2019 (11) TMI 1000 - AT - Income Tax

Tribunal quashes Section 263 order, citing pending appeal. Revenue urged to expedite CIT(A) process.

M/s RNR Devcon Versus Pr. CIT (Central) Bhopal

The Tribunal held that the Principal Commissioner of Income Tax was not justified in invoking Section 263 while the same issue was pending before the ... Revision u/s 263 - pendency of issue before the Ld. CIT(A) - HELD THAT:- In the present case there is no dispute with regard to the fact that the same issue i.e. valuation of land is pending consideration of the Ld. CIT(A). Ld. Pr. CIT heavily relied on the explanation (1) to clause (c) to section 263 of the Act. As per this clause, jurisdiction u/s 263(1) of the Act would extend to the matters as had not been considered and decided. Admittedly, the issue has not been decided as the matter is still pending consideration before the Ld. CIT(A) as submitted by the Ld. representatives of the parties. Whether the pendency of issue before the Ld. CIT(A) for consideration would oust the jurisdiction of Ld. Pr. CIT for invoking jurisdiction u/s 263 of the Act, this issue was under consideration before the Hon'ble High Court of Madras in the case of Renuka Philip Vs. ITO [2018 (12) TMI 129 - MADRAS HIGH COURT] wherein the Hon'ble High Court decided the issue against the revenue In the present case as well, the larger issue regarding valuation adopted by the A.O. is pending before the Ld. CIT(A). Therefore, respectfully following the judgement of the Hon'ble Madras High Court, we hold that Ld. Pr. CIT was not justified to invoke the jurisdiction u/s 263(1) of the Act when the similar issue was pending before Ld. CIT(A). Therefore, the impugned order is set aside and the ground raised qua this issue is allowed. Moreover, the revenue has not brought to our notice any other contrary binding precedents. However, it is made clear that the revenue would be at liberty to approach Ld. CIT(A) for expediting disposal of the appeal. The other objections of the assessee are on merit of addition made by the assessing officer. Issues Involved:1. Invocation of Section 263 of the Income Tax Act, 1961.2. Validity of the assessment order under Section 153A.3. Pending appeal before CIT(A) on the same issue.4. Methodology of computing unaccounted income.5. Set-off of unaccounted expenses against unaccounted income.Detailed Analysis:1. Invocation of Section 263 of the Income Tax Act, 1961:The primary issue was whether the Principal Commissioner of Income Tax (Pr. CIT) was justified in invoking Section 263 of the Income Tax Act, 1961. The assessee argued that the assessment order passed by the Assessing Officer (AO) was neither erroneous nor prejudicial to the interest of the Revenue. The Pr. CIT, however, believed that the AO had adopted an erroneous calculation for computing unaccounted receipts, resulting in an under-assessment of Rs. 2.53 crores. The Tribunal observed that the Pr. CIT has the authority to invoke Section 263 if the AO’s order is found to be erroneous and prejudicial to the interests of the Revenue. However, it was noted that the issue in question was pending before the CIT(A), which could potentially oust the jurisdiction of the Pr. CIT under Section 263.2. Validity of the Assessment Order under Section 153A:The assessee initially contended that the assessment order under Section 153A was illegal and void ab initio due to the absence of a valid search under Section 132. However, these grounds (1a and 1b) were not pressed by the assessee during the appeal, and thus, they were dismissed as not pressed.3. Pending Appeal Before CIT(A) on the Same Issue:The assessee argued that since an appeal on the same issue was pending before the CIT(A), the Pr. CIT could not invoke Section 263. The Tribunal supported this view, citing Explanation 1(c) to Section 263(1), which states that the powers of the Pr. CIT shall extend to matters not considered and decided in such appeal. The Tribunal referenced judgments from the Gujarat High Court and the Madras High Court, which held that the Pr. CIT lacks jurisdiction under Section 263 when the issue is already under appeal before the CIT(A).4. Methodology of Computing Unaccounted Income:The Pr. CIT contended that the AO should have taken the gross sales value of Rs. 22.50 crores for computing the pro-rata sale amount of the land, instead of the adopted value of Rs. 18.17 crores. The assessee argued that if the AO relied on an excel sheet recovered during the search, which showed a total sales amount of Rs. 22.50 crores, the AO was also bound to consider the expenses of Rs. 4.33 crores noted in the same sheet. The Tribunal found that the AO had adopted a reasonable approach by considering the net sales amount, and no fault could be found with the AO’s methodology.5. Set-off of Unaccounted Expenses Against Unaccounted Income:The assessee contended that the unaccounted expenses noted in the excel sheet should be set off against the unaccounted income. The Pr. CIT, however, argued that these expenses were unaccounted and unsupported by evidence, and thus could not be allowed as deductions. The Tribunal noted that it is settled law that unaccounted expenses noted on a loose paper should be set off against unaccounted income noted on the same paper.Conclusion:The Tribunal concluded that the Pr. CIT was not justified in invoking Section 263 when the same issue was pending before the CIT(A). The impugned order under Section 263 was set aside. The Tribunal allowed the appeal of the assessee, emphasizing that the Revenue could approach the CIT(A) for expediting the disposal of the appeal. The other grounds raised by the assessee on the merits of the addition were considered academic and were not adjudicated upon. The assessee was given liberty to make submissions before the CIT(A).Order Pronouncement:The order was pronounced in the open court on 19.11.2019.