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2022 (3) TMI 1514 - AT - Income TaxRevision u/s 263 - PCIT power to review that order of the CIT, Appeals.case was converted from limited scrutiny to complete scrutiny - Merger of order of AO with CIT - LTCG computation - assessee liability on MAT - HELD THAT - Case of the assessee was converted to a complete scrutiny from limited scrutiny. In the assessment proceeding the ld. AO touched upon the various aspects issue of capital gain and has made adjustments to the returned income. Against the said order of the assessing officer the assessee has preferred an appeal before the Commissioner of Income Tax, Appeals- 2, Jaipur and the appeal of the assessee was dismissed vide order dated 31.01.2018. Whereas the order in question was passed on 08.03.2019. Therefore, the order of the Commissioner of Income Tax, Appeals-2 order mergers with the order of the Assessing Officer. The Bombay High Court has also held in the case of Saraf Bandhu Private Limited 1992 (1) TMI 9 - BOMBAY HIGH COURT that once the original order goes in appeal and the appeal is decided, the original order ceases to exist since it merged in the appellate order and hence the original order cannot be revised under the revisional jurisdiction of the Commissioner u/s 263 of the Act. Similar view has been taken by the Honourable Calcutta High Court in the case of Oil India Limited 1981 (9) TMI 64 - CALCUTTA HIGH COURT where in the court held that the order of the ITO having been merged in the order of the AAC on the question of allowability of depreciation, the Commissioner has no jurisdiction to pass an order of revision u/s. 263 of the Act. Appeal of the assessee is allowed.
Issues Involved:
1. Condonation of delay in filing the appeal. 2. Validity of the revision order passed under Section 263 of the Income Tax Act, 1961. 3. Doctrine of Merger and its applicability in the case. 4. Calculation of Book Profit under Section 115JB of the Income Tax Act. Issue-wise Detailed Analysis: 1. Condonation of Delay in Filing the Appeal: The assessee filed an appeal with a delay of 932 days. The delay was attributed to the advice from the assessee's counsel, the subsequent lockdown due to the COVID-19 pandemic, and inadvertent circumstances beyond the control of the assessee. The Tribunal noted that the delay included 619 days attributable to the COVID-19 period, leaving a delay of 313 days. The Tribunal accepted the reasons provided by the assessee, including reliance on professional advice and the lockdown, as sufficient cause for the delay. The Tribunal referred to various judicial precedents, including the Hon’ble Supreme Court's decisions in the cases of Improvement Trust vs. Ujagar Singh and Vijay Vishin Meghani vs. DCIT, which emphasized a liberal approach towards condonation of delay to ensure justice. Consequently, the delay was condoned, and the appeal was admitted for adjudication on merits. 2. Validity of the Revision Order Passed under Section 263: The Principal Commissioner of Income Tax (PCIT) initiated revision proceedings under Section 263, asserting that the assessment order was erroneous and prejudicial to the interest of the revenue due to incorrect calculation of Book Profit under Section 115JB. The PCIT observed that the Assessing Officer (AO) failed to consider the profit on the sale of fixed assets while computing the Book Profit. The Tribunal, however, found that the AO had indeed examined the issue during the assessment proceedings and had made necessary adjustments. The Tribunal also noted that the assessee had already appealed against the assessment order, and the Commissioner of Income Tax (Appeals) [CIT(A)] had dismissed the appeal. Therefore, the assessment order had merged with the appellate order, and the PCIT lacked jurisdiction to revise the order under Section 263. 3. Doctrine of Merger: The Tribunal emphasized the Doctrine of Merger, which stipulates that once an appellate authority passes an order, the original order ceases to exist and merges with the appellate order. This principle was supported by various judicial precedents, including the Hon’ble Supreme Court's decision in CIT vs. Amritlal Bhogilal & Co. and the Bombay High Court's decision in CIT vs. Tejaji Farasram Kharawalla. Since the CIT(A) had already adjudicated the matter, the PCIT could not invoke Section 263 to revise the assessment order. The Tribunal concluded that the revision order passed by the PCIT was without jurisdiction and thus, bad in law. 4. Calculation of Book Profit under Section 115JB: The PCIT contended that the AO had failed to include the profit on the sale of fixed assets in the Book Profit calculation under Section 115JB. The assessee argued that the profit on the sale of fixed assets was reported as an extraordinary item and was correctly excluded from the Book Profit. The Tribunal noted that the AO had separately determined the MAT liability and had made necessary adjustments during the assessment proceedings. The Tribunal also observed that the inclusion of profit on the sale of fixed assets in the Book Profit calculation would be revenue-neutral, as the assessee would be entitled to MAT credit in subsequent years. The Tribunal found no merit in the PCIT's contention and concluded that the AO had correctly computed the Book Profit under Section 115JB. Conclusion: The Tribunal allowed the appeal, quashing the revision order passed by the PCIT under Section 263. The Tribunal held that the PCIT lacked jurisdiction to revise the assessment order, which had already merged with the appellate order. The Tribunal also condoned the delay in filing the appeal, ensuring that the matter was adjudicated on merits.
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