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Income Tax Appellate Tribunal, JAIPUR BENCHES,”B” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No.274/JPR/2021
आयकरअपीलीय अधिकरण] जयपुरन्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Mk0 ,l- lhrky{eh]U;kf;d lnL; ,o aJh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ fu/kZkj.ko"kZ@Assessment Years :2014-15 cuke M/s Jaipur Telecom Pvt. Ltd. Pr.CIT-2, Vs. 3, Amrapali Circle, Jaipur Vaishali Nagar, Jaipur. LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCJ 0763 D vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksjls@Assesseeby :Sh. Manish Agarwal(C.A.) jktLo dh vksjls@Revenue by: Sh. Ajey Malik (CIT) lquokbZ dh rkjh[k@Date of Hearing : 15/02/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 15/03/2023 vkns'k@ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM
This appeal is filed by the assessee aggrieved from the order of the Learned Principal Commissioner of Income Tax-2, Jaipur [ herein after referred as ld. “Pr.CIT”] for the assessment year 2014-15 dated 08.03.2019, which in turn arises from the order passed by the Assistant Commissioner of Income Tax, Circle-4 Jaipur under Section 143(3) of the Income Tax Act, 1961 (in short 'the Act') dated 28.12.2016.
M/S Jaipur Telecom Pvt. Ltd. 2. At the outset of hearing, the Bench observed that there is delay of 932 days in filing of the appeal by the assessee for which the ld. AR of the assessee filed an application for condonation of delay with following prayers:
“Hon'ble Sirs, Sub: Application seeking Condonation of delay - M/s Jaipur Telecom Pvt. Ltd. -Assessment Year 2014-15
In the aforesaid context, it is humbly submitted that an order u/s 263 was passed in the case of assessee by Pr. Commissioner of Income Tax-2, Jaipur on 08.03.2019. Appeal against such order was supposed to have been filed within 60 days, i.e. 06.05.2019, however, the appeal got delayed by 932 days, as the appeal is being filed now on 243 for the reasons as explained below:
1. 1. That, as soon as the impugned order passed by Id. Pr. CIT was received, the same was forwarded to the office of counsel of assessee so as to decide if appeal against such order was required to be filed.
2. That, the counsel of assessee advised that no appeal is required to be filed against impugned order and appeal would be filed against the order passed u/s 143(3) r.w.s. 263 of the Income Tax Act.
3. That, order u/s 143(3) r.w.s. 263 was passed on 02.12.2019, and when the same was discussed with another counsel, assessee was advised as to why no appealwas filed against order u/s 263.
4. However, by that time, there was countrywide lockdown and offices of counsels remained closed due to COVID 19 pandemic and again appeal could not be filed against order passed u/s 263.
5. Thus, it is submitted that the delay in filing the appeal is absolutely inadvertent and has occurred due to circumstances beyond the control of assessee.
6. That, the assessee always has acted in bonafide and the delay is of 932 days.
7. An affidavit signed by assessee deposing the above facts is enclosed hereiwith. In the circumstances of the matter it is humbly prayed to the Hon'ble Bench to please accept the application / prayer of the M/S Jaipur Telecom Pvt. Ltd. condonation of delay which is of 932-days and to please be kind enough to direct the listing of the appeal for disposal on the merits. Your kindness would go a long way to impart effective justice to the ignorant litigants.”
2.1 In addition to the petition for condonation of delay which is also supported by an affidavit duly sworned and executed by director of the assessee company wherein it has been contended that;
“I, SaurabhKakkar, Director of M/s Jaipur Telecom Pvt. Ltd. aged about 50 years S/o Late Shri V.K. Kakkar R/o A-65, Ram Marg, Shyam Nagar, Jaipur-302019 (Rajasthan) do hereby solemnly affirm on oath as under:
1. 1. That, as soon as the impugned order passed by Id. Pr. CIT was received, the same was forwarded to the office of counsel of assessee so as to decide if appeal against such order was required to be filed.
2. That, the counsel of assessee advised that no appeal is required to be filed against impugned order and appeal would be filed against the order passed u/s 143(3) r.w.s.263 of the Income Tax Act.
3. That, order u/s 143(3) r.w.s. 263 was passed on 02.12.2019, and when the same was discussed with another counsel, assessee was advised as to why no appeal was filed against order u/s 263. However, by that time, there was countrywide lockdown and offices of counsels remained closed due to COVID 19 pandemic and again appeal could not be filed against order passed u/s 263.
