2023 (3) TMI 144 - AT - Income Tax

Revision u/s 263 - AO allowed exemption under section 54F instead of section 54 - assessee has filed appeal against the same issues before Ld. CIT(Appeals) u/s 250 of the Act and the same are pending adjudication - HELD THAT - Assessee filed an appeal against said order, since larger issue was pending before Commissioner (Appeals), Commissioner could not invoke jurisdiction under section 263 against said order of Assessing Officer on account of statutory bar. In the case of CIT v. Vam Resorts Hotels (P.) Ltd 2019 (8) TMI 1418 - ALLAHABAD HIGH COURT when an appeal is pending before Commissioner (Appeals), exercise of jurisdiction under section 263 by Commissioner would be barred. The ITAT Rajkot in the case of Parin Furniture Ltd. 2022 (7) TMI 957 - ITAT RAJKOT held that when an appeal is preferred by the assessee under section 250 of the Act before CIT Appeals is pending against order passed by the learned AO under section 147 of the Act, the same cannot be revised under section 263 of the Act. Since the issues in respect of which 263 proceedings were initiated are pending adjudication before Ld. CIT(Appeals) in appeal filed by the assessee under section 250 of the Act, the Principal CIT cannot proceed to simultaneously assume jurisdiction with respect to those very same issues which are under consideration before CIT(Appeals). Accordingly, in view of the above observations and in light of judicial precedents highlighted above, we are of the considered view that the order passed by Principal CIT is unsustainable and is therefore set aside. Appeal of the assessee is allowed.

Summary

Issues:
Appeal against order under section 263 of the Income Tax Act, 1961 for A.Y. 2017-18.

Analysis:
1. The Principal Commissioner of Income Tax (PCIT) passed an order under section 263 of the Income Tax Act, 1961, setting aside the assessment completed under section 144 of the Act. The PCIT observed discrepancies in the assessment where the assessee firm had declared additional income from on-money receipts, but the Assessing Officer (AO) had not made the necessary additions based on the disclosures made during a survey. The PCIT also noted discrepancies in the firm's expenses and capital, leading to the conclusion that the assessment order was erroneous and prejudicial to the revenue's interest.

2. The assessee appealed against the PCIT's order, arguing that the issues raised were indeed considered by the AO during the assessment proceedings. The assessee had responded to queries and filed detailed explanations, challenging the additions made by the AO. The appeal against these additions was pending before the CIT(Appeals) under section 250 of the Act. Citing judicial precedents, the assessee contended that the PCIT should not have passed an order on issues already under appeal before the CIT(Appeals).

3. Upon review, the ITAT Rajkot found that the issues raised by the PCIT were indeed considered by the AO during the assessment. The ITAT noted that the same issues were subject to appeal before the CIT(Appeals), citing legal precedents where the jurisdiction under section 263 was barred when larger issues were pending before the appellate authority. Referring to relevant cases, the ITAT concluded that the PCIT's order was unsustainable as the issues were already under consideration before the CIT(Appeals).

4. Consequently, the ITAT allowed the assessee's appeal, setting aside the PCIT's order under section 263. The ITAT emphasized that the PCIT could not assume jurisdiction on issues already pending before the CIT(Appeals), in line with established legal principles and precedents.

In conclusion, the ITAT ruled in favor of the assessee, setting aside the PCIT's order under section 263 due to the issues being already under appeal before the CIT(Appeals), following legal precedents and principles of jurisdiction.