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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI RAVISH SOOD, JM & SHRI ARUN KHODPIA, AM
The assessee has filed this appeal against the order passed by the Pr. CIT, Railpur-1, u/s 263 dated 30/03/2021 for the assessment year 2012- 2013, which is arises against the order of Ld. AO u/s 143 r.w.s. 147 of the of the I.T. Act. The assessee has raised the following grounds of appeal:
1. (a) For that on the facts and in the circumstances of the case, the order passed by the Ld. PCIT u/s 263 of the Act is bad in law and is liable to be quashed. (b) For that on the facts and in the circumstances of the case the Ld. PCIT was not justified in initiating proceedings u/s 263.
2. (a) For that the Ld. CIT erred in exercising the power of revision for the purpose of directing the A.O. to hold another investigation when the A.O. had made enquiries and also Ld. PCIT. (b) For that the Ld. PCIT erred in preferring to take a different view as a basis for an action u/s.263 when the A.O. had taken a particular view after considering the material on record and after due investigation.
3. For that the Ld. PCIT was not justified in holding that the A.O. had not conducted proper enquiry in regard to transaction relating to the shares of M/s 21st Century (I) Ltd and, as such, the assessment order was erroneous insofar as it was prejudicial to the interest of the revenue.
4. For that the appellant craves leave to add, alter or delete all or any of the grounds of appeal.
At the time of hearing the registry pointed out the filing of the appeal in the present case is delayed by 438 days, thus, barred by limitation. In this respect, assessee has submitted an affidavit dated 10/08/2022, stating that the delay in the present case was c on account of COVID-19 pandemic period since the order u/s 263 was received by the assessee on 30/03/2021. The affidavit of the assessee a/w explanations by the assessee are furnished before us. The main reason submitted by the Ld. AR was that due to pandemic the office of the ITAT bench was closed for which the assessee has approached his counsel to file the appeal online, who has also expressed the inability to do so and suggested to wait. Under such circumstances, the assessee instructed his representative to approach the office Ld. PCIT and accordingly under the bonafide belief that the authority
263, should be the competent authority to receive memo. Accordingly, the appeal memo was submitted in the office of PCIT stamped copy of the same was furnished before us. It is also submitted that the fee for filing the appeal was also paid by the assessee on 08/05/2021 details of which are mentioned in the form No. 36, this also substantiate the bonafide of the assessee. Also copy of the communication between the assessee and his counsel Shri Shubhash Agrawal through Whatsapp is submitted before us with an affidavit dated 25/07/2023 stating that the facts in the said affidavit are true and correct. Copy of the affidavit, copy of acknowledgment by the office of PCIT dated 24/05/2021 and copy of WhatsApp image are extracted as under:
We have considered the aforesaid submission of the assessee on the condonation of delay a filing of the appeal. In the present hearing and in the earlier hearings in the present case, Ld. CIT DR’s are confronted with the submissions and facts pertaining involvement of delay in filing of the appeal and were requested to respond on the same, on which no objection has been raised, but submitted that the same may be decided in accordance with law. Considering the overall facts and circumstances due to which the appeal was filed with the delay, were found to be under bonafide belief and beyond the apprehensions of the assessee’s, however, the excuse that the assessee was not aware with the appellate procedure and proceedings cannot be a plausible plea to allow such delay, therefore, a cost of Rs. 5000/- is imposed on the assessee to be deposited within one month in Prime Minister’s Relief Fund and acknowledgment of such payment be submitted to this office for information of the compliance. the assessee accordingly, the delay in filing of the appeal is condoned and the matter is permitted for hearing and adjudication on merits.
Brief facts of the case are that the assessee filed his return of income on 31/07/2012 declaring total income at Rs.6,88,010/-. Thereafter on the basis of certain information, which was believed that the income of the assessee chargeable to tax for the relevant AY has escaped assessment accordingly notice u/s.148 of the Act was issued in response to which the assessee has filed his return showing total income as was declared original i.e. Rs.6,88,010/-. During the course of re-assessment proceedings, the AO
observed that the assessee is an individual and during the year under consideration the assessee has shown income from salary, house property, business /profession and is also having income from other sources. Accordingly, the AO assessed the total income of the assessee at Rs.6,88,010/-.
