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Judgment
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER :
This captioned appeal has been filed by the assessee against the order of the learned Pr. Commissioner of Income Tax (Appeals)-Delhi-15 [‘CIT(A)’ in short] dated 29.03.2022 arising from the assessment order under section 147 read with section 143(3) of the Income Tax Act, 1961 (‘the Act’) on 28.12.2019 for Assessment Year 2012-13.
Brief facts of the case are that the assessee is an individual and has declared Income from Business and Profession, and income from Other Sources during the year under consideration. The assessee filed its Original Return of income for the A.Y. 2012-13 electronically on 30.08.2012 declaring total income of Rs. 2,83,434/-. The return was processed u/s 143(1) on 24.11.2012. Thereafter, on the basis of information from investigation wing, Delhi that the assessee has provided accommodation entries amounting to Rs. 65,00,000/- during the F.Y. 2011-12 to Sh. Anand Kumar Jain and Sh. Naresh Kumar Jain and received cash in return, reassessment proceedings in the case of the assessee for A.Y. 2012-13 were initiated u/s 147 of the I.T. Act and the AO made an addition of Rs 65,00,000/- u/s 68 of the Act vide order u/s 147 r.w. 143(3) of the Act vide order dated 28.12.2019.
Subsequently, the learned Principal Commissioner of Income-tax, Delhi-15 (PCIT) invoked revisionary jurisdiction under Section 263 of the Act by issuing a show-cause notice. The PCIT vide order u/s 263 dated 28.03.2023 held that the reassessment order passed by the AO was "erroneous in so far as it is prejudicial to the interest of the Revenue as there was lack of enquiry or verification by the AO, as contemplated under Explanation 2 to Section 263, as the AO failed to consider the value of immovable property in light of Section 50C of the Act and the cash deposits made in two bank accounts aggregating to Rs. 7,25,500. Based on the above, the PCIT set aside the assessment order and directed the AO to conduct fresh enquiries on these issues.
The assessee challenges the validity of the proceedings under Section 263 stating that the order of the PCIT u/s 263 of the Act is beyond the period of limitation and relied on the decisions as follows:
•CIT vs Industrial Development Bank of India Ltd. ([2023] 152 taxmann.com 591 (SC)]
•CIT, Chennai vs Alagendran Finance Ltd ([2007] 162 taxman 465 (SC)]
•CIT, Delhi-l vs Bharti Airtel Ltd. ([2013] 37 taxmann.com 218 (Delhi High Court)]
•Daffodils Pharmaceuticals Ltd. vs Principal Commissioner of Income Tax ([2023] 157 taxmann.com 195 (Delhi Tribunal)]
•Auro Iron Ltd. vs Principal Commissioner of Income Tax-l ([2025] 173 taxmann.com 365 (Jaipur Tribunal)]
•Hotel Babylon Continental Pvt Ltd. vs Principal Commissioner of Income Tax (Central) ([2024] 164 taxmann.com 306 (Raipur Tribunal)]
•Gulab Badgujar (HUF) vs The Commissioner of Income Tax (Central) (ITA No. 798 and 799/PUN/2015) (Pune Tribunal)
•Shiv Vegpro Pvt Ltd vs The PCIT, Udaipur (ITA No. 1014/JPR/2024) (Jaipur Tribunal)
It is the say of the ld AR that the reassessment proceedings were on the issue of accommodation entries while the PCIT has invoked the proceedings u/s 263 on the issue of applicability of section 50C as the valuation of property by stamp duty authority of Rs 2,20,57,000/-, was not considered by the assessee while computing the LTCG of sale of property and deposits in Bank. As these issues were not before the AO under reassessment proceedings, the relevant date for the purposes of determination of period of limitation for exercising the powers u/s 263 would relate back to the date of original assessment order u/s 143(1). The ld AR argued that as the order u/s 263 was passed on 28.03.2023, the same was beyond the time prescribed u/s 263(2) of the Act.
Per contra, the ld DR relied on the order of the PCIT.
We have heard the rival submissions and have perused the materials on record. The factual matrix of the case shows that the order under revisionary proceedings u/s 263 of the Act is dated 28.12.2019 passed u/s 147 r.w. 143(3) of the Act. The issue for reopening the reassessment proceedings were taxability of accommodation entries amounting to Rs. 65,00,000/- given during the F.Y. 2011-12 to Sh. Anand Kumar Jain and Sh. Naresh Kumar Jain for which the assessee received cash in return. The AO accordingly, assessed the entry of Rs 65,00,000/- as unexplained income u/s 68 of the Act in the reassessment proceedings vide order u/s 147 r.w. 143(3) of the Act dated 28.12.2019.
In such factual matrix, the ratio of the judgement of the hon’ble Supreme Court in the case of CIT vs Industrial Development Bank of India Ltd. ([2023] 152 taxmann.com 591 (SC)] and CIT, Chennai vs Alagendran Finance Ltd ([2007] 162 taxman 465 (SC)] squarely applies. The decision in the case of CIT vs Industrial Development Bank of India Ltd lays down the law as under:
“3.At the outset, it is required to be noted and it is not in dispute that, as such, the commissioner exercised powers under section 263 of the Act with respect to the issues which were not covered in the re-assessment proceedings. Therefore, the issue before the Commissioner while exercising the powers under Section 263 of the Act relate back to the original Assessment Order and, therefore, the limitation would start from the original Assessment Order and not from the Re-assessment Order. We are fortified with our view by the decision of this Court in the case of CIT v. Alagendran Finance Ltd. [2007] 162 Taxman 465/293 ITR 1/[2007] 7 SCC 215. As observed and held by this Court in the aforesaid decision, once an Order of Assessment is re-opened, the previous order of assessment will be held to be set aside and the whole proceedings would start afresh but the same would not mean that even when the subject matter of re- assessment is distinct and different, the entire proceedings of assessment would be deemed to have been re-opened. Meaning thereby, only in a case where the issues before the Commissioner at the time of exercising powers under section 263 of the Act relate to the subject matter of re-assessment, the limitation would start from the date of Re-assessment Order. However, if the subject matter of the re-assessment is distinct and different, in that case the relevant date for the purpose of determination of period of limitation for exercising powers under section 263 of the Act would be the date of the original Assessment Order.
4.In view of the above and for the reasons stated hereinabove and in the facts and circumstance of the case narrated hereinabove, no error has been committed by the ITAT or even the High Court in holding the proceedings under section 263 of the Act by the Commissioner as barred by limitation. Under the circumstances, the present appeal deserves to be dismissed and is accordingly dismissed”.
In the instant case, the PCIT exercised powers under section 263 of the Act with respect to the issues which were not covered in the re-assessment proceedings. Therefore, the issues, before the PCIT while exercising the powers under Section 263 of the Act, relate back to the original Assessment Order and accordingly, the limitation would start from the original Assessment Order and not from the Re-assessment Order. Since the order u/s 263 is passed on 28.03.2023, more than two years from the end of financial year in which the original order u/s 143(1) for AY 2012-13 was passed on 24.11.2012, the same is considered beyond the prescribed time period u/s 263(2) of the Act and accordingly quashed as not sustainable in the eyes of law. The grounds are allowed.
In the result, the appeal in ITA 1681/Del/2023 is allowed.