TaxTMI 
TaxTMI 
2021 (3) TMI 1163
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....o the order of the learned CIT (A). 3. The learned PCIT erred in holding that the AO has not verified the details while passing the order dated 2nd May 2018. 4. The learned PCIT erred in holding that the order passed by the AO is erroneous and prejudicial to the interest of the revenue. 5. The learned PCIT erred in deciding the merits of the addition against the assessee. The action of the learned PCIT is also without giving proper opportunity of hearing. The Appellant craves leave to add, delete, amend and/or alter all or any of the grounds of appeal herein." 2.1. The assessee has raised the following additional grounds of appeal on 14/01/2021. "1. Additional ground No 1: On the peculiar facts and circumstances of the case and in law, the Ld. PCIT acted against the law in passing the order u/s 263 of IT Act, 1961 when the subject matter involved in the order Dt 02.05.2018 was duly considered and decided by the Income Tax Appellate Tribunal vide order Dt. 14.01.2019. 2. Additional ground No 2 The Ld. PCIT illegally assumed jurisdiction u/s 263 of the IT Act, 1961 treating that order passed u/s 143(3) read wi....
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.... order of the CIT(A) dated 28.06.2017. The provision of clause (c) of explanation 1 to Section 263 of the Income Tax Act, 1961 clearly debars the powers of PCIT for invoking jurisdiction in respect of the matters as had been considered and decided in such appeal. It is not denied that all the matters for which the PCIT invoked jurisdiction under section 263 of the Income Tax Act, 1961 had duly been considered in appellate proceedings not only by CIT(A) but also by this tribunal vide its order dated 14.01.2019. Your honours will appreciate that in case, an order is passed by your good selves, the consequential order giving effect to the order of this tribunal naturally is required to be passed by the assessing officer. If the action of the PCIT is legal or it is held that the PCIT had valid jurisdiction, PCIT can even revise the order which is being passed by ITAT in consequence of appeal before your honours, i.e. indirectly PCIT be superior to the Hon'ble Tribunal and PCIT can disturb any order which is passed by your good self and can modify the order passed by this Hon'ble Tribunal. 1.1 The Hon'ble Tribunal is the second Appellate authority and is independent to the inco....
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.... Tribunal, High Court or Supreme Court. Therefore, such restricted meaning cannot be given to clause (c) of explanation 1 to Sub-Section (1) of Section 263 of the Income Tax Act, 1961. Therefore, the only interpretation with respect to order of assessing officer under Section 263 of the Income Tax Act, 1961 have to be given only to an independent order passed by the assessing officer by applying his own mind nor to an order which has been passed by the assessing officer in consequence of the order of the Appellate Authority or on the direction of any other authority. 1.3 In the impugned case at the cost of repetition I may again bring your honours' attention to the impugned order, show cause notice, order of the CIT (Appeal) dated 28.06.2017 and the tribunal order dated 14.01.2019 from which it is apparent that all the five issues in respect of which relief was given and duly considered by the CIT (Appeal) and confirmed by ITAT are the same in respect of which jurisdiction under Section 263 of the Income Tax Act, 1961 has been exercised by the PCIT and accordingly he directed, to the assessing officer, as is apparent from page 38 of the order passed by PCIT under ....
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....ng the assessee to file this Appeal and unnecessary wasting the precious man power and cost of the exchequer and provided mental torture and harassment to assessee. 2.1 It is a settled law that the proceeding before the Income Tax Tribunal are the judicial proceedings. This fact has duly been recognised by Hon'ble Supreme Court in the case of ITAT Vs. V.K.Agarwal (235 ITR 175 (S.C), the respondent (Ex-Law Secretary, Ministry of Law and Justice, Government of India) In the said case, the Hon'ble Supreme Court held as under: "This court has consistently held that the Supreme Court has power under this article to punish, not merely for contempt of itself, but also for contempt of all courts and Tribunals subordinate to it. In the case of Delhi judicial Service Association, Tis Hazari Court, Delhi Vs. State of Gujarat, AIR 1991 Supreme Court 2176; (1991) 3 SCR 936, this court examined at length the power of this court under article 129 to punish for contempt. This court first examined the jurisdiction of the Supreme Court and held (at page 970 and page 2194 of AIR 1991 Supreme Court): "There is therefore no room for any doubt that this court has wide power to inte....
