2011 (12) TMI 612 - AT - Income Tax

Scope of revision u/s 263 - Held that - Issues which were considered and decided by the CIT(A), cannot be made subject to the provisions of Section 263 of the Act by the CIT, as is evident from the reproduction of sub-clause c of Explanation to Section 263(1) of the Act

Summary

Issues:
1. Validity of order passed under Section 263 of the Income-tax Act, 1961.
2. Consideration of penalty under Section 271(1)(c) for sales tax subsidy.
3. Jurisdiction of CIT to invoke Section 263 after consideration by CIT(A).

Analysis:

Issue 1: Validity of order under Section 263
The appeal challenged the order passed under Section 263 of the Income-tax Act, 1961 by the ld. CIT-I Ludhiana. The appellant contended that the penalty order passed by the ld. AO was not erroneous or prejudicial to the interest of revenue. The Tribunal examined the contentions and found that the CIT(A) had already adjudicated the issue of levy of penalty concerning sales tax subsidy. The Tribunal referred to the Explanation to Section 263(1) of the Act, which prohibits re-examination of matters already decided in appeal. Consequently, the Tribunal quashed the order passed by the CIT under Section 263.

Issue 2: Consideration of penalty for sales tax subsidy
The AO had levied a penalty under Section 271(1)(c) on the assessee for treating sales tax subsidy as a revenue receipt, despite the assessee's claim that it should be considered a capital receipt. The CIT, in his order under Section 263, noted that the AO had failed to quantify the penalty in the original order. However, the Tribunal observed that the issue had already been considered and decided by the CIT(A) in a previous order. The Tribunal referred to the legal provision that prohibits re-examination of matters already decided in appeal and concluded that the CIT's order under Section 263 could not be sustained.

Issue 3: Jurisdiction of CIT to invoke Section 263 post CIT(A) decision
The Tribunal emphasized the statutory provision that limits the CIT's power under Section 263 when matters have been considered and decided in appeal. As the issue of penalty for sales tax subsidy had already been adjudicated by the CIT(A), the Tribunal held that the CIT's order under Section 263 was not maintainable. Consequently, the Tribunal allowed the appeal of the assessee and quashed the CIT's order.

In conclusion, the Tribunal set aside the order passed under Section 263, emphasizing the statutory limitations on re-examining matters already decided in appeal. The judgment highlighted the importance of adhering to legal provisions and ensuring that jurisdictional powers are exercised within the statutory framework.