4. Thus, it is submitted that the delay in filing the appeal is absolutely inadvertent and has occurred due to circumstances beyond the control of assessee.
5. That, the assessee always has acted in bonafide and the delay is of 932 days.
6. Thus the delay of 932 days occurred in filing appeal due to circumstances beyond the control of the assessee.
7. That, the assessee has submitted an application seeking condonation of delay and this affidavit is being submitted in confirmation to the facts narrated in the application seeking condonation of delay.”
2.2 Based on the stated facts in the petition and affidavit filed by the assessee it is noted as even confirmed by the registry that this present appeal is delayed by 932 days delay and if the delay of covid period for 619 days is deducted than the delay is of 313 days. For that matter of the delay the ld. AR of the assessee submitted that the majority part of the delay is on account of covid 19 period and rest of the period delay in filling this appeal is absolutely inadvertent and has occurred due to advise of the counsel appeared in the assessment proceedings and has not advised to file an appeal against the order of the PCIT passed under section 263 of the Act. There was no malafide of deliberate delay in filling the present appeal and when the assessee came to know about the absolute right of filling an appeal against the order of the PCIT they moved this present appeal. The ld. AR of the assessee further submitted that in the assessment proceeding the other chartered accountant represented the company. Whereas the present appeal is filled by another chartered accountant. This fact itself proves the version stated in the affidavit and therefore, there is no need of any other independent evidence and in the interest
M/S Jaipur Telecom Pvt. Ltd. of the justice he prayed to condone the delay. The ld. AR of the assessee also submitted that the assessee has not gained anything and there is no prejudice caused to the department of present dispute as the assessee has merits of its case. In support of this contention the ld. AR of the assessee has relied upon the following judicial precedent directly applicable to the facts on the case. The decision so relied are as under: a) Hon’ble Supreme Court in the case of Improvement Trust vs Ujagar Singh &Ors in Civil Appeal No. 2395 of 2008 dated 09.06.2010. b) Hon’ble Bombay High Court in the case of Vijay VishinMegahni Vs. DCIT 398 ITR 250. c) ITAT Jaipur Bench in the case of Shri Rakesh Tak vs. ITO to 318/JP/2020 dated 28.01.2021.
2.3 Per contra the ld. DR appearing on behalf of the revenue strongly objected to the condonation petition on reasons placed before the bench. The assessee is a company availing the professional services of chartered accountant. Their turnover exceeded the audited limit. Company has it’s own legal professional to deal with such matters. The assessee left with the sufficient time before covid 19 also, but failed to file the appeal even before covid. So, the assessee has no merits on this condonation petition and the appeal should not be entertained as the assessee failed to justify the delay in filling
M/S Jaipur Telecom Pvt. Ltd. the present appeal. The affidavit filed by the director has no support of any evidence to support the contention so raised. In the case law relied upon by the ld. AR of the assessee is having the independent reasons for the delay. The ld. DR has filed the following judgement in support of his contentions objecting the condonation petition filed by the assessee:
We have heard the rival contentions and also persuaded the material available on record made available by both the parties. We have also gone through the various judicial
M/S Jaipur Telecom Pvt. Ltd. precedent cited by both the parties to drive home to their contentions so raised and to plead the delay in filling this appeal by the assessee. The bench noted that there is no dispute about the number of days delay by both the parties that this appeal is filed by the assessee after a delay of almost 932 days. Out of 932 days delay, 619 days on account relaxation on account of covid-19 granted by the apex court and therefore, there is delay of 313 days for which the ld. AR of the assessee submitted that they have reasonable reasons for not filing an appeal in time.
3.1 There is also no dispute that under section 253(5) of the Act, the Tribunal may admit an appeal filed beyond the period of limitation where it is satisfied that there was sufficient cause on the part of the assessee for not presenting the appeal within the prescribed time. Section 253(5) deals the power of the tribunal and the same is reiterated here in below:
Section 253 (5) The Appellate Tribunal may admit an appeal or permit the filing of a memorandum of cross-objections after the expiry of the relevant period referred to in sub-section (3) or sub-section (4), if it is satisfied that there was sufficient cause for not presenting it within that period.
M/S Jaipur Telecom Pvt. Ltd. 3.2 Thus, based on that provision tribunal may admit an appeal filed beyond the period of limitation where it is satisfied that there exists a sufficient cause on the part of the assessee company for not presenting the appeal within the prescribed time. The explanation of the assessee therefore, becomes relevant to determine whether the same reflects sufficient and reasonable case on its part in not presenting the present appeal within the prescribed time. In the present case, the director of the company filed an affidavit stating that the counsel of the assessee company advised that no appeal is required to be filed against impugned order and appeal would be filed against the order passed u/s. 143(3) r.w.s. 263 of the Act.
