Maintainability of writ against section 263 revision power, while appeal before CIT(A) is pending

Prestige Marketing Vs PCIT (Kerala High Court)

Maintainability of writ against the revision power under section 263 of the Income Tax Act, while appeal before CIT A is pending

Facts :- The petitioner has preferred a statutory appeal before the CIT(Appeals) on 15.1.2020. It is during the pendency of the appeal that the first respondent issued show cause notice dated 21.2.2022, to the petitioner on the finding that, out of the total addition of Rs. 3,35,33,509/- in Ext P1 A.O, only an amount of Rs. 68,25,000/- was taxed at the special rate under Sec. 69 read with Sec. 115BBE of the Act and balance amount of Rs. 2,67,08,509/- was assessed to tax at normal rates, treating it as ‘income from other sources’. The first respondent has found the assessment not in order because the petitioner had not produced any proof to get the benefit of normal rate of tax.Even though the petitioner submitted reply to show cause notice, the first respondent, by the impugned order, set aside A.O and directed the Assessing Officer to pass a speaking order in accordance with law, after affording the petitioner an opportunity of being heard.It is this action of the first respondent that is assailed in the writ petition

Assessee contention _Explanation I (c) of sub-sec.(1) of Sec. 263 of the Act has two limbs. The first limb deals with while the matter is sub-judice before the First Appellate Authority and the second one deals with when the matter has been decided in the appeal. Hence, in those matters decided in the appeal, the doctrine of merger applies. The subject matter in dispute in the appeal and the revision is one and the same, and is hence statutorily barred. In the instant case, the assessing authority, after conducting a detailed inquiry, has held that the income is from other sources. It is this turnover which is made the subject-matter of revision, on the premise that it is to be assessed at higher rate of tax under Section 115 BBE as unexplained credit

Revenue Contention _clause (c) of Explanation I of Sec. 263 (1) of the Act ousts the revisional power of the first respondent, while an appeal is pending, is untenable. In the case on hand, as the appeal is pending consideration, the above provision cannot be pressed into service. The said provision is based on the principle of doctrine of merger. Where an issue in the assessment order is neither agitated before the CIT(Appeals) nor has been considered by him, that portion of the assessment order will not merge with the order of CIT(Appeals). The first respondent has rightly and judicially exercised his powers, under Sec. 263 of the Act, to correct an error committed by the Assessing Officer in applying the correct rate of tax applicable to the additions by way of income made in the assessment. The petitioner has challenged only the additions made to the total income in the A.O. Therefore, the jurisdiction exercised by the first respondent is in consonance with the provisions of Sec. 263 of the Act.

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