Subsequently, the ld. Pr.CIT, invoking his powers u/s.263 of the Act, called for the assessment records and found that the AO has conducted inadequate enquiries on the issues and also non-application of mind for reaching any conclusion which would lead to hold the assessment order passed by the AO erroneous and prejudicial to the interest of revenue. Accordingly, the ld. Pr.CIT set aside the assessment order to frame the assessment afresh.
Against the above order of the ld. Pr. CIT, the assessee is in appeal before the Tribunal.
7. At the outset, Ld. AR submitted that the same issue, having identical facts, has been delt in the case of assessee’s brother Mr. Yogesh Goyal in by the coordinate bench of the ITAT, Raipur vide order dated 10/07/2023, wherein the appeal of the assessee was allowed by quashing the order u/s 263 of Ld. PCIT on account of assumption of jurisdiction in exercise of powers confers u/s 263 of the Act. The the copy
of the said judgment is furnished before us, the relevant extract from the said judgment is reproduce as under:
On the basis of the aforesaid documents, it was submitted by the ld. AR that on perusal of the reasons recorded u/s.147 of the Act, it is stated that the assessee is one of the beneficiaries of accommodation entry in trading in penny stock company namely, M/s DLS Exports Pvt. Ltd.. The assessee has also vide his letter dated 26.12.2019 filed objection to the reasons recorded that the assessee has not undertaken any trading in shares of M/s DLS Exports Pvt. Ltd., which were duly responded by the ld. AO. Before the ld. AO during the reopening of assessment proceedings, the assessee has also submitted that he had purchased 450 shares of Sarathi Dealers Pvt. Ltd., which was later on amalgamated with M/s 21st Century India Pvt. Ltd. And had received 17100 shares of 21st Century (India) Ltd. During the year under consideration, the assessee has sold those shares of 21st Century (India) Ltd. And in support of such submissions, the assessee has furnished following documents before the ld. AO :- a. Copy of purchase bill and copy of share certificate of shares of Sarthi Dealers Pvt Ltd. b. Copy of bank statement from where payment has been made against the shares purchased. c. Copy of audited financials of share trading business d. Copy of contract note of sale of shares of 21sl Century India Limited, e. Copy of Demat account statement for the year under consideration.
8. It was further stated by the ld. AR that the AO after considering the written submission and documents filed by the assessee, passed the assessment order u/s 147 r.w.s. 143(3) of the Act dated 26/12/2019
and accepted the returned income. It was further stated by the ld. AR that the ld. Pr.CIT subsequently has observed that the DDIT (Inv). Unit- 2(l), Kolkata has sent another information stating that the assessee is beneficiary of accommodation entry in trading in a penny stock company namely M/s 21st Century (India) Ltd. Further it is mentioned that the information was overlooked during assessment proceedings. It was the submission of the ld. AR that during the course of assessment proceedings u/s.147 r.w.s.143(3) of the Act, has submitted all the documentary evidence with regard to trading in shares with M/s 21st Century (India) Ltd. And the AO in both the assessment proceedings had considered those submissions and documents and passed the assessment order by accepting the returned income. It was the submission of the ld. AR that the assessee is a regular trader/investor in the stock market, who undertakes regular transactions as per the technical rules and regulations through the regulatory agencies with the respective regulator. The assessee is not involved in any dubious transaction and neither caused any prejudice to the revenue, therefore, the assessee has requested the ld. Pr.CIT to drop the proceedings by invoking the provisions of Section 263 of the Act. Ld. AR further submitted that the ld. Pr.CIT has not convinced with the submissions of the assessee and has set aside the matter to the files of AO along with directions to examine the issue afresh and to pass a fresh assessment order. It is the submission of the ld. AR of the assessee that since the issue on the foundation of which reassessment proceedings u/s.147 of the Act was started but after satisfaction, no addition could have been made by the AO, therefore, as per the settled legal position, the revisionary proceedings u/s.263 of the Act cannot be invoked on a different issue which was never a part of the initial reasons to believe. Ld. AR place reliance on the judgment of the Hon’ble Bombay High Court in the case of Jet Airways (I) Ltd., reported in [2011] 331 ITR 236 (Bombay), wherein the Hon’ble High Court in para 16 has held as under :- 16. Explanation 3 lifts the embargo, which was inserted by judicial interpretation, on the making of an assessment or reassessment on grounds other than those on the basis of which a notice was issued under section 148 setting out the reasons for the belief that income had escaped assessment. Those judicial decisions had held that when the assessment was sought to be reopened on the ground that income had escaped assessment on a certain issue, the Assessing Officer could not make an assessment or reassessment on another issue which came to his notice during the proceedings. This interpretation will no longer hold the field after the insertion of Explanation 3 by the Finance Act (No. 2) of 2009. However, Explanation 3 does not and cannot override the necessity of fulfilling the conditions set out in the substantive part of section 147. An Explanation to a statutory provision is intended to explain its contents and cannot be construed to override it or render the substance and core nugatory. Section 147 has this effect that the Assessing Officer has to assess or reassess the income ("such income") which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which, comes to his notice during the course of the proceedings. However, if after issuing a notice under section 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under section 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee.
