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Income Tax Appellate Tribunal, LUCKNOW BENCH “B”, LUCKNOW
Before: SHRI. A. D. JAIN & SHRI T. S. KAPOOR
This is assessee’s appeal against the order dated 17.3.2022 of the PCIT, Lucknow, passed under section 263 of the Income Tax Act, 1961 for Assessment Year 2012-13. The assessee has raised the following Grounds of Appeal:
BECAUSE the assessment order u/s 147/143(3) dated 21.12.2019 which has been set aside u/s 263 of the Act by the impugned order passed by Pr. CIT itself was Illegal and was not enforceable due to several infirmities in the initiation and conclusion of re-assessment proceedings, the same could not have been subjected to revision u/s 263 of the Act and consequently, the impugned order is wholly without jurisdiction.
2. BECAUSE the Pr. CIT has erred in law and on facts in holding that the assessment order dated 21.12.2019 passed by the ACIT-5, Lucknow-New u/s 147/143(3) of the Act is erroneous in so far as it is prejudicial to the interest of revenue and in setting aside the same by exercising his revisionary jurisdiction u/s 263 of the Act.
3. BECAUSE the Pr. CIT has erred in law and on facts in setting aside the assessment order dated 21.12.2019 passed u/s 147/143(3) of the Act and in directing the Assessing Officer to make fresh assessment by making proper enquiry and verification on the issues specified therein, even though the requisite conditions for invoking the revisionary jurisdiction u/s 263 of the Act were not satisfied.
BECAUSE the Pr. CIT has failed to show and specify as to how the order passed by the Assessing Officer could be said to have been passed without making enquiries or verification which should have been made in the facts and circumstances of the case and as such Explanation 2(a) of section 263 of the 'Act' does not apply in the present case.
BECAUSE the assessment order dated 21.12.2019 had been passed by the assessing officer after due examination and deliberations and after making adequate enquiry as was thought to be made on the issues forming the basis for invoking the revisionary jurisdiction, the same could not have been held to be erroneous within the meaning of section 263 read with Expalnation-2(a) thereof and consequently the Pr. CIT could not have exercised his revisionary jurisdiction u/s 263 of the Act in relation to the said assessment order.
6. BECAUSE while passing the assessment order dated 21.12.2019, the ACIT-5. Lucknow-New had made all such enquiries, as were required to be made, and Perdue examination and deliberations, had passed the assessment order after due application of mind by taking one of the probable views and as such the Pr. CIT could not have held the said assessment order as erroneous in so far as prejudicial to the interest of the Revenue.
7. BECAUSE without prejudice to the aforesaid grounds and in any case the assessment order dated 21.12.2019 had been the subject matter of appeal before Ld. CIT(A) and subsequently the disputed tax involved in the said appeal has been settled under DTVSVA-2020, the said assessment
order could not have been subjected to revision u/s 263 of the Act in view of clause (c) of Explanation-I thereof. 8. BECAUSE the order passed by Pr. CIT is contrary to the provisions of section of the Act and comes in direct conflict with the judicial precedents. 9. BECAUSE the order appealed against is contrary to the facts, law and principles of natural justice.
The assessee has also raised the following Additional Grounds: “10. BECAUSE the impugned order passed by the Pr. Commissioner of Income-tax, Lucknow-1 is barred by limitation as specified in sub-section (2) of section 263 of the Income-tax Act, 1961, and consequently, the said order deserves to be held as illegal being wholly without jurisdiction. 11. BECAUSE the Pr. Commissioner of Income-tax, Lucknow-1, exercising his revisionary jurisdiction reopened the assessment on the following issues: i) receipt of rental income from house property at Rs.26,49,790/-; and ii) plot income of Rs.68,600/-, the said issues not being the subject matter of the re- assessment proceedings, the period of limitation as envisaged under sub-section (2) of section 263 of the Act commenced from the date of intimation/order u/s 143(1) and not from the date of order u/s 147/143(3) of the Act, and accordingly the proceedings invoked under section 263 of the Act by the Ld. PCIT vide notice dated 18.1.2022 is barred by limitation and the order dated 17.3.2022 passed in consequence of the said notice is void-ab-initio.”
These Additional Grounds raise a legal issue going to the root of the matter, not requiring any fresh material to be gone into. Accordingly, they were admitted.
