AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (5) TMI 1675
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....iness income'. However, the assessing officer while passing the assessment order treated the lease rental income of Rs. 11,78,29,224/- as income from 'other sources'. On appeal before learned Commissioner (Appeals), the lease rental income was allowed as 'business income' vide order dated 20.04.2016. No further appeal before Tribunal was filed by revenue/ assessing officer. 3. Subsequently, the learned Principal Commissioner of income tax (ld. Pr. Commissioner) issued a show cause notice under section 263 dated 03rd March 2017 for revising the assessment order dated 19th January 2015. In the show cause notice the ld. Pr. Commissioner show caused as to why the assessment order passed under section 143(3) be not set aside directing the assessing officer to pass the assessment order afresh qua the treatment given to lease rental income. As per the ld. Pr. Commissioner, the lease income was liable to be assessed under the head "Income from House Property". The assessee filed its reply dated 10th March 2017. In the reply the assessee stated that as per the doctrine of the merger the assessment order passed under section 143(3) dated 19.01.2015 merged with the order of first appellate ....
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....e impugned order as regard the head of income under the lease rental income are to be assessed. 4. We have heard the submission of learned authorize representative (AR) of the assessee and ld. Departmental Representatives (DR) for the revenue and perused the material available on record. We have also deliberated on various case laws relied by learned representative of the parties. The learned AR of the assessee submits that as per the theory Doctrine of Merger, the assessment order passed by assessing officer under section 143(3) dated 19th January 2015 has since merged with the order of learned Commissioner (Appeals) qua the issue sought to be revised by the Pr. Commissioner u/s 263 of the Act. The learned Pr. Commissioner has no power to revise the assessment order passed by assessing officer on the issue which has been since examined by Commissioner (Appeal). In the return of income the assessee offered the lease rental income as 'business income', the same was not accepted by the assessing officer, the assessing officer treated the same as assessable under the head "Income from 'other sources'. The assessee filed appeal before ld. Commissioner (Appeals). In appeal the assesse....
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....,457/- (being 30% deduction of Rs. 11,78,29,224/- would be Rs. 3,53,48,676/-). The ld. Pr. Commissioner can revise the assessment order if there is loss to the revenue by the order of the assessing officer. In the present case there is no loss to the revenue rather there would be lower additions if the order passed by ld. Pr Commissioner is upheld. 7. On the other hand the ld. CIT-DR for the revenue supported the order of the ld. Pr Commissioner passed under section 263 of the Act. The ld. DR further submits that the taxability of lease rental income as income from house property was never before the ld. Commissioner (Appeals), therefore the theory of merger is not applicable in the present case. The CBDT circular cited by the ld. AR for the assessee is not applicable on the facts of the assessee as the assessee is not the developer of the industrial park. The ld. DR prayed for dismissal of the appeal filed by the assessee. 8. We have considered the rival submissions of the parties and have gone through the assessment order passed under section 143(3) dated 19.01.2015, order of ld Commissioner (Appeals) dated 20.04.2016 and the order of ld Pr Commissioner dated 27.03.2017(which....
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.... the Act and Explanation (c) there under which are material for consideration on the issue in this appeal and read as under :- "263. Revision of orders prejudicial to revenue.-(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous insofar as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation.-For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- ****** (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject-matter of any appeal, the powers of the Commissioner under this sub-section shall extend to such matters as had not been considered and decided in such appeal." 10. A careful reading of the provisions of section 263 makes....
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....invoked by the Assessee and it was applied by the Tribunal to uphold the objection raised by the Assessee. 11. In the above factual circumstances, we do not find that the Tribunal erred in holding that clause (c) of the Explanation to sub section (1) of section 263 of the Income Tax Act, 1961 cannot be applied. In the present case, that has no application because the matters which have been considered and decided in the Appeal by the first appellate authority are being made subject matter of the revisional authority's order. In other words, the power to revise, as conferred by section 263, is sought to be exercised so as to deal with the same matters which have been considered and decided in the Appeal. We do not find any merit in Mr. Mohanty's submission because detailed references have been made in the foregoing paragraphs to the case of the Assessee before the Assessing Officer, his initial order, the order of the first appellate authority, the direction issued by the first appellate authority and which was given effect to by the Assessing Officer. All these would denote that something which was very much part and parcel of the appellate authority's order and deal....
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....ering the similar objection of the department held that it was difficult to accept the submission of the department that the issue of depreciation being optional or the issue whether the assessee was at all entitled to deduction under section 80HHC or not, was not a subject-matter of appeal filed by the assessee before the Commissioner (Appeals). A matter might have many aspects and the above-mentioned two factors might be the aspects of the matter but not the entire 'matter' itself. The 'matter', in the instant case, was deduction under section 80HHC. Therefore, the assessment order, so far as it related to deduction under section 80HHC, had merged with the order of the Commissioner (Appeals) and, therefore, exercise of power by the Commissioner under section 263 was even not available under Explanation (c) to section 263(1). Therefore, order under section 263 was not a valid order in the eyes of law. 14. Now again turning to the events of the case in hand, in the return of income the assessee offered the lease rental income as business income, the treatment of the income offered by assessee was not accepted by the assessing officer, the assessing officer treated the same as inc....