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....or is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not "acceptable" to the Department - in itself an objectionable phrase - and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result will only be undue harassment to the assessees and chaos in administration of tax laws". The Hon'ble M.P High Court further observed in clear terms as under: "Obviously, the Commissioner of Income tax (Appeals) not only committed judicial impropriety but also erred in law in refusing to follow the order of the Appellate Tribunal. Even where he may have some reservations about the correctness of the decision of the Tribunal, he had to follow the order. He could and shou....
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....ase may be, even where he may have reservations on its correctness. He has to follow the order of the higher appellate authority. This may instantly cause some prejudice to the Revenue but the remedy is also in the hands of the same officer. He has only to bring the matter to the notice of the Board or the Collector so as to enable appropriate proceedings being taken under section 35E(1) or (2) to keep the interests of the department alive. If the officers' view is the correct one, it will no doubt be finally upheld and the revenue will get the duty, though after some delay which such procedure would entail. It is clear that the observations of the High Court, seemingly vehement, and apparently unpalatable to the Revenue, are only intended to curb a tendency in revenue matters which, if allowed to become widespread, could result in considerable harassment to the assessee public without any benefit to the Revenue. We would like to say that the department should take these observations in the proper spirit. The observations of the High Court should be kept in mind in future and utmost regard should be paid by the adjudicating authorities and the appellate authorities to the requireme....
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....s functioning, irrespective of the pendancy of any appeal or special leave application against that judgment. He would equally be bound by a decision of another High Court on the point, because not to follow that decision would be to cause grave prejudice to the assessee. Where there is a conflict between different High Courts, he must follow the decision of the High Court within whose jurisdiction he is functioning, but if the conflict is between decisions of other High Courts, he must take the view which is in favour of the assessee and not against him. Similarly, if the Income tax Appellate Tribunal has decided a point in favour of the assessee, he cannot ignore that decision and take a contrary view, because that would equally prejudice the assessee." There cannot be any dispute that the ratio of the decision of Jurisdictional High Court equally applies to the orders passed by the ITAT also vis-à-vis the authorities down below. 2.7 A.P. High Court in the case of State Of Andhra Pradesh Vs. CTO, referred (Supra), as we also come across numerous instances of such kind of observations as noted by Hon'ble High Court. "In recent times, we are coming acro....
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.... taxable in India. The Hon'ble High Court considered the action of the assessing officer as an act of "Hierarchical indiscipline". The relevant observations made by Hon'ble Calcutta High Court are extracted below: "I have gone through the impugned notices as well as the impugned order passed by the Income Tax Officer concerned. I have no manner of doubt that the Income-tax Officer concerned had assessed income-tax on the same income which was fetched from the consultancy services. I find the specific finding of the learned Tribunal that this income is not taxable and I also find from the finding of the learned Tribunal that the amount which was paid by way of advance tax is liable to be refunded. The learned Tribunal painstakingly considered all the points advanced before him on behalf of the Department. Since the reference has been refused by the court so also previously by the Tribunal, at the present moment the findings of the learned Tribunal have reached finality. In my view, the venture which has been undertaken by the Income tax Officer for making an assessment is absolutely an act of hierarchical indiscipline. This exercise is nothing short of setting the Tribunal's....
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....arned PCIT and the assessing officer would be bound by the decision rendered by the jurisdictional Income tax Appellate Tribunal. Refusal to follow the order of the ITAT would render that authority guilty of committing contempt of Tribunal for which the concerned authority is liable to be proceeded against. 2.11 As held by Hon'ble M.P High Court in the case of in the case Agarwal Warehousing and Leasing Ltd, (Supra), the Learned CIT(A), in the instant case, has committed judicial impropriety and also erred in law in refusing to follow the order of the Appellate Tribunal by passing order under Section 263 Income Tax Act, 1961 and directing the assessing officer to withdraw the relief given by CIT(A) and as confirmed by tribunal. Being an authority in the higher hierarchy of the Income tax Department, that too holding administrative charge, PCIT should not have committed this kind of judicial impropriety. In view of aforesaid submission your honours will appreciate that this is the case where by passing an order under Section 263 Income Tax Act, 1961, the PCIT illegally withhold the refund which has arisen in consequence of the PCIT (Appeal) order as well as Inc....
