2022 (8) TMI 1307

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.... dated 29.03.2022. In ITA Nos. 340 & 341/Chny/2022, in the cases of Kathiravan Ananthalakshmi and Kathiravan Srinivasan, the assessments were framed by ACIT, Central Circle-1, Trichy for AYs 2018-19 and 2017-18 u/s. 144 of the Act vide order dated 21.12.2019 and u/s 143(3) of the Act vide order dated 25.12.2019 respectively. 2. The only common issue for these two appeals of assessees is as regards to the revision orders passed by PCIT, in both the appeals, holding the original assessment framed as erroneous and prejudicial to the Revenue for the reason that the Assessing Officer has not applied higher rate of tax u/s 115BBE of the Act on income assessed by the AO as unexplained but declared by assessees as agricultural income. The facts ....

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....e Act in exercising their jurisdiction over an issue in the order of assessment which is being challenged in appeal by the appellant before the Commissioner of Income Tax (Appeals). 3.2 The PCIT failed to consider explanation 1 to section 263 of the Act and therefore the impugned order is liable to be set aside. 4.1 The PCIT has grossly erred in directing the AO to add the agricultural income of the appellant u/s. 68 of the Act in the impugned order when there was no such proposal in his show-cause notice." 4. Brief facts are that the Income Tax Department conducted search u/s. 132 of the Act in M/s. Dhanalakshmi Srinivasan Charitable and Educational Trust on 15.02.2018. During the search on this group, the assessee was....

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....o the interest of the Revenue and assessee contested the revision order. The assessee also raised objection that the rate of tax for agricultural income was to be revised is the matter that has been contested before CIT(A) and this being so, the Proviso to clause (c) of Explanation (1) to section 263 of the Act will come into play and the doctrine of merger will apply. Ld. Counsel for the assessee relied on the decision of the Hon'ble Madras High Court in the case of Smt. Renuka Philip vs ITO, Business Ward-XV(2) [2019] 409 ITR 567 (Madras) and also the decision of Hon'ble Allahabad High Court in the case of CIT vs Vam Resorts & Hotels (P) Ltd [2019] 418 ITR 723 (All). 6. On the other hand, Ld. CIT(DR) heavily relied on the revision orde....

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....of clause (c) of Explanation (1) to section 263 of the Act. Hon'ble Madras High Court has considered this issue and observed from Para 22 to 25 read as under: "22. The above explanation makes it clear that when the appeal is pending before the Commissioner, the exercise of jurisdiction under Section 263 of the Act is barred. The Commissioner in the order dated 14.03.2012 states that the appeal pertains to the claim made by the assessee under Section 54 of the Act and it has got nothing to do with the order passed by the Assessing Officer under Section 54F of the Act. The said finding rendered by the Commissioner is wholly unsustainable, since the assessee went on appeal against the re-assessment order dated 31.12.2009 stating that ....

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....ction under Section 263 of the Act, the twin tests are to be satisfied and even assuming, the re- assessment order is to be held as erroneous, it cannot be stated to be prejudicial to the interest of Revenue as every erroneous order cannot be subject matter of Revision under Section 263 of the Act. Further more, if the order passed by the Commissioner under Section 263 of the Act as confirmed by the Tribunal is allowed to stand, then the very purpose of the remand order against the original re-assessment proceedings would become a fait accompli. 25. Thus, for the above reasons we are fully satisfied that the assumption of jurisdiction by the Commissioner under Section 263 of the Act was wholly without jurisdiction as the twin tests....