2022 (9) TMI 1188 - AT - Income Tax

Tribunal overturns Pr. CIT's order under Section 263, citing issues already decided by CIT(A).

M/s. Bishandayal Jewellers, Nayasarak, Cuttack Versus Pr. CIT (Central), Hyderabad

M/s. Bishandayal Jewellers, Nayasarak, Cuttack Versus Pr. CIT (Central), Hyderabad - TMI Issues:Appeal against order u/s.263 of the IT Act for AY 2016-17, Condonation of delay in filing appeal, Assessment based on search and seizure operation, Additions made under various heads, Compliance with CBDT Instruction, Invocation of Explanation 2 to Section 263, Compliance with appraisal report, Consideration of issues by AO and CIT(A), Powers of Pr. CIT u/s.263(1) post appellate order.Analysis:The appeal was filed against the order of the ld Pr. CIT, Hyderabad under Section 263 of the IT Act for the assessment year 2016-17. The appeal was initially time-barred by 196 days, but the delay was condoned due to reasons related to the COVID-19 pandemic and unintentional delay in filing. The assessee, a jeweler, was involved in manufacturing and trading in jewelry and stones, and the assessment was based on a search and seizure operation conducted in 2015. The additions were made under various heads, leading to a revised loss amount. The Revenue filed an appeal against the CIT(A)'s order, prompting the Pr. CIT to issue a show cause notice under Section 263, citing discrepancies between admitted income and estimates by the Investigation Wing. The Pr. CIT set aside the assessment order, directing a reassessment considering closing stock and following CBDT Instruction.The arguments presented by the parties revolved around the compliance with the appraisal report, with the assessee contending that the AO followed the report, and the CIT DR asserting otherwise. The Tribunal analyzed the assessment order and found that the AO had indeed incorporated the appraisal report in the assessment. The Tribunal also examined the CBDT Instruction referred to by the Pr. CIT under Section 263, highlighting that it was an internal communication guideline for search and seizure cases, not issued under Section 119 of the IT Act. Consequently, the Tribunal held that the order under Section 263 was unsustainable and annulled it.Moreover, the Tribunal observed that the issues raised by the Pr. CIT had already been considered and decided by the CIT(A) in his order before the show cause notice was issued. As per Section 263(1), the powers of the Pr. CIT could only extend to matters not considered in the appellate order. Since both issues were subject to CIT(A)'s consideration and decision, the order under Section 263 was deemed unsustainable and quashed. Therefore, the Tribunal allowed the appeal of the assessee, emphasizing the importance of prior consideration of issues by the appellate authority in limiting the scope of revisionary powers under Section 263.