AGRO SERVICE SYNDICATE,KOLKATA vs ITO, WARD-29(3)), KOLKATA, KOLKATA

Income Tax Appellate Tribunal, KOLKATA BENCH “B” KOLKATA

Before: Shri N.V.Vasudevan & Shri Waseem Ahmed

आदेश/O R D E R

PER Waseem Ahmed, Accountant Member:-

This appeal by the assessee is arising out of order of Commissioner of Income Tax (Appeals)-XVI, Kolkata in appeal No.74/CIT(A)-XVI/10-11/Kol dated 21.02.2011. Order u/s. 154/264 was framed by ITO(Tech)-10, Kolkata of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 19.07.2011for assessment year 2005-06.

The issue raised by the assessee in the present appeal is that the Ld.CIT has erred in passing the rectification order u/s 154 of the Act.

Briefly stated facts are that the assessee is a partnership firm and is into the business of pesticides. The firm was assessed u/s 143(3) by the AO for

ITA No.1421/Kol/2012 A.Y. 2005-06 Agro Service Syndicate v. ITO Wd-29(3) Kol. Page 2 the assessment year 2005-06 for an amount of Rs. 6,10,300/- and the same assessment order was rectified u/s 154 of the Act wherein the income was enhanced to an amount of Rs. 6,23,420/-. Subsequently the notice was issued under section 148 of the Act and assessment was framed accordingly u/s 147 of the Act by making an addition of Rs. 57,20,682/- to the income of the assessee and the total income was enhanced to an amount of Rs. 63,44,100/-

The assessee filed an application to the Ld. CIT for revision u/s 264 of the Act on dated 12-12-2011against the assessment order passed u/s 143(3)r.w.s 154/147 of the Act. The Ld.CIT has deleted the addition of Rs. 57,20,682/- by passing a revision order u/s 264 of the Act on dated 30-12- 2011. However, the CIT finds from the record and order of section 264 a mistake apparent from the records in so far the order u/s 264 of the Act was passed in contravention of the provisions of section 264(4)© of the Act i.e. order passed by the AO was subject to an appeal to CIT(A). The CIT issued a show notice to the assessee which is reproduced as under:- “Please refer to your application for revision u/s 264 of the Income Tax Act, 1961, filed on 12th December, 2010, against order u/s. 143(3)/154/147 passed by ITO, Ward-29(3), Kolkata on 21-12-2010. In this case an order u/s. 254 of the Income Tax Act, 1961 was passed by the CIT, Kolkata-X, Kolkata on 30- 12-2011 allowing your petition. In this order the CIT had admitted your petition u/s. 264 by giving the following finding: ‘Further, there was no appeal pending against the impugned reassessment order as on the date of filling this application.’ However, on going through the records it is noticed that the above finding is erroneous as you had filed an appeal against the impugned reassessment order before the Ld. CIT(A)-XVI, Kolkata vide appeal No. 74/CIT(A)- XVI/Ward-29(3)/10-11 which was not only pending on the date of filing the revision application but was also pending on the date of order made u/s. 264 of the Income-Tax Act, i.e. 30-12-2011. From the records it is also seen that you had filed a letter dated 13th December, 2011 to the ld CIT(A)-VI, Kol stating that you hereby withdraw the above appeal. However, no order has been passed by the CIT(A) before the disposal of application u/s. 254. As per the provision of Section 264(4)© of the Income-Tax Act, the Commissioner shall not revise any order under that Section where the order has been made, the subject of an appeal to the Commissioner of Income-Tax (Appeals). As per CBDT Circular No. 367 dated 26th July, 1983, an order cannot be said to have been made ‘subject of an appeal’ where the appeals

ITA No.1421/Kol/2012 A.Y. 2005-06 Agro Service Syndicate v. ITO Wd-29(3) Kol. Page 3 was withdrawn by the assessee and it is dismissed as such by the CIT(A) without passing an order on merits. In the instant case no such order has been passed by the Ld. CIT(A)-XVI, Kol before the date of passing of order u/s. 264. Therefore, the assessment order against which the application u/s. 264 was made was still the subject of an appeal before the Commissioner (Appeals)-XVI, Kol and as such the Commissioner should not have revised order u/s. 264 as per the provisions of Section 264(4)(c). This being a mistake apparent from records is proposed to be rectified u/s. 154 of the Income Tax Act and your application u/s. 264 against the impugned assessment order is proposed to be dismissed as not maintainable in law. You are given an opportunity to show cause why the proposed action should not be taken by appearing before me on the date specified in the notice u/s. 154 of the Income Tax Act dated 03-04-2012, enclosed herewith.

