RAMESHBHAI DEVRAJBHAI KHICHADIA, RAJKOT V. PR. CIT, RAJKOT-1, RAJKOT

ITA 51/RJT/2022

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 6390 (ITAT-RAJKOT)
• Duration Of Justice: 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 07-03-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Reason to believe
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 153

Judgement Text

आयकर अपीलीय अिधकरण, अहमदाबाद ᭠यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER, And SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER आयकर अपील सं./ITA No. 51/Rjt/2022 िनधाᭅरण वषᭅ/Asstt. Years: 2012-2013 Shri Rameshbhai Devrajbhai Khichadia, Aalap Avenue A-13, University Road, Rajkot-360005. PAN: AETPK0199K Vs. The Principal Commissioner of Income Tax, Rajkot-1, Rajkot. Assessee by : Shri Mehul Ranpura, A.R Revenue by : Shri Sanjeev Jain, CIT. D.R सुनवाई कᳱ तारीख/Date of Hearing : 29/06/2022 घोषणा कᳱ तारीख /Date of Pronouncement: 16/09/2022 आदेश/O R D E R PER BENCH: The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Principal Commissioner of Income Tax , Rajkot-1, Rajkot, dated 18/01/2022 arising in the matter of assessment order passed under s.263 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2012-13. ITA No. 51/Rjt/2022 A.Y. 2012-13 2 2. The only interconnected issue raised by the assessee is that the learned PCIT erred in holding the assessment framed under section 143(3) of the Act as erroneous insofar prejudicial to the interest of Revenue. 3. The brief facts are that the assessee is an individual and director in the companies. In the present case the reassessment proceeding were initiated under section 147 of the Act after recording the reasons as detailed below: “The assessment is re-opened only on the information has been received from DDIT (inv.) Unit-2(1) Kolkata. The DDIT (Inv.) has reported that information from credible sources was received that during the period of 01.01.2012 to 28.02.2012 M/s DLS Export Pvt. Ltd., through its bank account maintained with ICICI Bank Ltd. has transferred large amount to various entities through various linked accounts by RTGS. These accounts were linked with several other' accounts where largo value of cash deposited and subsequently transferred to various entities through linked accounts. During the investigation, a cash trail from the account where the cash is deposited and subsequently transferred to various beneficiaries by layering through various bank accounts was established. Further, it was found that the assesses is one of the beneficiary of accommodation entry to the tune of Rs. 34,85,042/-." 3.1 Finally the assessment was framed under section 143(3) section 147 of the Act at the income declared by the assessee in the return of income at Rs. 22,17,280/- vide order dated 30 of December 2019. 3.2 Subsequently, the proceedings under section 263 of the Act was initiated vide notice dated 11 December 2021 alleging that the assessee has declared long-term capital gain at ₹ 95,22,429/- which was claimed as exempted under section 10(38) of the Act. As per the learned PCIT, such long-term capital gain was bogus in nature but the same was not verified by the AO during the assessment proceedings. Thus it was proposed by the learned PCIT to hold the assessment framed under section 143(3) read with section 147 of the Act as erroneous insofar prejudicial to the interest of revenue. Finally the learned PCIT vide order dated 18 January 2022 held the assessment order as erroneous insofar prejudicial to the interest of revenue for the reason that the assessee has shown bogus long-term exempted capital gain which was not verified by the AO. ITA No. 51/Rjt/2022 A.Y. 2012-13 3 4. Being aggrieved by the order of the learned PCIT, the assessee is in appeal before us. 5. The learned AR before us has filed a paper book running from pages 1 to 24 and contended that the re-opening under the provisions of section 147 of the Act was initiated on the reasoning that the assessee has taken accommodation entry from the entry operator through layering the funds in different bank accounts. As such the issue was raised in the reasons recorded with respect to the unexplained cash credit and therefore based on that the AO has completed the assessment under section 143(3) read with section 147 of the Act. As such, the AO was empowered to assess any other escaped income if it comes to his knowledge in the process of the assessment proceedings under section 147 of the Act. But nothing has come to the notice of the AO with respect to any other escaped income during the re- assessment proceedings. As such, the income shown under the head long-term capital gain which was claimed exempted under section 10(38) of the Act was not reviewed by the AO as bogus in nature. Therefore, he did not extend the scope of the assessment proceedings beyond the points which were recorded in the reasons to believe for the escapement of income. Thus, the PCIT cannot exercise his jurisdiction under the provisions of section 263 of the Act by enhancing the assessment under the provisions of section 147 of the Act beyond the scope the reasons recorded for escapement of income. Thus, the learned AR prayed before us that the revision order passed by the learned PCIT under 263 of the Act is not sustainable. 