2023 (9) TMI 556 - HC - Income Tax

Revision u/s 263 - revisional power of the first respondent, while an appeal is pending - principle of doctrine of merger - HELD THAT - We are unable to accept the contention of the petitioner that the first respondent does not have the power to pass Ext P5 order because the appeal is pending consideration before the CIT(Appeals). Going by the law referred to above, the first respondent has the revisional power to interfere with assessment order as provided under Sec. 263 of the Act, till the disposal of the appeal. Furthermore, I do not find any prejudice being caused to the petitioner because, if at all the petitioner is aggrieved by the order that is to be passed by the AO in compliance with the direction in Ext P5 order, the petitioner can very well challenge the said order also in an appeal, notwithstanding the pendency of the appeal filed against Ext P1 order. Resultantly, we dismiss the writ petition, reserving the right of the petitioner to challenge the order, if so advised, proposed to be passed by Assessing Officer pursuant to Ext P5 order, in accordance with law, notwithstanding the challenge against Ext P1 order.

Summary

Issues involved:
The writ petition to quash Ext P5 order passed by the Principal Commissioner of Income Tax is challenged on the grounds of legality, arbitrariness, and unauthorized actions.

Determination of the writ petition:
The petitioner, a partnership firm in the PVC pipes business, filed its income tax return for the assessment year 2017-2018. The assessment was completed under Sec. 143(3) of the Income Tax Act. Subsequently, a notice was issued to reopen the assessment under Sec. 263 of the Act, which the petitioner contested, citing the matter's sub-judice status in an appeal before the CIT(Appeals). Despite the petitioner's arguments, the first respondent passed Ext P5 order, leading to the writ petition challenging its legality.

Contentions and arguments:
The respondents defended Ext P5 order, asserting the first respondent's authority to correct errors in the assessment order, particularly related to the tax rate applied. The petitioner argued that the revisional authority should not have exercised jurisdiction under Sec. 263 of the Act, especially when the matter was already under appeal. The petitioner highlighted the impact of Ext P5 order on their appeal and cited relevant case laws to support their position.

Legal interpretation and conclusion:
The Court analyzed Sec. 263 of the Income Tax Act, emphasizing the Commissioner's power to revise an order even during the pendency of an appeal. The Court referenced previous decisions to support the view that the revisional power extends until the appeal's disposal. It was concluded that the first respondent had the authority to pass Ext P5 order, and the petitioner's right to challenge subsequent orders remained intact. Therefore, the writ petition was dismissed, allowing the petitioner to challenge future orders in compliance with the law, irrespective of the pending appeal against Ext P1 order.