By TIOL News Service

AHEMDABAD, FEB 28, 2018: THE issue is - Whether revisional authority can exercise powers u/s 264 even during pendency of appeal pertaining to same subject matter, in case the litigant had simultaneously waived his right to appeal and conveyed the same to appellate authority. YES IS THE VERDICT.

Facts of the case:

The Assessee is a proprietor of a sales agency. Returns filed by him for A.Y 2011-12 was taken in scrutiny and the AO passed order of assessment u/s 143(3). Subsequently, he initiated penalty proceedings u/s 271(1)(c) for concealment and for furnishing of inaccurate particulars. Despite assessee's objections, the AO imposed penalty of Rs.10,00,399/- under his order. Aggrieved, the assessee filed appeal against such order of penalty before the CIT(A). Subsequently however, the assessee filed a Revision Petition against the order of penalty passed by AO before the CIT. On same day, he also made a communication to the CIT(A) before whom his appeal was pending, in which, he conveyed that he would withdraw the appeal subject to the condition that stay petition would be allowed by the CIT Gandhinagar in favour of assessee. The Commissioner allowed the assessee's revision petition and deleted the penalty levied by AO. By that time, though the CIT(A) had not passed any order on the assessee's request for withdrawal of appeal, such appeal should have become infructuous. This was brought to the notice of CIT(A) by the assessee, despite which, he proceeded to decide the appeal on merits and dismissed the same by passing an order. The assessee thereupon approached the Tribunal, which had set aside the same order of penalty observing that AO had completely ignored that the long term capital gain had been included in the gross income of assessee and thus the assessee did disclose the capital gain in his return, hence this was not a fit case for penalty.

High Court held that,

++ it is seen that the main ground on which this petition has been filed by AO is that the Commissioner could not have exercised powers u/s 264 when appeal of assessee pertaining to the same subject matter was pending before the CIT(A). This Court is not sure under what circumstances, the AO was instructed to file the present petition. Whether he was acting under the instructions of the competent authority or the panel vested with such powers is not known. For the present case, it is sufficient to recall that the assessee while filing petition u/s 264 had simultaneously conveyed to the CIT(A) that he does not want to pursue the appeal. Thus, his intention was very clear and which was to pursue the revision petition and not the appeal. He was thus, not desirous of riding on two horses simultaneously;

++ coming to Section 264(4), it is to be noted that this provision imposes restrictions on the Commissioner to exercise his revisional powers in cases, where the period of limitation for filing appeal has not expired and the assessee has not waived the right of appeal. This is essentially to ensure that at the hands of the same assessee, a single issue does not receive consideration at the hands of two separate and independent authorities, one exercising appellate jurisdiction and the other revisional jurisdiction. Applying this principle to the facts on hands, it is found that the assessee had clearly made a choice to persuade the CIT to exercise his revisional powers u/s 264 and not pursue his appeal before the CIT(A). The revisional authority therefore correctly proceeded to decide the revision petition of assessee and on facts correctly allowed the same. The assessee had made full disclosure of the capital gain tax and there was no failure on his part to give necessary details thereof;

++ it is also to be noted that the CIT(A) even after the revisional authority had set aside the order of penalty, proceeded to decide the appeal of assessee. Even if the CIT(A) was personally of the opinion that the revisional order should not have been passed, once such order was passed, he must abide by the discipline of a quasijudicial structure and respect the order as it stands. Unless the order of the revisional authority was set aside by competent authority or Court, its effect must be allowed to be felt on record with full force. The only effect of the order was that the order of penalty passed by AP does not survive. If the penalty order was thus set aside by revisional authority, it was thereafter not open for the appellate Commissioner to still examine the merits of such an order and declare his legal opinion on the same.

(See 2018-TIOL-357-HC-AHM-IT)