2019 (6) TMI 1298 - HC - Income Tax

Revision u/s 263 - in original assessment AO estimated net profit @ 7% which was reduced by CIT(A) @ 5% - subject matter of appeal - HELD THAT - We are in no confusion to hold that there was no infirmity in the exercise done by the Commissioner, Income Tax II purportedly u/s 263 because the provisions of Section 263(c) suitably empowers the Commissioner to pass such order even if any appeal is pending but with a caveat, that the order passed under Section 263 shall govern only such matters which was neither a subject matter nor decided in appeal. It is not in dispute that issue on which the remand order was passed in purported exercise of powers vested in the CIT u/s 263 i.e. unsecured loans/creditors, was not a subject matter of appeal and obviously could not have because this issue had been decided by the statutory authority in favour of assessee. No infirmity in the exercise and since the order has been acted upon to result in the fresh assessment order, we leave it open for the assessee to question the same in accordance with law but finding no issues which are in the nature of substantial question of law we refuse to grant indulgence, to dispose in this appeal. Be noted that we have not expressed any opinion on the inter-party merits and the appellant shall be at liberty to raise all issues as he chooses to raise, to question the order passed on remand of the matter u/s 263.

Summary

Issues Involved:
Assessment of net profit, exercise of power under Section 263 of the Income Tax Act, 1961, appeal against assessment order, remand of the matter, infirmity in the exercise by the Commissioner, unsecured loans/creditors, finality of profit assessment, substantial question of law.

Analysis:

Assessment of Net Profit:
The appeal was against the judgment and order of the Income Tax Appellate Tribunal, Patna, related to the Assessment Year 2008-2009. The Assessing Authority had estimated the net profit of the assessee at 7%, leading to a fresh demand. The appellant appealed, and the Commissioner of Income Tax (Appeal) revised the net profit estimation to 5%, remitting the matter back for a fresh order.

Exercise of Power under Section 263:
The Commissioner of Income Tax II, under Section 263 of the Act, found the assessment order erroneous and prejudicial to Revenue's interest. This led to a direction for reassessment considering unsecured loans/creditors. The appellant challenged this order, which was rejected by the Tribunal.

Appeal Against Assessment Order:
The Revenue, dissatisfied with the Commissioner's order, approached the Income Tax Appellate Tribunal, which rejected their appeal. Subsequently, a fresh assessment order was passed on 06.03.2013, based on the Commissioner's direction under Section 263.

Infirmity in the Exercise by the Commissioner:
The Court found no infirmity in the Commissioner's exercise of power under Section 263, as it was within the scope of the Act. The order under Section 263 could govern matters not subject to appeal or already decided. The issue of unsecured loans/creditors, being decided in favor of the assessee, was not a subject of appeal.

Finality of Profit Assessment:
The assessment of profit had attained finality, and the fresh assessment order based on the Commissioner's direction was acted upon. The Court left it open for the assessee to challenge the order in accordance with the law but refused to grant indulgence due to the absence of substantial questions of law.

Substantial Question of Law:
The Court did not express any opinion on the inter-party merits, allowing the appellant to raise all issues to question the order passed on remand under Section 263 of the Act. The appeal was disposed of accordingly.