TMI Blog2022 (7) TMI 844X X X X Extracts X X X X X X X X Extracts X X X X ..... - SHRI N.K. SAINI, VICE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER Assessee by: Shri Tej Mohan Singh, Adv. Revenue by : Shri Sarabjeet Singh, CIT DR ORDER Per Sudhanshu Srivastava, Judicial Member: This appeal is preferred by the assessee against the order dated 30.05.2021 of Learned Principal Commissioner of Income Tax (Central), Gurgaon at Chandigarh [in short the Ld. Pr.CIT ], passed u/s 263 of the Income Tax Act, 1961 (in short the Act ) for the assessment year 2013-14. 2.0 The brief facts of the case are that the assessee is manufacturer of Aluminum Extrusion having its unit-II at Baddi, Himachal Pradesh. Return declaring total income of Rs.2,64,39,760/- was filed on 29.09.2013 after claiming deduction under Chapter-VI-A of the Act to the tune of Rs.5,90,46,270/- from the from the gross total income of Rs.8,54,86,028/-. As per the return of income, the assessee had claimed refund of Rs.2,13,71,035/- and had claimed deduction of Rs.5,87,89,770/- u/s 80IC of the Act. The assessment was completed u/s 143(3) of the Act at an income of Rs.4,76,40,025/- after making an addition of Rs.2,12,00,265/- on account of share of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substantial expansion s initial assessment year of the undertaking which were not in consonance with the details available on record. 2.4 The assessee submitted detailed reply to the show cause notice but the same did not find any favour with the Ld. Pr.CIT and he observed that although the initial assessment year, on the basis of completion of substantial expansion as per the facts of the case, was assessment year 2007-08, but wrong facts were presented by the assessee in different financial years, which were accepted by the AO who took the initial assessment year as assessment year 2009-10 by relying on the factually wrong claim of the assessee. The Ld. Pr.CIT further observed that this error led to allowing of deduction u/s 80IC of the Act in assessment year 2012-13 as well as in assessment year 2013-14 @ 100% as against 30% of the eligible profits and, therefore, the order passed by the AO u/s 143(3) r.w.s. 147 of the Act, was erroneous in so far as it was prejudicial to the interest of the Revenue. The Ld. Pr.CIT proceeded to set aside the assessment order on the ground of the AO taking assessment year 2009-10 as the year of completion of substantial expansion of Baddi uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary, opposed to the facts of the case and is unsustainable in law. 3.0 At the outset, the Ld. AR submitted that he would be addressing the Bench first on ground No.3 of the assessee s appeal which challenged the action of the Ld. Pr.CIT in assuming jurisdiction u/s 263 of the Act by treating the assessment order dated 27.11.2017 to be erroneous and prejudicial to the interest of the Revenue for the reason that the ITAT had already dealt with this issue in assessee s appeal for assessment year 2013-14 against the order passed u/s 147 of the Act in ITA No.123/Chd/2019 and the ITAT Chandigarh Bench, vide order dated 14.06.2019, had categorically held that the assessee was eligible for deduction @ 100% u/s 80IC of the Act on account of having undertaken substantial expansion. The Ld. AR submitted that, thus, the order passed u/s 263 of the Act was not a valid order in the eyes of law as in view of the order passed by the ITAT for the same assessment year i.e. 2013-14, the order of the AO as well as of the Ld.CIT(A) got merged with the order of the ITAT which had attained finality and, therefore, the Ld. Pr.CIT had no power to pass order u/s 263 of the Act on 30.03.3021 when the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 2009-10, although, from the facts on record, the initial assessment year after substantial expansion was assessment year 200708. The Ld.CIT DR argued that, therefore, the Ld. Pr.CIT had rightly invoked the revisionary powers u/s 263 of the Act because there was a failure on the part of the AO to have enquired into this aspect of eligibility of deduction. While supporting the order of the Ld. Pr.CIT and also refuting the contention of the Ld. AR that there was merger of order for assessment year 2013-14 post the order passed by the ITAT, the Ld.CIT DR submitted that in the said order of the ITAT, there is no specific finding with respect to substantial expansion not having taken place in assessment year 2007-08 but in assessment year 2009-10. The Ld.CIT DR submitted that in view of the detailed observations of the Ld. Pr.CIT in the impugned order, it was beyond doubt that the AO had not carried out proper verification while passing the order u/s 147 of the Act and restricting the assessee s claim to 30% of the eligible profits. 5.0 We have heard the rival submissions and have also perused the material available on record. The main thrust of the assessee s arguments befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed by the ITAT on 14.06.2019 whereas the impugned order is dated 30.03.2021, but the Ld. Pr.CIT has chosen to re-ignite the controversy by resorting to his power u/s 263 of the Act which is nothing but arbitrariness and mis-appreciation of facts on the part of the Ld. Pr.CIT. In view of the Doctrine of Merger, as argued by the Ld. AR and as also settled judicial precedents, it is our considered view that the Ld. Pr.CIT should have been cautious while passing the impugned order because, apparently, the Ld. Pr.CIT has not considered the aspect of Doctrine of Merger at all. 5.21 In the case of CIT Vs. Nirma Chemical Works Pvt. Ltd., reported in (2009) 309 ITR 67 (Guj.), the Hon'ble Gujarat High Court had dealt at some length on the principle of merger. It was a case in which the assessee had claimed deduction under Section 80I of the Act which the Assessing Officer allowed partially. The assessee filed an appeal against the disallowance. The Commissioner (Appeals) allowed the appeal. Subsequently the Commissioner, in exercise of powers under Section 263 of the Act, disallowed the claim under Section 80I of the Act on the ground that the assets used by the assessee in new indu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that when the AO has denied the claim of the assessee for benefit of exemption u/s 11 of the Act and the Commissioner (Appeals) had allowed the said claim, it was a case of merger of assessment order with the order of Commissioner (Appeals) and the Commissioner exercising revisional jurisdiction u/s 263 of the Act could not disallow the assessee s claim of exemption. 5.4 Similarly, in another judgment in the case of CIT-3 Vs. Sanvijay Rolling Engineering Ltd., reported in (2022) 137 Taxmann.com 123 (Bombay), the Hon'ble Bombay High Court went on to hold that where the Commissioner (Appeals) had allowed deduction claimed by the assessee company u/s 80IA 80IB of the Act and since there was a merger of order of the Commissioner (Appeals) with the order of the Tribunal which attained finality, the Commissioner could not initiate revisionary provisions u/s 263 of the Act so as to disallow the said deduction. 5.5 Therefore, we are in complete agreement with the Ld. AR that in the present case there was a merger of the order of the lower authorities with the order of the Tribunal for assessment year 2013-14 in ITA No.123/Chd/2019 wherein the Tribunal had ruled in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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