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TMI Blog2022 (5) TMI 1411X X X X Extracts X X X X X X X X Extracts X X X X ..... it is prejudicial to the interest of revenue and revisionary powers assumed by the PCIT in this case are justified. Deduction of Tax Source from the Commission to Agents was not responded by the assessee, however the same has been restored back to the AO with directions to make fresh assessment with a reasonable opportunity of being heard and to furnish required details and submissions. We observe that Ld PCIT has rightly decide the matter in the interest of justice, therefore we do not find it fit to interfere with the order of the Ld PCIT, accordingly this ground of assessee is also dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... 2/- and Rs.3,86,46,649/- u/s.40(a)(ia) and provision for bad and doubtful debts respectively, the former addition u/s.40(a)(ia) of the Act later reduced to Rs.2,71,64,572/- i.e. 30% of Rs.9,05,48,572/- by an order u/s.154 of the Act on 19.03.2019. Finally, the AO determined the total income of the assessee at Rs.6,58,11,220/-. 3. Subsequently, the Pr.CIT u/s.263 of the Act called for the assessment record and after examination of the same, found that the assessment order passed by the AO is erroneous and prejudicial to the interest of revenue. Consequently the Pr.CIT partly set aside the assessment with a direction that the mistake in computation and disallowance on account of commission to agents etc. be taken up afresh. 4. Now, the assessee is in further appeal before us. 5. Ld. AR before us filed written submission, wherein he submitted as under:- 1. The Ld. AO has disallowed the deduction claimed U/S sec 80P and brought the income to tax( page 13 of the Assessment Order) and the Assessee has gone for appeal against this disallowance and for this issue no revision proceeding can be initiated U/S 263 as per the provision of Act Clause c of Explanation 1 to Sec 263. 2. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side the order of AO as the AO while computing taxable income, amount of deduction u/s.80P(2)(a)(i) of the Act i.e. Rs.56,89,905/- was required to be added to the return income of the assessee. However, the gross total income before deduction under Chapter VIA was taken as NIL instead of Rs.56,89,905/-, which amounts to underassessment. It was also submitted by the ld. CIT-DR that as per the provisions of Section 194H of the Act, any person who is responsible for paying commission or brokerage to a resident is required to deduct tax thereon at the rate in force at the time of credit of such income to the account of payee if the amount of such payment exceeds Rs.15,000/- during the financial year. Therefore, the ld. CIT-DR submitted that under the provisions of Section 40(a)(ia) of the Act, 30% of expenditure towards payment shall not to be allowed where TDS has not been deducted. It was also submitted by the ld. CIT-DR that payment of commission less than Rs.15000/- to individual agents during the previous year cannot be ruled out. But onus lies with the assessee to prove that Section 194H has been followed in paying commission with documentary evidence, however, the assessee could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal [filed on or before or afier the 1st day of June, 1988], the powers of the [Principal Commissioner or Commissioner under this sub-section shall extend [and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal.]" It would be appropriate to reproduce hereunder the relevant clauses of Notes on Clauses and Memorandum to Finance Bill 1988 relating to the amendments in section 263 of the Act by the Finance Act, 1988 through which the above Explanation was introduced as under: "Notes on Clauses to Finance Bill, 1988 "Clause (c) of the Explanation clarifies that where any order passed by the Assessing Officer has merger with the order of Commissioner(Appeals) or the Appellate Tribunal, the Commissioner and revise that part of the order which has not been considered and pronounced upon by the appellate authority." Memorandum to Finance Bill, 1988 48(b) Regarding the circumstances under which order of an Assessing Officer merges with that of an appellate authority: Here again, there have been conflicting dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subordinate forum merges with the decision by the superior forum and it is the latter which subsists, remains operative and is capable of enforcement in the eye of law. 2. The doctrine of merger is not a doctrine of universal or unlimited application. It will depend on the nature of jurisdiction exercised by the superior forum and the content or subject-matter of challenge. Thus, we are of the view that where an issue in the assessment order has neither been agitated before the Commissioner (Appeals) nor considered by him, in such a scenario that portion of the assessment order will not merge with the order of the Commissioner (Appeals) and therefore, the Commissioner will have the jurisdiction under section 263 to revise the assessment order with respect to that particular issue. To make it clear, let us assume that in a particular case, the AO had made addition on account of three issues A, B and C, against which the assessee filed appeal to CIT(A) on two issues i.e. B and C and the CIT(A) has also passed an appellate order. Thus, in view of the Explanation as reproduced above, the PCIT cannot assume jurisdiction in respect of issue 13 and C u/s 263 of the Act, however, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R are related to provisions of old Income-tax Act of 1922. It is important to mention that section 31 of 1922 Act corresponds to section 251 of 1961 Act and under section 31 of 1922 Ac as well as under section 251 of the Act, the CIT(A) can enhance the income. Similarly section 33A of 1922 Act corresponds to section 263 and 264 of 1961 Act and the provisions of section 33A of 1922 Act are not identical with the provisions of section 263 of the 1961 Act. Therefore, it would be appropriate to reproduce the relevant provisions of section 33A of 1922 Act which corresponds to section 263 of 1961 Act as under: "33A. Power of revision by Commissioner.