The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has recently, in an appeal filed before it, held that section 263 is not a mechanism available for PCIT for taking Second Opinion.
The aforesaid observation was made by the Mumbai ITAT, when an appeal was filed by the Assessing Officer, as against the order u/s 263 of the Income Tax Act, 1961, passed by the Pr. Commissioner of Income Tax, for the assessment year 2011-12.
The question raised by the AO’s appeal being as to whether on the facts and in the circumstances of the case and in law, Pr. CIT erred in passing the revision order ws. 263, though the re-assessment order passedW/s.143(3) r.w.s.147 ,is not erroneous and in so far is not prejudicial to the interests of the revenue; the brief facts of the case pertaining to the issue in question were that the assessee-company had filed its return of income for the assessment year 2011-12 on 22.03.2012, declaring a total income of ₹67,167/.
The case of the assessee was processed u/s 143(1) of the Income Tax Act, 1961, and subsequently, on the basis of the information received from ITO (Investigation), Unit-4, Kolkata, a notice u/s 148 dated 30.03.2017 was issued to the assessee. The assessee then filed the return on 24.04.2017, and thereafter, notice u/s 143(2) dated 15.06.2017 and notice u/s 142(1) dated 29.11.2017 were issued and duly served to the assessee.
Thereafter, on 30.03.2017, the Assessing Officer Ward-15(2), Kolkata , after giving his reasons , made disallowance u/s 14A towards ₹5,84,041/, followed by the Pr. CIT vide notices dated 19.03.2020, 05.03.2020 u/s 263 of the Income Tax Act, 1961, asking the assessee as to why order u/s 263 should not be passed setting aside the assessment order wherein the transaction relating to share premium was not examined by the Assessing Officer u/s 143(3)/147 of the Act.
Subsequently, the Pr. CIT vide order dated 15.12.2017, directed the Assessing Officer to examine and consider the evidences ,and decide the issue afresh, and thus, set aside the earlier directions given u/s 143(3) r.w.s. 147 of the Income Tax Act. . And it is by being aggrieved by the order u/s 263 passed by the Pr. CIT, that the assessee has filed the instant appeal before the Mumbai ITAT.
With Mr. Prakash Jhunjhunwala, the AR for the assessee submitting that on 19.03.2020, the Pr. CIT, Mumbai, had dropped the 263 proceedings for technical reasons, and that the Assessing Officer vide notice dated 29.11.2017 issued u/s 142(1) had specifically asked copy of all bank statements specifying name and address of bank branch along with the reconciliation for the period of issue if any, as well as the audited annual accounts for the financial year 2010-11 and the letter dated 05.12.2017, he added that the assessee had given to the Assessing Officer all of these documents which included the copy of the bank statement as well as the nature of business in respect of the investment in relation to quoted and un-quoted shares.
The AR further submitted that all the relevant material in respect of identity, genuineness and creditworthiness of the transactions relating to share premium received by the assessee from M/s Gokul Commodities Pvt. Ltd. were before the Assessing Officer, and that the same was properly examined, and was never doubted by the Assessing Officer as the assessee had explained the transactions as per the law.
On the other hand, Mr. Harendra Narayan Singh, the CIT-DR on behalf of the Revenue , however relied upon the order of the Pr. CIT passed u/s 263, thereby submitting that the Assessing Officer had not verified the share transactions, and therefore that the Pr. CIT has rightly invoked the revisionary power u/s 263.
Hearing the opposing contentions of either sides and perusing the materials available on record, the ITAT Bench consisting of Pramod Kumar, the Vice- President, and Suchitra Kamble , the Judicial Member observed:
“The Assessing Officer after verifying all the documents more specifically mentioned in the reply filed by the assessee along with audited accounts has taken cognizance and made the disallowance u/s 14A r.w. Rule 8D. Therefore, the interest of the Revenue was protected by the Assessing Officer by taking cognizance of the evidences produced before the Assessing Officer by the assessee.”
“It is to be noted that Section 263 is not a mechanism available for the Principal Commissioner of Income Tax for taking second opinion wherein the fact were already examined by the Assessing Officer”,the ITAT Panel added.
Thus, allowing the assessee’s appeal, the Mumbai ITAT ruled :
“ In this particular case, the Pr. CIT has given the different opinion and different treatment to the share investment made by the assessee which amounts to second opinion. This is not permissible u/s 263 as the assessment order does not amount to erroneous and prejudicial to the interest of the Revenue. Hence, the order u/s 263 does not sustain and the appeal of the assessee is allowed.”
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