CIT u/s 263 can not revise order passed by Commissioner Appeals to examine the same issue – High Court

CIT u/s 263 can not revise order passed by Commissioner Appeals to examine the same issue as assessment order made by Assessing Officer got merged with the order of the Appellate Commissioner.

The instant appeals were filed by the Revenue challenging the orders passed by the Income Tax Appellate Tribunal(Tribunal/ITAT) setting aside the order  passed by the Commissioner for Income Tax (CIT) under Section 263 of the Income Tax Act, 1961 (the Act).

ABCAUS Case Law Citation
ABCAUS 2355 (2018) 06 HC

The assessee was a partnership firm. A search was conducted in the premises of the assessee and a notice under section 153A of the Act was issued for two assessment years. The Assessing Officer (AO) completed the assessment after making addition in respect of both assessment years

On appeal, the Commissioner (Appeals) allowed partial relief to the assessee. Subsequently, the CIT by exercising his powers of revision under Section 263 of the Act, proceeded to hold that the properties purchased by the assessee and the subsequent sale did not tally in respect of both the assessment orders, and therefore, directed reconsideration of the entire materials.

The Revisional Commissioner further found that certain expenses had to be added for the one assessment year. Similarly, in respect of payment towards commission, the Revisional Commissioner found that the cheque payments and TDS made for claiming expenditure had to be verified. Thus, he ordered for making addition in respect of both the assessment years.

Aggrieved by the said order passed in the revisions, the assessee preferred appeals to the Income Tax Appellate Tribunal which set aside the order passed by the Revisional Commissioner.

Before the Hon’ble High Court, the respondent assessee contended that the Revisional Commissioner could not have exercised jurisdiction under Section 263 of the Act to revise the order disallowing certain expenses as the said items had been considered both by the Assessing Officer as well as the Appellate Commissioner for both the assessment years and the assessment orders had merged with the appellate orders.

Accordingly the question before the Hon’ble High Court was, whether the Commissioner of Income Tax exercising jurisdiction under Section 263 of the Act, could re-consider the claim of expenses which had been considered by the Assessing Officer and concluded by the Appellate Commissioner after re-consideration.

The Hon’ble High Court opined that when the expenses as considered by the Assessing Officer were the subject matter of appeal and the Commissioner of Income Tax (Appeals) on the judicial side had found that for both the assessment years, the expenses incurred had to be accepted, the question of Commissioner of Income Tax (Administration) exercising revisional jurisdiction under Section 263 to once again examine the very same issue so as to disallow the same expenses does not arise, as the order of assessment made by the Assessing Officer got merged with the order of the Appellate Commissioner. The Revisional Authority cannot, by acting under Section 263 of the Act interfere and upset the order passed by the Appellate Commissioner. If the Revenue was aggrieved by the order of the Appellate Commissioner, the only remedy was to file an appeal to the Tribunal or to re-open the assessments.

The Hon’ble High Court opined that the conclusion reached by the Commissioner while exercising revisional jurisdiction tantamounts to directly interfering with the conclusions reached by the Appellate Commissioner. Such power of the revisional authority cannot be conceded to enable him to interfere with the orders passed by the Appellate Commissioner in view of the doctrine of merger. Hence, it has to be held that the Revisional Commissioner acted without jurisdiction in passing the said order.

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