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.....O. 27.03.1995 15.03.2016 02.05.2018 (Order u/s 154 of the Act giving effect to order of CIT(A) dated 28.06.2017) 2. CIT(A) 28.02.2003 24.03.2010 28.06.2017 (In respect of few additions, CIT(A) directed the A.O. to grant relief after verification) 3. ITAT 11.07.2008 [Set aside to CIT(A)] 29.10.2014 (Set aside to A.O.) 14.01.2019 (Assessment order quashed) (the order dated 02.05/2018 is subject matter of revision u/s.263 vide impugned order dated 22/01/2020) 3.5. We find from the aforesaid table that the ld. PCIT seeks to revise the order passed by the ld. AO on 02/05/2018 which is effectively the order giving effect to order of the ld. CIT(A) dated 28/06/2017, though the same has been termed as an order passed u/s.154 of the Act by the ld. AO. There is one more interim order which was passed by the ld. AO giving effect to the order of the ld. CIT(A). This interim order was passed by the ld. AO on 28/09/2017 terming it as "order giving effect to ld. CIT(A)‟s order dated 28/06/2017". In this interim order, the ld. AO categorically admits that the issues mentioned i....
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.... LESS (As per 24.22 of CIT(A)'s order dated 28.06.2017) Addition on account of money market oversold position - Relief due to decree transactions 438,43,55,195 LESS (As per para 24.16 of CIT(A)'s order dated 28.06.2017) Addition on account of money market oversold position - Relief due to inconsistencies in Annexure M-2 418,81,76,323 LESS (As per para 24.24 of CIT(A)'s order dated 28.06.2017) Additional lesson account of money market trading activities 2,61,95,078 LESS (As per para 24.24 of CIT(A)'s order dated 29.06.2017) Addition on account of money market unexplained stock -Relief due to order of Supreme Court dated 01.11.2002 and 03.12.2008 224,37,25,245 LESS (As per para 27.9 of CIT(A)'s order dated 28.06.2017) Addition on account of interest on money market 10,42,27,500 TOTAL TAXABLE INCOME 1143,38,34,164 Rounded off to 1143,38,34,160 3.7. Out of the aforesaid sums which were granted relief by the ld. AO in the giving effect order after due verification of the issues together with the relevant supporting evidences, the issues that are subject matter of revision proceedi....
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.... In the case at present, the Pr. CIT invoked the proceedings u/s 263 of the Act on the request of the AO. The AO prayed for the revision of the assessment order as admitted in Paragraph 3 of the impugned order dated 22.01.2020. Under section 263(1) clearly says,"The Commissioner may call for and examine the records of any proceedings under this Act, and if he considers ... ", which means that proposal for initiation of revision proceedings must be initiated by the CIT, because, it is the CIT who has to call for and examine the records. In the case at present, the CIT did not initiate the proceedings himself but initiated the proceedings on the proposal received from the AO. Only on receipt of proposal from the AO, the Pr. CIT initiated revision proceedings. It is not the case where CIT called for the record and after examining the same, initiated the proceedings under section 263. This clearly proves that there is no application of mind on the part of CIT WHILE invoking jurisdiction u/s 263. As mentioned above, that the proposal for initiation of revision proceedings must be initiated by the CIT, which is not the case at present, therefore,....
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....cribed by the statute cannot be allowed to get fresh innings to reassess because it was his duty to enquire properly within the time limit prescribed by the statute. (iii)Shanti Exim Ltd Vs CIT [20171 88 taxmann.com 361 (Ahd. Tribunal) The Commissioner set aside assessment order in exercise of his power under section 263 on the ground that the Assessing Officer did not make any independent verification to establish the genuineness of the purchase transaction of the assessee-company with eight parties. Held that the action under section 263 initiated on the basis of recommendation by the concerned Assessing Officer/Joint Commissioner. The said Assessing Officer has categorically held that the order of his predecessor is erroneous and prejudicial to the interest of the revenue. Thereafter the case record was called for by the Commissioner. If the recommendation would not have received from the successor the Assessing Officer, then the Commissioner would even not have initiated the proceedings under section 263. Therefore, it could not be termed that the Commissioner himself has called for the records. In this case, the record has been call....
