MOHD SHAHBUDDIN KHAN,CHANDIGARH V. PCIT-1, CHANDIGARH

ITA 564/CHANDI/2024

AI Insights

The case involves an appeal by the assessee, Mohd Shahbuddin Khan, against the order of the Ld. PCIT, Chandigarh-1, which set aside a reassessment order passed by the Assessing Officer. The reassessment was initially based on information that the assessee received Rs. 27,00,000 from M/s Sunrise Infratech Pvt. Ltd. as an advance towards the sale of land. The assessee contended that no sale occurred and the amount was received to negotiate a property purchase on behalf of the company, which ultimately did not materialize. The AO accepted the assessee's explanation during reassessment, but the PCIT later found the order to be erroneous and prejudicial to the interests of the Revenue, leading to the current appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 705892 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Assessment Year: 2013-2014
• Other Referred Cases: Malabar Industrial Co. Ltd. v. CIT, CIT v. Jawahar Bhattacharjee, CIT v. Gee Vee Enterprises, ITO v. DG Housing Projects Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: TARUNDEEP KAUR
• Assessee Lawyers: AJAY JAIN; LOVESH BANSAL
• Keywords: Set aside; Reassessment proceedings; Revision of order
• Section: 147; 263

Judgement Text

"आयकर अपीलीय अिधकरण,चǷीगढ़ Ɋायपीठ “बी” , चǷीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH HEARING THROUGH: PHYSICAL MODE ŵी लिलत क ुमार, Ɋाियक सद˟ एवं ŵी मनोज क ुमार अŤवाल, लेखा सद˟ BEFORE: SHRI. LALIET KUMAR, JM & SHRI. MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./ ITA No. 564 /Chd/ 2024 िनधाŊरण वषŊ / Assessment Year : 2013-14 Mohd Shahbuddin Khan C/o Harish Gautam And Associates, Chartered Accountants SCO 34, 2nd Floor Sector 33D, Chandigarh- 160020 बनाम The PCIT-1 Chandigarh ˕ायी लेखा सं./PAN NO: AAPPK0667A अपीलाथŎ/Appellant ŮȑथŎ/Respondent िनधाŊįरती की ओर से/Assessee by : Shri Ajay Jain, CA and Shri Lovesh Bansal, CA राजˢ की ओर से/ Revenue by : Smt. Tarundeep Kaur, CIT, DR सुनवाई की तारीख/Date of Hearing : 26/06/2025 उदघोषणा की तारीख/Date of Pronouncement : 04/07/2025 आदेश/Order PER LALIET KUMAR, J.M: This appeal is filed by the assessee against the order passed by the Ld. Pr. CIT, Chandigarh-1 dated 14.03.2024 under Section 263 of the Income Tax Act, 1961, whereby the Ld. PCIT set aside the reassessment order dated 21.03.2022 passed under Section 147 r.w.s. 144B by the Assessing Officer (AO), with the direction to conduct fresh assessment after making due inquiries. 2. In the present appeal Assessee has raised the following grounds: 1. That on the law, facts, circumstances and legal position of the case, the Worthy Pr. CIT in his order dated 14.03.2024 erred in passing order in contravention of the provisions of Section 263 of the Income Tax Act, 1961. 2. That on the facts and circumstances of the case and in law, the Id. Pr.CIT has erred in assuming jurisdiction u/s 263 when the order of the AO is neither erroneous nor prejudicial to the interest of the Revenue. It is well settled law that once an issue is settled through an assessment order, it cannot be revisited in a subsequent notice. This principle safeguards against redundant litigation and ensures the finality of judgments. 3. That on the facts and circumstances of the case and in law, amount of notice for revision of reassessment, if any must have been for Rs 27,00,000/-, the amount related to the relevant Assessment Year, re-verification of transactions amounting to Rs. 46,90,000/-, which pertains to two different Assessment Years is bad under the law and shows the non-consideration of relevant contents of verification in the Original 2 Assessment Order and hence the order passed under Section 263 is beyond the jurisdiction of Worthy Pr.CIT, hence needs to be set aside. 4. The action of the Id. Pr. CIT is illegal, unjustified, arbitrary and against the facts of the case. 5. Relief may please be granted by quashing the order passed u/s 263. 6. That the appellant craves leave for any addition, deletion or amendment in the grounds of appeal on or before the disposal of the same. 3. Briefly, the facts of the case are that the assessee filed his return of income for A.Y. 2013-14 on 27.07.2013 declaring total income of Rs.5,20,570/-. Based on information that the assessee had received Rs.27,00,000/- from M/s Sunrise Infratech Pvt. Ltd., Zirakpur as advance towards sale of land, the case was reopened u/s 147 of the Act. The assessee, however, contended during reassessment that no sale had taken place, and the amount was received to negotiate purchase of property on behalf of the said company. It was further submitted that the transaction failed, and the balance of Rs.25,90,000/- was returned to the company in subsequent years through banking channels. 3.1 The AO accepted the explanation and passed the reassessment order u/s 147 r.w.s. 144B on 21.03.2022, accepting the returned income. Subsequently, the Ld. PCIT exercised jurisdiction u/s 263, holding that the order was erroneous and prejudicial to the interests of Revenue as the AO had failed to conduct requisite inquiries and verification. 4. Against the order of the Ld. Pr. CIT, the assessee preferred an appeal before the Tribunal. 