3.3 The assessee company when the order subsequent to the proceeding under section 263 passed discussed the issue with another counsel, the assessee company director was asked as to why no appeal was filed against the order of PCIT passed under section 263 of the Act and as advised by the said counsel the present appeal lies against the order passed u/s. 263 of the Act.
M/S Jaipur Telecom Pvt. Ltd. 3.4 As there was county wide lockdown and office of the counsel remained closed due to pandemic and the delay is based on that set of advice of the counsel the company could not file the appeal in time and there was delay of about 932 days including the delay on account of covid-19.
3.5 From the decision cited by the ld. AR of the assessee we refer to the decision the Hon'ble Bombay High Court in case of Vijay VishinMeghani vs. DCIT wherein it has referred to the decision in case of Concord of India Insurance Co. Ltd. Vs. Smt. Nirmala Devi &Ors. AIR 1979 SC 1666 wherein the Hon'ble Supreme Court has held that a legal advice tendered by a professional and the litigant acting upon it one way or the other could be a sufficient cause to seek condonation of delay and coupled with the other circumstances and factors for applying liberal principles and then said delay can be condoned. Eventually, an overall view in the larger interest of justice has to be taken. None should be deprived of an adjudication on merits unless the Court of law or the Tribunal/Appellate finds that the litigant has deliberately and intentionally delayed filing of the appeal, that he is careless, negligent and his conduct is lacking in bona fides. The Hon'ble
M/S Jaipur Telecom Pvt. Ltd. High Court thereby condoned the delay of 2984 days in filing the appeals holding that the explanation placed on affidavit was not contested nor we find that from such explanation, can we arrive at the conclusion the assessee was at fault, he intentionally and deliberately delayed the matter and has no bona fide or reasonable explanation for the delay in filing the proceedings and the position is quite otherwise.
3.6 In case of Collector, Land Acquisition vs MST Katiji, the Hon'ble Supreme Court has held that the expression 'Sufficient Cause' employed by the legislature is adequately elastic to enable the Courts to apply the law in a meaningful manner to sub-serves the ends of justice that being the life-purpose of the existence of the institution of Courts. It was further held by the Hon'ble Supreme Court that such liberal approach is adopted on one of the principles that refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. Another principle laid down by the Hon'ble Supreme Court is that when substantial justice and technical considerations are M/S Jaipur Telecom Pvt. Ltd. pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non- deliberate delay. It was also held by the Hon'ble Supreme Court that there is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of male fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. In the instant case, applying the same principles, we find that the assessee has all along acted diligently in safeguarding his legal rights and availing the remedies available to him and has acted and taken action basis the advice and assistance sought from his legal Counsels. He was initially advised not to file appeal by the earlier counsel, however, due to subsequent advice of another counsel the assessee was advice to file the present appeal, we find that there is no culpable negligence or malafide on the part of the assessee in delayed filing of the present appeal and he does not stand to benefit by resorting to such delay. Similar view is taken by the apex court in the case of Improvement Trust, Ludhiana in civil appeal no. 2395 of 2008, wherein the court ruled that in the legal arena, an attempt should always be M/S Jaipur Telecom Pvt. Ltd. made to allow the matter to be contested on merits rather than to throw it on such technalities. The apex court further held that it is the duty of the court to see to it that justice should be done between the parties.
3.7 In light of above discussions and in the entirety of facts and circumstances of the case, we are of the considered view that the assessee in his averments has made out a clear case that there was sufficient cause which being beyond his control, prevented him from filing the present appeal in time before the Tribunal. The assessee has sought advice from his Counsels and was not guilty of negligence on his part and it cannot be said that the delay was due to the negligence and inaction on the part of the assessee, which could have been avoided by the assessee if he had exercised due care and attention. We find that there is no culpable negligence or malafide on the part of the assessee in delayed filing of the present appeal and he does not stand to benefit by resorting to such delay. Therefore, in the factual matrix of the present case, we find that there exists sufficient and reasonable cause for condoning the delay of 932 days in filing the present appeal and as held by the Hon'ble Supreme Court, where substantial justice and technical
M/S Jaipur Telecom Pvt. Ltd. considerations are pitted against each other, the cause of substantial justice deserved to be preferred. Therefore, in exercise of powers under section 253(5) of the Act, we hereby condone the delay of 932 days in filing the present appeal as we are satisfied that there was sufficient cause for not presenting the appeal within the prescribed time and the appeal is hereby admitted for adjudication on merits.
Now, coming to the merits of the case, the assessee has marched this appeal on the following grounds of appeal:
“ 1. On the facts and in the circumstances of the case and in law, Id. PCIT-2, Jaipur has grossly erred in revising the assessment completed u/s 263 of the Income Tax Act, 1961 arbitrarily. 1.1 That Id. PCIT-2, Jaipur has further erred in passing the impugned order u/s 263 of the Income Tax Act, 1961 by ignoring the doctrine of merger as impugned order was already adjudicated by the ld. CIT(A) prior to the initiation of revision proceedings, thus the impugned order deserves to be quashed and be hold as having been passed without the authority of law.
On the facts and in the circumstances of the case and in law Id. PCIT-2, Jaipur has grossly erred in issuing direction for revision of completed assessment for re computing the Book Profit u/s 115JB of the Income Tax Act. Appellant prays that Book profit declared by assessee is in accordance with law and deserves to be accepted as such.
3. That the appellant craves the right to add, delete, amend or abandon any of the grounds of appeal either before or at the time of hearing of appeal.”
M/S Jaipur Telecom Pvt. Ltd.
The facts as culled out from the records is that the assessee company is engaged in the business of lease rentals and real estate development. In this case, return of income was e-filed on 17.11.2014 declaring income of Rs. 1,42,40,840/-. The case was converted from “limited scrutiny to complete scrutiny”. The assessment u/s 143(3) of the IT Act, 1961 was completed by the AO on 28.12.2016 on a total income of Rs. 1,69,76,200/- after making disallowance of Rs. 22,50,530/- on account of excess depreciation on building, LTCG Rs. 3,47,485/- on sale of land and disallowance of Rs. 1,37,346/- on account of excess depreciation on vehicle.
On culmination of the assessment proceeding the ld. PCIT on perusal of the assessment record observed that the assessee company has shown profit on sales of fixed assets of Rs. 2,66,53,550/- under the head extraordinary items in Profit & Loss account ( Notes-18). The ld. PCIT also observed that the assessee company has reduced profit on sale of fixed assets to the extent of Rs. 2,66,53,550/- as per computation of income filed with the return, as a result the MAT u/s. 115JB has also been reduced to that extent. Considering these facts, a show
M/S Jaipur Telecom Pvt. Ltd. cause notice u/s. 263 of the Act was issued to the assessee vide notice no. Pr.CIT-II/ITO(T&J)/JPR/263-264/2018-19/1104 dated 06.12.2019 to explain as to why the assessment order passed by the ACIT, Circle-4, Jaipur may not be revised u/s. 263 and may not be treated as erroneous and prejudicial to the interest of the revenue regarding the taxability of income as per the prevalent law on the issue as the assessment order was passed mechanically without application of mind for the reasons mentioned.
In response the ld. AR of the assessee has filed a detailed submission objecting the action of the PCIT vide written submission dated 07.12.2019. The PCIT being not satisfied with the explanation submitted by the assessee company and given his finding which is reiterated here in below:- “8. From the above facts and circumstances of the case and having regard to the material available on record, the Assessing Officer failed to consider/apply his mind to the information available on record with regard to the calculation of book profit u/s 115JB. Thus the order passed on 28-12- 2016 is without making necessary verification of the income determined under section 115JB and without examination of the claim of MAT and as such the assessment was made without application of mind on the given facts on record. This in turn has resulted in passing of an erroneous order by the Assessing Officer in the case due to non application of mind to relevant material, an incorrect assumption of facts and an incorrect application of mind to law which s prejudicial to the interest of the revenue. 9. Since, the case was converted into complete scrutiny for the purposes of verifying the correctness of return of income, the Assessing Officer was M/S Jaipur Telecom Pvt. Ltd. required to examine and correctly determined the book profit u/s 115JB and charge MAT tax and interest u/s 234B & 234C thereon. In this case, the Assessing Officer failed to correctly charge MAT tax. Thus the order passed U/s 143(3) on 28-12-2016 is erroneous and prejudicial to the interest of the revenue in terms of Judgment of the Hon'ble Supreme Court in the case of Malabar Industrial Limited Vis CIT2431TR wherein it has held as under- "An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind"
Accordingly by the virtue of powers conferred on the undersigned under the provisions of section 263 of the Income Tax Act 1961, I hold that the order under Section 143 (3) of the IT Act dated 28-12-2016 for AY 2014-15 passed by the Assessing Officer is erroneous in so far as it prejudicial to the interest of revenue as the said order has been passed by the Assessing Officer in a routine and perfunctory manner without verification of the computation of book profit us 115JB and MAT as shown by the assessee The order has thus resulted in short levy of taxes. The order of the Assessing Officer is therefore liable to revision under the explanation (2) clause (b) and clause (a) of section 263 of the Income Tax Act. Hence, the assessment order is set aside on the determination of book profit u/s 115JB and calculation of MAT as per law to be redone afresh de novo in the light of the observation made in this order and with direction to the Assessing Officer to verify and examine the claim made by the assessee regarding computation of book profit u/s 115JB and calculation of MAT and finalize the assessment in accordance with the prevailing law to quantify the correct income of the assessee liable to tax for AY 2014-15 after according reasonable opportunity to the assessee.”