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....s received on 10.06.2010 from the AO under section 263 of the Income Tax Act, 1961, pointing out some discrepancies/short comings in the assessment order". This clearly shows that in so far as the CIT was concerned, he did not apply his own mind........ We are of the considered opinion that the CIT could not have invoked the jurisdiction under section 263 without his own independent application of mind. (vi)Span Overseas Ltd. Vs. CIT, Pune ITA No. 1223/PN/2013 (21.12.2015] The Commissioner of Income Tax has invoked the provisions of section 263 without applying his own independent judgment and merely at the behest of proposal forwarded by the Dy. Commissioner of Income Tax is against the spirit of Act. Thus, the impugned order is liable to be set aside. For revision of order of AO, the Pr. CIT had not made any inquiries on his own but had merely relied on the proposal made by the AO as is apparent from show cause notice as well as order u/s 263 to Pr. CIT that in the assessment order certain points were not verified although verification was duly made by assessing officer while allowing effect to the order of the CIT(A). Even the CIT did not point out wha....
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....e each entry in the books of account and to decide the issue afresh after examining the books of account of the assessee and ultimately revised the assessed income accordingly, if there was a mistake in the order of the AO dated 30.01.2015, the only course of action available to the AO was to take an action u/s 154 of the Act but not to initiate the proceedings for passing a second order i.e. the impugned order. The AO having once passed an order giving effect to the order of ITAT, becomes functus officio. The AO does not have any jurisdiction to pass second order giving effect to the order of the Tribunal. We do not find any such provision under the Act and even Sh. Denial could not bring to our knowledge or attention any such provision. It is an undisputed fact that the AO has not taken any action u/s 154 of the Act in respect of the first order dated 30.01.2015 giving effect to the order of Tribunal dated 29.10.2014. Even no contrary decision was brought to our knowledge which has taken a view that the AO has the power to pass a second order giving effect to ITAT order. We are bound to follow the decision of the jurisdictional High Court as well of the co-ordinate Bench. We ther....
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....issioner or Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal [filed on or before or after the 1st day of June, 1988], the powers of the [Principal Commissioner or] Commissioner under this sub-section shall extend [and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal.]" 3.12. No doubt this section refers to any order passed by the Assessing Officer. Any order passed by the Assessing Officer has to be an order which is independently passed by the Assessing Officer. In the impugned case, the impugned order dated 02.05.2018 against which ld. PCIT has invoked section 263 of the Income Tax Act, 1961 is an order in fact which was passed in consequence of giving the appeal affect of the order passed by ld.CIT(A) dated 28.06.2017 which is not included in the order eligible for revision in the aforesaid Explanation u/s 263 of the Act. Technically it cannot be called to be the order of the Assessing Officer. If ld. PCIT is permitted to invoke jurisdiction u/s 263 of the Income Tax Act, 1961 in respect of the order passed for....
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....er passed by the ld AO, for which revision jurisdiction u/s 263 of the Act could be invoked by the ld PCIT. One more pertinent point which must be appreciated is that initially the revenue and the assessee filed an appeal before the Tribunal against the order of ld.CIT (Appeal) and knowingly that even after passing the order of the Tribunal dated 14.01.2019, ld. PCIT under section 263 of the Act passed impugned order dated 22.01.2020 directing the ld. AO to withdraw the relief given by the ld.CIT (Appeal) and as confirmed by this Tribunal. This fact that Tribunal has duly considered and confirmed the relief given by the ld.CIT (Appeal) was placed before the ld. PCIT during the course of 263 proceeding which is apparent from pages 34 to 38 of the order of the ld. PCIT. The ld. PCIT brushed aside the argument of the assessee made merely on the basis that the revenue has not accepted the order of the Tribunal dated 14.01.2019 and the same is being contested before Hon‟ble High Court. Needless to mention that the decision of the tribunal is binding on revenue including the ld. PCIT which passed an order under Section 263 of the Act until and unless operation of the order of this ....