4. Before us, the ld. Counsel for the assessee, with reference to the Additional Ground nos. 10 & 11, has submitted that the impugned order passed by the ld. PCIT, Lucknow-1 is barred by the limitation provided under sub section (2) of section 263 of the Act; that the ld. PCIT has set aside the assessment order dated 27.12.2019 to the Assessing Officer under section 143(3)/147 of the Act, with a direction to make fresh assessment by making proper enquiry and verification on the issues of (1) receipt of rental income from house property at Rs.26,49,780/- shown in the return under the head ‘Income from House Property’ and (2) Plot Income of Rs.68,600/- shown in the return under the head ‘Income from Other Sources’; that the original return of income was filed on 29.01.2013, which had been processed under 143(1) of the I.T. Act on 07.05.2013, wherein the income under various heads, as reflected in the return, i.e., Income from House Property, short term capital gain and Income from other sources, got accepted by the Department; that subsequently, re-assessment proceedings were initiated to tax the statedly escaped income of Rs.6,64,000/- derived from sale of shares of M/s NYSSA Corporation Ltd. and the reassessment proceedings were completed vide order dated 27.12.2019, making an addition of Rs.6,64,000/-; that therefore, the revisionary powers under section 263 of the Act, on the issues which were not the subject matter of reassessment, could not have been exercised by the ld. PCIT; that the basis of invoking the revisionary jurisdiction under section 263 of the I.T. Act by the ld. PCIT is that the Assessing Officer passed the order dated 27.12.2019 under section 143(3)/147, without making enquiries or verification, which the Assessing Officer should have made; that thus, it is clear that issues which were not the subject matter of re-assessment proceedings under section 147, as is evident from the said reassessment order read with the reasons to believe, formed the basis for initiation of proceedings under section 263; and that therefore, since the ld. PCIT has exercised his revisionary jurisdiction on issues which were not the subject matter of re-assessment proceedings and were pertaining only to the original assessment proceedings, the period of limitation provided for under sub section (2) of section 263 of the Act, would begin from the date of the original assessment, and not from the date of the order dated 27.12.2019, passed under section 147. In support of his contentions, the ld. Counsel for the assessee has placed reliance on ‘CIT vs. Alagendran Finance Ltd.’, (2007) 293 ITR 1 (SC).
5. The ld. Counsel for the assessee has submitted that the impugned order passed by the ld. PCIT, Lucknow-1 is wholly without jurisdiction and the same be quashed.
On the other hand, the ld. D.R., placing strong reliance on the impugned order, has submitted that it can be seen from the assessment records as well as the reply of the assessee, that no details regarding gross receipts of rental income from house property and deductions claimed against it, had been filed either during the assessment proceedings, or during the revisionary proceedings; that the Assessing Officer had also not made any verification/enquiry on the deductions claimed by the assessee; that it is amply clear that the Assessing Officer had passed the assessment order without making relevant enquiries or verification on the two issues, i.e., rental income (Income from House Property) at Rs.26,49,780/- and plot income (Income from Other Sources) of Rs.68,600/- under the head ‘other sources’; that the case of the assessee is covered by the provisions of Explanation 2(a) to Section 263 of I.T. Act, as per which, an order passed by the Assessing Officer shall be deemed to be erroneous insofar as it is prejudicial to the interests of the Revenue, if, in the opinion of the PCIT, the order is passed without making enquiries or verification; and that therefore, the order passed by the ld. PCIT, setting aside the order dated 27.12.2019 of the Assessing Officer, passed under section 143/147 of the I.T. Act, and directing him to make fresh assessment on carrying out proper enquiry and verification on the issues as discussed, is in order and no interference therein is called for.
Heard. The brief facts of the case are that as available from the Computation of Income (APB-13-15), the assessee filed its return of income on 29.01.2013, declaring a total income of Rs.36,27,914/-, comprising the income from house property at Rs.26,49,780/-, income from short term capital gain at Rs.9,03,233/- and income from other sources at Rs.74,901/-. The Assessing Officer processed the return under section 143(1) of the I.T. Act on 07.05.2013, as is clear from the chronology of processing of return, downloaded from the e-filing Account of the Income Tax Website (APB-81).
Thereafter, re-assessment proceedings were initiated for the reason (APB-19-21) that the amount of Rs.6,64,000/- claimed in the return under the head ‘short term capital gain’ on sale of shares of M/s Nyassa Corporation Ltd. had statedly escaped assessment. The Assessing Officer passed the re- assessment order (APB-54-60) under section 143/147 of the Act on 27.12.2019, adding the sum of Rs.6,64,000/- under section 68 of the Act, under the head ‘Income from Other Sources’, with simultaneous reduction of the corresponding amount from the short term capital gain claimed by the assessee under the head ‘Income from Capital Gain'.
Aggrieved by the re-assessment order, the assessee preferred an appeal (APB-61-63) before the ld. CIT(A).
