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2022 (7) TMI 844 - AT - Income TaxRevision u/s 263 by CIT - deduction u/s 80IC - HELD THAT - We are in complete agreement with the Ld. AR that in the present case there was a merger of the order of the lower authorities with the order of the Tribunal for assessment year 2013-14 2019 (9) TMI 142 - ITAT CHANDIGARH wherein the Tribunal had ruled in favour of the assessee by holding that the assessee was eligible for deduction @ 100% u/s 80IC vis- -vis substantial expansion and, therefore, after such merger, Pr.CIT could not have legally and validly invoked the provisions of section 263 of the Act to set aside the matter again to the file of the AO for reconsidering the initial assessment year vis-a-vis substantial expansion. Thus, in our considered view, Pr.CIT has stepped beyond the power conferred upon him u/s 263 and we have no option but to hold that these powers were not exercised under correct appreciation of law. We, therefore, quash the proceedings u/s 263 of the Act and allow the grounds raised by the assessee.
Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act. 2. Basis of the order passed under Section 263. 3. Merger of the assessment order with appellate orders. 4. Application of Doctrine of Merger. 5. Validity of reassessment proceedings under Section 147. Issue-wise Detailed Analysis: 1. Jurisdiction under Section 263 of the Income Tax Act: The primary issue revolves around whether the Principal Commissioner of Income Tax (Pr.CIT) rightly assumed jurisdiction under Section 263 of the Income Tax Act to set aside the assessment order dated 27.11.2017. The assessee argued that the order was neither erroneous nor prejudicial to the interest of the Revenue, making the assumption of jurisdiction under Section 263 illegal, arbitrary, and unjustified. The Tribunal concluded that the Pr.CIT exceeded his jurisdiction by invoking Section 263, as the issue had already been settled by the ITAT in favor of the assessee, rendering the Pr.CIT's order invalid. 2. Basis of the Order Passed under Section 263: The Pr.CIT issued a show cause notice under Section 263, claiming that the reassessment proceedings were based on a wrong assumption of facts regarding the initial assessment year of substantial expansion. The Pr.CIT observed that the AO had accepted the assessee's claim based on incorrect facts, leading to erroneous allowance of deductions. The Tribunal disagreed, noting that the issue had already been adjudicated by the ITAT, which had ruled in favor of the assessee, thereby invalidating the Pr.CIT's basis for invoking Section 263. 3. Merger of the Assessment Order with Appellate Orders: The assessee contended that the assessment order had merged with the ITAT's order, which had attained finality. The ITAT had previously ruled that the assessee was eligible for a 100% deduction under Section 80IC due to substantial expansion. The Tribunal agreed, stating that the Pr.CIT could not invoke Section 263 to re-examine an issue that had already been settled by the ITAT, as it would violate the principle of merger. 4. Application of Doctrine of Merger: The Tribunal extensively discussed the Doctrine of Merger, citing various judicial precedents. It emphasized that once an appellate authority has adjudicated an issue, the lower authority's order merges with the appellate order, and the revisional authority cannot re-open the same issue. The Tribunal referenced cases like CIT Vs. Nirma Chemical Works Pvt. Ltd. and CIT(Exemptions), Mumbai Vs. Slum Rehabilitation, reinforcing that the Pr.CIT's action was contrary to established legal principles. 5. Validity of Reassessment Proceedings under Section 147: The reassessment proceedings initiated under Section 147 were also scrutinized. The AO had added an amount to the assessee's income based on the belief that the assessee had wrongly claimed a 100% deduction under Section 80IC. However, the ITAT had previously quashed these reassessment proceedings, affirming the assessee's eligibility for the deduction. The Tribunal reiterated that the Pr.CIT could not invoke Section 263 to revisit an issue already settled by the ITAT. Conclusion: The Tribunal quashed the proceedings under Section 263, holding that the Pr.CIT had overstepped his jurisdiction. The Tribunal emphasized the principle of merger and the finality of the ITAT's previous orders, which had ruled in favor of the assessee regarding the 100% deduction under Section 80IC. Consequently, the appeal of the assessee was allowed, and the other grounds raised became academic in nature.
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