2023 (2) TMI 700 - AT - Income Tax

Appeal allowed as revision order invalid under section 263; doctrine of merger applied

The Tribunal allowed the appeal of the assessee, declaring the revision order under section 263 invalid due to the pendency of the appeal before the ... Revision u/s 263 by CIT - doctrine of merger - appeal of the assessee is pending for adjudication AND Again for the same reasoning, the ld. PCIT has passed revision order under section 263 - addition towards unexplained cash deposits - HELD THAT:- Assessee has filed an appeal before the ld. CIT(A) and the appeal of the assessee is pending for adjudication. Again for the same reasoning, the ld. PCIT has passed revision order under section 263 of the Act, which appears to be incorrect for the reason that the addition made by the Assessing Officer was subject matter of appeal before the ld. CIT(A), which is to be covered by the concept of doctrine of merger in view of the provisions of clause (c) of Explanation (1) to section 263 - See KATHIRAVAN ANANTHALAKSHMI AND KATHIRAVAN SRINIVASAN VERSUS. case [2022 (8) TMI 1307 - ITAT CHENNAI] In the present case also, against the addition towards unexplained cash deposits, the assessee has preferred an appeal before the ld. CIT(A) and once this being contested before the ld. CIT(A), thus as per the provisions of clause (c) of Explanation (1) to section 263 of the Act, the doctrine of merger will apply and the ld. PCIT cannot take any cognizance of the matter while passing revision order under section 263 of the Act. Under the above facts and circumstances of the case, the revision order passed under section 263 of the Act is quashed. Appeal filed by the assessee is allowed. Issues:1. Delayed filing of appeal due to Covid-19 pandemic.2. Assessment based on cash deposits and subsequent revision under section 263 of the Income Tax Act, 1961.3. Validity of revision order when appeal is pending before the CIT(A).Issue 1: Delayed filing of appeal due to Covid-19 pandemic:The appeal filed by the assessee was delayed by 662 days due to the Covid-19 pandemic. The delay was condoned, and the appeal was admitted for adjudication.Issue 2: Assessment based on cash deposits and subsequent revision under section 263:The assessee, an individual, filed the return of income for the assessment year 2015-16, admitting a total income of Rs. 15,000. The Assessing Officer noted a significant cash deposit of Rs. 4,41,28,135 and estimated the net profit at 8% of the total cash deposit, bringing it to tax. Subsequently, the Principal Commissioner of Income Tax (PCIT) issued a notice under section 263, questioning a cash deposit of Rs. 8,52,06,588. The PCIT considered the assessment order erroneous and prejudicial to the revenue, setting it aside and directing a re-assessment.Issue 3: Validity of revision order when appeal is pending before the CIT(A):The assessee appealed against the revision order under section 263 before the Tribunal, arguing that the PCIT cannot exercise revisional power when the appeal is pending before the CIT(A). Citing relevant case law, the Tribunal observed that the doctrine of merger applies in such cases, barring the PCIT from taking cognizance of the matter while the appeal is pending before the CIT(A). The Tribunal quashed the revision order, stating that the PCIT's action was without jurisdiction.In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing that the revision order under section 263 was invalid due to the pendency of the appeal before the CIT(A) and the application of the doctrine of merger. The decision was pronounced on 15th February 2023 at Chennai.