MAYUR RICE MILLS PRIVATE LIMITED, JHUMRITELAIYA V. PCIT, RANCHI

ITA 33/RAN/2022

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 9083 (ITAT-RANCHI)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 20-09-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 16-05-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Revision of order; Opportunity of being heard; Period of limitation; Accommodation entries; Assessment record; Reassessment proceedings
• Section: 147; 148; 263; 143(3); 133(6)

Judgement Text

आयकर अपीलीय अिधकरण, “रांची“ ᭠यायपीठ रांची IN THE INCOME TAX APPELLATE TRIBUNAL “RANCHI” BENCH, RANCHI (Heard from Kolkata Benches through web-based video conferencing platform) ] ] BEFORE SHRI RAJPAL YADAV, HON’BLE VICE PRESIDENT AND SHRI RAJESH KUMAR, HON’BLE ACCOUNTANT MEMBER ITA No. 33/Ran/2022 Assessment Year: 2012-13 Mayur Rice Mills Private Limited Gujhandi Road Vill – Barwadih, Jhumritelaiya Pin - 825409 PAN : AAFCM5928H Vs Pr. CIT, Ranchi अपीलाथᱮ/ (Appellant) ᮧ᭜ यथᱮ/ (Respondent) Assessee by : Shri S.K. Pransukha, A/R Revenue by : Shri Sanjay Mukherjee, CIT, D/R सुनवाई कᳱ तारीख/Date of Hearing : 21/09/2022 घोषणा कᳱ तारीख /Date of Pronouncement : 02/11/2022 आदेश/O R D E R PER SHRI RAJESH KUMAR, ACCOUNTANT MEMBER : The present appeal is directed at the instance of the assessee against the order of the learned Principal Commissioner of Income Tax (Appeals) - Ranchi (hereinafter ‘ld. Pr. CIT’), dated 30/03/2022, passed under Section 263 of the Income Tax Act, 1961 (in short “the Act”), for Assessment Year 2012-13. 2. The sole issue raised in the various grounds of appeal is against the invalid exercise of jurisdiction u/s 263 of the Act by the ld. Pr. CIT as the revisionary proceedings are hopelessly barred by limitation. 3. The facts in brief are that the assessment u/s 143(3) of the Act was framed vide order dt. 19/03/2015. Thereafter, the case of the assessee was reopened u/s 147 of the Act and again assessment was framed vide order ITA No. 33/Ran/2022 Assessment Year: 2012-13 Mayur Rice Mills Private Limited 2 dt. 15/11/2019 passed u/s 143(3) r.w.s. 147 of the Act. Pertinent to state that the assessment was reopened on the ground that the assessee is a beneficiary of accommodation entries in the form of share capital and share premium and received a sum of Rs.5,00,000/- on 15/02/2012 from M/s. Plasma Dealtrade (P) Ltd., which was further transferred on 24/02/2012 in the bank account of M/s. Plasma Dealtrade (P) Ltd. The said amount of Rs.5,00,000/- was ultimately added in the income of the assessee in the assessment by the Assessing Officer and was duly brought to tax. 4. The ld. Pr. CIT on examination of the assessment records observed that the assessee has issued 24800 shares of Rs.10/- each at a premium of Rs.64.51 per share on 31/03/2012 and the total proceeds from issuing of the shares were Rs.1,59,98,480/-. According to the ld. Pr. CIT, the Assessing Officer has failed to verify the identity, creditworthiness and genuineness of the shareholders who invested money in the assessee company . The ld PR CIT further observed that these shares need to be valued in terms of Rule 11UA of the Income Tax Rules, 1962 (hereinafter ‘the Rules’) to check the applicability of Section 56(2)(vii) of the Act. The ld. Pr. CIT observed that to this extent, the order passed by the Assessing Officer u/s 143(3) r.w.s. 147 of the Act, dt. 15/11/2019, was erroneous and prejudicial to the interest of the revenue. Accordingly, a showcause notice u/s 263 of the Act was issued to the assessee on 24/03/2022 which was duly served and complied with by the assessee by making written submissions from time to time. Finally, the ld. Pr. CIT cancelled the assessment framed by the Assessing Officer u/s 143(3)/147 of the Act dt. 15/11/2019 by directing the Assessing Officer to conduct a detailed enquiry in respect of the issues mentioned in the foregoing paragraphs and frame the assessment accordingly. ITA No. 33/Ran/2022 Assessment Year: 2012-13 Mayur Rice Mills Private Limited 3 5. The ld. Counsel for the assessee contended before us that the revisionary jurisdiction exercised by the ld. Pr. CIT is incorrect and hopelessly barred by limitation. The ld. Counsel for the assessee drew out attention to the provisions of Section 263(2) of the Act which provides for limitation for exercise of jurisdiction u/s 263 of the Act. The ld AR agrued that section 263(2) of the Act mandates that no order shall be passed u/s 263 of the Act after expiry of two years from the end of financial year in which the order sought to be revised was passed. The ld. Counsel for the assessee submitted that in the present case, the assessment was originally framed by the Assessing Officer u/s 143(3) of the Act vide order dt. 19/03/2015 and, therefore, the limitation starts from 31/03/2015 and expires on 31/03/2017. The ld. Counsel for the assessee, further submitted that the issue which was raised by the ld. Pr. CIT in the revisionary proceedings is in respect of the issue of 24,800 equity shares which was not the subject matter of reopening of assessment nor the Assessing Officer during the course of reassessment proceedings came across any such escapement of income resulting from the issue of shares by the assessee to various parties. The ld. Counsel