Aggrieved from the said order of the PCIT u/s. 263 the assessee company is in appeal before this tribunal on the grounds as reproduced here in above in para 4 above. In support of the grounds so raised by the assessee, the ld. AR of the assessee has submitted a detailed written submission and the same is reiterated here in below:
“Brief facts of the case are that assessee is a private limited company engaged in the business of lease rentals and real estate development. Return of income for the year under consideration was filed on 17.11.2014 declaring
M/S Jaipur Telecom Pvt. Ltd. total income of Rs.1,42,40,840/-. Case of assessee was selected for scrutiny assessment, which was completed vide order dated 28.12.2016 passed u/s 143(3) of the Income Tax Act (hereinafter referred to as “the Act”) at a total income of Rs. 1,69,76,200/- after making following additions: - Disallowance of part depreciation on building Rs.22,50,530/- - Long Term Capital Gain on Sale of Land Rs. 3,47,485/- - Part disallowance of depreciation on Vehicle Rs. 1,37,346/- Rs.27,35,361/- Aggrieved of the additions made in the assessment order, assessee preferred appeal before ld. CIT(A), which proceedings were also concluded vide order dated 31.01.2018. Subsequently, ld. PCIT(adm.) initiated the proceedings u/s 263 by issue of ,show cause notice vide letter No. Pr. CIT-II/ITO/(T & J)/JPR/263- 264/2018-19/1104 dated 06.12.2018. In response to such notice, assessee furnished relevant details and Revision proceedings were concluded vide order dated 08.03.2019, whereby order passed u/s 143(3) was held as erroneous and prejudicial to the interest of the revenue and was set aside with the direction to re-determine the book profits u/s 115JB and for calculation of MAT by including the profit from sale of asset into it. Aggrieved of the order so passed by ld. PCIT, assessee has preferred present appeal before the hon’ble bench. Grounds of Appeal No. 1, 1.1 and 2: In grounds of appeal No.1 & 1.1, assessee has challenged the action of ld. PCIT in revising the order passed by ld.AO u/s 143(3) of the Act, by ignoring the doctrine of merger, as entire assessment order was challenged in appeal, which was already decided vide order dated 31.01.2018, i.e. prior to initiation of revision proceedings. In ground of appeal No. 2, assessee has challenged the action of ld. PCIT in issuing direction for revision of completed assessment for re computing of Book profit u/s 115JB of the Income Tax Act. Since both the grounds of appeal are interrelated, the same are canvassed together for the sake of convenience. At the outset brief facts of the case are submitted as under: The assesse company was engaged in business of lease rentals. During the year under consideration, assesse sold a building out of its fixed assets for a consideration of Rs.3,35,00,000/-, on which profit was earned to tune of Rs. 2,66,53,550/-. Since, sale of asset was not a part of regular business activities, profit earned on same was reported as “Extraordinary item” under the Profit & Loss
M/S Jaipur Telecom Pvt. Ltd. account (APB 21, 23). Accordingly, sum of Rs.2,66,53,550/- was reduced while computing total income as well as book profits. In scrutiny assessment, such profit on sale of asset was duly examined by ld.AO and certain additions/disallowances were made while determining Capital Gain earned on such sale. The ld. AO also made adjustments in block of assets for building after examining the sale value of the asset sold on which profit has been earned. Assessee preferred appeal before ld. CIT(A) against order passed by ld.AO u/s 143(3), (which has been directed to be revised by ld. PCIT) and stood decided vide order dated 31.01.2018 (i.e. even prior to initiation of Revision proceedings by ld. PCIT). Ld. PCIT for the first time issued show cause notice u/s 263 on 06.12.2018 seeking explanation as to why assessment order passed u/s 143(3) may not be treated as erroneous insofar as it is prejudicial to the interest of the revenue. Prior to that for a long period of almost two years nothing has been heard from the office of the ld. PCIT. In this regard, at the outset it is submitted that ld.AO though had not elaborately computed book profits in Assessment Order, however had mentioned MAT income u/s 115JB in Income Tax Computation Sheet issued alongwith Assessment order, thus it is not the case that issue of MAT has not been examined at all. Moreover, basically Revision proceedings were initiated for inclusion