DUSHYANT BHATI,NOIDA V. PCIT, NOIDA, NOIDA

ITA 1914/DEL/2024

AI Insights

The case involves an appeal by Sh. Dushyant Bhati against the order of the Ld. PCIT, Noida, which set aside the reassessment order passed by the National Faceless Assessment Centre (NFAC) and directed a fresh assessment. The original reassessment was concerning the assessment year 2013-14, where income from capital gains on the sale of agricultural land was brought to tax. The Tribunal examined whether the Ld. PCIT was justified in exercising revisional powers under Section 263, given that a subsequent reassessment order had already been passed, rendering the earlier order non-existent.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 653093 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Other Referred Cases: Malabar Industrial Co. Ltd. Vs. CIT, CIT vs. Max India, ITO vs. K.L. Srihari (HUF), Tata AIG Life Insurance Co. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Assessee Lawyers: RAKESH GUPTA; SOMIL
• Keywords: Set aside; Opportunity of being heard; Reassessment proceedings; Principle of natural justice; Accommodation entries; Competent authority; Revision of order
• Section: 147; 148; 143(3); 142(1); 263; 139

Judgement Text

" INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B”: NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI VIMAL KUMAR, JUDICIAL MEMBER ITA No. 1914/DEL/2024 Assessment Year: 2013-14 Sh. Dushyant Bhati, House No.16,Shivalik, Sector 61, Noida Uttar Pradesh PIN 201 301 PAN No. AQYPB2009C Vs. PCIT, Noida (Appellant) (Respondent) O R D E R PER VIMAL KUMAR, JUDICIAL MEMBER: The appeal of assessee is against order dated 26.03.2024 of Learned Principal Commissioner of Income-Tax, Noida (hereinafter referred as “Ld. PCIT” ) under Section 263 of the Income Tax Act, 1961 ( hereinafter referred as “the Act”) arising out of order dated 23.03.2022 by the National Faceless Assessment Centre (NFAC) (hereinafter referred as “Ld. AO\") under Section 147 r.w.s. 144B of the Act for assessment year 2013-14. Assessee by: Dr. Rakesh Gupta, Adv. Shri Somil Aggarwal & Shri Saksham Aggarwal, Advs. Department by: Ms. Pooja Swaroop CIT (DR) Date of Hearing: 05.05.2025 Date of pronouncement: 18.06.2025 ITA No.1914/Del/2024 2 2. Brief facts of case are that assessee e-filed its return of income on 23.07.2013 declaring income of Rs.10,02,150/- under the head ‘income from business and profession’. The case was reopened after recording reasons and obtaining necessary sanction under Section 151 of the Act. In response to the notice under Section 148 dated 28.02.2021, assessee filed ITR Section 139 dated 23.07.2013 totaling to income of Rs.10,02,150/-. The return was considered as return filed in response to notice under Section 148 of the Act. On request of assessee, reasons recorded for reopening were supplied and a notice under Section 143(2) dated 01.02.2022 was issued to assessee. Notice under Section 142(1) dated 03.02.2022 was issued calling information. Assessee did not submit information. Other notices under Section 142(1) of the Act dated 06.02.2022 and 25.02.2022 were issued. Assessee filed detailed reply vide letter dated 02.03.2022. After considering submissions, assessment was completed at the returned income by Ld. AO vide order dated 23.03.2022. 3. Subsequently, Shri Harish Chand Bhati, father of assessee co-seller in the sale transaction, assessment order dated 28.03.2022 by National Faceless Assessment Centre (NFAC) by making addition filed writ petition. After perusing the record, discrepancies were found. Show-cause-notices were issued to the assessee. Assessee filed replies through e-filing portal. On completion of proceedings, Ld. PCIT vide order dated 26.03.2024 set aside assessment order ITA No.1914/Del/2024 3 dated 23.03.2022 under Sections 147/148 of the Act and directed the Ld. AO to pass fresh order. 4. Being aggrieved, appellant/assessee preferred present appeal. 5. Learned Authorised Representative for the appellant/assessee submitted that Ld. PCIT erred in law and on facts in assuming jurisdiction under Section 263 of the Act and holding reassessment order dated 23.03.2022 and erroneous sales prejudicial to the interest of Revenue and further setting aside the order dated 23.03.2022 and directed Ld. AO to pass fresh order in violation of principles of natural justice. Ld. PCIT erred in assuming jurisdiction and issue of income under the head of ‘capital gain’ on sale of immoveable property have been examined and accepted during course of reassessment proceedings. Ld. PCIT erred in holding that Ld. AO had failed to examine the issue which makes the order erroneous and prejudicial to the interest of Revenue. No agriculture operations were carried out on the land prior to the sale of the land. Ld. AO accepted the version of assessee without making any independent provision. The intention of seller and buyer at the time of the sale deed execution to be heard and land is not for residential purposes. The claim of deduction under Section 154B is not allowable to assessee. Ld. AO failed to apply mind and in assuming jurisdiction during the course of assessment. ITA No.1914/Del/2024 4 6. Learned Authorised Representative for the appellant/assessee submitted that view taken by the Ld. AO was possible view and hence action taken up by the Ld. PCIT under Section 263 did not lie in view of the following judicial decisions:  Malabar Industrial Co. Ltd. Vs. CIT, (2000) 243 ITR 83 (SC);  CIT vs. Max India, CIT 295 ITR 282 (SC). 7. Learned Authorised Representative for the Revenue submitted that Explanation 2 has been inserted in section 263 of the Act and Finance Act,2015 w.e.f. 01.06.2015. After giving notice to the assessee, Ld. PCIT pointed out discrepancies in the order dated 23.03.2022. 8. Learned Authorized Representative for the Revenue submitted that Explanation 2 has been inserted in section 263 of the Act and Finance Act,2015 w.e.f. 01.06.2015. After giving notice to the assessee, Ld. PCIT pointed out discrepancies in the order dated 21.03.2025 in ITA No.1728/Del/2024 held as under: “2. Brief facts of the case are that the appellant/assessee e-filed its return of income on 09.10.2016 declaring income of Rs.6,95,980/- for the assessment year 2016-17. Information was received on the Insight Portal of the Department. The ADIT, Inv. Unit 2(1), Delhi vide letter dated 14.01.2020 disseminated the information regarding the search action carried out on 18.11.2015 on entry operator Shri Pradeep Kumar Jindal who was providing accommodation entries in lieu of cash to large number of beneficiaries through non-descript companies managed and controlled by him with the help of dummy directors. A total of 69 front companies and total of 17 front nondescript firms of Shri Pradeep Kumar Jindal were identified. Shri Pradeep Kumar Jindal admitted to have ITA No.1914/Del/2024 5 charged commission in cash of 2% to 2.5% from various beneficiaries for providing accommodations entries. Notice under Section 148 dated 31.03.2021 was issued after obtaining prior approval from the competent authority. Notice under Section 143(2) dated 13.07.2021 was issued. Notices under Section 142(1) dated 13.12.2021 and 08.03.2022 were issued. Vide reply dated 03.03.3022, the assessee objected to the reasons for reopening the assessment on various contentions including jurisdictions under Section 147 of the Act being not in accordance with law. After considering objections filed by the assessee, proceedings under Section 148 of the Act, were initiated vide notice dated 31.03.2021. Ld. A.O vide order dated 29.03.2022 completed the assessment on the returned income. 3. Ld. PCIT vide order dated 31.03.2024 directed the A.O to pass an order under Section 263/147/144B of the Act in this case as held in this order and add an amount of Rs.1,74,19,000/- as undisclosed income under Section 69 of the Act. 4. Ld. AO vide order dated 30.01.2024, accepted the returned income. 5. Being aggrieved, appellant/assessee preferred present appeal with following grounds: “That on the facts and in the circumstances of the case and in law the Pr. Commissioner of Income Tax, Delhi erred in passing order under Section 263 of the Income-Tax Act, 1961 ( ‘the Act’ for short) holding the order dated 29.03.2022 passed by the Assessing Officer u/s 143(3) of the Act to be erroneous and prejudicial to the interest of revenue and directing the Assessing Officer to make a fresh assessment. That order being, arbitrary, misconceived, erroneous and unlawful must be quashed.” 6. Learned Authorised Representative for the appellant/assessee submitted that before delving into the details of the case and pointing out the relevant facts which are necessary to establish that there is neither any error nor any prejudice to the Department vide the impugned reassessment order dated 29.03.2022 it is submitted that when on 31.03.2024 the Pr. CIT passed the revision order, the impugned order dated 29.03.2022 did not exist for it had been superseded by the second reassessment order dated 31.01.2024 referred to in para 5 above. With the wiping out of the impugned reassessment order dated 29.03.2022 by the second reassessment order dated 30.01.2024, there was no cause of action left for the Pr. CIT to reignite the case with reference to the 29.03.2022 order for ITA No.1914/Del/2024 6 a revision. The Pr. CIT could have assumed jurisdiction only in the event of a subsisting and live order which was existent and operative. At the time when the Ld. Pr.CIT(A) passed the revision order, the impugned order dated 29.03.2022 had got obliterated and cancelled qua the second reassessment order dated 31.01.2024. That order of 29.03.2022 of the A.O did not exist in law at the relevant time on 16.03.2024. 6.1 By reference to case of ITO vs. K.L. Srihari (HUF) (2001) 250 ITR 193 (SC) and Mumbai Bench of the ITAT in ITA Nos. 3556 and 3557/Mum/2012 dated 30.06.2023 in Tata AIG Life Insurance Co. Ltd., has held as under: “ “17. One more contention of CIT is that the reopened assessment starts from where one ends in the order u/s. 143(3), In assessee's case, the assessment was reopened for the reason that the surplus as per the actuarial report has not been taken as the income of the assessee and the assessing officer proceeded to compute the total income of the assessee afresh completely ignoring the way income has been assessed in the original assessment u/s. 143(3). In this regard we notice that the Hon'ble Supreme Court in the case of KL Shri Hari (HUF) & Ors (supra) where it has been held that the Assessing Officer if in the reassessment order makes a fresh assessment of the entire income of the assessee, then the earlier assessment order is effaced by the subsequent order. In the facts of the present case the Assessing Officer has made a fresh assessment of the income of the assessee considering the provisions of the Act along with the various judicial proceeding and therefore in our view the ratio laid down by the Hon'ble Supreme Court is applicable in assessee's case also. Accordingly we are of the view that the excise of the revisionary powers u/s. 263 for this reason is not justified.” 7. Learned Authorized Representative for the Department of Revenue relied on the order of Ld. PCIT. 8. From examination of record in the light of aforesaid rival contentions, it is crystal clear that vide order dated 31.3.2024, Ld. PCIT exercised revisional jurisdiction regarding reassessment order dated 29.03.2022. Ld. AO had passed second reassessment order dated 30.01.2024. So, there ITA No.1914/Del/2024 7 was no cause of action left for Ld. PCIT to adjudicate on order dated 29.03.2022. 9. In view of above material facts and well settled principles of law, noticed in order dated 30.06.2023 in Tata AIG Life Insurance Co. Ltd.’s case (supra), it is apparent on record that the earlier assessment order dated 29.03.2022 after passing of order dated 30.01.2024 was non-existent, therefore, Ld. PCIT had no cause of action to exercise the revisional powers. Accordingly, impugned order dated 31.03.2024 of Ld. PCIT is illegal and set aside. The ground of appeal is allowed.” 9. From examination of record in light of aforesaid rival contentions, it is crystal clear that appellant/assessee in ground nos. 1 to 5 has challenged the exemption of jurisdiction under Section 263 of the Act by Ld. PCIT and holding reassessment order dated 23.03.2022 under Section 147 as erroneous and prejudicial to the interest of the Revenue. The reassessment order dated 23.03.2022 was passed by mentioning that no capital gain on sale of agricultural land was found taxable though the case was reopened to bring to tax, income under the head of ‘capital gain’. The issue of capital gain on sale of land was extensively enquired into during reassessment proceedings. The reasons recorded for bringing to tax capital gain are at page nos. 5 to 7 of the paper books. Copy of notice under Section 148 dated 28.03.2021 is at page 8 of the paper books. Copy of show-cause-notice dated 18.11.2021, showing as to why capital gain on sale of property should not be taxed as at page no. 10 of the paper books and copy of reply of assessee dated 24.12.2021 is at page 13 of the paper book. ITA No.1914/Del/2024 8 10. Therefore, the view taken by Ld. AO was possible and the action taken by Ld. PCIT was not permissible in the light of Hon'ble Supreme Court’s decision in the case of Malabar Industrial Co. Ltd. Vs. CIT, (2000) 243 ITR 83 (SC), supra which provides as: “(i) that the exercise of jurisdiction by the Commissioner under Section 263(1) of the Act was not only unwarranted but also illegal; he contended that mere loss of tax could not be treated as prejudicial to the interests of the revenue and that only when the order of the Assessing Officer would affect the administration of the revenue that it could be treated as prejudicial to the revenue; (ii) that the amount of Rs.3,66,649 was in reality agricultural income and, therefore, ought not to have been brought to tax. Mr. Anoop G. Choudhary, learned senior counsel for the respondent, asserted that the Income-tax Officer passed the order without application of mind and inasmuch as it resulted in loss of tax it was also prejudicial to the interests of the revenue, therefore, the exercise of jurisdiction under Section 263(1) of the Act by the Commissioner was justified and legal. He further submitted that the second contention was not open to the appellant as the basic facts found by the Appellate Tribunal were not questioned before the High Court. To consider the first contention, it will be apt to quote Section 263(1) which is relevant for our purpose:- 263. Revision of orders prejudicial to revenue - (1) The 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 is erroneous insofar 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 an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation - x x x A bare reading of this provision makes it clear that the prerequisite to exercise of jurisdiction by the Commissioner suo moto under it, is that the order of the Income- tax Officer is erroneous insofar as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of twin ITA No.1914/Del/2024 9 conditions, namely, (i). the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent -- if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue.” 11. In view of above material facts and well settled principles of law, exercise of jurisdiction is unsustainable in law and illegal. Therefore, impugned order is set aside. Accordingly, grounds of appeal nos. 1 to 5 are allowed. 12. In the result, the appeal of appellant/assessee is allowed. Order pronounced in the open court on 18 June, 2025. Sd/- Sd/- (SHAMIM YAHYA) (VIMAL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 18/06/2025 Mohan Lal Copy forwarded to - 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "