CIT cannot exercise revision powers under Section 263 when appeal against same assessment order is pending before CIT(A)

ITAT Chennai held that CIT cannot exercise revision powers u/s 263 when an appeal against the same assessment order is pending before CIT(A). The assessee had challenged the reassessment proceedings u/s 147 and 153C on grounds including lack of fresh material and improper sanction u/s 151. Since larger legal issues were already before the first appellate authority, Explanation-1 Clause (c) to Section 263 bars revision proceedings. The tribunal ruled that CIT(A) has co-terminus powers with AO and can address any deficiencies. The revision order was quashed and assessee's appeal was allowed.

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Issues Involved:
The issues involved in this legal judgment include the invocation of revisionary jurisdiction under section 263 by the Principal Commissioner of Income Tax, legality of the sanction made by the competent authority under section 151 of the Act, the applicability of clause (c) of Explanation-1 to Section 263(1) when the subject matter is pending before the First Appellate Authority, and the legality of the assessment proceedings under sections 147 and 153C.

Assessment Proceedings:
The appellant, a resident corporate assessee engaged in manufacturing, filed its return of income for AY 2017-18 admitting total income which was scrutinized under section 143(3). Subsequently, during search proceedings, incriminating material was found leading to proceedings under section 153C. The assessment under section 153C was completed making a disallowance under section 40(a)(ia) while other issues were pending before the First Appellate Authority.

Revisionary Proceedings:
The Principal Commissioner sought revision of the assessment order to make additional disallowances not considered by the Assessing Officer. The appellant contended that the notice under section 148 was without jurisdiction as no fresh material existed for reopening. The Principal Commissioner held that there was an escapement of income and the reassessment proceedings were valid, directing the AO to disallow the items. The appellant challenged this revision on various legal grounds.

Findings and Adjudication:
The Tribunal found that the original assessment was reopened on the allegation of escapement of income while proceedings under section 153C were initiated separately. The appellant had challenged the legality of reassessment proceedings under section 147 before the First Appellate Authority. The Tribunal held that the revision under section 263 was not maintainable as the larger legal issues were pending before the CIT(A) and the order could not be revised in such circumstances.

Judicial Precedents:
The Tribunal cited judicial precedents from the Madras High Court and Allahabad High Court where it was held that when larger issues were pending before the CIT(A), the revisionary authority could not exercise jurisdiction under section 263. Following these decisions, the Tribunal concluded that the revision under section 263 was bad-in-law and ordered its quashing.

Conclusion:
Based on the above analysis and legal precedents, the Tribunal allowed the appeal and pronounced the order quashing the revision under section 263 on 9th January 2024.

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