During the pendency of appeal before the First Appellate Authority, the assessee settled the tax arrears involved in the said appeal under DTVSVA-2020, vide Form Nos. 3 and 5 (APB- 67-80). 11. Subsequently, the ld. PCIT initiated proceedings under section 263 of the Act, invoking his revisionary jurisdiction and issued notice (APB-7-8) dated 18.1.2022, qua the issues of income from house property and income from other sources. These two issues, it remains undisputed, were not the subject- matter of reassessment. The solitary matter involved in the reassessment proceedings was that concerning the alleged escapement of income of Rs.6,64,000/-, comprising income claimed as short term capital gain. 12. After considering the replies dated 20.1.2022 (APB-9-10) and 7.2.2022 (APB-11) filed by the assessee, the ld. PCIT passed the impugned order, setting aside the order dated 27.12.2019 passed by the Assessing Officer under section 143(3)/147 of the I.T. Act and directed him to make fresh assessment on making proper enquiry and verification on the issues discussed by him in his order. 13. As is evident from the chronology of the processing of the return downloaded from the e-filing account of the Income Tax Department’s Website (APB:81), the return for Assessment Year 2012-13 was filed by the assessee on 29.1.2013, having Acknowledgement No.554676090290113 and the assessment order was passed on 7.5.2013. Thereafter, notice under section 148, dated 30.3.2019 (APB:16) was issued for initiating the reassessment proceedings. The reasons recorded by the Assessing Officer (APB:19 to 21) for initiating the reassessment proceedings are scanned and reproduced below:
Thus, to reiterate, and as evident from the reasons recorded by the AO, the sole reason for reopening of the assessment was that the assessee’s income, amounting to Rs.6,64,000/- relating to the share transactions with M/s NYSSA Corporation Ltd. had statedly escaped assessment.
The heads of income declared by the assessee for the year under consideration are as below:
1. House property Rs.26,49,780/- 2. Short Term Capital Gains Rs.9,03,233/- 3. Other Sources Rs.74,901/-
The reopening of the assessment relates to escapement of income, amounting to Rs.6,64,000/- towards share transactions with M/s NYSSA Corporation Ltd., which has been settled by the assessee by opting the Vivad Se Viswhas Scheme, on 28.1.2021.
The ld. PCIT invoked revisional jurisdiction for the reason that the Assessing Officer had not enquired about the aforesaid income heads of House Property, Short Term Capital Gains and Other Sources, and had completed the assessment without due examination. 18. From the above, it is amply clear that the Assessing Officer, while processing the return for the year under consideration, had considered the incomes from House property, Short Term Capital Gains and Other Sources, as declared by the assessee. The ld. PCIT exercised the revisional jurisdiction under section 263 of the I.T. Act on those issues which were dealt with by the Assessing Officer in the original assessment order passed on 7.5.2013, and which issues did not form the subject-matter of the reassessment. This is beyond the period of two years from the end of the financial year in which the order sought to be revised was passed. Therefore, exercise of revisional jurisdiction, in the present case, on those issues, in the contention of the assessee, is time barred and null and void. The assessee maintains that hence, the same is beyond the purview of revisionary jurisdiction. Is it so? 19. Section 263 (1) & (2) read: “263. (1) The Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer or the Transfer Pricing Officer, as the case may be, is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including,— (i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) an order modifying the order under section 92CA; or (iii) an order cancelling the order under section 92CA and directing a fresh order under the said section. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed.”
Thus, as per Section 263(2) of the Act, no order under, inter alia, Section 263(i), cancelling the assessment and directing a fresh assessment, shall be passed after the expiry of two years from the end of the financial year in which the order sought to be revised was passed.
In ‘CIT vs. Alagendran Finance Ltd.’ (supra), the Hon'ble Supreme Court, on an identical issue, held (emphasis supplied by us) as under:
“15. We, therefore, are clearly of the opinion that keeping in view of facts and circumstances of this case and, in particular, having regard to the fact that the Commissioner of Income-tax exercising its revisional jurisdiction reopened the order of assessment only in relation to lease equalization find which being not the subject of the reassessment proceedings, the period of limitation provided for under sub- section (2) of section 263 of the Act would begin to run from the date of the order of assessment and not from the order of reassessment. The revisional jurisdiction having, thus, been invoked by the Commissioner of Income-tax beyond the period of limitation, it was wholly without jurisdiction rendering the entire proceeding a nullity”.
In ‘CIT vs. Alagendran Finance Ltd.’ (supra), the assessment order under consideration was passed in scrutiny proceedings under section 143(3), whereas the one passed in the present case is under section 143(1). On being put to question regarding this, the ld. Counsel for the assessee has placed reliance on CIT vs. Lark Chemicals Ltd.’, [2014] 368 ITR 655 (Bom.), wherein, the assessment was framed under section 143(1) and wherein, ‘Alagendran Finance’ (Supra) was followed.