5. During the course of hearing, the assessee submitted that the AO had issued notices and called for information, and all relevant details were submitted during the reassessment proceedings. It was clarified that no property was sold and that the amount was only advanced to him to facilitate a deal which did not materialize. The assessee submitted a bank statement evidencing the return of Rs.25,90,000/- in three instalments and referred to an affidavit of the company confirming part of the amount. 3 5.1 The assessee argued that the AO had applied his mind and accepted the explanation after due consideration of the material, and merely because the PCIT did not agree with the view taken by the AO, it cannot be said that the order was erroneous or prejudicial. Reliance was placed on Malabar Industrial Co. Ltd. v. CIT (supra), and it was submitted that both conditions under section 263 were not fulfilled. 6. Per contra, the Ld. DR, relying on the findings in the revision order u/s 263, submitted that the AO accepted the assessee’s explanation without conducting any meaningful inquiry into the genuineness and source of the amount of Rs.46,90,000/- claimed to have been received from M/s Sunrise Infratech Pvt. Ltd. 6.1 It was pointed out that the assessee failed to produce any documentary evidence for receipt of the entire Rs.46,90,000/-. While an affidavit was produced confirming receipt of Rs.19,90,000/- in a prior year (F.Y. 2011–12), there was no confirmation or agreement for the balance Rs.27,00,000/-, nor any evidence of a legally binding contract or correspondence from the company authorizing such negotiation. 6.2 The Revenue contended that repayment of the amount of Rs.25,90,000/- after a delay of nearly 6 years (in 2019) raises serious doubts about the veracity of the assessee’s claim. The sequence of events, repayment timing, and absence of formal documentation made the explanation implausible. 6.3 The Ld. DR also emphasized that the explanation lacked commercial sense and that the AO failed to verify: (i) the purpose and legitimacy of the transaction, (ii) the identity and creditworthiness of the payer, and (iii) the absence of tax evasion. In this context, it was submitted that the AO’s action amounted to a superficial inquiry and that inadequate inquiry is tantamount to “no inquiry”, as held by Hon’ble Courts. 4 6.4 The DR relied on judicial precedents, including: Malabar Industrial Co. Ltd. v. CIT (243 ITR 83, SC) – laying down that failure to make inquiries renders the order both erroneous and prejudicial. CIT v. Jawahar Bhattacharjee (342 ITR 74, Gauhati HC) CIT v. Gee Vee Enterprises (99 ITR 375, Delhi HC) ITO v. DG Housing Projects Ltd. (343 ITR 329, Delhi HC) 6.5 It was thus submitted that the impugned assessment order was passed in breach of the duty cast on the AO as both investigator and adjudicator, and the PCIT rightly assumed jurisdiction under section 263 to restore the matter for fresh and proper examination. 7. We have heard the rival contention and perused the material available on the record. It is evident that the AO had issued notices u/s 142(1), and in response, the assessee furnished explanations regarding the receipt and subsequent repayment of the impugned amount. However, the record does not show that the AO made any independent verification or inquiry into the genuineness of the transaction, the nature of the services rendered by the assessee, or the creditworthiness of the payer company. 7.1 Mere production of a bank statement evidencing repayment after several years does not establish the genuineness of the initial receipt, especially when the explanation lacks corroborative documentary evidence such as a formal agreement, board resolution, or contemporaneous communication. 7.2 We find merit in the Revenue’s contention that the Assessing Officer has failed to make due inquiries, particularly in light of the fact that the amount was substantial, the delay in repayment was significant, and the affidavit on record related only to part of the amount in a different 5 assessment year. The AO’s failure to examine these issues renders the assessment order erroneous in law. 7.3 It is a settled principle that “lack of inquiry” or “inadequate inquiry” that results in an incorrect assumption of facts or misapplication of law empowers the Commissioner to invoke Section 263, as held by the Hon’ble Delhi High Court in DG Housing Projects Ltd. (supra). 7.4 In light of the above discussion, we uphold the order passed by the Ld. PCIT under Section 263. The assessment order dated 21.03.2022 is set aside, and the AO is directed to conduct a fresh assessment after making necessary inquiries into the nature, source, and genuineness of the impugned transaction, and pass a speaking order after affording adequate opportunity to the assessee. Accordingly, the appeal of the assessee is dismissed. 8. In the result, appeal of the Assessee is dismissed. Order pronounced in the open Court on 04/07/2025 Sd/- Sd/- मनोज क ुमार अŤवाल लिलत क ुमार (MANOJ KUMAR AGGARWAL) (LALIET KUMAR) लेखा सद˟/ ACCOUNTANT MEMBER Ɋाियक सद˟ /JUDICIAL MEMBER AG आदेश की Ůितिलिप अŤेिषत/ Copy of the order forwarded to : 1. अपीलाथŎ/ The Appellant 2. ŮȑथŎ/ The Respondent 3. आयकर आयुƅ/ CIT 4. आयकर आयुƅ (अपील)/ The CIT(A) 5. िवभागीय Ůितिनिध, आयकर अपीलीय आिधकरण, चǷीगढ़/ DR, ITAT, CHANDIGARH 6. गाडŊ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar "