CITY UNION BANK LIMITED,KUMBAKONAM vs. ACIT CIRCLE 1, KUMBAKONAM

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ITA 1789/CHNY/2018Status: DisposedITAT Chennai15 November 2018AY 2010-114 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the Section 263 revision was barred by limitation because the issue of Section 14A disallowance was already considered in the original assessment order and was not part of the reassessment. The doctrine of merger, as interpreted by the Supreme Court, applies only to issues that were the subject of appeal, not those not considered in reassessment.

What were the facts?

The assessee's original assessment order for AY 2010-11 included a disallowance under Section 14A. A subsequent reassessment order under Section 147 did not address this issue. The CIT then invoked Section 263 to revise the reassessment order, proposing to re-work the Section 14A disallowance.

What were the issues?

Whether a revision under Section 263 is permissible when the issue sought to be revised was already dealt with in the original assessment and not in the subsequent reassessment? Whether the revision order under Section 263 was barred by limitation?

Which sections of the Income-tax Act were involved?

Section 14A,Section 143(3),Section 147,Section 148,Section 40(a)(ia),Section 263

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, ‘ D’ BENCH : CHENNAI

Before: SHRI GEORGE MATHAN & SHRI A.MOHAN ALANKAMONY

आदेश / O R D E R

PER GEORGE MATHAN, JUDICIAL MEMBER

1.

This is an appeal filed by the assessee against the order of the Principal Commissioner of Income-tax,Trichy-2 in C No.7143(8)/Pr.CIT/TRY-2/2017-18 dated 27.03.2018 for the assessment year 2010-11.

ITA No. 1789/chny/2-018 :- 2 -: Mr.S.Ananthan & Mr.Abarna represented on behalf of the 2. Assessee and Mr.Varuvuuru Sridhar represented on behalf the of the Revenue.

3.

It was submitted by the ld.A.R that the assessee had filed its return of income for assessment year 2010-11 on 30.09.2010 and the original assessment order came to be passed u/s.143(3) of the Act on 28.03.2013 wherein certain disallowance u/s.14A of the Act read with Rules 8D of the Income Tax Rules,1962 had been made at 2% of exempt income. Subsequently, the assessment came to be reopened u/s.148 of the Act and the reopened assessment was completed u/s.143(3) r.w.s.147 of the Act on 22.03.2016 wherein disallowance by invoking the provisions of the section 40(a)(ia) of the Act had been made. Subsequently on 20.02.2018, the ld.CIT issued a show cause notice u/s.263 of the Act proposing to revise the assessment order dated 22.03.2016 passed u/s.143(3) r.w.s.147 of the Act for re- working the disallowance u/s.14A read with Rules 8D. It was a submission that the issue of disallowance u/s.14A read with Rules 8D was not considered in the assessment order dated 22.03.2016, but was an issue in the assessment order passed u/s.143(3) of the Act on 28.03.2013, and consequently, the order passed u/s.263 of the Act dated 27.03.2018 directing the ld. Assessing Officer to re-work the ITA No. 1789/chny/2-018 :- 3 -:

disallowance u/s.14A read with Rules 8D was erroneous and liable to be quashed.

4.

In reply, the ld.D.R vehemently supported the order u/s.263 of the Act passed by Principal Commissioner of Income Tax, Trichy. It was a submission that the disallowance u/s.14A read with Rules 8D had not been properly done by the ld. Assessing Officer. In reply, the ld.A.R submitted that issue was now squarely covered by the principles laid down by the Apex Court in the case of Alagendran Finance Ltd., reported in [2007] 293 ITR 1 (SC) wherein the Hon’ble Supreme Court has categorically held that:-

“There may not be any doubt or dispute that once an order of assessment is re-opened, the previous under assessment will be held to be set aside and the whole proceedings would start afresh, but that would not mean that even when the subject-matter of reassessment is distinct and different, the entire proceeding would be deemed to have been reopened.

Explanation (c) appended to sub-section (1) of section 263 of the Income- tax Act, 1961, which deals with the power of the Commissioner in revision, is clear and unambiguous, as in terms thereof the doctrine of merger applies only in respect of such items which were the subject-matter of appeal and not in respect of those which were not.”

5.

We have considered the rival submissions. Admittedly the issue of disallowance u/s.14A read with Rules 8D was an issue considered in the original assessment order passed u/s.143(3) of the Act dated 28.03.2013. The issue of disallowance u/s.14A r.w.r.8D was ITA No. 1789/chny/2-018 :- 4 -:

not a subject matter of assessment in the assessment order passed u/s.143(3) r.w.s.147 of the Act dated 22.03.2016 and consequently, we have no hesitation in holding that applying the principles laid down by Hon’ble Supreme Court in the case of Alagendran Finance Ltd., referred to supra, the order passed u/s.263 of the Act is time barred by limitation in so far as the issue proposed for revision u/s.263 of the Act is an issue, which had been considered in the original assessment order dated 28.03.2013 and the order passed by Principal CIT, Trichy u/s.263 of the Act dated 27.03.2018 is barred by limitation.

6.

In the result, the appeal of the assessee is allowed.

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