The A/R of the assessee demonstrated before the Ld.CIT that the appeal filed by the assessee has been withdrawn by letter dated 13-12-2011 besides assessee has submitted various case laws and CBDT Circular in support of its claim. However the Ld.CIT has rejected the plea of the assessee and held that the order of the AO dated 21.12.2010 u/s 143(3)/154/147 of the Act stand correct. Aggrieved assessee is in appeal before us against the order of Ld. CIT u/s 154 of the Act on the following grounds of appeal:- “1. For the Learned CIT X/Kol erred in initiating proceedings u/s. 154 to rectify the order u/s. 264 dated 30.12.11 passed by his predecessor in office CIT X.

For the fact that the alleged mistake was not apparent from the records but interpreted as such by the CIT Sri Subrat Mishra after long arguments, debates and interpretation, the said order of rectification passed u/s. 154/264 was wrong and should be cancelled.

For the Learned CIT X erred in holding that on the date of passing the Order u/s. 264 by the CIT X on 30,.12.2011, an appeal by the assessee was pending before the CIT(A) XVI ignoring the fact that the appeal was dismissed by the CIT(A) XVI on 13.12.2012 as appears from the noting in Order sheet of the appeal proceedings.”

Mr.V.N. Purahit, Ld. AR appeared on behalf of assessee and Mr. Niloy Basan Som, Ld. DR appeared on behalf of Revenue

ITA No.1421/Kol/2012 A.Y. 2005-06 Agro Service Syndicate v. ITO Wd-29(3) Kol. Page 4 5. Before us Ld. AR submitted paper book which contains pages from no. 1 to pages 24 and submitted that in view of the CBDT Circular the order passed by the AO cannot be said to have been made “subject matter of appeal” if the appeal has been disposed of by the Ld.CIT(A) without passing an order u/s 251(1) on merits besides this Ld AR has submitted the case laws in support of his claim as mentioned under : 1. Chiranjilal Daga v. CIT & Anr. (1978) 113 ITR 363 (Mad) 2. Radhey Shyam Subdar Mal v. CIT (1984) 146 ITR 374(All) 3. Lala Rajeshwar Pershad v. CIT (1955) 28 ITR 842 (P&H) 4. CIT v. United Mercantile Co. (P) Ltd. (1986) 158 ITR 41 (Raj)

The Ld DR vehemently supported the orders of the authorities below.

We have heard the rival submissions of both the parties and perused the materials available on record. As per section 264 of the Act the assessee can seek relief against the order of AO by making an application to the Ld. CIT within the prescribed time. The application for relief to the Ld.CIT can be filed subject to the fulfillment of certain conditions as enumerated in the clause © of sub section (4) of section 264 of the Act. Clause © reads as under:- 264. (4) The [Principal Commissioner or] Commissioner shall not revise any order under this section in the following cases- (a) …. (b)… … © where the order has been made the subject of an appeal [to the Commissioner (Appeals) or] to the Appellant Tribunal.”

However the CBDT in term of its Circular No. 367 dated 26.7.1983 has described the situations where order can be said to have been made “subject of an appeal” in terms of clause © of sub section (4) 1. Section 264(4)© re-produced as under:- “1. Section 264(4)© provides that the Commissioner shall not revise any order under that section where the order has been made the subject of an appeal to the Commissioner (Appeals) or to the Appellant Tribunal. A doubt has been raised whether in the following situations the order can be said to have been made “subject of an appeal”:

ITA No.1421/Kol/2012 A.Y. 2005-06 Agro Service Syndicate v. ITO Wd-29(3) Kol. Page 5 (i) Where the appeal was withdrawn by the assessee and it was dismissed as such; (ii) Where the appeal was dismissed on the ground that the appeal was incompetent; (iii) Where the appeal was dismissed on ground of limitation.