- (1) The Commissioner may of his own motion call for the record of any proceeding under this Act in which an order has been passed by any authority subordinate to him and may make such inquiry or cause such inquiry to be made and, subject to the provisions of this Act, may pass such order thereon, not being an order prejudicial to the assessee, as he thinks fit: Provided that the Commissioner shall not revise any order under this sub-section if- (a) where an appeal against the order lies to the Appellate Assistant Commissioner or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This is sufficient to answer the question which has been referred. 6. The question referred is, therefore, answered in the negative, in favour of the revenue and against the assessee." In the case of Ratilal Bacharilal & Sons (supra) it has been held by the Hon'ble High Court that: "21. Having said so, turning to the facts of this case, so far as allowance under section 35B to the extent it was allowed by the ITO is concerned, the powers of the Commissioner under section 263 shall extend and shall be deemed always to have extended to such matter because the same had not been considered and decided in the appeal filed by the assessee. At the instance of the assessee, the allowance on the sum of Rs. 5,63,350 could not have been the subject-matter of appeal before the CIT(A) as the assessee was never aggrieved with that part of the order. In other words, solar as weighted deduction under section 35B in the sum of Rs. 5,63,350 is concerned, the same was 7201 a subject-matter of the appeal before the CIT(A). Factually in this case, the doctrine of merger could not, have been applied by the Tribunal to that part of the order, which was not a subject- matter of appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Courts and consequently, was not considered in these judgements. We also reiterated that there is no proviso in section 263 of 1961 Act corresponding to proviso of section 33A of the old Act of 1922. It clearly reflects the intention of the legislature in the 1961 Act that even during the pendency of appeal before CIT(A), the PCIT can assume jurisdiction u/s 263 of the Act. Further, in view of the Explanation (c) to section 263(1) of the Act, the PCIT can assume jurisdiction Lifts 263 of the Act in respect of the issues which have not been considered and decided by CIT(A). The coordinate Bench with the same combination in the case of Virendra Singh Bhadauriya v. Pr. CIT [IT Appeal No. 255 (JP) of 2020 wherein the similar ground was raised in appeal, vide order dated 25/03/2021 had decided the issue in favour of the revenue. It would be appropriate to reproduce the relevant ground of appeal in the said case as under: "Ground No. 4:-Assessee humbly prays that the order dt. 16- 3-2020 passed by Ld. Pr. CIT--3, Jaipur u/s 263 of Income-tax Act, 1961 and its operation may he stayed as assessee has already preferred IT appeal against order dt. 26-12-2017 passed by ld. A0 u/s 143 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s ground of appeal raised by the assessee stands dismissed. 10. Respectfully following the decision of Coordinate bench of ITAT Jaipur which is squarely applicable in the present case, accordingly provisions of Section 263 are correctly and lawfully invoked by the Ld PCIT and therefore, we dismiss this ground of the assessee. 11. Now to decide the second issue "Whether the revisionary proceedings u/s 263 of the IT Act 1961 are bad in law in absence of any new fact, information, corroborative evidence or materials being made available by the Ld PCIT?". In this context, it is required to discuss order of the Ld PCIT, hence relevant portion of the order is reproduced as under:- 4. From the Examination of the relevant record, the following facts became discernible- (a) On verification it is found that the A.O. vide his order u/s 143(3) dated 28.12.2018 has disallowed deduction/exemption u/s 80P(2)(a)(i) [Para No.11 of page No.13]. While computing taxable income, amount of deduction u/s 80P(2)(a)(i) of Rs.56,89,905/- was required to be added to the return income of the assessee. The gross total income before deduction under Chap VIA was taken as NIL instead of Rs. 56,89,905/-, thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision is an opportunity of hearing to the Assessee, CIT vs Amitabh Bachhan Civil Appeal NO.5009 of 2016 (SC) and Taradevi Agrawal 76 ITR 496 (SC). 8. It is well settled that an order involving lack of enquiry or a case of no enquiry on a vital issue which requires verification that should have been carried out by a prudent officer would constitute an order erroneous and prejudicial to interest of revenue within the meaning of Sec 263(1) of the Act. In this context, reference may be had to Explanation -2 to Sec 263(1) that reads as under: Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,- 1. the order is passed without making inquiries or verification which should have been made; . The position is a mere affirmation of what has been confirmed by the Apex court and several HCs earlier & few of such decisions beg mentioning. In Rampyari Devi Sarogi 67 ITR 84(SC) and Smt Taradevi Agarwal 88 ITR 323(SC), it was held that lack of enquiry or due verif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... done afresh.
12. On perusal of the Order of CIT, it is emerged that the Ld AO has under assessed the income of the assessee which is evident from records that a disallowance was made U/s 80P(2)(a)(i) for Rs. 56,86,905/- but the same has been escaped to be added in the taxable income of the assessee. Therefore the assessment order passed by the AO is deemed to be erroneous in so far as it is prejudicial to the interest of revenue and revisionary powers assumed by the PCIT in this case are justified.
13. Second issue in the order of Ld PCIT regarding Deduction of Tax Source from the Commission to Agents to the tune of Rs. 3,34,78,902/- was not responded by the assessee, however the same has been restored back to the AO with directions to make fresh assessment with a reasonable opportunity of being heard and to furnish required details and submissions. We observe that Ld PCIT has rightly decide the matter in the interest of justice, therefore we do not find it fit to interfere with the order of the Ld PCIT, accordingly this ground of assessee is also dismissed.
14. In the result, the appeal of the assessee stands dismissed.
Order pronounced in the open court on 27/05/ 2022. X X X X Extracts X X X X X X X X Extracts X X X X
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