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Facts
The assessee filed an appeal against an order passed by the PCIT under section 263 of the Income Tax Act. The PCIT had initiated revision proceedings due to alleged erroneous assessment by the AO, which was considered prejudicial to the revenue. The primary issue involved the source of investment in immovable properties.
Held
The Tribunal held that the PCIT could not exercise revisional jurisdiction under section 263 when the matter was already under consideration by the CIT(A). Invoking section 263 in such a scenario would usurp the appellate jurisdiction of the CIT(A).
Key Issues
Whether the PCIT can exercise revisional jurisdiction under section 263 when the subject matter is already pending before the CIT(A) in appeal?
Sections Cited
263, 148, 143(3), 133(6), 251(1)(a)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW ‘B’ BENCH, LUCKNOW
O R D E R PER NIKHIL CHOUDHARY, A.M.: This is an appeal filed by the assessee against the order of the ld. PCIT-2, Lucknow passed under section 263 of the Income Tax Act on 14.03.2018. The grounds of appeal
are as under: - “1. That revision proceeding initiated u/s 263 of Income-tax Act, 1961 by learned Pr. CIT-2. Lucknow is illegal and without jurisdiction.
2. That since assessment order passed by the AO was not erroneous in so far as it is prejudicial to the interests of the revenue, hence revision order passed by Ld. Pr. CIT-2, Lucknow is illegal and without jurisdiction.
3. That Ld.AO had examined the issue and after being satisfied by the documentary evidences and explanations furnished by appellant, passed assessment order, hence revision order, cancelling the assessment order is illegal and without jurisdiction.
4. That where an order passed by AO is subject to an appeal that had been filed, then Commissioner cannot invoke power under section 263 in such matters, which are agitated in such appeal. Since issue under appeal before Commissioner (Appeals) and revision order passed under section 263 is same, hence, revision order passed by Commissioner is illegal and without jurisdiction.
5. That the appellant seeks permission to modify and/or add any other ground or grounds of appeal as the circumstances of the case might require or justify.”
Shri. Brahma Prakash Singh A.Y. 2012-13 2. The facts of the case are that the Department came in possession of information that the assessee had made an investment of Rs. 61,18,820/- in the purchase of immovable property and deposited cash amounting in total to Rs. 3,37,000/- in two savings bank accounts maintained with Punjab National Bank and the State Bank of India. Accordingly, a notice under section 148 of the Income Tax Act was issued to the assessee, in response to which the assessee filed a return showing a total income of Rs. 10,47,392/-. During the course of assessment, the assessee was required to substantiate the source of investment to the tune of Rs. 61,18,820/- in the purchase of immovable property and cash deposits made into its two savings bank accounts. In response, it was submitted that the assessee had received Rs. 47,60,000/- from Brahma Prakash Singh (HUF). Later, the assessee submitted that it had not received any amount in cash from M/s Brahma Prakash Singh (HUF) except Rs.28,205/-, however Rs. 56,94,795/- was paid / deposited by M/s Brahma Prakash Singh (HUF) either to the sellers of the immovable property or in fixed deposit or in bank accounts of the assessee amounting in total to Rs. 57,23,000/- exclusive of opening balances of the assessee. It was submitted that of this amount Rs.9,63,000/- had been paid back to Brahma Prakash Singh (HUF) during the year leaving a balance of Rs. 47,60,000/-. The ld. AO issued a notice under section 133(6) to Brahma Prakash Singh (HUF) seeking further information and records that a reply was received in response to the same stating that it engaged in marketing activity of agricultural produce; it did not maintain a bank account and dealt exclusively in cash, it had proposed to purchase certain immovable properties for which it had paid the stated amounts to the assessee but because the deal could not be finalize, it had got the paid amount back and that the unsecured loan of Rs.57,23,000/- had been given out of gold sold during the year, out of business income and out of past saving. The details of the mode of unsecured loan were also submitted. The ld. AO thereafter made enquiries with the Chief Manager Uttar Pradesh Cooperative Bank Limited at Vidhansabha Marg, Lucknow with regard to the cheques through which the assessee was stated to have made repayment to Brahma Prakash Singh (HUF) and observed from the reply that the Shri. Brahma Prakash Singh A.Y. 2012-13 said cheques had been paid to various other entities. He, therefore, concluded that there was an error in the responses given by the assessee. He also asked the assessee to submit details regarding the identity and creditworthiness of the other depositors i.e. Smt. Kamini Singh and Smt. Asha Rawat, who had made deposits on behalf of the assessee in the Punjab National Bank account. After considering the various replies received from parties, the AO came to the conclusion that the source of investment in the purchase of immovable properties stood explained to the extent of Rs. 49,73,813/- but a sum of Rs. 11,45,007/- was unexplained. He, therefore, added this amount back to the income of the assessee and completed the assessment at the total income of Rs. 21,92,399/-.
