2024 (1) TMI 550 - AT - Income Tax

Doctrine of merger - Validity of Revision u/s 263 when existing pending appeal against order passed u/s 153C r.w.s. 144 - as per CIT assessment order, though considered the issue of disallowance u/s 40(a)(ia), did not consider the issue of disallowance of donation and CSR expenses which make the order erroneous and prejudicial to the interest of the revenue - HELD THAT - As in the pending appeal against order passed u/s 153C r.w.s. 144, the assessee has questioned the legality of reassessment proceedings u/s 147, inter-alia, on the ground that no fresh material came into the possession of Ld. AO so as to form an opinion of escapement of income. Since the proceedings u/s 147 was bad in law, the scope of assessment u/s 153C would not include the scope of reassessment u/s 147. The assessee also assailed the proceedings on the ground that sanction issued u/s 151 was given in a mechanical and casual manner. The assessee has also challenged the legality of proceedings u/s 153C. Since the larger issues including legal issues are already pending before first appellate authority, the order passed by Ld. AO, in our considered opinion, could not be subjected to revision u/s 263. The assessee s case, in such a situation, would be covered under Clause (c) of Explanation-1 to Sec. 263 which puts a bar on initiation of revision u/s 263 when an appeal is pending before Ld. CIT(A). Even otherwise also, the powers of Ld. CIT(A) are co-terminus with those of the AO and he can do what AO could do and can also direct the later to do what the later has failed to do so. As decided in the case of Smt. Renuka Philip vs. ITO 2018 (12) TMI 129 - MADRAS HIGH COURT when larger issue was pending before CIT(A), the revisionary authority could not exercise jurisdiction u/s 263 . thus we would hold that the impugned revision u/s 263 was bad-in-law and the same is therefore, liable to the quashed. Also see VAM Resorts and Hotels Pvt. Ltd. 2019 (8) TMI 1418 - ALLAHABAD HIGH COURT Assessee appeal allowed.

Summary

Issues Involved:
The issues involved in this legal judgment include the invocation of revisionary jurisdiction under section 263 by the Principal Commissioner of Income Tax, legality of the sanction made by the competent authority under section 151 of the Act, the applicability of clause (c) of Explanation-1 to Section 263(1) when the subject matter is pending before the First Appellate Authority, and the legality of the assessment proceedings under sections 147 and 153C.

Assessment Proceedings:
The appellant, a resident corporate assessee engaged in manufacturing, filed its return of income for AY 2017-18 admitting total income which was scrutinized under section 143(3). Subsequently, during search proceedings, incriminating material was found leading to proceedings under section 153C. The assessment under section 153C was completed making a disallowance under section 40(a)(ia) while other issues were pending before the First Appellate Authority.

Revisionary Proceedings:
The Principal Commissioner sought revision of the assessment order to make additional disallowances not considered by the Assessing Officer. The appellant contended that the notice under section 148 was without jurisdiction as no fresh material existed for reopening. The Principal Commissioner held that there was an escapement of income and the reassessment proceedings were valid, directing the AO to disallow the items. The appellant challenged this revision on various legal grounds.

Findings and Adjudication:
The Tribunal found that the original assessment was reopened on the allegation of escapement of income while proceedings under section 153C were initiated separately. The appellant had challenged the legality of reassessment proceedings under section 147 before the First Appellate Authority. The Tribunal held that the revision under section 263 was not maintainable as the larger legal issues were pending before the CIT(A) and the order could not be revised in such circumstances.

Judicial Precedents:
The Tribunal cited judicial precedents from the Madras High Court and Allahabad High Court where it was held that when larger issues were pending before the CIT(A), the revisionary authority could not exercise jurisdiction under section 263. Following these decisions, the Tribunal concluded that the revision under section 263 was bad-in-law and ordered its quashing.

Conclusion:
Based on the above analysis and legal precedents, the Tribunal allowed the appeal and pronounced the order quashing the revision under section 263 on 9th January 2024.