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TMI Blog2022 (10) TMI 1031X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal before us, the effective issue to be decided in these appeals is as to whether the ld. Administrative CIT (Ld. CIT) was justified in invoking revisionary jurisdiction u/s.263 of the Act in the facts and circumstances of the instant case by treating the order of the ld. AO as erroneous in as much as it is prejudicial to the interest of the Revenue. 3. We have heard the rival submissions and perused the materials available on record. We find that the assessee company is engaged in the business of manufacture and supply of electrical products, systems and solutions, electronic goods, healthcare systems like X-ray machines, power generation and transmission equipments, transport equipment like signalling equipment for railways and related industrial and commercial activities. The assessee also undertakes turnkey projects in industrial and infrastructure sectors including the concept, engineering, supplies, execution, commissioning and after sale services. The ld. AR placed on record the list of dates and events for better adjudication of the appeal which also contained his arguments:- 1 30.10.2001 The assessee filed its return of income for assessment year 2001 -02 decla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion made vide letter dated 19.02.2008. This discloses that there was thorough application of mind by the AO while passing the assessment order giving effect to the Order dated 07.01.2008 of the Settlement Commission. 9 12.06.2009 The Settlement Commission disposed of rectification applications filed by the Assessee as well as the Revenue. It was urged by both the parties that the 35 issues as identified by the Revenue ought to have been decided by the Settlement Commission rather than restoring the same to the AO. The said application was dismissed as infructuous as the AO had already passed the order dated 25.02.2008 giving effect to the Order of the Settlement Commission. Thus, neither in the course of the proceedings before the Settlement Commission nor in the rectification application, the Revenue which was represented through the CIT, ever referred to any issues other than the 35 as identified by them. Based thereon, the assessee submits that it is not now open to the CIT in the revision proceedings to expand the controversy beyond such issues. 10 06.11.2008 The CIT issued notice under section 263 of the Act inter-alia alleging that in the order dated 25.02.2008 pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly restricted to these issues. 3.1. It was vehemently argued that the primary assumption of jurisdiction by the ld. CIT u/s.263 of the Act is patently illegal and bad in law as the order of the ld. AO in the instant case could not be termed as erroneous at all as he had originally passed the order in accordance with the directions of the Hon'ble Income Tax Settlement Commission (ITSC) which directed the ld. AO to examine 35 items. We find from the aforesaid list of dates and events and also from the paper book submitted by the assessee, the ld. AO had indeed examined all the 35 items that were mandated by the ITSC to examine and the assessee also had furnished all the details pertaining to those 35 items before the ld.AO during the course of assessment proceedings. The ld.AO on examination and verification of the details furnished by the assessee in respect of 35 items had accepted the same for majority of the issues and had made certain disallowances in respect of some issues. These facts are not in dispute before us. We find that the ld.CIT is seeking to invoke revision jurisdiction u/s.263 of the Act in respect of the following items:- a) Claim of deduction in respect of loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of Section 245D (3) of the Act and furnish Rule 9 report before the Settlement Commission as per Settlement Commission Rules. It is also not in dispute that the Settlement Commission had passed an order dated 07/01/2008 u/s.245D(4) of the Act after considering the various contentions raised by the Administrative CIT in Rule 9 report. The Settlement Commission order is being passed by the Officers of the Income Tax department who are in the rank of the Chief Commissioners of Income Tax (CCIT). When an Assessing officer passes an order giving effect to the said Settlement Commission order framed by the Officers in the rank of CCITs, then it loses the status of the order passed by the ld. AO simplicitor. Now, the legal question arises whether this order could be subject matter of revision u/s.263 by the ld. CIT. In our considered opinion, the answer would be an emphatic "No". It is very clear from the provision of the Act that Section 263(1) of the Act clearly mandates the ld. CIT to invoke revision jurisdiction only in respect of orders passed by a subordinate authority. As stated supra, the order passed by the ld. AO u/s.143(3) r.w.s. 245D(4) of the Act dated 25/02/2008 cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s listed in the Settlement Commission Order. The examination of those 35 items alone would be in direct consonance and compliance with the directions of the Hon'ble Settlement Commission. This is what has been done by the ld. AO in the instant case. How the ld. CIT could expect the ld. AO in the aforesaid scenario to look beyond 35 items. Hence, the order of the ld. AO cannot be treated as erroneous in respect of the issues that were not forming part of 35 items listed in the order of the Settlement Commission. To this extent, the revision order passed by the ld. CIT u/s. 263 of the Act is quashed. Hence, the observations made by the ld. CIT in his order u/s.263 of the Act in respect of (a) impact of taxable income as a consequence of change in the method of recognition of the Revenue and (b) quantitative details in respect of raw materials and finished goods are dismissed and quashed. 3.5. Now what is left is exercise of revision jurisdiction u/s.263 of the Act by the ld. CIT in respect of claim of deduction towards provision for warranty. Admittedly this issue was not included in the list of 35 items which the ld. CIT wanted the Settlement Commission to consider in his Rule 9 re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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