According to the principle of law laid down by the Hon’ble Bombay High Court in the case of Jet Airways (I) Ltd.(supra), ld. AR submitted that since there was no addition on the basis of reasons to believe initially formed by the ld. AO, shows that there was no escapement of income, however, there was a different ground or reason to believe based on which ld. Pr.CIT has initiated the proceedings u/s.263 of the Act which is not permissible since even in an assessment u/s.147 of the Act if there is a different issue other than the issue on the basis of which the reason to believe was formed, no addition can be made if the revenue intends to assess such income independent of the issue based on which 147 proceedings were initiated, it can be done only by issuing a fresh notice u/s.148 of the Act, it is not the case in the present matter and, therefore, the AO who had not made any addition of an income which is alleged to be an income escaped assessment, which was not the subject matter of initial reason to believe, thus, the ld. AO has no authority or jurisdiction to examine an issue or make an addition on the basis of such issue which was never recorded in the reasons to believe that income escaped assessment, therefore, the order of the ld. AO was well with application of mind, cannot be said to be overlooking of any aspect which was part of reasons recorded and thus, cannot be said to be an order erroneous in the eyes of law. It might be prejudicial to the interest of revenue but not at all erroneous. Since there was no error in the order of the ld. AO u/s.147 r.w.s.143(3) of the Act, the revisionary proceedings initiated against such order deeming the same as erroneous insofar as it is prejudicial to the interest of revenue, are bad in law and deserves to be set aside.
10. Contrary to the submission of the ld. AR, ld. CIT-DR relied on the orders of the ld. Pr.CIT and vehemently supported the same.
We have considered the rival submissions perused the material available on record and the case laws placed before us in support of the contentions by the ld. AR. Apparently, the revisionary
proceedings initiated by the ld. Pr.CIT u/s.263 of the Act were on an issue which was not forming a belief of the revenue that there was some escapement of income on the basis of sch reason. The original issue forming the reason to believe that the escaped assessment was relating to certain transactions with M/s DLS Exports Pvt. Ltd. from which the assessee had received huge funds of Rs.30,50,206/- as per the report of the DDIT, Kolkata, the said DLS Exports Pvt. Ltd. was a paper company having no financial credentials and carrying out no business activities. It was the belief of the AO while recording the reasons u/s.148 of the Act that by indulging in such transactions, the assessee had brought back its unaccounted money through the above- mentioned shell/paper company without payment of income tax. With recording of such reasons, the ld. AO stated that on the basis of such details, the assessee had not correctly disclosed its return of income for the year under consideration and, therefore, there was a reason to believe that income of the assessee to the tune of Rs.30,50,206/- has escaped assessment. The issue was discussed during the assessment u/s.147 of the Act, questionnaires were issued, details were furnished by the assessee along with the submissions and finally the assessment was culminated without making any addition on the basis of reasons to believe recorded by the AO. Subsequently, ld. Pr.CIT has examined the assessment records and also on receipt of certain information from DDIT (Inv.) Unit-2(1), Kolkata that the assessee is a beneficiary of accommodation entries in trading in a penny stock company namely, M/s 21st Century Ltd., ld. Pr.CIT has observed that the transactions with M/s 21st Century were overlooked during the assessment proceedings u/s.143(3) r.w.s.147 of the Act and, therefore, the order passed by the ld AO dated 26.12.2019 was erroneous and prejudicial to the interest of revenue.
