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2018 (6) TMI 105 - HC - Income TaxRevision u/s 263 - Doctrine of merger - Disallowance for labour charges, expenses of commission and work in progress - whether the Commissioner of Income Tax (Appeals) exercising jurisdiction u/s 263 could re-consider the claim of development expenses which had been considered by the AO? - Held that - Appellate Commissioner has considered the matter while concurring with the order passed by the Assessing Officer, and therefore, the order of the Assessing Officer stood merged with the order of the Appellate Commissioner. In such circumstances, the same question cannot be re-opened by the Revisional Authority exercising power under Section 263 of the Act. Expenses of purchase of land and profit from sale of properties - Held that - Appellate Authority considered both the appeals and in his order ordered for deletion of the additions made by the Assessing Officer, as a result the conclusions regarding purchase price paid for acquiring the lands and the sale proceeds received by selling the lands stood concluded as per the order of the Appellate Commissioner - no scope for the Revisional Commissioner to exercise jurisdiction under Section 263 also had no justification to add cost price in a sum of ₹ 2,71,13,658/- stating that it pertained to sales made for the subsequent year. Assessee submitted full details regarding payment of commission and also proper TDS has been deducted on the said expenses - thus it was not open for the revisional authority u/s 263 to interfere with the same only because another view was possible as followed in the case of THE COMMISSIONER OF INCOME TAX VERSUS SHRI NIRAV MODI 2016 (6) TMI 1004 - BOMBAY HIGH COURT - Decided in favor of assessee. - Decided in favor of assessee.
Issues Involved:
1. Validity of the Commissioner of Income Tax's exercise of revisional jurisdiction under Section 263 of the Income Tax Act, 1961. 2. Disallowance of development expenses, including labour charges and work in progress. 3. Disallowance of expenses on purchase of land and profit from the sale of property. 4. Disallowance of commission expenses paid to agents. Issue-wise Detailed Analysis: 1. Validity of the Commissioner of Income Tax's exercise of revisional jurisdiction under Section 263 of the Income Tax Act, 1961: The primary issue was whether the Commissioner of Income Tax (CIT) was justified in exercising revisional jurisdiction under Section 263 of the Act. The High Court concluded that the CIT could not re-examine issues already considered and decided by the Assessing Officer (AO) and the Appellate Commissioner. The doctrine of merger applied, meaning the AO's order merged with the Appellate Commissioner's order. Hence, the CIT's revisional jurisdiction was not valid in this context. 2. Disallowance of development expenses, including labour charges and work in progress: The AO had scrutinized the development expenses claimed by the assessee, including labour charges and work in progress, and made certain additions. The Appellate Commissioner reviewed these additions and confirmed only a portion of them. The High Court held that the CIT could not re-examine these expenses under Section 263, as the issue had already been adjudicated by the Appellate Commissioner, and the AO's order had merged with the Appellate Commissioner's order. 3. Disallowance of expenses on purchase of land and profit from the sale of property: The AO had reviewed the expenses related to the purchase of land and profit from the sale of property to Brigade Enterprises and made additions for unexplained income. The Appellate Commissioner deleted these additions after examining the evidence provided by the assessee. The High Court ruled that the CIT could not re-examine these expenses under Section 263, as the issue had already been decided by the Appellate Commissioner, and the AO's order had merged with the Appellate Commissioner's order. 4. Disallowance of commission expenses paid to agents: The AO had accepted the commission expenses claimed by the assessee after verifying the details provided, including names, addresses, cheque payments, and TDS deductions. The CIT, exercising jurisdiction under Section 263, disallowed these expenses, stating that the assessee had to establish the actual service rendered by each agent. The High Court upheld the Tribunal's decision that the CIT was in error, as the AO had already scrutinized and accepted the commission expenses. The Tribunal correctly noted that the CIT could not interfere merely because another view was possible. Conclusion: The High Court dismissed the appeals filed by the Revenue, holding that the Tribunal was correct in ruling that the CIT was not justified in exercising revisional powers under Section 263 of the Act. The substantial question of law raised by the Revenue was answered in the negative, and the Tribunal's decision to set aside the CIT's order was upheld.
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