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TMI Blog2024 (7) TMI 590X X X X Extracts X X X X X X X X Extracts X X X X ..... s become final and stood quashed, no question of passing another order will arise in view of the fact that the subsequent order passed by the Assessing Officer is invalid in the eye of law, as the opinion formed by the Assessing Officer is not sustained on the reasoning that revision under Section 263 is not permissible. When the order of assessment is found to be erroneous and prejudicial to the interest of Revenue, the right vests with the Principal Commissioner to review the order and since the said stipulation has not been satisfied, the order passed under Section 263 cannot stand on its leg. Whether Tribunal has erred in law and facts in allowing the appeal of the assessee, which is following hybrid system of accounting with respect to interest on debtors on cash basis in contravention of the provisions of Section 145 of the IT Act, 1961? - It is true that the term res judicata cannot be blindly applied to the income-tax proceedings as held by the Supreme Court in the case of Parashuram Pottery Works Ltd [ 1976 (11) TMI 1 - SUPREME COURT] but at the same time, in the absence of challenge to the fundamental aspect permeated through different assessment years, no attempt could b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng, in which the order of re-assessment was upheld by an order dated 26.07.2019. Again two appeals in I.T.A.No.45/(Gau)/2019 and in I.T.A.No.418/(Gau)/2019, have been preferred by the Company against the orders dated 12.12.2018 and 31.01.2019, in and by which, the Income Tax Appellate Tribunal, quashed the revisionary proceedings carried out under Section 263 of the Act, 1961 dated 12.12.2018 and closed the other appeal as infructuous. Dissatisfied with the order of the Tribunal, the Department is before this Court. 4. Learned counsel for the Department submitted that in this appeal, though four substantial questions of law had been raised, the Department has been canvassing this appeal in respect of Issue No.3 alone and for the sake of convenience, the four substantial questions of law are extracted below: 1. Whether the Hon ble Tribunal has erred in law and facts in quashing the revisionary proceedings carried out u/s 263 of the Act by the Ld.PCIT, Shillong in concluding that the order of the A.O. is neither erroneous nor prejudicial to the interest of revenue? 2. Whether the Hon ble Tribunal has erred ignoring the fact that the assessee company followed mercantile system of acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a disputable item and may at any time be reduced or waived and, therefore, despite the fact that the assessee maintains a mercantile system of accounting, the ITAT and the CIT (Appeals) have rightly set aside the order passed by the assessing officer adding surcharge to the income of the assessee. It would be appropriate to point out that income tax is fundamentally a levy on income and though the Act may prescribe different points in time at which liability to taxation enures still remains a tax on receipt of income. A hypothetical income that may or may not materalise should not be made subject matter of tax merely because of an entry in the accounts books maintained by an assessee. A reference in this regard may be made to a judgment of the Hon ble Supreme Court in Commissioner of Income-tax Vs. Shoorji Vallabhdas and Co. [1962] 046 ITR 0144 , wherein it has held as follows:- Income-tax is a levy on income. Though the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt, yet the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 92) 193 ITR 321 (SC) this Court did not think it appropriate to allow the reconsideration of an issue for a subsequent assessment year if the same fundamental aspect permeates in different assessment years. In arriving at this conclusion, this Court referred to an interesting passage from Hoystead v. Commissioner of Taxation 1926 AC 155 (PC) wherein it was said: Parties are not permitted to begin fresh litigation because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted and there is abundant authority reiterating that principle. Thirdly, the same principle, namely, that of setting to rest rights of litigants, applies to the case where a point, fundamental to the decision, taken or assumed by the plaintiff and traversable by the defendant, has not been traversed. In that case also a defendant is bound by the judgment, although it may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it may not have added anything much to the public coffers. 33. For the aforesaid reasons, we dismiss the civil appeals with no order as to costs, but with the hope that the Revenue implements its litigation policy a little more practically and a little more seriously. Thus, it was prayed by the learned counsel for the Company that the order of the Tribunal is perfectly justified and the present appeal is liable to be dismissed. 8. Heard the learned counsel for the parties and perused the documents, including various judgments produced by the parties. 9. It was the case of the Company that there was no real income accrued to the Company and in fact, the income accrued was only hypothetical, as the transaction recorded under the advance licences or under the duty entitlement passbook do not represent the real income of the assessee and as such, the re-assessment order of the Authority concerned on the basis of Hybrid System of accounting has no legs to stand. 10. In this case, the Assessing Officer had passed an order under Section 263 of the Act, 1961, which was admittedly set aside by the Principal Commissioner of Income Tax, Shillong and thereafter, the order of reassessment was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e,] conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner authorised by the Board in this behalf under section 120; (iii) an order under section 92CA by the Transfer Pricing Officer;] (b) record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at all the time of examination by the Principal Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer or the Transfer Pricing Officer, as the case may be,] had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of 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. Explanation 2. For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue No.3 alone (reproduced below once again), in which question of fact is involved and this Court cannot interfere with the finding of fact dealt with by the Tribunal at this moment: 3. Whether the Hon ble Tribunal has erred in law and facts in allowing the appeal of the assessee, which is following hybrid system of accounting with respect to interest on debtors on cash basis in contravention of the provisions of Section 145 of the IT Act, 1961? 12. It is true that the term res judicata cannot be blindly applied to the income-tax proceedings as held by the Supreme Court in the case of Parashuram Pottery Works Ltd., Vs. Income Tax Officer , reported in (1977) 106 ITR 1 (SC) , but at the same time, in the absence of challenge to the fundamental aspect permeated through different assessment years, no attempt could be made to alter the position in the subsequent year. That apart, the Punjab Haryana High Court elaborately dealt with this aspect, which got the assent from the Supreme Court as well. Thus, in the considered opinion of this Court, the order of the Tribunal is wholly justified, as we do not find any infirmity or irregularity in the order. 13. In the result, ITA No.2/2024 is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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