reasons for reopening of the assessment which was ultimately found to be incorrect and non-existent. It is well settled law that when no new material other than examined by the A.O originally found on record for the purpose of initiating the re-assessment proceedings, the proceedings under section 148 of the I.T. Act would be invalid and bad in law. We rely upon decision of Delhi High Court in the case of Atul Kumar Swamy 362 ITR 693, Consulting Engineers Services India Pvt. Ltd., 378 ITR 318, Nestle India Ltd., 384 ITR 334 and Priyadesh Gupta 385 ITR 452. The Hon'ble Delhi High Court in the case of SNG Developers Ltd., 404 ITR 312 held that when A.O. initiated the re- assessment proceedings without application of mind, such proceedings would be invalid. A.O. in the present case has failed to verify the information received from Investigation Wing. Therefore, it is non-application of mind on the part of the A. O. to record correct facts in the reasons for reopening of the assessment. In such circumstances, the re- assessment order could not be treated as valid and in accordance with law. Since re-assessment proceedings are invalid and bad in law, therefore, such proceedings could not be revised under section 263 of the IT. Act. Following the reasons for decision in the case of M/s. Supersonic Technologies Pvt.Ltd.(supra), we set aside the order passed by the ld.Pr.CIT under section 263 of the I.T.Act and quash the same.
In the result, of the Assessee is allowed”.
Further, neither the AO nor the ld.PCIT has admittedly any other information other than the very same bank account which was filed by the assessee and the balance sheet which was already available on record. Therefore, in our opinion, there cannot be any error in the re-assessment order which was based on the report of the investigation wing especially when the reopening was made after due approval given by the ld.PCIT to the extent of Rs. 1,65,00,000/-. Once, the order is not erroneous then
15 JVR Retails Pvt.Ltd. the twin conditions namely the order is erroneous and the order is prejudicial to the interest of the revenue are not satisfied. Therefore, in view of the decision of Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd vs. CIT reported in 243 ITR 83, the order cannot be revised u/s. 263 of the I.T.Act in absence of fulfillment of the twin conditions.
Further, it has been held in various decisions that the ld.PCIT cannot exercise his powers u/s. 263 of the Act to revise the reassessment order which did not form part of reasons for reopening of assessment. We find the Pune Bench of the Tribunal in the case of Indo Enterprises Pvt.Ltd vs PCIT reported in TS-38- ITAT-2021(Pune) has held that exercising of revisional powers on issues not forming part of reassessment is impermissible. Therefore, the ld.PCIT is not justified in setting aside the assessment order pass u/s. 147/143(3) of the I.T.Act.
In view of the discussion above, we are of the considered opinion that the order passed by the AO cannot be termed as erroneous although it may be prejudicial to the interest of the revenue and therefore, in absence of the fulfilment of the twin conditions, the ld.PCIT in our opinion was not justified in setting aside the order by invoking his revisional powers u/s. 263 of the I.T.Act. Accordingly, the grounds raised
by the assessee are allowed.
20. In the result, the appeal filed by the assessee is allowed. Order pronounced in the Open Court on 31st January, 2023.