The ld. PCIT(1), Lucknow called for and examined the assessment records and records in his order that the order passed under section 143(3) r.w.s. 147 was erroneous in so far as it was prejudicial to the interest of Revenue. The ld. PCIT noted that during the year under consideration, the assessee had invested in the purchase of immovable property to the tune of Rs. 61,18,820/- but during the entire proceedings before the AO, the assessee kept changing his submissions and was unable to produce any documentary evidence in support of his submissions. The ld. AO without carrying out any enquiries / verifications has accepted the assessee’s plea by making addition of only Rs. 11,45,007/- and left the remaining Rs. 49,73,513/- as untouched, which also ought to have been added back to the income as unexplained income. He accordingly, asked the assessee to show cause as to why the order ought not to be revised accordingly. In response, the assessee made a submission in which he narrated the details of all the information that had been furnished by him during the course of assessment proceedings and in response to the various queries from the assessee. It was submitted that from a perusal of the order-sheets and the documents contained in the assessment folder, the ld. AO had asked for information, explanations and evidences in respect of sources of investment in immovable properties purchased by the assessee during the assessment years under consideration from time to time. He had also issued notices to third parties and to banks to submit explanations, information and Shri. Brahma Prakash Singh A.Y. 2012-13 documents in respect of the issue under assessment. The assessee had filed explanations, various details and documentary evidences in respect of issues under assessment including the investment in purchase of immovable properties during the assessment year in question. The third parties including banks had furnished information and evidences in response to the notice of the ld. AO. The ld. AO had examined the explanation, information and evidence furnished by the assessee and raised further queries and asked for further evidences. Finally, after considering the various documents and explanations furnished by the assessee and the third parties, the ld. AO was satisfied and accepted the sources amounting to Rs. 49,73,813/- out of the total investment in immovable property amounting to Rs. 61,18,820/-. Therefore, he had only added back Rs. 11,45,007/-. Therefore, it was submitted that the satisfaction of the Commissioner that the assessee had not produced any documentary evidences in support of his submissions for investment in purchase of immovable property were incorrect and that his satisfaction that the AO had accepted the assessee’s submissions without carrying on any enquiries / verifications were also incorrect. Thereafter, the assessee relied upon a number of cases of various Courts to show that the conclusion arrived at by the ld. PCIT that the order was erroneous and prejudicial to the interest of the Revenue was incorrect. The assessee also enclosed alongwith its reply, 71 documents in proof of the fact that the AO had raised all queries and the assessee had submitted responses to all the queries that have been raised.
However, the ld. PCIT was not convinced by the replies submitted by the assessee. He noted that initially the assessee had stated the investment had been made according to his receipt and payment account. Then he had stated that deposit had been made by Brahma Prakash Singh (HUF), Smt. Kamini Singh and Smt. Asha Rawat directly in his account as unsecured loan and a loan given to Brahma Prakash Singh (HUF) earlier had been deposited back by Brahma Prakash Singh (HUF) as repayment of loan. Thereafter, on 22.07.2016, the assessee had stated that he had sold the land and received consideration of Rs. 25,25,000/- and Shri. Brahma Prakash Singh A.Y. 2012-13 all the amounts had been received in cash. He had also submitted that he had taken unsecured loan of Rs. 50,10,000/- out of which Rs. 25,00,000/- had been taken in earlier years and remaining amount of Rs. 47,60,000/- had been paid by Brahma Prakash Singh (HUF) directly to the seller, but no supporting evidence of the same was furnished. Then the assessee had submitted that out of the sum of Rs. 25,51,000/-, Rs. 17,57,000/- had been received in earlier years and the remaining was received either through cheque or by directly depositing in bank or directly depositing in sellers account and no supporting evidence to substantiate the claim was filed. Thereafter, the assessee had submitted that the cash book filed by it was on the basis of memory and should be treated as null and void. Subsequently, Brahma Prakash Singh (HUF) had stated that it had given Rs. 2,50,000/- to the assessee as unsecured loan in earlier years and further paid Rs. 57,23,000/- in F.Y. 2011-12 out of sale of gold ornaments during the year but no supporting evidence was provided. In view of the fact that the submissions of the assessee kept on changing during the course of assessment proceedings, the ld. PCIT came to the conclusion that the assessee was unable to substantiate its claim with documentary evidence in respect of the purchase of immovable property to the tune of Rs. 61,18,820/-. The assessee had merely filed some explanations without any material evidence to support the same and the AO without conducting the necessary verifications that should have been made had passed the assessment order which made it erroneous and prejudicial to the interest of the Revenue in view of explanation 2(a) to section 263. Therefore, he set aside the assessment order and directed the AO to frame a fresh order as per law, after making the necessary enquiries and examination of the issues involved and affording a fair and reasonable opportunity of hearing to the assessee.
