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2022 (5) TMI 1411 - AT - Income TaxRevision u/s 263 - whether proceedings u/s 263 can be initiated when the matter is already pending for appeal with the CIT(A)? - HELD THAT - Respectfully following the decision of Coordinate bench of ITAT Jaipur 2022 (5) TMI 351 - ITAT JAIPUR which is squarely applicable in the present case, accordingly provisions of Section 263 are correctly and lawfully invoked by the Ld PCIT and therefore, we dismiss this ground of the assessee. Whether the revisionary proceedings u/s 263 of the IT Act 1961 are bad in law in absence of any new fact, information, corroborative evidence or materials being made available by the Ld PCIT? - On perusal of the Order of CIT, it is emerged that the Ld AO has under assessed the income of the assessee which is evident from records that a disallowance was made u/s 80P(2)(a)(i) but the same has been escaped to be added in the taxable income of the assessee. Therefore the assessment order passed by the AO is deemed to be erroneous in so far as it is prejudicial to the interest of revenue and revisionary powers assumed by the PCIT in this case are justified. Deduction of Tax Source from the Commission to Agents was not responded by the assessee, however the same has been restored back to the AO with directions to make fresh assessment with a reasonable opportunity of being heard and to furnish required details and submissions. We observe that Ld PCIT has rightly decide the matter in the interest of justice, therefore we do not find it fit to interfere with the order of the Ld PCIT, accordingly this ground of assessee is also dismissed.
Issues Involved:
1. Jurisdiction under Section 263 when the matter is pending before CIT(A). 2. Validity of revisionary proceedings under Section 263 in the absence of new facts or evidence. Issue-Wise Detailed Analysis: 1. Jurisdiction under Section 263 when the matter is pending before CIT(A): The primary issue was whether the Principal Commissioner of Income Tax (Pr.CIT) could invoke jurisdiction under Section 263 of the Income Tax Act, 1961, when the matter was already pending before the Commissioner of Income Tax (Appeals) [CIT(A)]. The Tribunal referred to the case of JR Industries v. Principal Commissioner of Income-tax [2021] 132 taxmann.com 302 (Jaipur - Trib.), which discussed the doctrine of merger. According to this doctrine, if an appeal against an assessment order is filed and pending before CIT(A), the Pr.CIT can only revise matters that were not considered and decided in the appeal. The Tribunal emphasized that the power of the Pr.CIT under Section 263 extends to issues not considered and decided by the appellate authority. The Tribunal cited several judicial precedents, including the Supreme Court's decision in Kunhayammed v. State of Kerala [2000] 113 Taxman 470/245 ITR 360, which clarified that the doctrine of merger is not universally applicable and depends on the nature of the jurisdiction exercised by the superior forum. The Tribunal concluded that the Pr.CIT was within his rights to invoke Section 263, even if the appeal was pending before the CIT(A), provided the issues under revision were not the subject matter of the appeal. The Tribunal dismissed the assessee's ground, affirming that the Pr.CIT correctly invoked Section 263. 2. Validity of revisionary proceedings under Section 263 in the absence of new facts or evidence: The second issue was whether the revisionary proceedings under Section 263 were valid in the absence of any new facts, information, corroborative evidence, or materials being made available by the Pr.CIT. The Tribunal examined the order of the Pr.CIT, which identified two main errors in the assessment order: the incorrect computation of taxable income by not adding the disallowed deduction under Section 80P(2)(a)(i), and the failure to verify the non-deduction of TDS on commission payments to agents. The Pr.CIT found that the Assessing Officer (AO) had not properly added the disallowed amount of Rs. 56,89,905/- to the taxable income, resulting in underassessment. Additionally, the Pr.CIT noted that the AO failed to verify compliance with Section 194H regarding TDS on commission payments, which could lead to disallowance under Section 40(a)(ia) if TDS was not deducted. The Tribunal referred to Explanation 2 to Section 263(1), which states that an order is deemed erroneous and prejudicial to the interests of revenue if it is passed without making necessary inquiries or verification. The Tribunal cited several judicial precedents, including Rampyari Devi Sarogi 67 ITR 84 (SC) and Malabar Industrial Co Ltd. Vs. CIT 243 ITR 83 (SC), which held that lack of inquiry or due verification by the AO constitutes an erroneous order. The Tribunal upheld the Pr.CIT's order, stating that the AO's failure to make necessary inquiries and verification rendered the assessment order erroneous and prejudicial to the interests of revenue. The Tribunal dismissed the assessee's ground, affirming the validity of the revisionary proceedings under Section 263. Conclusion: The Tribunal dismissed the appeal of the assessee, upholding the Pr.CIT's invocation of Section 263. The Tribunal concluded that the Pr.CIT was within his rights to revise the assessment order, even when the matter was pending before CIT(A), provided the issues under revision were not considered and decided in the appeal. Additionally, the Tribunal affirmed the validity of the revisionary proceedings under Section 263, citing the AO's failure to make necessary inquiries and verification. The order was pronounced in the open court on 27/05/2022.
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