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2010 (4) TMI 1071 - AT - Income TaxThird Member Appointment - difference in opinion between the ld JM and the ld AM - Validity of order passed u/s 263 - receipt of gold ornaments and cash by the assessee through the Will - whether the order of the AO got merged with the order of the CIT(A) on the matter relating to the addition - claimed relief u/s 80-I - assessee has claimed that she has received a sum of 4, 50, 000 while the AO accepted only a sum of 4, 00, 000 and made the addition of 50, 000 - AO accepted the validity of the Will. Subsequently the assessee went in appeal before the CIT(A) and the CIT(A) deleted the addition of 50, 000 and has also accepted the validity of the appeal. Main reasons for revising the order by the CIT were that the Assessing Officer failed to examine (a) whether the Will has been probated or not? (b) whether the person who bequeathed the said amount and jewellery did so in terms of Hindu Succession Act? and (c) whether the said cash and jewellery were part of her Stridhan or self-acquired property which she could legally bequeath or was it part of HUF and did the said cash and jewellery factually exist? The learned JM was of the view that the order of the AO had merged with the order of the CIT(A) and therefore the CIT was not having any jurisdiction to pass the impugned order u/s 263. Learned AM on the other hand took the view that the order of the CIT(A) has not merged with the order of the AO and it is the case where there had not been proper enquiry by the AO and therefore the order passed u/s 263 was valid one. HELD THAT - The word matter is wider than the word point . Once a particular matter has been considered and decided in appeal and if any point relating to that remains unconsidered it cannot be said that the subject-matter of appeal had not been considered and decided in such appeal. The subject-matter in appeal before the CIT(A) relates to the addition of 50, 000 on the basis of the will of the mother of the assessee. A subject-matter may consist of number of arguments and number of points. If any point in my opinion has not been referred to by the CIT(A) in his order it cannot be said that the matter relating to the addition on the basis of the Will has not been considered. While computing the deductible amount from the taxable income the assessing authority is required to ensure that the profits and gains are derived from an industrial undertaking; such profits and gains are included in the gross total income of the assessee; and the allowance has to be made in accordance with and subject to the provisions of section 80-I. Therefore to contend that sub-section (1) of section 80-I has to be independently considered i.e. independent of other sub-sections of section 80-I is not a correct proposition especially when the provision itself says that it has to be in accordance with and subject to the provisions of this section. The provision does not use the phraseology in accordance with and subject to the provisions of the sub-section but refers to the entire section which includes sub-section (2). When the deduction u/s 80-I was granted by the AO after disallowing a part of the claim which was carried in appeal before CIT(A) the appellate authority was duty-bound to examine whether the claim made by the assessee was in accordance with and subject to the provisions of section 80-I. The requirement of fulfilment of conditions stipulated by sub-section (2) of section 80-I is therefore very much subject-matter of the appeal in relation to the income from warehousing which had been disallowed by the AO. The subject-matter of the appeal since relates to the addition in the case of the assessee on the basis of the Will and since the assessee has gone in appeal before the CIT(A) against the addition made by the AO on the basis of the Will therefore the order of the CIT(A) got merged with the order of the AO on the addition made by the AO on the basis of the Will and in view of Explanation (c) to section 263(1) in my opinion the CIT will not have any jurisdiction to invoke the provisions of section 263 hence the order passed by the AO got merged with the order of CIT(A) on subject-matter of addition on the basis of the Will. Accordingly in my opinion the order of CIT should be cancelled. Thus ground as decided in favour of the assessee. The learned Third Member has agreed with the view of the learned JM. Therefore in view of the majority decision the assessee succeeds in its appeal.
Issues Involved:
1. Validity of the CIT's revision order under section 263 of the Income-tax Act, 1961. 2. Whether the assessment order had merged with the appellate order of CIT(A). 3. Examination of the Will and its implications on the assessment. Issue-wise Detailed Analysis: 1. Validity of the CIT's revision order under section 263 of the Income-tax Act, 1961: The CIT issued a notice under section 263, revising the assessment order on the grounds that it was erroneous and prejudicial to the interests of the Revenue. The CIT directed the Assessing Officer to re-examine the issues, including the genuineness of the Will and the actual existence of the assets bequeathed. The CIT questioned whether the Will had been probated, whether the bequest was in accordance with the Hindu Succession Act, and whether the assets were part of the mother's "Stridhan" or self-acquired property. 2. Whether the assessment order had merged with the appellate order of CIT(A): The assessee argued that the assessment order had merged with the CIT(A)'s order, and thus, the CIT had no jurisdiction to revise it under section 263. The CIT(A) had already considered and decided on the addition of Rs. 50,000 based on the Will. The Tribunal, in its majority decision, agreed with the assessee, stating that the subject matter of the appeal before the CIT(A) was the addition based on the Will, and since the CIT(A) had decided on this matter, the assessment order had merged with the appellate order. Consequently, the CIT could not invoke section 263 for the same issue. 3. Examination of the Will and its implications on the assessment: The Assessing Officer had accepted the Will as genuine but restricted the cash bequeathed to Rs. 4,00,000 instead of Rs. 4,50,000, leading to an addition of Rs. 50,000. The CIT(A) deleted this addition, finding the assessee's explanation reasonable. The CIT, however, questioned the lack of proper inquiry by the Assessing Officer into the Will's probate status, the legal capacity of the mother to bequeath the assets, and the factual existence of the assets. The Tribunal, in its majority decision, held that the CIT's concerns were already addressed by the CIT(A), and thus, the CIT could not revise the assessment order under section 263. Conclusion: The Tribunal concluded that the CIT's revision order under section 263 was invalid as the assessment order had merged with the appellate order of the CIT(A) on the issue of the addition based on the Will. The Tribunal set aside the CIT's revision order and restored the original assessment order, allowing the assessee's appeal.
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