The assessee is aggrieved at this order under section 263 and has accordingly come in appeal before us. Sh. Dharmendra Kumar, C.A. (hereinafter referred to as the ld. AR), represented the case before us. It was submitted that the assessee had filed a return on 31.03.2014 showing a total income of Rs. 10,65,760/-. On 22.03.2016, the case of the assessee had been reopened to 5 Shri. Brahma Prakash Singh A.Y. 2012-13 examine the sources of investments in purchase of immovable properties which have been purchased in cash between F.Y. 2011-12 to F.Y. 2012-13. Further, there had been deposits in cash of Rs. 3,35,000/- in the two bank accounts of the assessee. The ld. AO after conducting extensive enquiries had accepted sources of investment into the said immovable properties to the tune of Rs. 49,79,813/- and only made an addition of Rs. 11,45,007/-. The assessee had filed an appeal against this addition before the ld. CIT(A) on 31.01.2017. Since the additions made by the AO pertain to partially unaccepted sources of investment out of the total investment, hence the assessee had mentioned the entire facts of total investments amounting to Rs. 61,18,820/- and had explained and furnished documents and evidences regarding the sources of entire investment in the statements of facts, grounds of appeal and written submissions filed during the appeal proceedings. The appeal filed before the ld. CIT(A) was pending till the date of filing of the paper book. In the meanwhile, the ld. PCIT had issued a show cause notice on 22.01.2018 for the AO having accepted the assessee’s investments to the extent of Rs. 49,73,513/-. However, under section 251(1)(a), it was the CIT(A) who had the powers against an order of assessment to confirm, reduce, enhance or annul the assessment. Therefore, when an appeal was pending the before ld. CIT(A), the power of the CIT(A) was co-terminus with the power of the AO. For this proposition, the ld. AR placed reliance upon the following judgments. i. M/s Ranka Jewellers vs. Addl CIT [ITA No. 1311 of 2009] (Bombay High Court). ii. M/s Vision Habitate & Services vs. Pr. CIT, Sambalpur [ITA No.214/CTK/2019] (ITAT Cuttack) iii. M/s Vishnu Tea & Industries Pvt. Ltd. vs. DCIT, Kolkata [ITA No. 1315 & 1316/Kol/2017] (ITAT Kolkata) iv. Mahipat Raichand Sharebroking vs. DCIT, Ahmedabad [IT(SS) A No.323/AHD/2010] (ITAT Ahmedabad). It was further submitted that during the assessment proceedings, the ld. AO had asked for information, explanation and evidences in respect of the sources of investment in immovable properties purchased by the assessee during the Shri. Brahma Prakash Singh A.Y. 2012-13 assessment year under consideration from time to time. Enquiries have been made from the bank Manager, from Brahma Prakash Singh (HUF) and responses have been filed in respect of all these enquiries. After examining the information, explanation and evidences furnished by the assessee, the ld. AO have raised further queries and then after considering the various documents and explanations furnished by the assessee, he was accepted and satisfied with the sources of investment amounting to Rs. 49,73,813/- out of the total investment of Rs. 61,18,820/-. The ld. AR submitted that since the AO had made enquiry and examined the issue in the light of the information furnished by the assessee and the third parties and thereafter passed the assessment order, therefore, it could not be said that the order of the AO was erroneous in so far as it was prejudicial to the interest of Revenue. For this proposition, the ld. AR relied upon the following case laws:- “a. U.P.Development System Corporation Ltd v. Pr.CIT-2, Lucknow [ITA No.198/LKW/2017] (Lucknow Bench of ITAT) b. M/s K. Sera Sera Productions v. CIT [ITA No.3024/Mum/2012](Mumbai Bench of ITAT) c. CIT v. International Travel House Ltd [ITA 94/2010] (Delhi High Court) d. Small Wonder industries v. CIT [ITA No.2464/Mum/2013] (ITAT- Mumbai) e. CIT v. Ganpat Ram Bisnoi [2008-296 ITR 292] (Rajasthan High Court) f. CIT v. Amit Corporation [Tax Appeal No.2583 of 2010] (Gujarat High Court) g. CIT v. Hotz Industries Ltd [2014-226 Taxman 252] (Delhi High Court) h. CIT v. Anand Food Products [ITA No.382 of 2013] (Andhra Pradesh High Court) i. Meerut Roller Flour Mills (P.) Ltd v. CIT [2019] 110 taxmann.com 170 (Allahabad)” It was, therefore, submitted that the order of the ld. DCIT was uncalled for as the provisions of Explanation 2(a) to section 263 could not be invoked without pointing out what enquiries had not been done. In the circumstances, it was prayed that the order of the ld. PCIT may be quashed.
