TMI Blog2016 (5) TMI 934X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 36(1)(iii) of the Act were not the "matters" before the CIT (Appeals). Though we can say that one of the aspects related to these "matters" were not there before the Assessing Officer or the CIT (Appeals). In this view, we do not hesitate to hold that the disallowances under sections 14A and 36(1)(iii) of the Act were the "matters" before the CIT (Appeals). Therefore, the same does not come under the jurisdiction of the Commissioner of Income Tax in provisions of section 263 of the Act. - Decided in favour of assessee - ITA No. 400/Chd/2013 - - - Dated:- 25-4-2016 - Shri Bhavnesh Saini, Judicial Member And Ms. Rano Jain, Accountant Member For the Appellant : Shri Ashwani Kumar For the Respondent : Shri Manoj Mishra, CIT DR ORDER Per Rano Jain, A. M. The appeal filed by the assessee is directed against the order of learned Commissioner of Income Tax- II, Ludhiana dated 21.3.2013 for assessment year 2008- 09, passed under section 263 of the Income Tax Act, 1961 (in short 'the Act'). 2. Briefly, the facts of the case are that the assessment under section 143(3) of the Act was completed vide order of the Assessing Officer dated 29.12.2008 at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no jurisdiction under section 263 lies with the Commissioner of Income Tax. Apart from this, with regard to disallowance under section 14A of the Act, it was stated that the assessee had substantial amount aggregating to ₹ 24.19 crores available by way of owned funds i.e. share capital, reserves and surplus on which no interest was paid. Since no investment in the partnership firm was made out of the borrowed funds, no disallowance under section 14A can be made. With regard to disallowance under section 36(1)(iii) of the Act, it was stated that the advance had been made out of loans raised against security of FDRs and the disallowance of interest, if any, would be only notional since the same would be set off against the corresponding interest income from the FDR. 5. The learned Commissioner of Income Tax after considering the submissions of the assessee, rejected the same and held that the order of the Assessing Officer dated 29.12.2008 suffers from errors, which renders it prejudicial to the interest of revenue and accordingly, set aside the same and directed the Assessing Officer to frame a fresh assessment keeping in view the discussion made in order under section 263 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reply with regard to disallowance under section 14A of the Act that the assessee had sufficient owned funds to invest in partnership firm, no disallowance under section 14A of the Act is called for. It was stated that this issue raised by the assessee has not been dealt with by the Commissioner of Income Tax while framing the order under section 263 of the Act. A copy of the judgment of Hon'ble Delhi High Court in the case of CIT Vs. DLF Ltd. (2013) 31 Taxmann.com 158 (Del) was placed on record to the fact that since the disallowance of expenditure under section 14A of the Act is a debatable issue, the same did not render order of the Assessing Officer as unsustainable, revisionary powers under section 263 of the Act cannot be exercised. With regard to the theory of merger, a copy of the order of the I.T.A.T., Chandigarh Bench in the case of M/s Trident Limited Vs. ACIT in ITA No.653/Chd/2011 dated 27.12.2011 was placed on record. 10. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. The undisputed facts and chronology of events of the present case are that the origina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation-1 to section 263 of the Act as under : (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.] 13. The above explanation was inserted by the Finance Act, 1989, with retrospective effect from 1st June 1988. Earlier to that, two judicial views were prevailing, one endorsing the view that the Assessing Officer's order once being subjected to appeal before the CIT (Appeals), revision under section 263 of the Act is not tenable as the whole order gets merged into the appellate order. The other view was that the merger of the assessment order be treated as confined to the issues actually considered and decided in appeal only. With the Explanation (c) having been brought into the statute, the first view got superseded. 14. From the provisions of the above Explanation, it is very clear that the learned Commissioner of Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of these sections in whole were there before the Assessing Officer i.e. he was seized of all the issues involved in these respective provisions. The learned CIT (Appeals) have the powers of wide amplitude, co-terminus powers with that of the Assessing Officer as well as the power of enhancement. Since these issues were before him also, we cannot say that one of the aspects related to both these issues were not open before him. What has been referred in the Explanation-1 to section 263(1) of the Act is the term matter . The issues relating to sections 14A and 36(1)(iii) of the Act in its entirety consists of matters . However, there may be many aspects of a matter . We cannot say that the issues of sections 14A and 36(1)(iii) of the Act were not the matters before the CIT (Appeals). Though we can say that one of the aspects related to these matters were not there before the Assessing Officer or the CIT (Appeals). In this view, we do not hesitate to hold that the disallowances under sections 14A and 36(1)(iii) of the Act were the matters before the CIT (Appeals). Therefore, the same does not come under the jurisdiction of the Commissioner of Income Tax in provisions of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated by the AAC, without any further direction that it should be confined to 11 months or 12 months. But, now, if further consideration is superimposed by the Commissioner by rectification made by the ITO as a result of the order passed by the Commissioner under Section 263 then that would be in conflict with the direction given by the AAC in his appellate order. Therefore, where an appeal is preferred and the subject-matter of appeal, particularly raised, is the subject-matter before the AAC, then that order, in our opinion, cannot be the subject-matter of an order of revision by the Commissioner. This principle, however, comes where the appeal does not lie from the order of the ITO and before the AAC where different kinds of appeal are provided for in the scheme of the I.T. Act. This principle was enunciated by the Supreme Court in the case of CIT v. Amritlal Bhogilal Co. . This was also reiterated in the decision in the case of Jeewanlal (1929) Ltd. v. Addl. CIT and the decision in the case of Premchand Sitanath Roy v. Addl. CIT . The Allahabad High Court reiterated the same principle in the case of J. K. Synthetics Ltd. v. Addl. CIT . Therefore, it appears to us that as the q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income-tax Officer which has been the subject-matter of appeal before the Appellate Assistant Commissioner, it has to be ascertained as to whether the Commissioner has set aside the entire order of assessment or only that part of the order of assessment which was not the subject-matter of an appeal either because the Appellate Assistant Commissioner had no jurisdiction to consider that matter or because the Appellate Assistant Commissioner, though having jurisdiction to examine that subject-matter, did not do so. If the Commissioner has set aside the entire order of assessment, then it could not be held that he has exercised power conferred upon him because he has no power under Section 263 of the Act to revise the order of the Appellate Assistant Commissioner. In this view of the matter, the decision in CIT v. R.S. Banwarilal [1983] 140 ITR 3 (MP) does not lay down the correct law in so far as it impliedly holds that the Commissioner could, in exercise of revisional power, set aside the entire order of assessment passed by the Income-tax Officer though it had been the subject-matter of an appeal before the Appellate Assistant Commissioner. In view of the above also, the o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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