Revision under S.263 – not permissible on issues already considered by CIT (A) in appeal filed on or before or after the 1st Day of June, 1988

[CA DEV KUMAR KOTHARI]

Relevant links.

          Section 263 of the Income-tax Act, 1961

VISHNU TEA AND INDUSTRIES PVT. LTD. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE -4 (2) , KOLKATA - 2018 (7) TMI 1639 - ITAT KOLKATA

Orders by CIT and CIT(A):

Readers are well aware about functions and nature of orders of CIT and CIT(A) in relation to revision  by CIT   and orders on  appeals preferred by assesse before CIT(A).

As per general information and understanding of public and also as per information available in e-media the CIT and CIT(A) both are of same rank. Though generally CIT is a grade achieved after promotion from post of CIT(A). A CIT may then be promoted as Pr. CIT or Chief CIT, as per administrative policies from time to time.

Orders and appeals against them:

Order of CIT u/s 263 and order of CIT(A) U/s 250 -251 both are appealable before the Tribunal. The CIT has no power to revise order of CIT(A). From these angel also we can say that CIT and CIT(A)  both are of equal rank in relation to appeal and revision.

Bar on revisions on matters already considered by CIT(A):

In provisions of Section 263 we find bar on powers of revision by the CIT, in case the matter has already been decided by CIT(A) in case of assesse: The said bar is couched in the following language:

 263. Revision of orders prejudicial to revenue.- .......

(1) xxx 

Explanation.1 - For the removal of doubts, it is hereby declared that, for the purpose of this sub-section,-

(a) ..... (b) .....

 

 (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal [filed on or before or after 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.”

 

On reading of the above explanation we can observe that if on any issue the assesse had preferred any appeal ( it may be for relevant year or any other year) before CIT(A) and the matter had been considered and relief had been  allowed  by CIT(A) on such issue, then the CIT will not have power to make a revision order on such issue. 

This is for the simple reason that in case CIT(A) has allowed some relief, then order of AO allowing similar relief in any other year cannot be called erroneous. Furthermore, on instructions of CIT, the AO can prefer an appeal before the ITAT against order of CIT(A), if it is not acceptable to revenue. In case no appeal has been filed against order of CIT (A) on particular issue, then the order of CIT(A) has attained finality.

Besides there is specific provision by way of explanation prescribing powers and  restricting power of CIT in the matter of revision u/s 263.

Case before ITAT in case of Vishnu Tea & Ind. P. Ltd (supra):

In the above case Tribunal held that the order of revision u/s 263 was without jurisdiction because CIT(A) had already considered similar issues in case of assesse and had decided matter in favour of assesse. Therefore, orders for two years u/s 263 were set aside. Relevant portion of the order drawing conclusion and order are reproduced below with highlights added:

    Quote:

     11. Therefore, we find that the aforesaid issues which has been set aside by the Ld. Pr. CIT for fresh adjudication of AO vide impugned order dated 30.03.2017 has already merged with the order of the Ld. CIT(A) so, the Ld. Pr. CIT lacks jurisdiction to interfere with the  order on the issues that has already merged with the order of the Ld. CIT(A) dated 20.07.2016. 

    12. Coming to AY 2012-13.  We note that all the three identical issues discussed above  which has been remitted by the Ld. Pr. CIT has been taken cognizance by the Ld. CIT(A) in  the regular appeal preferred by the assessee well before the Ld. CIT issued the SCN conveying his desire to invoke revisional jurisdiction u/s. 263 of the Act, therefore, as per the clause (c) to Explanation (1) of sec. 263 (supra) of the Act, the subject matters of all the three issues was already under appeal before the Ld. CIT(A) and, therefore, the Ld. CIT  does not enjoy revisional jurisdiction u/s. 263 to interfere on these issues which is under appeal before the Ld. CIT (A). Therefore, we find merit in the appeal of the assessee and we quash both the impugned orders of the ld. Pr. CIT. Thus, both the appeals of the assessee are allowed. 

13. In the result, both the appeals of assessee are allowed.

Un quote:

It is worth to mention that even before insertion of  the Explanation in this regard, Courts have recognized rule of merger of order of AO in order of CIT(A) and had held that in such cases CIT will not have jurisdiction to make revision u/s 263. In fact the explanation as per language used “had been the subject matter of any appeal  filed on or before or after the 1st day of June, 1988] “ means that this is applicable for all periods that is  appeals filed at any time.

The order of honourable Tribunal is as per clear and specific provisions of S. 263. Therefore, revenue is expected not to indulge into further litigation on the issue of jurisdiction u/s 263 in case of Vishnu Tea (supra.).

In this case grounds raised by assesse also included on issue of order u/s 154 for which  show cause notice was issued had not allowed any relief therefore the order of revision of order u/s 143.3 for which no notice was issued notice was void. Contentions raised were also that the order of AO, even on issues covered by order u/s 143.3 was neither erroneous nor prejudicial to interest of revenue and therefore order u/s 263 is void.

However, Ld. Tribunal allowed appeal of assessee on ground of merger of order of AO in order of CIT(A), therefore other grounds were not dealt by the Ld. Tribunal.

Whether CIT(A) can enhance assessment in such situation:

An interesting issue which arises is whether CIT(A)  can make enhancement of assessment on an issue which was already considered, decided in favour of assesse by CIT(A) in any year and such order has attained finality.

As discussed earlier, CIT(A) who is considering a case of enhancement, is a court or tribunal of the same rank as is the CIT(A) who had earlier decided similar issue. Therefore, a CIT(A) should also not make enhancement on issues which have been decided in favour of assesse, particularly so when the matter has attained finality. 

Author hope to write another article on this issue.

VISHNU TEA AND INDUSTRIES PVT. LTD. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE -4 (2) , KOLKATA - 2018 (7) TMI 1639 - ITAT KOLKATA