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....PCIT. Even this fact was duly brought to the notice of the ld. PCIT which had been conveniently ignored by the ld. PCIT while exercising revision jurisdiction u/s.263 of the Act. We find that reliance in this regard has been rightly placed by the ld. AR on the decision of Hon‟ble Karnataka High Court in the case of CIT vs. New Mangalore Port Trust reported in 382 ITR 434 wherein it was held that where on facts the assessment order was no longer in existence, any order passed by the Commissioner u/s.263 revising a non-existent order was to be declared void ab initio. Hence, even on this count, the entire revision order passed by the ld. PCIT u/s.263 of the Act deserves to be quashed and is hereby quashed. 3.14. We find that the ld. PCIT had in his revision order u/s.263 of the Act alleged that proper enquiries were not carried out by the ld. AO in the order dated 02/05/2018 while granting relief to the assessee. In this regard we find that in the first paragraph of the order dated 02/05/2018, the ld. AO categorically admits that he had concluded that the entire verification proceedings were carried out in accordance with various directions issued by the ld. CIT(A) on variou....
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....7. The list of paper books filed before the ld. AO are as under:- Sr. No. Paper book No. Ground of Appeal Page Nos. 1. V Money Market Oversold position Money Market Trading Loss 1-276 2. VI 1-383 3. XVI 1-78 4. Ill Money Market Unexplained Stock 1-162 5. IV 1-63 6. XI Interest on Money Market Securities 1 - 105 3.17. We find that in the proceedings before the Special Court (Trial of offences relating to transactions in securities) Act, 1992 at Bombay, the ld. Senior Counsel representing Income Tax department on instructions of the ld. AO i.e. Shri Manpreet Singh Duggal has stated that all orders giving effect to are pending before the ld. AO and accordingly, sought time from the Special Court. Further before the Special Court on 08/12/2017, the ld. Sr. Counsel representing the Income Tax department had categorically admitted in para 3 that certain grounds were allowed by the ld. CIT(A) thereby granting reliefs, verification has not been entirely carried out before arriving at the amounts referred to in the computation and therefore, the notice of demand does not reflect the correct amount. Before the S....
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....ld. CIT(A) order dated 28/06/2017 could not be passed immediately after the receipt of order of the ld. CIT(A) in view of the fact that efforts were carried out to trace the original assessment folder which was traced finally at later point in time and due verification process as directed by the ld. CIT(A) was indeed carried out. The ld. AO also categorically affirmed before the Special Court in his affidavit by stating that letter to BSE (Bombay Stock Exchange) has been issued for verification purposes in respect of certain issues before granting relief to the assessee pursuant to order of the ld. CIT(A). We also find that the ld. AO in his affidavit in para 9 thereof had categorically admitted that necessary opportunity was given to the assessee and wherever verification from third party is required, the required notices were also issued. The order giving effect to the ld. CIT(A) order will be passed after receipt of replies from those third parties without any further delay. So, all these points categorically drives home the point that the ld. AO had indeed carried out extensive verification of the issues before giving effect to the order of ld. CIT(A) dated 28/06/2017. While th....
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.... this case even though stated that the Assessing Officer failed to examine during the course of the assessment proceedings but did not point out what type of inquiry or verification should have been carried out in this regard by the Assessing Officer. How non-examination of this aspect has resulted in under assessment. The power entrusted on the Commissioner of Income-tax under this Explanation cannot be to be vague and he may mention the irrelevant enquiries to be made by the Assessing Officer even though the law does not require in respect of the issue involved such enquiry to be made by the Assessing Officer. The Explanation cannot override the provisions of the section. It can extend the scope but that has to be within the purview of the main provision. The order passed by the Assessing Officer, in our opinion, shall be deemed to be erroneous in so far as prejudicial to the interests of the Revenue if the Principal Commissioner would have specifically pointed out which of the inquiries or verification should have been carried out by the Assessing Officer in this regard and how examination of those were necessary by the Assessing Officer while making the assessment and dealing w....