The Income Tax Appellate Tribunal (ITAT), Delhi Bench ruled that the revisional jurisdiction can not be invoked when re-assessment is illegal.
The return of income, in this case, was originally filed declaring a loss of Rs.7,817. In this case, information received from the office of DIT that the assessee has received bogus accommodation entries of Rs.40 lakhs during the Financial Year 2007-2008 under appeal.
The notice under section 148 has accordingly been issued, which was served upon the assessee. The AO provided a copy of the reasons for reopening the assessment to the assessee also. The AO issued statutory notice and called for the details which have been filed by the assessee and examined by the AO.
The AO noted that the assessee-company is a building developer/ colonizer and dealt in all kinds of immovable properties during the year under consideration. The assessee was required to furnish confirmation along with a copy of the ITR and bank statement of the parties.
The assessee has furnished confirmation along with a copy of the financial statement, a copy of the bank statement of the parties from whom share application/ share capital money received, notice under section 133(6) was also issued, and statements of the Directors were also recorded by the AO. The AO was satisfied with the explanation of the assessee and thus, the AO assessed the income of the assessee at NIL under section 143(3) or 147 of the Income Tax Act, 1961.
However, the Pr. CIT, found that assessee has received accommodation entries and the material found during the course of search in the case of Shri S.K. Jain Group has not been considered by the A.O. The explanation of assessee was called for as to why the re-assessment order cannot be set aside.
The Assessee submitted that since the re-assessment order is illegal and bad in law and is covered by the Order of the Tribunal Dated 01.04.2019 in the case of assessee on the same issue, therefore, the Learned Pr. CIT cannot exercise jurisdiction under section 263 of the Income Tax Act, 1961 in collateral proceedings.
On the other hand, the relied upon the impugned Order of the Learned Pr. CIT submitted that since the assessee did not challenge the reopening of the assessment, therefore, it cannot be challenged in proceedings under section 263 of the Income Tax Act, 1961.
The coram of N.K.Billaiya and Bhavnesh Saini held that the Pr. CIT has wrongly assumed the jurisdiction under section 263 of the Income Tax Act.
“Since the re-assessment proceedings are already declared illegal and bad in Law in A.Y. 2009- 2010 in the case of assessee on the same reasons, therefore, in the assessment year under appeal also the initiation of re-assessment proceedings is illegal and bad in Law,” the ITAT said.
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