for the assessee submitted that the issue of issue of 24800 shares was examined by the AO in the original assessment proceedings and even the details/information was called for u/s 133(6) of the Act from the investor. Therefore the ld. Counsel submitted that Pr. CIT has revised the reassessment order passed u/s 143(3) r.w.s. 147 of the Act which is wrong and against the provisions of section 263(2) of the Act and as there was no mistake in the said order which may have caused prejudice to the revenue. He further submitted that this issue was examined by the AO in the original assessment proceedings by calling not the subject matter of the showcause notice or proceedings u/s 263 of the Act. At the most, the ld. Pr. CIT could have cancelled the original assessment passed u/s 143(3) ITA No. 33/Ran/2022 Assessment Year: 2012-13 Mayur Rice Mills Private Limited 4 of the Act but it is barred by limitation which is against the ratio laid down by the Hon’ble Supreme Court in the case of CIT vs Alagendran Finance Ltd (293 ITR 1) (SC) and CIT vs. ICICI Bank Limited (2012) 343 ITR 74 (Bom.). The ld. A.R. submitted that in both these decisions, the Hon’ble Courts have held that the two years period of limitation shall run from the end of financial year in which the original assessment was framed and not from the end of financial year in which the reassessment was framed when the issue on which the assessment was revised was not subject matter of reassessment proceedings. The ld. A.R. also submitted that in view of this settled position of law, the revisionary proceeding as exercised by ld. PCIT under section 263 of the Act and the consequent order may quashed as being barred by limitation. 6. Per contra, the ld. D.R. relied heavily on the order of ld. PCIT by submitting that no prejudice is going to be caused to the assessee if the assessment order is revised by the Assessing Officer as the assessee would be given reasonable and sufficient opportunity during the set aside assessment proceeding also and the assessee is free to present its case on merit before the Assessing Officer. The ld. D.R. also submitted that the ld. PCIT has only directed the Assessing Officer to verify the issue proposed in the impugned order and frame the order in accordance with law after making the fresh enquiry and affording reasonable opportunity of being heard to the assessee and therefore, the same needs to be affirmed by the dismissing the legal issue raised by the assessee. 7. Having heard the rival contentions and perusing the material available on record, we note that the assessment under section 143(3) was framed vide order dated 19.03.2015. Thereafter the assessment was reopened by the Assessing Officer under section 147 read with section 148 of the Act on 12.01.2018 after recording the reasons to believe under section 148(2) of the Act that income has escaped ITA No. 33/Ran/2022 Assessment Year: 2012-13 Mayur Rice Mills Private Limited 5 assessment Thereafter, the case of the assessee was reopened u/s 147 of the Act and the assessment was framed vide order dt. 15/11/2019 passed u/s 143(3) r.w.s. 147 of the Act. Pertinent to say that the assessment was reopened on the ground that the assessee is a beneficiary of accommodation entries in the form of share capital and share premium and received a sum of Rs.5,00,000/- on 15/02/2012 from M/s. Plasma Dealtrade (P) Ltd., which was further transferred on 24/02/2012 in the bank account of M/s. Plasma Dealtrade (P) Ltd. The said amount of Rs.5,00,000/- was ultimately added in the income of the assessee in the assessment framed by the Assessing Officer and was duly brought to tax. Now the issue before us for adjudication is whether the revisionary jurisdiction exercised by the ld. PCIT under section 263 of the Act is barred by limitation. The scope of powers of the AO in original assessment proceedings and reassessment proceedings are not same. In order to decide the issue at hand we would like to dwell upon the powers of the AO in the original assessment proceedings and the reassessment proceedings. In the original assessment proceedings the AO has vast powers whereas in the reassessment proceedings the powers are limited though the AO has the power to assess any other item of income which is not subject matter of the reasons u/s 148(2) of the Act which comes to notice during the course of proceedings but subject to the condition that the addition is made in respect of escaped income as recorded in the reasons u/s 148(2) of the Act. We note that in assessment proceedings which culminated under section 143(3) order dated 19.03.2015 in which the AO had examined this issue. In the reopened assessment under section 147 read with section 148 of the Act as finalised vide order dated 15.11.2019 this issue did not come to the notice of the AO during the proceedings. 