2020 (12) TMI 89 - HC - Income Tax

Validity of Revision u/s 263 by CIT - ITAT rejecting the appeal of the Appellant u/s 263 and confirming the assumption of jurisdiction as well as the merits of the issues raised therein - HELD THAT - CIT, in exercising its revisional jurisdiction, has satisfied the twin requirements as prescribed in Section 263 of the ITAT Act. There was material before the ITAT to at least prima facie infer that there was under-invoicing and that this aspect of under-invoicing was not considered by the AO in making his assessment order. The CIT, in exercising its revisional jurisdiction, has not shut out any of the defences open to the Assessee, but has directed the AO to pass a fresh assessment order after verifying and examining all the relevant facts of the case, legal position and giving adequate opportunity of being heard to the Assessee. In Malabar Industrial Co. Ltd . 2000 (2) TMI 10 - SUPREME COURT has held that the CIT can pass an order under Section 263 of the IT Act even on debatable issues. Similarly, it is clear where the assessment was completed without proper inquiries which circumstances necessitated, it is competent for the CIT to invoke the revisional jurisdiction and direct fresh assessment, after verifying and examining all relevant facts, as well as legal position as may be involved. Both, the CIT, as well as the ITAT, have already made clear that adequate opportunity of being heard is required to be extended to the Assessee in the fresh assessment proceedings to be undertaken by the AO. Therefore, no liberty or clarification is necessary. In any case, it is clarified that the Assessee will be entitled to rely upon all legally permissible material, including the decision of this Court in Sesa Sterlite Limited 2019 (8) TMI 16 - BOMBAY HIGH COURT and there is no doubt that the AO, in undertaking the fresh assessment, will take into account all such contentions of the Assessee and make a fresh order in accordance with law, on its own merits. Substantial questions of law answered against the Assessee.

Issues:
1. Framing of substantial questions of law for appeal.
2. Jurisdiction of the Income Tax Appellate Tribunal (ITAT).
3. Revisional powers under Section 263 of the Income Tax Act.
4. Merger of assessment orders.
5. Principles of consistency in assessment.
6. Applicability of res judicata in income tax proceedings.
7. Grounds raised before the ITAT.
8. Exercise of revisional jurisdiction by the Commissioner.
9. Legal principles governing revisional jurisdiction.
10. Relevance of previous judicial decisions in the case.

Issue 1: Framing of substantial questions of law for appeal
The Appellant's Senior Advocate proposed framing substantial questions of law related to the rejection of the appeal by the Income Tax Appellate Tribunal (ITAT) and the acceptance of submissions regarding the report of Serious Fraud Investigation Officers (SFIO). The Standing Counsel for the Revenue consented to framing these questions, subject to the contention that they may not arise or could be decided in favor of the Revenue.

Issue 2: Jurisdiction of the Income Tax Appellate Tribunal (ITAT)
The Appellant filed an appeal before the ITAT against the Commissioner's order, which directed a fresh assessment. The ITAT dismissed the appeal, leading to the present appeal under Section 260-A of the Income Tax Act, focusing on substantial questions of law.

Issue 3: Revisional powers under Section 263 of the Income Tax Act
The Commissioner exercised revisional powers under Section 263 based on reports from the SFIO and the Justice M.B. Shah Commission. The Assessee challenged this exercise of jurisdiction, citing principles of natural justice and fair play.

Issue 4: Merger of assessment orders
The Appellant argued that the assessment order by the Assessing Officer had merged into the order of the Commissioner (Appeals) for a subsequent year, preventing the Commissioner from initiating revisional proceedings under Section 263 of the Income Tax Act.

Issue 5: Principles of consistency in assessment
The Appellant contended that the issues for the Assessment Year 2008-09 were identical to those for 2009-10, where the Revenue had accepted most contentions. Applying the principle of consistency, the Appellant argued that any different view for 2008-09 was unsustainable.

Issue 6: Applicability of res judicata in income tax proceedings
The Standing Counsel for the Revenue argued that the principles of res judicata do not apply to income tax proceedings as each year is a separate unit for assessment, thus justifying different treatment for different assessment years.

Issue 7: Grounds raised before the ITAT
The Appellant's Senior Advocate claimed that several grounds were raised before the ITAT, but only one ground was considered. The Standing Counsel argued that since only one ground was pressed before the ITAT, the Assessee cannot raise additional grounds in the present appeal.

Issue 8: Exercise of revisional jurisdiction by the Commissioner
The Commissioner invoked revisional jurisdiction based on reports and directed a fresh assessment order. The Appellant challenged this, stating that the reports were withdrawn or lacked compliance with natural justice principles.

Issue 9: Legal principles governing revisional jurisdiction
The Court analyzed legal precedents, including the ruling in Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax, emphasizing the CIT's authority to pass orders under Section 263 on debatable issues and incomplete assessments.

Issue 10: Relevance of previous judicial decisions in the case
The Court referred to the decision in Sesa Sterlite Limited vs. The Assistant Commissioner of Income-Tax, clarifying that the Assessee could rely on this ruling in the fresh assessment process.

This detailed analysis covers the various issues addressed in the judgment, providing insights into the legal arguments, interpretations, and conclusions reached by the Bombay High Court.

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