By TIOL News Service

AHMEDABAD, MAY 17, 2018: THE ISSUE IS - Whether if revision petition stands decided, it is not open to the CIT(A) to decide the appeal on merit. YES IS THE VERDICT.

Facts of the case:

The assessee is an individual and had filed return for relevant AY. The return was taken in scrutiny. The AO completed assessment by making addition for unexplained cash credit. Against such order of assessment, the assessee could either file appeal or a revision petition but could not pursue both. The assessee initially chose the appeal route. With effect from 01.03.2016, rule 45 of the Income Tax Rules, was amended, making it compulsory to file an appeal before the Appellate Commissioner electronically. The assessee however, manually filed appeal against the order of assessment on 15.04.2016 before the CIT(A). After filing appeal, the assessee filed a revision petition before the CIT challenging the very same order of assessment. The CIT noted that it was confirmed from the office of CIT(A) that there was no appeal filed by the assessee in that office against the impugned order and therefore, he had the jurisdiction to hear the revision petition. CIT noted that addition of almost Rs. 20 crores being a serious matter, require a reconsideration. The assessee himself had requested for a special audit. The CIT therefore while disposing of the revision petition, remanded the proceedings back to the AO to frame a fresh assessment after carrying out special audit of the accounts of the assessee.

On 29.09.2016, the CIT(A) asked assessee to furnish the appeal in the prescribed format electronically within seven days of the receipt of the letter so that the appeal can be proceeded further for disposal. The assessee conveyed that after filing the manual appeal, he had taken opinion from the professional and preferred to pursue the Revision Petition available u/s 264 of the Act. Such Revision Petition had already been disposed of by an order dated 07.07.2016. Because of this he had not filed E -appeal. He requested that the manual appeal be treated as no appeal having been filed. But CIT(A) ignored such pleas of the assessee and proceeded to dispose of the manual appeal of the assessee and dismissed the same. The department through the AO had therefore filed petition challenging the revisional order dated 07.07.2016 passed by the CIT on grounds that when the appeal filed by the assessee was pending before the CIT(A), the revisional jurisdiction could not have been exercised. The second ground concerns the merits of the revisional order.

High Court held that,

++ CIT did not committed any error in entertaining the assessee's revision petition. In fact, it was the Commissioner (A) who was clearly in error in dealing with the assessee's appeal having once taken a stand that if no electronic appeal is presented, the manually filed appeal would be treated as nonest and as if no appeal was ever filed. The assessee had also pointed out to him that he had filed the Revision Petition which was already disposed of. Once the Revision Petition was filed and decided, it was not open to the Commissioner (Appeals) to decide the appeal on the same ground. In fact once the Revision Petition was allowed and assessment order set aside, no order survived for him to confirm in the appeal;

++ the Commissioner has committed a serious error in passing the impugned order dated 07.07.2016. Firstly, the Commissioner noted that the assessee failed to respond to series of notices issued by the AO during the assessment proceedings. Even when at long last, the Chartered Accountant of the assessee appeared before the Assessing Officer, in the opinion of the Commissioner himself several issues remained totally unexplained. These issues pertained to opening cash balance of Rs.1.81 crores (rounded off). Unsecured loans of Rs.2.42 crores (rounded off) with respect to which, the assessee had not satisfactorily discharged the onus of establishing identity, capacity of the creditors or the genuineness of the transactions, as also clarification regarding Rs.13.66 crores found in the suspense account. If this was the opinion of the Commissioner, he could not have simply ignored such materials on record on the ground that addition of a sum of Rs.20 crores being a serious matter, the same should be examined again. It is not the quantum of additions but the justification thereof which would be germane for deciding to exercise revisional powers. Equally, second ground pressed by the Commissioner in service was unsustainable. Section 142(2A) of the Act empowers the AO to call for special audit if at any stage of the assessment proceedings, having regard to the nature and complexity of the accounts, volume of the accounts, doubts about correctness of the accounts, multiplicity of the transactions in the accounts or specialized nature of business activity of the assessee and in the interest of the revenue, is of the opinion that it is necessary to do so. This could be done only with the previous approval of the concerned authority. The powers to be exercised by the AO under the said provision thus are meant for specific purposes. Such special audit can be called for only with the prior approval of the concerned authority. It is certainly not an option or a choice which an assessee can exercise or insist upon. The Commissioner of Income Tax therefore gave undue importance to the assessee requesting for such special audit;

++ both the grounds for interfering with the order of assessment and to remand the proceedings for fresh assessment before the assessing authority after obtaining special audit report are unsustainable.The impugned order dated 07.07.2016 is set aside. Though not challenged still it was declared that the order dated 21.09.2017 passed by the CIT(A) is unsustainable and inoperative. The CIT(A) had no power to dismiss an appeal which was as per his own stand defective and which in any case, the assessee conveyed that he does not wish to pursue.

(See 2018-TIOL-923-HC-AHM-IT)