12. Now, the question before us is as to whether in a case where the income escaped according to the reasons recorded u/s.147 of the Act was not considered as income escaped assessment and no addition was made on the basis of the same, can the AO make an independent addition of some other income or can the AO is open to bring in some other income on the basis of some independent information came to his knowledge within the scope of assessment proceedings u/s.147 of the Act? In this aspect, the Hon’ble Bombay High Court in the case of Jet Airways (I) Ltd. (supra) has categorically held that, “Whether, however, if after issuing a notice under section 148, he accepts contention of assessee and holds that income, for which he had initially formed a reason to believe that it had escaped assessment, has, as a matter of fact, not escaped assessment, it is not open to him to independently assess some other income; if he intends to do so, a fresh notice under section 148 would be necessary, legality of which would be tested in event of a challenge by assessee”. In view of such a categorical finding by the Hon’ble Bombay High Court, in the present case, since no fresh notice u/s.148 of the Act in the proceedings initiated by the AO, the AO was confined to assess the issue in reopening assessment proceedings u/s.147 of the Act, which was forming reason to believe and any issue prompting from an information beyond the reasons recorded, cannot be assessed by the AO. Thus, there was an embargo on the issues which are not the basis
to form the reasons to believe to be assessed by the ld. AO during the proceedings u/s.147 of the Act. Ld. Pr.CIT has held the order of the AO u/s.147 r.w.s.143(3) of the Act as erroneous and prejudicial to the interest of revenue on the basis of a fresh issue which was never a part of the reasons to believe for which reopening assessment u/s.147 of the Act was initiated. We, therefore, respectfully following the principle of law laid down by the Hon’ble Bombay High Court in the case of Jet Airways (I) Ltd. (supra), are of the considered opinion that since the AO was confined to assess the issues only which were recorded in the reasons to believe, no fresh issue was open as a prerogative of the AO to touch upon, therefore, the order of the ld. AO cannot be said to be erroneous, may it be prejudicial to the interest of revenue, but since it is not erroneous, provisions of Section 263 of the Act for initiating revisionary proceedings in absence of one of the mandatory conditions out of two that the order of the AO should be erroneous as well as prejudicial, cannot be invoked. Accordingly, the revisionary proceeding started u/s.263 of the Act by the ld. Pr.CIT was without proper assumption of jurisdiction in exercise of powers conferred under Section 263 of the Act. Thus, we quash the impugned order passed by the ld. Pr.CIT u/s.263 of the Act dated 16.03.2022 on account of invalid assumption of jurisdiction.
With the aforesaid submission, it was the plea of the Ld. AR that since the matter in the case of Mr. Yogesh Goyal (supra), has been decided, wherein the facts are identical as in the present case. In the case of Mr.
Yogesh Goyal also the basis of reopening u/s 147 was that the assessee has received huge funds from Paper Company M/s DLS Exports Pvt. Ltd. having no financial credentials and carrying out no business activity. It was the contention of Ld. AR that the revisionary proceeding in the present case is also initiated with the same line of allegation by the Ld. PCIT. Therefore, the case of the assessee is squarely covered by the decision of the coordinate bench of ITAT, Raipur, in the case of Mr. Yogesh Goyal (supra), thus, the proceedings u/s 263 are liable to be quashed.
9. Ld. CIT DR on the other hand, vehemently supported the order of Ld. PCIT.
We have considered the rival contention, perused the material available on record and the case law relied upon by the assessee. On perusal of the order of the ITAT, Raipur, in the case of Mr. Yogesh Goyal (supra), wherein, after careful perusal of the material available in the form of notice issued u/s 263, reasons recorded for reopening u/s 147, order of Ld. PCIT u/s 263, response of the assessee towards the notice u/s 148 etc., it can be safely gather that the foundation of the reopening in both the cases was same i.e., “the assessee has received huge funds from Paper Company M/s DLS Exports Pvt. Ltd. having no financial credentials and carrying out no business activity”, however, the decision of setting aside the order u/s 147 of Ld. AO in revisionary proceedings 263 was on a different issue. Therefore, in our considered opinion the decision rendered in ITA
NO. 57/RPR/2022 in the case of Mr. Yogesh Goyal is mutatis mutandis applicable in the present case, wherein all the facts and circumstances are identical accept the figures of transactions. Consequently, we are inclined to set aside the order dated 30/03/2021 passed u/s 263 by the Ld. PCIT. In the result legal grounds raised by the assessee under present appeal is allowed.
11. Since, we have struck down the order of the ld. Pr.CIT u/s.263 of the Act, therefore, we refrain ourselves from adverting to the other contentions advanced by the ld. AR and the same are left open.
In the result, appeal of the assessee is allowed in terms of our observations hereinabove,
Order pronounced in the court on 25/10/2023.