2015 (6) TMI 101 - HC - Income Tax

Revision u/s 263 - payment of interest was in accordance with the provisions of Section 40(b)(iv) - Held that - In view of the fact that the order dated 02.01.2012 has attained finality, it would in any event not be possible to proceed any further in the parallel proceedings under section 263 of the Act. The observations in the order dated 02.01.2012 regarding the validity of the payment of interest by the respondent/assessee have also attained finality. The appellant can not succeed in the proceedings under section 263 only by an order and upon a finding which would be contrary to and in conflict with the findings and the decision dated 02.01.2012 of the C.I.T. (A) in the appeal filed by the respondent against the order of assessment dated 03.07.2007. This would be impermissible as two parallel proceedings cannot be allowed against the same assessment order.

Issues:
1. Jurisdiction of CIT under section 263 of the Income Tax Act.
2. Validity of assessment order dated 03.07.2007.
3. Proceedings under section 263 initiated by CIT.
4. Tribunal's orders setting aside previous orders.
5. Finality of order dated 02.01.2012.
6. Permissibility of parallel proceedings.

Jurisdiction of CIT under section 263 of the Income Tax Act:
The High Court analyzed the appeal against the ITAT order allowing the respondent's appeal against the CIT's order under Section 263 of the Income Tax Act for the assessment year 2004-05. The appellant raised a substantial question of law regarding the CIT's jurisdiction to substitute his view for that of the A.O. The court held that the substantial question of law did not arise in this case.

Validity of assessment order dated 03.07.2007:
The respondent filed its return of income in 2004, which was processed under section 143(1) of the Act. Subsequently, the Assessing Officer reopened proceedings under Sections 147 and 148, leading to an assessment under section 143(3) and 147 of the Act. The respondent appealed against this order, and the CIT(A) allowed the appeal, noting the validity of interest payment to partners as per the partnership deed.

Proceedings under section 263 initiated by CIT:
The CIT initiated proceedings under section 263, alleging that the Assessing Officer failed to make necessary inquiries. The CIT set aside the assessment order dated 03.07.2007 and directed a fresh assessment after issuing a notice to show cause. However, the Tribunal later set aside this order, leading to parallel proceedings in revision.

Tribunal's orders setting aside previous orders:
The Tribunal set aside the CIT's order under section 263, and subsequent fresh assessment orders were also set aside by the Tribunal. The finality of the order dated 02.01.2012, where the CIT(A) allowed the respondent's appeal, was crucial in determining the validity and permissibility of the parallel proceedings.

Finality of order dated 02.01.2012:
The order dated 02.01.2012, where the CIT(A) allowed the respondent's appeal against the assessment order dated 03.07.2007, attained finality and was not challenged. This finality of the order impacted the subsequent proceedings and the permissibility of conflicting decisions.

Permissibility of parallel proceedings:
The High Court emphasized that conflicting findings in parallel proceedings cannot be allowed against the same assessment order. It was deemed impermissible for the appellant to succeed in section 263 proceedings with a finding conflicting with the decision dated 02.01.2012. The court dismissed the appeal, highlighting the impossibility of proceeding further due to the finality of the earlier order.

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