2020 (9) TMI 1055 - HC - Income Tax

Appeal challenging original order maintainable beyond notice scope

The High Court held that the appeal challenging the original order under Section 143(3) was maintainable for matters not covered under the Section 263 ... Revision u/s 263 or appeal-able order before CIT(A) u/s 246A - Subject matter of revision was limited - Doctrine of merger - CIT(A) and ITAT rejected the appeal of assessee - assessee submitted that CIT (Appeals) and the Tribunal ought to have appreciated that the appeal is maintainable in respect of the issues which were not subject matter of notice issued u/s 263 and ought to have adjudicated the matter in respect of privilege fee - HELD THAT:- Taking into account the fact that appeal is maintainable in respect of the subject matter, which does not pertain to grounds under Section 263 of the Act. The Commissioner of Income Tax (Appeals) therefore, ought to have adjudicated the appeal on merits to the aforesaid extent. In view of preceding analysis, first substantial question of law is answered in favour of the assessee and against the revenue. It is not necessary for us to answer the remaining substantial questions of law in view of our conclusion to first question of law. In the result, the orders passed by the Commissioner of Income Tax (Appeals) and the Tribunal are hereby quashed and the matter is remitted to the Commissioner of Income Tax (Appeals) to adjudicate the appeal afresh on merits and in respect of the grounds, which were not the subject matter of notice under Section 263 of the Act. Issues:1. Justification of holding the original order under Section 143(3) as non-est and appeal maintainability.2. Adjudication of disallowance of privilege fee under Section 43B.3. Applicability of Section 43B regarding payment of privilege fee to the State Government.4. Justification of disallowing privilege fee under Section 43B.Analysis:Issue 1:The appeal under Section 260A of the Income Tax Act, 1961 was filed by the assessee challenging the holding of the authorities that the original order under Section 143(3) dated 30.10.2006 was non-est. The High Court found that the appeal was maintainable in respect of matters not covered under the notice issued under Section 263 of the Act. The Court held that the Commissioner of Income Tax (Appeals) should have adjudicated the appeal on its merits beyond the scope of the Section 263 notice.Issue 2:Regarding the disallowance of privilege fee under Section 43B, the Court noted that the authorities failed to adjudicate on this matter as it was not the subject matter of the notice under Section 263. The Court held that the appeal should have been examined on its merits, including the issue of privilege fee, which was not part of the Section 263 notice.Issue 3:The Court considered the applicability of Section 43B concerning the payment of privilege fee to the State Government. The assessee argued that the privilege fee of Rs. 3,50,00,000 was wrongly disallowed under Section 43B by the Assessing Officer. The Court did not delve into this issue as it was remitting the matter back to the Commissioner of Income Tax (Appeals) for a fresh adjudication.Issue 4:The Court addressed the justification of disallowing the privilege fee of Rs. 3,50,00,000 under Section 43B. It was argued that the Assessing Officer erred in disallowing this amount based on the payment date and invoking Section 43B. The Court did not provide a detailed analysis of this issue as the appeal was remitted for fresh adjudication by the Commissioner of Income Tax (Appeals).In conclusion, the High Court quashed the orders passed by the Commissioner of Income Tax (Appeals) and the Tribunal, remitting the matter back to the Commissioner of Income Tax (Appeals) for a fresh adjudication on the appeal's merits, specifically addressing the issues not covered under the Section 263 notice.