The Orissa High Court (HC) has held the revisional order by PCIT will be invalid if the original reassessment order was not validly passed.
The Revenue is directed to challenge the common order dated 18th August 2022 passed by the Income Tax Appellate Tribunal (ITAT), Cuttack Bench, Cuttack whereby the ITAT allowed the aforementioned appeals of the Assessees thereby setting aside an order dated 23rd March 2021 passed by the Principal Commissioner of Income Tax (PCIT), Sambalpur under Section 263 of the Income Tax Act, 1961 (Act) holding the original assessment order dated 28th December 2018 of the Assessing Officer (AO) to be erroneous and prejudicial to the interests of the Revenue.
The Assessee Badal Prakash Jindal, HUF is concerned, the said Assessee filed its return of income after claiming Long Term Capital Gains (LTCG) under Section 10(38) of the Act. The AO reopened the assessment by issuing notice to the Assessee under Section 148 of the Act, alleging that the Assessee had taken an accommodation entry in the form of a bogus LTCG and that TTML was a sham company.
The AO passed an assessment order under Section 143 (3) read with Section 147 of the Income Tax Act accepting the revised income as disclosed in the return and accordingly raising a demand. The PCIT, Sambalpur then exercised the suo motu revisional power under Section 263(1) of the Act and an order was passed on 23rd March 2021 directing the AO to add an entire amount of Rs.29,49,800/- under Section 68 read with Section 115BBE of the Act.
A Coram comprising of Justice M S Raman observed that reassessment proceedings were themselves invalid since the reasons recorded in the file for reopening and the reasons supplied to the Assessee were different. Further held that if the original re-assessment order itself was not validly passed, the subsequent revisional order by the PCIT was required to be held invalid. The Court upheld the impugned order of the ITAT and dismissed the appeals.
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