AUTHORGEN TECHNOLOGIES PRIVATE LIMITED,PUNJAB vs PRINCIPAL COMMISSIONER OF INCOME TAX, CHANDIGARH-1, CHANDIGARH

आदेश/Order

Per Krinwant Sahay, A.M.:

The appeal in this case has been filed by the Assessee against the order passed u/s 263 of the Income Tax Act, 1961 (in short 'the Act') dated 26.03.2024 of the ld. Principal Commissioner of Income Tax (PCIT), Chandigarh-1.

541-Chd-2024 – Authorgen Technologies Private Limited, Gurgaon 2

Grounds of appeal are as under: - General Grounds

On the facts and circumstances of the case, the order passed by the Learned Principal Commissioner of Income Tax (Ld.PCIT) under section 263 of the Income tax Act, 1961 ('the Act') is bad in law, and without jurisdiction, as the order sought to be revised is neither erroneous nor prejudicial to the interests of the revenue.

Passing of order under section 263 of the Act beyond the period of limitation

On the facts and circumstances of the case, the order passed by the Ld. PCIT under section 263 of the Act is beyond the period of limitation prescribed under Section 263(2) of the Act, thus liable to be set aside.

2.1 That the Ld. PCIT has failed to appreciate that the order sought to be revised is the order passed by the Assessing Officer (AO) under section 143(3) r.w.s 263 and 144B of the Act, dated 28.03.2022 in which the subject matter of present revision was not under consideration.

Incorrect assumption of jurisdiction under Section 263 of the Act without satisfying the twin conditions of the order being erroneous and prejudicial to the interests of the revenue.

That the learned PCIT has erred in law and on facts in invoking the revisionary jurisdiction under section 263 of the Act on the alleged ground that the order passed by

541-Chd-2024 – Authorgen Technologies Private Limited, Gurgaon 3 the Assessing Officer (AO) is erroneous and prejudicial to the interests of the revenue, as the order has been passed in a summary manner without making requisite enquiries or verification.

3.1. That the Ld. PCIT has also erred in law and on facts in invoking Explanation 2 to section 263 of the Act, as the same is clarificatory in nature and does not dilute the basic requirement of the provisions of section 263(1) of the Act, to satisfy that the order is erroneous in law or facts, and that the same could only be invoked in a case wherein the AO has not made any enquiry or there is complete lack of enquiry, which is not the case of the appellant

Non applicability of Section 68 of the Act on opening balances :

That the Ld. PCIT erred in law and on facts in invoking the provisions of Section 68 of the Act on the opening balance of securities premium of Rs. 6421.53 lacs is on March 31, 2017, which pertained to the previous assessment years and could not be brought to tax in the subject year by any stretch of imagination or under any provision of the Act.

Non applicability of revision proceedings under Section 263 of the Act since matter already settled under the Vivnd Sc Vishwas Act.

That the Ld. PCIT erred in passing the order under Section 263 of the Act without

541-Chd-2024 – Authorgen Technologies Private Limited, Gurgaon 4 appreciating the fact that the case settled under Vivad se Vishwas Act, 2020 cannot be subsequently disturbed byinitiating revision proceedings.

All the above grounds are without prejudice to each other. The Appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal.

The Appellant prays that appropriate relief be granted based on the said grounds of appeal and the facts and circumstances of the case.

Brief facts of the case as per the order of the PCIT are as under:- “….. that the assessee company is engaged in the business of providing a platform to its users where students can learn online from real instructors-powered by a SAAS (Software as a Service) based business model and providing a platform for students to opt for courses uploaded by various authors and tutors for a marketing fee.

The assessee company filed its return of income u/s 139(1) of the Income Tax Act, 1961 on 29.11.2017 for the year under consideration, declaring a total loss of (-

541-Chd-2024 – Authorgen Technologies Private Limited, Gurgaon 5 ) Rs. 10,92,67,710/-. However, the company revised its ROI on 30.03.2018 by enhancing its loss to Rs. 10,95,14,513/-. Later on, the return was processed u/s 143(1) and the case was selected for scrutiny under CASS. Statutory notice u/s 143(2) was issued to the assessee on 29.08.2018, and in response, the assessee company once again revised its income on 24.01.2019 declaring current year loss of Rs. 10,65,87,921/-. Consequently, the assessment u/s 143(3) was completed on 28.12.2019,-vide which returned loss was reduced to Rs. 4,10,02,419 by making an addition of Rs. 6,55,85,502/- (on account of share premium. Thereafter, provisions of section 263 were invoked and re-assessment was completed u/s 143(3) r.w.s. 263 r.w.s l44B of the Act on 28.03.2022 at an income of (-) Rs. 4,10,02,419/-.

During the proceedings before us, the ld. Counsel of the 4. Assessee submitted as under: - “4.9 It is a settled position of law that an assessing officer can not travel beyond the directions issued by the order of revision, the Ld. AO in the instant case ought to (as he did) restricted the scope of assessment made pursuant there too the professional / consultancy

541-Chd-2024 – Authorgen Technologies Private Limited, Gurgaon 6 expenses. It is also extremely important to note that the Ld. AO after being satisfied with the explanation provided and the evidence filed in support did not, make any disallowances while completing the assessment under Section 143(3) read with Section 263 and 144B of the Act in its order dated March 28, 2022.

4.10 Therefore, it is the submission of the Assessee that having regard to the fact that your Honour seeks to exercise revisional jurisdiction against the assessment order dated March 28, 2022 which was he revised order of assessment only in relation to the professional / consultancy expenses, the show cause notice issued is invalid as it seeks to raise objections on issues emanating from the original assessment order dated December 28, 2019. Hence, 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 original assessment and not from the assessment order passed in pursuance to the direction issued under Section 263 of the Act.” ……..

c. PCIT vs. K M Khadim and Cop [2023] 157 taxmann.com 491 (Calcutta), relevant portion of the Hon'ble Calcutta High Court is produced below to demonstrate that the facts of Assessee’s case and above are identical, therefore, the same is applicable to the facts of the present case.

" ...4. The short issue which falls for consideration is whether the assumption of jurisdiction by the Principal Commissioner of Income Tax, Kolkata-1 under section 263 of the

541-Chd-2024 – Authorgen Technologies Private Limited, Gurgaon 7 Act was just and proper, more so when the exercise of jurisdiction under the said provision was done for the second time. The learned Tribunal noted that (a) initially the PCIT had exercised its power under section 263 of the Act, on two grounds, namely alleged non-verification and the genuineness of the broker expenditure incurred on new loans and renewal of loans taken for the purpose of business and (b) interest free advances given by the assessee. Pursuant to the order passed under section 263, the Assessing Officer took up the matter for consideration and completed the assessment under section 143(3) of the Act by order dated 23.12.2019 determining the total income at Rs.17.70,850/- and raising the total demand of Rs. 5,47,192/-. Thereafter, once again the PCIT exercised power under section 263 of the Act and issued show-cause notice dated 21.02.2022. In the notice after setting out the reasons assigned by the Assessing Officer while completing the assessment vide order dated 23.12.2019 the PCIT would state that on further scrutiny of the assessment records it came to the notice that while computing the assessed income in the order under section 143(3) read with section 263 of the Act dated 23.12.2019 the Assessing Officer had erroneously added Rs.3,36,122/- for brokerage and commission works instead of the correct amount of Rs.3,63,122/-, which has resulted in under exemption of income of Rs.27,000/-. This was the reason for once again exercising power under section 263 of the Act. The assessee submitted the reply to the show-cause notice and raised the question of limitation stating that in terms of sub-section (2) of section 263 the power could not have been exercised beyond the

541-Chd-2024 – Authorgen Technologies Private Limited, Gurgaon 8 period of limitation prescribe therein. Further, the assessee contended that pursuant to the order passed by the PCIT on the earlier occasion giving specific direction to the Assessing Officer, he would have very limited, power to examine the issues in the proceedings which have been remanded back to the / Assessing Officer for consideration and does not empower the Assessing Officer to make other additions. Several decisions were also relied upon by the assessee. Though the Tribunal accepted the plea raised by the assessee as regards the aspect relating to the limitation, it examined the merits of the matter and has recorded a factual finding that the issue on which the PCIT proposed the revision of the order framed under section 143(3) read with section 263 of the Act dated 23.12.2019, issue which was directed by the PCIT in order under section 263 of the Act dated 23.03.2022 was not the subject matter of revisionary proceedings in the first round. Therefore, the learned Tribunal concluded that the period of limitation has to run from the date of assessment as framed under section 143(3) dated 26.12.2016, that is at the end of the financial year, 31.03.2017. Therefore, it held that the exercise of jurisdiction under Section 263 of the Act is hopelessly barred by limitation. The learned Tribunal also took note of the decision of Hon'ble Supreme Court in CIT v. Shri Arbuda Mills Ltd. [1998] 98 Taxman 457/231 ITR 50, wherein it was held that jurisdiction under Section 263(1) of the Act is sought to be exercised with reference to an issue which is covered by the original 'order of assessment under Section 143(3) of the Act, which does not form the subject matter of the reassessment. The limitation was necessarily begun to run from the

541-Chd-2024 – Authorgen Technologies Private Limited, Gurgaon 9 date of order passed under Section 143(3) of the Act. Reference was also made to the decision of the Hon'ble Supreme Court in the case of CIT v. Alagendran Finance Ltd. [2007] 162 Taxman 465/293 ITR 1.

Thus, we find that the order passed by the learned Tribunal had been passed taking note of the correct legal position and referring to the relevant decision and the said order does not call for any interference.

Accordingly, the appeal as well as the connected application."

The ld. DR relied on the order of the ld. PCIT.

We have considered the findings given by the ld. PCIT in his order passed u/s 263 as well as the arguments put forward by the ld. DR.

We have also considered the submissions filed by the Counsel of the Assessee and his arguments put forth before us during the proceedings. We find that the order passed by the PCIT u/s 263 was on two issues –(i) reconciliation issue for professional contingences expenses claimed and (ii) disallowance of prior period expenses u/s 37. 8. On both the issues, the Assessing Officer sought for details from the Assessee and passed an order making some additions on

541-Chd-2024 – Authorgen Technologies Private Limited, Gurgaon 10 28.3.2022. Once again, the ld. PCIT has issued notice u/s 263 of the Act and raised the issue of genuineness of transactions involving the issue of CCPS of premium remained unexamined during the original assessment proceedings.

Here, it is important to note that in the first order passed u/s 263 of the Act, this issue was not flagged by PCIT, therefore, the Assessing Officer did not consider it. So, there is no scope of revision order u/s 263 for issue not covered in the original 263 order. Therefore, for the second 263 order, the only available option for the PCIT is to pass order of the original 143 order which in this case was passed on 22.8.2019. Since the present and the second 263 order by the PCIT has been passed on 26.3.2024, therefore, in our opinion it is a clear case of an order passed beyond the prescribed time limit given in the Income Tax Act, 1961 i.e., within two years from the end of the assessment year in which the original 143(3) order was passed. As the original order was passed on 28.12.2019, i.e., with the financial year 2019-20, therefore, any order u/s 263 to make revision in this order could be passed only by 31.3.2022. Since the present 263 order is passed by the ld. PCIT, on 26.3.2024, therefore, in our opinion, this order is barred by limitation and. therefore, Assessee’s appeal on this issue is allowed.

541-Chd-2024 – Authorgen Technologies Private Limited, Gurgaon 11

10.

Since the order passed by the ld. Commissioner dated 24.12.2024 is barred by limitation, as section 263( 2) states that “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”, we are not giving any findings on other issues raised by the Assessee on other grounds of appeal.

11.

In the result, the appeal is allowed. Order pronounced on 23.09.2024.

Sd./- Sd/- (PARESH M. JOSHI) (DR KRINWANT SAHAY) Judicial Member Accountant Member

“आर.के.” आदेश क� ��त�ल�प अ�े�षत / Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड� फाईल/ Guard File आदेशानुसार/ By order,

सहायक पंजीकार/ Assistant Registrar

AUTHORGEN TECHNOLOGIES PRIVATE LIMITED,PUNJAB vs. PRINCIPAL COMMISSIONER OF INCOME TAX, CHANDIGARH-1, CHANDIGARH