Shri. Brahma Prakash Singh A.Y. 2012-13 6. On the other hand, Sh. R.K. Agarwal, ld. CIT DR (hereinafter referred to as the ld. DR) appearing on behalf of the Revenue argued that the Commissioner had rightly held that the assessment order was passed without making the necessary enquiries and verifications. Thus, in terms of Clause (a) of Explanation 2 to section 263, the assessment order was deemed to be erroneous in so far as it was prejudicial to the interest of Revenue. The ld. CIT DR pointed out that in this case the ld. PCIT-2, Lucknow had observed during the proceedings under section 263 of the Income Tax Act, that the assessee had changed his response to the notice under section 142(1) regarding the sources of investment in the purchase of immovable property on seven occasions and he has reproduced these different arguments in his order. In support of this, the ld. CIT DR also filed copies of these various submissions made by the assessee to point out the contradictions in the various submissions of the assessee. The ld. CIT DR also referred to the earlier paper book filed by his predecessor wherein reliance had been placed on the following decisions of the Courts for the proposition that identical / incomplete enquiry into the facts of the case merited intervention by the ld. CIT under section 263. “1. BSES Rajdhani Power Ltd vs Principal Commissioner of Income-tax, HC Delhi 2017 2. Rajmandir Estates (P.) Ltd. Vs Principal Commissioner of Income-tax, Kolkata- III. [2016] 70 taxmann.com 124 (Calcutta) 3. Surya Financial Services Ltd vs Pr. Commissioner of Income-tax (ITAT Delhi) [2018] 4. Malabar Industrial Co. Ltd. vs. Commissioner of Income-tax [2000] 109 Taxman 66 (SC).”
We have duly considered the facts and circumstances of the case. We may consider ground no. 1 of the assessee’s appeal in which assessee has argued that order of the ld. Pr. CIT, Lucknow is illegal and without jurisdiction on account of the fact that the addition on the same issue that was sustained by the Assessing Shri. Brahma Prakash Singh A.Y. 2012-13 Officer was in appeal before ld. CIT(A) and as per the provisions of section 251(1)(a) of the Act, the Commissioner (Appeals) had the powers in an appeal against an order of assessment to confirm, reduce, enhance or annul the assessment. Therefore, when an appeal was pending before the ld. CIT(A), the ld. CIT(A) had stepped into the shoes of the ld. AO and the entire field was open to the ld. CIT(A) to pass such orders as he deems fit confirming, reducing, enhancing or annulling the assessment. It has also been argued that as per clause (c) of Explanation 1 of section 263(1), the powers of the Pr. CIT only extend to such matters as have not been considered and decided in such appeal. We have gone through the case laws cited by the ld. AR. We note that in the case of M/s Vision Habitate & Services Pvt. Ltd. vs. Pr. CIT, Sambalpur (supra) the Hon’ble ITAT Cuttack Bench considered a similar matter and observed that the issues raised by the Commissioner with regard to the treatment of Excise Duty and Sales Tax incentives was dealt with in the course of assessment proceedings by the Assessing Officer. It was also clear that the stand of the assessee was not accepted by the Assessing Officer and the matter had travelled to the CIT(A) for consideration. The ITAT held that in view of Clause (c) of Explanation 1 to section 263, the Commissioner was not empowered to exercise the jurisdiction on an issue which is the subject matter of appeal before the CIT(A) and in that case, it was undisputed that the matter in question was in dispute before the ld. CIT(A). Therefore, the ITAT held that the Commissioner had no jurisdiction to consider these issues in revisionary proceedings. In the case of M/s Vishnu Tea & Industries vs. DCIT, Circle-4(2), Kolkata (supra), the ITAT noted that as the subject matter of all the three issues that were taken up by the ld. CIT(A) were already in appeal before the ld. CIT(A), therefore, the ld. CIT