2018 (5) TMI 1490 - HC - Income Tax

Revision u/s 263 - doctrine of merger - Whether the purchases were bogus - Held that - The entire issue was at large before the Appellate Commissioner. It is well known that the Commissioner (Appeals) while hearing the assessee's appeal has powers to even enhance the assessment. If he was of the opinion that not only limited additions made by the Assessing Officer but much larger additions were justified, he could have certainly exercised such powers, of course after putting the assessee to notice. The provisions thus statutorily recognizes the principle of merger and avoids any conflict of opinion between two quasi judicial authorities of the same rank. - Decision in the case of Nirma Chemicals Works P. Ltd. (2008 (2) TMI 373 - GUJARAT HIGH COURT) followed. When we therefore hold that the Commissioner had no jurisdiction to exercise revisional powers, asking the petitioner to submit to said impugned notice does not arise. - notice is therefore set aside - decided in favor of assessee.

Summary

Issues:
Challenge to notice under section 263 of the Income Tax Act, 1961.

Analysis:
The petitioner, a private limited company, challenged a notice issued by the Principal Commissioner of Income Tax under section 263 of the Income Tax Act, 1961. The notice questioned the genuineness of purchases made by the petitioner from a specific vendor. The Assessing Officer doubted the purchases based on information from the VAT department and proposed an addition to the income. The Assessing Officer eventually added a lesser amount after considering the petitioner's contentions. The petitioner appealed to the Commissioner (Appeals) seeking deletion of the addition. However, during the appeal process, the Principal Commissioner issued a notice for suo motu revision of the assessment order.

The Appellate Commissioner, before the petitioner could respond to the notice, decided the appeal in favor of the petitioner, stating that the Assessing Officer's addition based on gross profit ratio was not justified. The petitioner then replied to the show-cause notice, arguing that the assessment order was not erroneous and that the Appellate Commissioner had already granted relief. The petitioner contended that the revisional powers should not be exercised due to the principle of merger.

The petitioner's counsel argued that the notice was premature as the Commissioner had only issued a show-cause notice. The Commissioner's contention was that the assessment order was erroneous and prejudicial to the Revenue's interest. The issue of purchases being bogus was not part of the proceedings before the Appellate Commissioner.

The High Court analyzed the case and found that the Assessing Officer did not hold the purchases as bogus but added an amount considering the absence of transportation costs incurred by the petitioner. The Commissioner's notice was based on incorrect premises, as the purchases were not deemed bogus. The Court highlighted the principle of merger and the limitations on revisional powers when an appeal has been decided. Referring to relevant legal provisions and precedents, the Court concluded that the Commissioner had no jurisdiction to exercise revisional powers in this case. Consequently, the impugned notice was set aside, and the petition was disposed of accordingly.