In ‘CIT vs. Lark Chemicals Ltd.’ (supra), the Hon'ble Bombay High Court, on a similar issue, following, inter alia, the judgment of the Hon'ble Supreme Court in ‘CIT vs. Alagendran Finance Ltd.’ (supra), confirmed the order of the Tribunal and dismissed the appeal preferred by the Revenue, holding (emphasis supplied by us) as under: “12) We have considered the rival submissions. It is not disputed that save and except the issue of non-genuine purchases all other issues dealt by Commissioner of Income Tax in the order dated 30 March 2009 were not a subject matter of the assessment order passed on 28 June 2006 under Section 143(3)/147 of the Act. All the other issues on which the Commissioner of Income Tax is seeking to exercise jurisdiction under Section 263 of the Act were concluded by virtue of an intimation under Section 143(1) of the Act which admittedly was done beyond a period of two years prior to notice dated 17 March 2009 issued under Section 263 of the Act. Section 263(2) of the Act provides that no order would be made in exercise of jurisdiction under Section 263(1) of the Act after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. It is an admitted position that the Commissioner of Income Tax has not exercised revisional jurisdiction in respect of order/intimation passed Section 143(1) of the Act within two years of it being passed. Therefore, exercise of jurisdiction on those issues under Section 263 of the Act is time barred as held by this Court in CIT vs. Anderson Marine & Sons (P) Ltd. 266 ITR 694. Moreover, in view of the decision of the Apex Court in the matter of Alagendran Finance Ltd. as well as our Court in the matter of Ashoka Buildcon Ltd.(supra) jurisdiction under Section 263 of the Act cannot be exercised on issues which were not subject matter of consideration while passing the order of reassessment under Section 143(3) /147 of the Act but a part of an assessment done earlier under the Act.
13) In the above view, we find no fault with the order of the Tribunal in allowing the respondent's appeal. The submission of Mr. Chandrapal, learned Counsel for the Revenue is that in case of bogus bills and non-genuine purchases i. e. where the State is being defrauded the limitation as provided under Section 263 of the Act be ignored, cannot be accepted. This is for the reason that neither the Tribunal or we in our appellate jurisdiction can ignore the mandate of limitation provided under the Act. This is an issue which would fall within the domain of the Parliament so as to make suitable amendment to the law after considering the various competing interests. So far as the submission of Mr. Chandrapal learned Counsel for the revenue with regard to the decision of the Supreme Court in Alagendran Finance Ltd. (supra) and of this Court Ashoka Buildcon Ltd. (supra) being inapplicable merely on the ground that they do not deal with the issues of bogus bills or non-genuine purchases is in fact no distinction. The principle laid down in the aforesaid decisions is that a notice under Section 263 of the Act cannot be issued beyond the period of two years from the date when the order sought to be revised is passed. The case law relied upon in the impugned order are clearly applicable to the present facts. 14) In view of the fact that the impugned order has applied the binding decisions of the Apex Court and this Court, we see no reason to entertain the three questions of law as proposed by the Revenue.”
Thus, the Hon'ble Bombay High Court, in the case of ‘CIT vs. Lark Chemicals Ltd.’ (supra), following the decision of the Hon'lble Supreme Court in the case of ‘Alagendran Finance Ltd.’ (supra), held that where an assessment has been reopened under section 147 of the I. T. Act, in relation to a particular ground and, subsequent to the passing of the order of reassessment, the jurisdiction under section 263 is sought to be exercised with reference to issues which did not form the subject matter of the reopening of the assessment or the order of reassessment, the period of limitation provided for in sub-section (2) of section 263 would commence from the date of the order of assessment and not from the date of the reassessment order; and that in respect of the issues which did not form the subject matter of the reassessment proceedings under section 143(3) read with section 147, the limitation would commence from the date of the original order of assessment.
In the present case, to reiterate, the issues dealt by the ld. PCIT in the order dated 17.3.2022 were not a subject matter of the reassessment order passed on 27.12.2019 under section 143/147 of the Act. Both the issues, on which the ld. PCIT has exercised jurisdiction under section 263 of the Act, were concluded by virtue of assessment order dated 7.5.2013. The notice under Section 263 of the Act was issued on 18.01.2022, that is, eight and half years after the passing of the assessment order. The impugned order came to be passed on 17.3.2022. Section 263(2) of the Act provides that no order would be made in exercise of jurisdiction under section 263(1) of the Act after the expiry of two years from the end of the financial year, in which the order sought to be revised was passed. It is an admitted position that the ld. PCIT has not exercised the revisional jurisdiction in respect of the order/intimation passed under section 143(1) of the Act within two years of it being passed. Therefore, in keeping with ‘Alagendran Finance’ (Supra) and ‘Lark Chemicals’ (Supra), respectfully following these decisions, we hold that the notice dated 18.1.2022, issued under Section 263 and the impugned order passed in pursuance thereof, are barred by the limitation provided under Section 263(2) of the Act.
In this view of the matter, the Additional Grounds raised
by the assessee are accepted and the order under appeal is reversed as barred by limitation. As such, nothing further survives for adjudication, nor was anything else argued. Accordingly, the Appeal of the assessee is allowed.
27. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 01/09/2022.