2019 (4) TMI 103 - HC - Income Tax

Revision u/s 263 - merger of appellate order - Issue involved is subject matter of appeal before CIT(A) - Deduction u/s 80 IC(2)(b)(iii) - whether all the 59 oil well are to be treated as separate undertaking - form 10CCB was filed consolidated - ITAT set aside revision proceedings u/s 263 and also allowed appeal on merit HELD THAT - The revision proceedings under Section 263 of the Act will disclose that the very issue which was considered by the CIT(A) and concluded was reopened, which is indicative by the observation of CIT, wherein he has stated that the perusal of the record shows that the Assessing Officer had not examined or applied his mind on the basic issue as to whether the assessee is actually a mineral based industry or not. As noticed, the question of considering the wells of the assessee as an undertaking was not accepted by the Assessing Officer though the claim of mineral based industry was not rejected. Whether such acceptance was erroneous and whether the CIT(A) has committed an error in allowing the claim will lose its relevance when it is to be noticed only to the extent of finding out whether the same issue could have been examined in a subsequent revision proceeding under Section 263 of the Act. When in the revision proceedings the CIT accepts during the course of the order that the assessee had claimed deduction under Section 80 IC claiming to be a mineral based industry and in that background when the claim was disallowed by the Assessing Officer but allowed by the CIT(A), the issue would stand concluded and there would be no scope for re-examination in the jurisdiction under Section 263 of the Act as the assessment order has merged in the appellate order. The matter not having been examined in the same manner or to the same extent and depth is immaterial. When the claim for deduction was on that basis, the exception as contained in Clause-(c) to Explanation-1 to sub-section (1) of Section 263 of the Act would not apply nor will the circumstance stated by the Hon ble Supreme Court in the case of Shri Arbuda Mills Ltd., Ahmedabad 1996 (1) TMI 11 - SUPREME COURT be relevant to the present fact situation. In that view, the revision proceedings under Section 263 of the Act in the present context was not sustainable. - Decided in favour of assessee

Summary

Issues Involved:
1. Jurisdiction of CIT under Section 263 of the Income Tax Act.
2. Eligibility of the assessee as a mineral-based industry for deductions under Section 80 IC.
3. Applicability of the merger doctrine and the scope of revision under Section 263.

Issue-wise Detailed Analysis:

1. Jurisdiction of CIT under Section 263 of the Income Tax Act:
The primary issue addressed was whether the Commissioner of Income Tax (CIT) had the authority under Section 263 of the Income Tax Act to revise the assessment order dated 29.11.2007 after it had been appealed and decided by the Commissioner of Income Tax (Appeals) [CIT(A)] on 29.2.2008. The CIT initiated revision proceedings suo-moto, claiming that the Assessing Officer had not examined whether the assessee was a mineral-based industry. The High Court noted that Section 263 allows the CIT to revise an order if it is erroneous and prejudicial to the interests of the Revenue, but only if the matter was not already considered in an appeal. The court concluded that since the issue of the assessee being a mineral-based industry was already considered by the CIT(A), the CIT could not invoke Section 263 for the same issue.

2. Eligibility of the Assessee as a Mineral-Based Industry for Deductions under Section 80 IC:
The assessee claimed deductions under Section 80 IC by describing itself as a mineral-based industry situated in the North Eastern Region and claimed deductions for 59 oil wells. The Assessing Officer initially rejected this claim on technical grounds, stating that separate Forms 10CCB were not filed for each oil well. The CIT(A) later allowed the deductions, considering each oil well as an independent enterprise. The CIT, during revision proceedings, questioned whether the assessee was indeed a mineral-based industry. However, since the CIT(A) had already addressed this issue, the High Court held that the CIT could not re-examine this matter under Section 263.

3. Applicability of the Merger Doctrine and the Scope of Revision under Section 263:
The court examined whether the assessment order had merged with the appellate order of the CIT(A), thereby restricting the CIT's power to revise the assessment under Section 263. The court referred to various precedents, including the Supreme Court's decision in Commissioner of Income Tax, Gujarat-I, Ahmedabad vs. Shri Arbuda Mills Ltd., which held that the CIT could only revise matters not considered in the appeal. In this case, since the CIT(A) had already considered the issue of the assessee being a mineral-based industry, the assessment order had merged with the appellate order, and the CIT could not invoke Section 263 to revise the same issue.

Conclusion:
The High Court upheld the decision of the Income Tax Appellate Tribunal (ITAT), which had set aside the CIT's order under Section 263. The court concluded that the CIT's revision proceedings were not sustainable as the issue of the assessee's eligibility for deductions under Section 80 IC as a mineral-based industry had already been decided by the CIT(A). Consequently, the appeals filed by the Revenue were dismissed, and the cross-objections filed by the assessee were disposed of without specific orders.