Challenging the Invocation of Revisionary Jurisdiction: A Legal Analysis

Introduction:

• By way of this appeal, the assessee challenges the invocation of revisionary jurisdiction under section 263 by the Principal Commissioner of Income Tax-1, Coimbatore, in relation to an assessment framed by the Assessing Officer at the National Faceless Assessment Centre, Delhi. The grounds raised by the assessee primarily revolve around the legality and validity of the order passed by the Principal Commissioner. This article delves into the key arguments and findings presented during the appeal.

Grounds Raised by the Assessee:

1. The order passed by the Principal Commissioner under Section 263 is deemed bad and illegal.
2. The Principal Commissioner failed to consider the reply filed by the appellant regarding the validity of the notice issued under Section 148.
3. The assumption of jurisdiction under Section 263 is erroneous, as the assessment order in question is already pending on appeal before the CIT(A) at the National Faceless Appeal Centre, and overlapping jurisdiction is impermissible.

Legal Arguments Presented:

• The Learned Authorized Representative (AR) argued that the assessment proceedings were already under adjudication before the first appellate authority when the revision was initiated, invoking the doctrine of merger. Citing the decision in Prabhu Kanimozhi vs. Pr. CIT (ITA No.350/Chny/2022), the AR asserted that the initiation of revision under Section 263 is barred when an appeal is pending before the CIT(A). The AR contended that, based on similar facts, the case should be considered under Clause (c) of Section 263(1).
• The Counsel for the Revenue countered these arguments, emphasizing that the issue scrutinized in the return of income was not examined by the Assessing Officer, justifying the revision. Distinctions were sought in the facts of the cited decision of the Tribunal.
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Assessment Proceedings:

• The assessee's return of income was subjected to scrutiny due to cash deposits during the demonetization period. The case was reopened, and a notice under Section 148 was issued. The assessment, completed on a best judgment basis under Section 144, added undisclosed income to the assessee. Discrepancies in the trading results were noted, leading to the addition of Rs. 240.85 Lacs. The AO did not make any addition related to the cash deposits during demonetization.

Revisionary Proceedings:

• The Principal Commissioner, in the impugned order, found the assessment to be erroneous and prejudicial to the assessee's interest. The core issue of cash deposits during demonetization was not adequately addressed, leading to the revision of the assessment. The order set aside the assessment and directed the AO to re-examine the cash deposits and any other pertinent issues.

Findings and Adjudication:

• The Tribunal considered the facts, emphasizing that the assessment was made on a best judgment basis due to the assessee's failure to provide requisite details. The Tribunal held that the AO's judgment, though prejudicial to revenue, could not be termed as erroneous. Additionally, the pendency of the appeal before the CIT(A) was crucial. Citing decisions from the Hon’ble Madras High Court and the Hon’ble Allahabad High Court, the Tribunal concluded that, when a larger issue is pending before the CIT(A), the revisionary authority cannot exercise jurisdiction under Section 263.

Conclusion:

• In light of the legal arguments and precedents, the Tribunal found the revision under Section 263 to be bad-in-law. The appeal was allowed, emphasizing the impermissibility of revising an assessment when a larger issue is pending before the CIT(A). This case underscores the importance of procedural regularity and adherence to jurisdictional limitations in income tax proceedings.

Topic- V.G. Rajamani Agencies Pvt. Ltd. Versus Principal Commissioner of Income Tax

Court-ITAT-CHENNAI

Date-09/01/2024

Team Taxonation

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