of profit on sale of land and building under Book profits whereas this issue of quantum of profit related to land and quantum of profit related to building was already before ld. CIT(A), and no amendments whatsoever were made by ld. CIT(A) in order passed by ld.AO in this regard. It is submitted that by virtue of clause (c) of explanation to section 263(1), powers conferred vide section 263 cannot be exercised in respect of part of order that has been subject matter of adjudication by ld.CIT(A). In the instant case also, issue of profit on sale of land and building (which has been proposed to be not reduced while computing book profit) was subject to appeal and has been thus also examined by ld.CIT(A). Your honours would appreciate that after passing of order dated 31.01.2018 by ld.CIT(A), order passed u/s 143(3) got merged with the order of CIT(A), i.e. authority superior in hierarchy and therefore order passed u/s 263 on related issue already before ld. CIT(A) is bad in law. Hon’ble High Court of Bombay in CIT v. TejajiFarasram Kharawalla (1953 SCC OnLine Bom 28) has held that: … It is a well-established principle of law that when an appeal is provided from a decision of a tribunal and the appeal court after hearing the appeal passes an order, the order of the original court ceases to exist and is merged in the order of the appeal court, and although the appeal court may merely confirm the order of the trial court, the order that stands and is operative is not the order of the trial court but the order of the appeal court.
In CIT v. AmritlalBhogilal& Co. 1959 SCR 713, another decision which touches upon the doctrine of merger, the Supreme Court observed: “10. There can be no doubt that, if an appeal is provided against an order passed by a tribunal, the decision of the appellate authority is the operative decision in law. If the appellate authority modifies or reverses the decision of the Tribunal, it is obvious that it is the appellate decision that is effective and can be enforced. In law the position would be just the same even if the appellate decision merely confirms the decision of the Tribunal. As a result of the confirmation or affirmance of the decision of the tribunal by the appellate authority, the original decision merges in the appellate decision and it is the appellate decision alone which subsists and is operative and capable of enforcement….” In Gojer Bros. (P) Ltd. v. Ratan Lal Singh(1974) 2 SCC 453 the Supreme Court held that ‘’there cannot be, at the same time, more than one operative order governing the same subject matter’’. Court also reiterated that insofar as the doctrine of merger was concerned there could be no distinction in terms of application of the doctrine of merger between an appellate judgment simpliciter dismissing an appeal, and an appellate judgment modifying or reversing the decree of the lower court. Further since the entire order of assessment comes up for review before the appellate authority and that authority is quite competent to deal with and revise all the matters therein whether or not contested by either party and it can, if need be, rewrite the order. The Explanation below section 251 of the Income-tax Act specifically empowers the appellate authority to decide any matter arising in the proceedings for assessment though it may not be raised in the appeal. Even if there is no such a provision in the statute, the decision in Shapoorji Pallonji Mistry v. CIT [1958] 34 ITR 342 (Bom.) affirmed in CIT v. Shapoorji Pallonji Mistry [1962] 44 ITR 891 (SC) that an appellate authority can deal with any matter covered by the order appealed against, irrespective of the fact whether that matter is raised in appeal or not. If it does not deal or revise any of the points within its jurisdiction, it should be assumed that the appellate authority has affirmed the findings on those points and has not thought it necessary to interfere with them. Hence, the entire order of assessment should be deemed to merge in the appellate order subject only to any other enabling statutory provision, as in the Explanation below section 251 of the Income-tax Act mentioned above. J.K. Synthetics v. Addl. CIT [1976] 105 ITR 344, (Alld) upholds this view. The ratio of the decision in Tel Utpadak Kendra's case [Tel Utpadak Kendra v. Dy. CST [1981] 48 STC 248.] is also that when an appeal is filed, the appellate authority is seized of the entire order and not only that part of it which is challenged before it.