The Board are of the view that the order cannot be said to have been made “subject of an appeal” if the appeal has been disposed of by the Commissioner (Appeals) or the Appellant Tribunal without passing on order under section 251(1) or 254(1) on merits. Circular : No. 367 [F.No.273/21/80ITJ], dated 26-7-1983” In the present case Ld. CIT(A) has passed the clear order dated 03.09.2012 stating that the assessee’s appeal is dismissed as withdrawn for statistical purpose. However the crux of the order of CIT(A) is reproduced below for the sake of clarity. “3. Mr. A.K. Dutta, CA & AR submitted a letter on 13.12.2011 for withdrawal of appeal and submitted as follows:- ‘Further to our letter dt. 9th December, 2011, deposited in your office today, we state that we do hereby withdraw the above appeal.’

Ld. Predecessor CIT(A)-IV vide Order Sheet dated 13.12.2011 observed on the Order Sheet as follows:- ‘Mark as disposal in view of application for withdraw filed by appellant.’ From the aforesaid discussion, we observe that the application filed by the assessee for the relief under section 264 of the Act before Ld. CIT was accepted and the same was adjudicated, granting the relief to the assessee, but the same relief was rejected by passing an order under section 154 on the ground that the assessee for the same case has also filed an appeal to the Ld.CIT(A). The Ld.CIT also found that the appeal before Ld.CIT(A) was pending not only at the time of filing the application but also at the time of order under section 264 of the Act. The provisions of section 264(4)(c) of the Act prohibits the Ld. CIT to pass the revision order if appeal is pending. However it was also observed in terms of CBDT Circular that an order cannot be subject of an appeal if appeal has not been disposed on merits. In the

ITA No.1421/Kol/2012 A.Y. 2005-06 Agro Service Syndicate v. ITO Wd-29(3) Kol. Page 6 present case, appeal of assessee has never been disposed on merits rather the appeal was withdrawn by the assessee vide later dated 9th December 2011. However the Ld. CIT(A) passed the order of the appeal dismissal on dated 03-09-2012, and by that time the application filed for relief to the Ld. CIT under section 264 of the Act was adjudicated and consequently the impugned rectification order u/s.154 of the Act was passed. The fact however remains that the appeal of the Assessee has not been disposed on merits. In view of this, there was no bar to the CIT in exercising jurisdiction u/s.264 of the Act. The facts clearly show that the embargo imposed in Sec.264 of the Act that there should be no appeal pending before CIT(A) on the issues raised in the application u/s.264 of the Act is not applicable in the present case. We are therefore of the view that the order u/s.154 of the Act is liable to be cancelled and the same is hereby cancelled. The appeal of the Assessee is allowed.

In the result, assessee’s appeal is allowed for statistical purpose. Order pronounced in the open court 07/10/2015

Sd/- Sd/- (N.V.Vasudevan) (Waseem Ahmed) (Judicial Member) (Accountant Member) Kolkata, *Dkp �दनांकः- 07/10/2015 कोलकाता । आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. अपीलाथ� / Appellant-Agro Service Syndicate, C/O A.K.Dutta& Co. Room No.207 2, Church Lane, Kol-01 2. ��यथ� / Respondent-ITO Wd-29(3) Aaykar Bhavan (Dakshin), 2 Gariahat Rd,(S), Kol-68 3. संबं�धत आयकर आयु�त/ Concerned CIT Kolkata 4.आयकर आयु�त- अपील / CIT (A) Kolkata 5. �वभागीय ��त�न�ध,आयकर अपील�य अ�धकरण,कोलकाता/ DR, ITAT, Kolkata 6. गाड� फाइल / Guard file. By order/आदेश से, /True Copy/ उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, कोलकाता ।

AGRO SERVICE SYNDICATE,KOLKATA vs. ITO, WARD-29(3)), KOLKATA, KOLKATA