did not enjoy revisional jurisdiction under section 263 to interfere on these issues which was under appeal before the ld. CIT(A). In the case of Mahipat Raichand Sharebroking Pvt. Ltd. vs. DCIT, Ahmedabad (supra), the ITAT held that since the issue of back date had been considered by the appellate authorities therefore, the ld. CIT could not consider the matter again in revision proceedings under section 263. We have also Shri. Brahma Prakash Singh A.Y. 2012-13 considered the judgment of the Hon’ble Bombay High Court in M/s Ranka Jewellers vs. Addl CIT, Central Range-1, Pune, wherein the Hon’ble Bombay High Court has pointed out that once an issue had been considered and decided by the CIT(A), the remedy of the Revenue could not lie in invocation of the jurisdiction under section 263. After consideration of these judgments of the various courts and tribunal, it becomes apparent that a matter which has been considered and decided by the ld. CIT(A) cannot be considered in a revisionary proceeding under section 263. The question is whether a matter under the consideration of the ld. CIT(A) and prior to his decision on the issue, could be a subject matter of revisionary power under section 263. The assessee is correct when he states that once an appeal on an issue has been filed before the ld. CIT(A), the ld. CIT(A) is not restricted to deciding only those issues which are raised by the assessee in appeal but in fact he steps into the shoes of the Assessing Officer and the entire field is open before him. We note that the assessee, in his grounds of appeal
before the ld. CIT(A) has challenged the addition of Rs. 11,45,007/- on account of investment in immovable property through ground nos. 4, 5 &
6. After consideration of the powers of the ld. CIT(A) as enshrined in section 251(1)(a) of the Income Tax Act, 1961, which give him the powers to enhance an assessment, it cannot be said that the scope of the CIT(Appeal’s) powers was restricted to only the Rs. 11,45,007/- that were added back by the Assessing Officer. Thus, potentially the entire investment into the immovable property amounting to Rs. 61,18,820/- could have been examined by the ld. CIT(A) during the course of that appeal. The decision of the ld. PCIT to take up revisionary proceedings under section 263, thus in effect, had the impact of rendering ground nos. 4, 5 & 6 of the assessee’s appeal before the CIT(A) infructuous and as such constituted an interference in the appellate jurisdiction of the ld. CIT(A), which could not be the intention of the Legislature. Therefore, we must hold that since the issue of investment into purchase of immovable property was a matter under consideration of the ld. CIT(A), the exercise of the revisionary jurisdiction of the same subject was beyond the powers of the ld. PCIT. The appropriate course of action would have been to bring these Shri. Brahma Prakash Singh A.Y. 2012-13 facts of contradictory statements and lack of evidence before the ld. CIT(A) in an enhancement petition. However, in our view, the ld. CIT(A) could not be precluded from deciding the issues before him which is what would happen if the action of the PCIT under section 263 were to be upheld. Therefore, after a reading of section 251(1)(a) alongwith section 263 and following the judgment of the ITAT Cuttack Bench in the matter of M/s Vision Habitate & Services vs. Pr. CIT, Sambalpur (supra) (ITA No. 214/CTK/2019) dated 31.08.2020, we hold that the ld. PCIT ought not to have exercised his jurisdiction under the facts of present case on the issue of investment in immovable property in the revisionary proceedings under section 263 of the Act as it amounted to usurping the jurisdiction of the CIT(A). Accordingly, ground no. 1 of the assessee’s appeal is allowed. In view of the fact that ground no. 1 stands allowed, the remaining grounds are rendered infructuous and dismissed as such.
In the result, the appeal of the assessee is partly allowed. Order pronounced on 20.11.2025 in the Open Court.