M/S Jaipur Telecom Pvt. Ltd. 231 ITR 50 CIT vs. Shri Arbuda Mills Ltd. (SC): Revision – Doctrine of merger – Powers of Commissioner – Amendment of section 263(1) by Finance Act, 1989, with retrospective effect from 01.06.88 – Effect – Powers of Commissioner of Income Tax shall extend and shall be deemed to have extended to matters not considered and decided in appeal filed by assessee to CIT (Appeals) – Income Tax Act, 1961, sec. 263(1), Expln. cl. (c) 216 ITR 833 CIT vs. Saraf Bandhu Pvt. Ltd. (Bom.) Revision – Appeal – Appeal from assessment order – Original order merges in appellate order – Original order cannot be revised by Commissioner to Income Tax – Income Tax Act, 1961, s. 263. 138 ITR 836 Oil India Ltd. vs. CIT (Cal.) Where an appeal is preferred before the AAC and a subject is particularly raised, the Commissioner cannot revise such an order taking into account an aspect not dealt with by the AAC. In view of above, it is submitted that by virtue of Doctrine of Merger, Revision proceedings initiated and completed by ld. PCIT are not in accordance with law and deserves to be set aside. Without prejudice to above and in the alternative: It is submitted that ld. PCIT has issued direction for inclusion of profit on sale of land and building in books for the purpose of calculation of MAT. Your honours would appreciate that the provisions contained in section 115JB are alternative taxation mechanism and comes into play in the event, tax as per normal provisions of the Act is lower than tax on Book profits. Also, tax credit of such excess tax paid is available to the assesse in the years it is liable to pay tax as per normal provisions of the Act. In other words, mechanism of payment of taxes under MAT would be tax neutral exercise in the case of assessee as assessee would get tax credit of a taxes payable amounting to Rs. 23,01,380/- u/s 115JB in A.Y. 2014-15 (though not admitted) in immediately two succeeding years itself i.e. in A.Y. 2015-16 (Rs. 21,16,283/-) and in A.Y. 2016-17 (balance Rs. 1,85,097/-) as per chart enclosed. At this juncture, chronology of events is tabulated for the sake of convenience: Assessment Date Particulars Last date of Year filing Revised Return 2014-15 17.11.2014 Return filed u/s - 139(1) declaring total income of Rs.1,42,40,840/- under normal provisions of the Act 28.12.2016 Assessment
M/S Jaipur Telecom Pvt. Ltd. Completed u/s 143(3) 31.01.2018 Appeal decided by ld. CIT(A) 06.12.2018 Notice issued by ld.PCIT 08.03.2019 Order passed by ld.PCIT 2015-16 25.09.2015 Return filed 31.03.2017 2016-17 12.10.2016 Return filed 31.03.2018 From perusal of above, it is apparent that even at the time of initiation of Revision proceedings by ld.PCIT, last date of revising Returns of Income for A.Y. 2015-16 as well as A.Y. 2016-17 had already expired, therefore no remedy was left with assessee. In any case, there is no loss to revenue due to reduction of profit on sale of land for computation of MAT and accordingly, it is prayed that order u/s 263 be set-aside.”
The ld. AR of the assessee in addition the above written submission argued that the case of the assessee was for limited scrutiny and was converted into a complete scrutiny. The issue of capital gain has extensively argued and analyzed by the ld. AO in the assessment proceedings and out of the issue so examined the separate addition on the issue were also made as it is evident from the assessment order. The ld. AO while verifying the issue has made an addition to excess depreciation on the building was disallowed as claimed by the assessee when computing the capital gain and thus the long term capital gain was also increased while making the assessment. The M/S Jaipur Telecom Pvt. Ltd. assessee has preferred an appeal before the commissioner of income tax against that order of the assessment and the Commissioner of Income tax has already dismissed the appeal of the assessee. Thus, the order of the assessment made merges with the order of the Commissioner of Income Tax and thus that order cannot be subjected to revision u/s. 263 of the Act. To support this view the ld.AR of the assessee relied on the decision of Calcutta High Court in the case of Oil India Ltd. Vs. Commissioner of Income Tax (138 ITR 836 cal) and Bombay High Court in the case of CIT Vs. Saraf Bandhu Private Limited (216 ITR 833 Bom). Based on that aspect the revision order of the PCIT is against the law and judicial precedent available.
9.1 As regards the issue of MAT calculation on merits the ld. AR of the assessee demonstrated from the computation sheet issued by the assessing officer wherein, he has separately determined MAT liability after completing the assessment. Thus, the issue now that the PCIT is raising is nothing but a change of opinion and thereby PCIT is reviewing the order of the assessing officer and the law does not permit the review of M/S Jaipur Telecom Pvt. Ltd. an order by the PCIT. Thus, the PCIT failed to established that the order is erroneous and prejudicial to the interest revenue.
