RUPA JAYESH SHAH,MUMBAI vs. PR. CIT - 32, MUMBAI

We have heard rival submissions. We find that the assessee had filed his return of income in the A.Y.2011-12 on 17/09/2011 declaring total income of Rs.3,20,870/-. The said return was processed u/s.143(1) of the Act. Later the assessment was sought to be reopened and re- assessment was completed u/s.143(3) r.w.s. 147 of the Act dated 05/07/2016 wherein disallowance on account of non-genuine purchases were made to the tune of Rs.4,10,110/- being 25% of purchases of Rs.16,40,439/- made from four parties by the assessee. The assessee carried the matter in appeal before the ld. CIT(A) and the ld. CIT(A) in appeal No. CIT(A)-44/ITO 32(3)(2)/ITA-335/2016-17 dated 17/04/2018 disposed off the appeal of the assessee by restricting the disallowance to 12.5% of total purchases of Rs.16,40,439/-. In effect, the disallowance on account of non-genuine purchases was reduced to Rs.2,05,055/- by the ld. CIT(A). We find the ld. Administrative CIT had sought to invoke his revisionary jurisdiction u/s.263 of the Act by treating the order passed by the ld. AO as erroneous and prejudicial to the interest of the revenue on the ground that the entire purchases valued at Rs.16,40,439/- should have been considered for disallowance by the ld. AO. The ld. CIT in this regard placed reliance on the decision of the Hon’ble Supreme Court in the case of NK Proteins Ltd., reported in 2017-TIOL-23-SC-IT dated 16/01/2017. We find that the entire issue of disallowance on account of non-genuine purchases has been the subject matter of the adjudication by the ld. AO and by the ld. CIT(A) in the instant case by making some estimation of disallowance. Hence the doctrine of merger would duly get applied in the instant case, meaning thereby the order of the ld AO had already merged with that of the order of the ld CIT(A). The provisions of Smt. Rupa Jayesh Shah Section 263(1) Explanation -1 Clause-C are very clear that the issue cannot be the subject matter of revision u/s.263 where the same had been the subject matter of the appeal and the same had been heard and decided by the ld. CIT(A). Hence, we hold that the ld. CIT grossly erred in invoking revisionary jurisdiction u/s.263 of the Act in the facts and circumstances in the instant case. We hold that in the instant case, what the ld CIT had effectively sought to revise is not the order of the ld AO (subordinate authority) and instead had only sought to revise the order passed by an equal authority i.e ld CIT(A), which is not permissible u/s 263 of the Act. Hence, we have no hesitation in quashing the revision order passed by the ld. CIT u/s.263 of the Act. Accordingly, the grounds raised by the assessee are allowed.

In the result, appeal of the assessee is allowed.