6. On the other hand, the learned DR vehemently supported the order of the learned PCIT. 7. We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the present case relates whether the learned PCIT was competent to enhance the scope of assessment which was confined by the AO to the extent of the reasons recorded by him for escapement of ITA No. 51/Rjt/2022 A.Y. 2012-13 4 income. There is no dispute to the fact that the proceedings were initiated on account of unexplained cash credit as discernible from the reasons recorded reproduced in the preceding paragraph. Likewise, we have also referred the assessment framed under section 147 read with section 143(3) of the Act and note that there was no mention of any other income which has escaped assessment other than the reasons recorded by the AO. Thus, the AO framed the assessment considering the reasons recorded based on which the proceedings under section 147 of the Act were initiated. 7.1 The question arises whether the learned PCIT can hold the order of the AO as erroneous insofar prejudicial to the interest of revenue on the item of income which was neither the part of reasons recorded nor the re-assessment framed under section 147 of the Act. Admittedly, the AO in the proceedings initiated under section 147 of the Act is empowered to take into consideration any other item of income which has escaped assessment which can be verified from the provisions of the Act as reproduced below: 147. If the 13 [Assessing] Officer 14 [has reason to believe 15 ] that any income chargeable to tax has escaped assessment 15 for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess 15 such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings 15 under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : 7.2 From the above, it is transpired that it is the AO who can scope expand the scope of the proceedings initiated under section 147 of the Act but the same power are not available to the learned PCIT for including a fresh item of income or expense on the reasoning that the same was not verified. It is rightly so that the AO has not verified the new item for the simple reason that it was never the subject matter of re-assessment. The AO consciously concluded the assessment to the extent of the dispute raised in the reasons recorded. In other words, the learned PCIT, to our understanding, cannot hold the assessment order as erroneous insofar prejudicial to the interest of revenue with respect to the matters which were not subject matter of the reasons recorded by the AO as well as the assessment framed under section ITA No. 51/Rjt/2022 A.Y. 2012-13 5 147 read with section 143(3) of the Act. Accordingly, we hold that the learned PCIT has exceeded his jurisdiction by holding the assessment order as erroneous insofar prejudicial to the interest of revenue on account of non-verification of the long-term capital gain disclosed by the assessee. 7.3 Before parting it is also important to note that the long-term capital gain which was doubted by the learned PCIT was offered to tax in the original return of income. In other words, it is not the case that the assessee has disclosed long-term capital gain in the return of income filed in response to the notice issued under section 148 of the Act. For this purpose we refer the submission made by the assessee before the learned PCIT which has not been controverted by the learned DR appearing on behalf of the revenue which is reproduced as under: The assessee further submits that in the return of income filed originally it has furnished complete details of transactions in shares and earning of LTCG. The department was not satisfied with the details furnished in the return of income and it had reopened the assessment by invoking the provisions of section 147 of the Act and accordingly notice u/s 148 was issued on 26.03.2019. The assessee in turn filed the return of income and once again furnished the complete details of transactions of shares and earning of LTCG as stated supra. 7.4 In view of the above, there remains no ambiguity to the fact that learned PCIT has exceeded his jurisdiction by exercising his power under the provisions of section 263 of the Act in the given facts and circumstances and therefore we hold that the order passed by the learned PCIT is not sustainable. Thus, we quash the same. Hence, the ground of appeal of the assessee is allowed. 8. In the result, the appeal filed by the assessee is allowed. Order pronounced in the Court on 16/09/2022 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 16/09/2022 Manish