9.2 The ld. AR of the assessee also submitted alternatively that if the MAT liability in the opinion of the PCIT being erroneous is reworked there is no loss to the revenue as the assessee would be getting credit in the subsequent year as the subsequent year liability is in excess and if the tax so paid will not allowed to be carried over in that year and the time limit to revise those orders u/s. 154 is over and based on the fact this exercise would be revenue neutral also as assessee the assessee has to pay the tax in the subsequent years.Therefore, in fact there is no loss to the revenue in fact.
10. Per contra, the ld. DR relied upon the order of the PCIT and relied upon the following decisions to support the contentions so raised by him before us:-
The ld. DR in addition the above decision submitted that the ld. PCIT has passed speaking order considering the contentions of the assessee and the ld. AR of the assessee in his alternative submission accept that the assessee is liable to MAT. The ld. DR quoting the order of the PCIT in para 3.3 wherein the PCIT has observed that there is no inquiry appears to have been made, even the report u/s. 115JB in form no. 29 is not on record. It has thus not been examined by the AO. Based on these submissions the ld. DR supported the order of the PCIT on merits.
We have heard the rival contentions, perused the material on record and orders of the lower authorities. We have also gone through the various decisions cited by both the parties to drive home to the contentions raised by the rival parties. Apropos ground no. 3 the bench observed that the same is general in nature and therefore, it does not M/S Jaipur Telecom Pvt. Ltd. require any separate adjudication. The bench also observed that vide ground no.1, 1.1 and 2 the assessee has challenged the action of the Principal Commissioner of Income Tax-2, Jaipur and the grounds so raised are inter connected and relates on the issue of assessee liability on MAT. The bench also observed that the case of the assessee was converted to a complete scrutiny from limited scrutiny. In the assessment proceeding the ld. AO touched upon the various aspects issue of capital gain and has made adjustments to the returned income. Against the said order of the assessing officer the assessee has preferred an appeal before the Commissioner of Income Tax, Appeals- 2, Jaipur and the appeal of the assessee was dismissed vide order dated 31.01.2018. Whereas the order in question was passed on 08.03.2019. Therefore, the order of the Commissioner of Income Tax, Appeals-2 order mergers with the order of the Assessing Officer. The Bombay High Court has also held in the case of SarafBandhu Private Limited (supra), that once the original order goes in appeal and the appeal is decided, the original order ceases to exist since it merged in the appellate order and hence the original order cannot be revised under the revisional jurisdiction of the Commissioner u/s 263 of the Act. It is relevant to state that the ld. CIT(A) passed the order on 31.01.2018 that is much before the notice u/s 263 was issued by the M/S Jaipur Telecom Pvt. Ltd. ld. PCIT. The finding of the Bombay High Court in the case of SarafBandhu Private Limited (supra) is reproduced here in below: We notice catena of decisions rendered by this Court as well as the Supreme Court taking a view that once the original order goes in appeal and the appeal is decided, the original order ceases to exist since it merges in the appellate order and, hence, the original order cannot be revised under revisional jurisdiction- CIT v. P. Muncherji& Co.[1987] 167 ITR 671 (Bom.), Ritz Ltd. v. Union of India [1990] 184 ITR 599 (Bom.), CIT v. International Computers Indian Manufacture Ltd. [1991] 187 ITR 580 (Bom.), Tel Utpadak Kendra v. Dy. CST [1981] 48 STC 248 (SC) and Khandelwal Ferro Alloys Ltd v. State of Maharashtra [1991] 80 STC 42 (Bom.).
11.1 Similar view has been taken by the Honourable Calcutta High Court in the case of Oil India Limited (Supra) where in the court held that the order of the ITO having been merged in the order of the AAC on the question of allowability of depreciation, the Commissioner has no jurisdiction to pass an order of revision u/s. 263 of the Act.
11.2 The decision cited by the ld. DR are on different facts as compared the facts of the case and the ld. DR did not brought any contrary judgment as cited by the ld. AR of the assessee on the issue saying that when the appeal order received the order of the AO mergers with the order of the CIT(A) and therefore, the ld. PCIT has no power to review that order of the Commissioner of Income Tax, Appeals.
M/S Jaipur Telecom Pvt. Ltd. 11.3 Based on these observations and considering the facts and circumstances of the case the order of the PCIT passed u/s. 263 of the Act lacks jurisdiction and thus bad in law and the same is hereby quashed.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on15/03/2023.