8. Considering the facts of the case vis a vis the and the provisions of section 263(2) of the Act and also the citations made by the ld. Sr. ITA No. 33/Ran/2022 Assessment Year: 2012-13 Mayur Rice Mills Private Limited 6 Counsel before us, we are of the considered view that it is the original assessment order passed under section 143(3) of the Act which could be considered as erroneous and prejudicial to the interest of the Revenue as the issue of 24800 shares of Rs.10/- each at a premium of Rs.64.51 per share on 31/03/2012 raising thereby from issuing of the shares of Rs.1,59,98,480/- was examined by the AO thoroughly after issuing notices u/s 133(6) of the Act . We note that this issue was not subject matter in the re-assessment proceedings nor it came to the notice of the AO during re-assessment proceedings which again culminated under section 143(3) read with section 147 of the Act vide order dated 15.11.2019. In our opinion, the limitation runs from the end of the financial year in which the original assessment under section 143(3) of the Act was framed, i.e. 31.03.2015 and the limitation period expired on 31.03.2017, whereas the ld. PCIT has set aside and revised the reassessment order under section 143(3) read with section 147 dated 15.11.2019 and consequently the revisionary jurisdiction of the ld. PCIT cannot be sustained. The case of the assessee finds force from the decision in the case of CIT –vs.- Alagendran Finance Limited (supra), wherein the Hon’ble Apex Court has held that the period of limitation has to run from the date of order of assessment and not from the date of order of reassessment, where the item/issue in respect of which order is revised under section 263 of the Act by the ld. PCIT is not the subject matter of reassessment proceedings. The facts before the Hon’ble Apex Court were that, the ld. PCIT had sought to revise the part of the order of assessment, which related the lease equalisation fund. The reassessment proceeding was initiated and culminated under section 143(3) read with section 147 of the Act in which the issue of lease equalisation fund was not the subject matter and the Hon’ble Court has, therefore, held that doctrine of merger did not apply in the case of this nature and the period of limitation commences from the date of original assessment and not from the date of reassessment since the latter had not anything to do to lease equalisation fund and this was ITA No. 33/Ran/2022 Assessment Year: 2012-13 Mayur Rice Mills Private Limited 7 not a case where subject matter of assessment and subject matter of re- assessment were same. The Hon’ble Apex Court while passing the order has relied on the decision of Coordinate Bench in the case of CIT –vs.- Arbuda Mills (1998) 231 ITR 50 (SC). Similar ratio as laid down by the Hon’ble Bombay High Court in the case of CIT –vs,- ICICI Bank Limited(Supra) wherein the Hon’ble Bombay High Court has held that where the 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 and which does not form the subject matter of the reassessment, the limitation must necessarily begin to run from the date of order passed under section 143(3) by observing and holding as under:- “Held, dismissing the appeal, that neither in the first reassessment nor in the second reassessment was any issue raised or decided in respect of the deductions under section 36(1)(vii), (viia) and the foreign exchange rate difference. The order of the Commissioner under section 263(2) had not been passed with reference to any issue which had been decided either in the order of the first reassessment or in the order of second reassessment but sought to revise issues decided in the first order of assessment passed under section 143(3) on March 10, 1999, which continued to hold the field as regards the three issues in question. The order dated March 10, 1999, did not merge with the orders of reassessment in respect of issues which did not form the subject matter of the reassessment. Consequently, Explanation 3 to section 147 would not alter that position. Explanation 3 only enables the Assessing Officer, once an assessment is reopened, to assess or reassess the income in respecdt of any issue, even an issue in respect of which no reasons were indicated in the notice under section 148(2). This, however, will not obviate the bar of limitation under section 263(2). The invocation of the jurisdiction under section 263(2) was barred by limitation”. 9. In the instant case before us also the issue on which the ld. PCIT proposed the revision of reassessment order dated 15.11.2019, we note that the issue of equity shares at premium was not the subject matter of ITA No. 33/Ran/2022 Assessment Year: 2012-13 Mayur Rice Mills Private Limited 8 reassessment proceedings. Therefore, the period of limitation has to run from the end of the financial year in which the assessment is framed under section 143(3) of the Act. In view of this, we are inclined to hold that the revisionary jurisdiction exercised by the ld. PCIT is hopelessly barred by limitation in view of the ratio laid down by the Hon’ble Courts as discussed herein above. The appeal of the assessee is allowed. 10. In the result, the appeal of the assessee is allowed. Order pronounced in the Court on 2 nd November, 2022 at Kolkata. Sd/- Sd/- (RAJPAL YADAV) (RAJESH KUMAR) VICE PRESIDENT ACCOUNTANT MEMBER Kolkata, Dated 02/11/2022 *SC SrPs आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant 2. ᮧ᭜यथᱮ / The Respondent. 3. संबंिधत आयकर आयुᲦ / Concerned Pr. CIT 4. आयकर आयुᲦ)अपील (/ The CIT(A)- 5. िवभागीय ᮧितिनिध आयकर अपीलीय अिधकरण,Ranchi/DR,ITAT, Ranchi 6. गाडᭅ फाईल /Guard file. आदेशानुसार/ BY ORDER, TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Ranchi