PRAKASHBHAI GORDHANBHAI TOGADIYA, RAJKOT V. The Principal Commissioner of Income-tax, Rajkot-1, RAJKOT

ITA 121/RJT/2022

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 1468 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 28-04-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 17-04-2022
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Revision of order; Depreciation; Transfer pricing; Retrospective amendment; Question of law; Prejudicial to interest
• Section: 263; 143(3); 142(1); 250; 251; 264; 246A; 113; 13; 153

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE DR. A.L.SAINI, AM And DINESH MOHAN SINHA, JM आयकरअपीलसं./ITA No.121/RJT/2022 ( नधा रणवष / Assessment Year: (2017-18) (Hybrid Hearing) PrakashbhaiGordhanbhaiTogadiya, Ronak, Near ISCON Mall, 1 – Raghunath Park, Nana Mava Road, Rajkot – 360005. Vs. The Pr. CIT – 1, Rajkot थायीलेखासं./जीआइआरसं./PAN/GIR No.: ADYPT1331N (Appellant) (Respondent) Appellant by : Shri Rajendra Singhal, AR Respondent by : Shri Shramdeep Sinha, CIT-DR Date of Hearing : 29/04/2024 Date of Pronouncement : 25/06/2024 आदेश / O R D E R PER DR. A. L. SAINI, AM: By way of this appeal, the assessee has challenged the correctness of the order passed by the Learned Principal Commissioner of Income Tax - 1, Rajkot [in short ‘the Ld. PCIT’], dated 17.02.2022, under section 263 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’], for the Assessment Year (AY) 2017-18. 2. The grounds of appeal raised by the assessee are as follows: “1. The grounds of appeal mentioned hereunder are without prejudice to one another. As appeal is against the validity of revisional jurisdiction of Pr. CIT. 2. The order passed by Pr. Commissioner of Income-tax, Rajkot-1 [hereinafter referred as to “PCIT”] is bad in law, invalid, and requires to be quashed, the same may kindly be quashed, as appeal is against the validity of revisional jurisdiction of Pr. CIT. Page | 2 ITA No.121/RJT/2022 Prakashbhai G. Togadiya 3. The Ld. PCIT erred in law and on fact in arriving at a conclusion to the effect that the assessment order passed by the assessing officer was erroneous as well as prejudicial to the interest of the revenue on the ground that such order was passed without making proper enquiries or verification related to expenses to the tune of Rs.37,24,305/- only disallowed treating the same as bogus, in absence of any genuine supportive evidences in support of such expenses, whereas the total expenses of Rs.2,42,01,603/- was required to be disallowed. Therefore, the order passed by PCIT is required to be quashed and may kindly be quashed. As appeal is against the validity of revisional jurisdiction of Pr. CIT. 4. The ld. PCIT erred on facts as also in law in setting aside the assessment order dated 30.12.2019, passed u/s 143(3) of the I.T. Act, directing the assessing officer to pass fresh assessment order. The order passed u/s 263 of the Act by the ld. PCIT is totally unjustified on facts as also in law therefore the same may kindly be quashed. As appeal is against the validity of revisional jurisdiction of Pr. CIT. 5. Your Honour’s appellant craves leave to add, to amend, alter or withdraw any one or more grounds of appeal on/or before hearing of appeal. 3. The facts of the case may be briefly stated. The assessee before us is an individual, and filed return of income for assessment year(AY) 2017-18, on 10.10.2017, declaring total income of Rs.18,85,210/-. The assessee`s case was selected for complete scrutiny and the assessment was completed u/s 143(3) of the Act, on 30.12.2019, by determining total income at Rs.1,10,31,070/-. 4. Later on, the Learned Principal Commissioner of Income Tax - 1, Rajkot [in short ‘the Ld. PCIT’], had exercised his jurisdiction under section 263 of the Income Tax Act, 1961. On perusal of record, it was noted by ld. PCIT that during the previous year 2016-17, relevant to assessment year (AY) 2017-18, a show cause notice u/s 142(1) of the Act, dated 26.12.2019, had been issued by the Assessing Officer, seeking explanation of following expenditure amounting to Rs.3,65,96,248/-. 1. Labour expenses Rs.2,42,01,603/- 2. Sub contract expenses Rs.1,13,66,633/- 3. Supervisory salary expenses Rs.10,28,012/- Total Rs. 3,65,96,248/- Page | 3 ITA No.121/RJT/2022 Prakashbhai G. Togadiya Further, in show cause notice at para no.3, the assessee had been questioned on the discrepancies in the bills of Rs.2,42,01,603/- along with various bills of labour expenditure amounting of Rs.37,24,305/-, which were stated to be bogus, due to discrepancies in signature, PAN and year etc, in the bills. It was also stated that other labour work bills submitted during the course of assessment proceedings were also freshly prepared and stated the same dates and bill number. Also, the year mentioned in several bills was 2019, which proves that the bills were made recently. Moreover, there was no description with respect to quantity and type of labour work done by them. This clearly shows that the bills had been prepared 2-3 days before they were produced before the Assessing Officer during the course of assessment proceedings. Thus, in view of the above narrated facts it appears that the expenses incurred by the assessee were bogus in nature and required to be disallowed and added back to the total income for the year under consideration.However, expenses to the tune of Rs.37,24,305/- only was disallowed treating the same as bogus, in absence of any genuine supportive evidences, in support of such expenses, whereas the total expenses of Rs.2,42,01,603/- was required to be disallowed. During the course of assessment proceedings u/s 143(3) of the Act, the Assessing Officer had not verified these issues. In view of the above, the assessment order passed by the Assessing Officer for AY.2017-18 was erroneous in so far as it is prejudicial to interests to the Revenue. 5. Therefore, the Ld.PCIT issued a show cause notice dated 13.01.2022 to the assessee to explain the transaction and bogus bills prepared by the assessee. Page | 4 ITA No.121/RJT/2022 Prakashbhai G. Togadiya 6. In response to the notice of the Ld.PCIT, the assessee submitted its written submission before the Ld.PCIT, which are reproduced by Ld.PCIT in his revision order on page no. 2 to 7. In the written submissions, the assessee has objected to the present proceedings stating that the issue under consideration has already been examined by the Assessing Officer in the assessment proceedings. Further, the additions made by the assessing officer on this account has been challenged before the Ld. CIT(A) and the said appeal is pending for disposal. Further, the assessee also submitted that on the similar issue no revision could be made u/s 263 of the Act, and for this the assessee relied on certain decisions/judgments of Hon’ble Courts, which were mentioned by Ld. PCIT in his order. 7. The Ld. PCIT have gone through the records and the submissions made by the assessee during the revision proceedings, and noted that the assessing officer has not brought out his view to restrict the disallowance of the bogus expenses of Rs.37,24,305/- out of the total labour expenses of Rs.2,42,01,603/-. Moreso, when other labour work bills submitted were also freshly prepared and having various discrepancies with regard to the year of bill, absence of the details of the quantity and type of labour work etc. The Assessing Officer could have examined in detail the entire claim of labour expenses through enquiries which has not been done in the assessment proceedings. Further, the assessee failed to rebut the queries with corroborative evidences in the assessment proceedings and the assessee did not have any documents to substantiate its claim that the same were made genuinely for the purpose of business. Therefore, the Ld. PCIT was of the view that order passed by the assessing officer is erroneous and prejudicial to the interest of revenue. Page | 5 ITA No.121/RJT/2022 Prakashbhai G. Togadiya 8. The Ld.PCIT also noted that with effect from 01.06.2015, Explanation 2 to the section 263(1) has been inserted which reads as under: “Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal [Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner,— (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d)the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.” 9. As per the Explanation -2,to the section 263(1) of the Act, reproduce above, the Ld. PCIT noted that the order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interest of the Revenue, if the order is passed by assessing officer allowing any relief without inquiring into the claim. However, the Assessing Officer did not conduct any such inquiries or verification as outlined above and simply accepted the assessee’s submission. In this manner the assessee’s case is also covered under para ‘a’ of Explanation 2 of section 263(1) of Income Tax Act. Therefore, the order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue to that extent. 10. The assessee has submitted before ld PCIT that as per clause C of Explanation 1 to section 263 of the Act, no revision of the assessment order could be made, as the appeal is pending in this case before the Ld. Page | 6 ITA No.121/RJT/2022 Prakashbhai G. Togadiya CIT(A). In support it, the assessee has submitted copy of Form No.35 before ld PCIT. Since, the issue under consideration is under appeal before Ld. CIT(A), therefore no revision could be made as per assessee. 11. However, the Ld. PCIT observed that as per provisions of Explanation-1, clause-C of section 263 of the Act, the revision can be made. Since the interpretation of the nature of transaction and in application of provisions would be relevant and therefore it cannot be said that the issue was same as decided by the Assessing Officer. On the one hand the Assessing Officer has made the disallowance of part of the expenses without any basis and on the other side no evidences from assessee or Assessing Officer have brought on record to show the entire claim of labour expenses was genuine and incurred for the purpose of business. Thus, the Assessing Officer has not appreciated the full facts of the case. The matter before the Ld. CIT(A) was only with regard to the disallowance of labour expenses of Rs.37,24,305/- but for the remaining claim of expenses, no issue was pending before the Ld. CIT(A), and the same is for consideration in the present proceedings. Keeping in view these facts, the Ld. PCIT was of the view that this is a fit case for invoking section 263 of the Income-Tax Act, as the twin conditions namely:(i) the order of the Assessing Officer sought to be revised is erroneous, (ii) it is prejudicial to the interest of the Revenue are satisfied.Therefore, the Ld. PCIT, directed the assessing officer to make fresh assessment keeping in view the observations made above. 12. Aggrieved by the order of Ld. PCIT, the assessee is in appeal before us. Page | 7 ITA No.121/RJT/2022 Prakashbhai G. Togadiya 13. Learned Counsel for the assessee, vehemently argued that Ld. PCIT has exercised his jurisdiction on account of labour expenses, sub-contract expenses and supervisory salary. The assessee’s case was selected for complete scrutiny wherein the Assessing Officer has examine these expenses by way of issuing notice under section 142(1) of the Act and assessee has replied during the assessment proceedings. Besides, the Assessing Officer has also disallowed these expenses, on estimated basis, by taking the plausible view, therefore order passed by the Assessing Officer is neither erroneous nor prejudicial to the interest of Revenue. 14. The Ld. Counsel for the assessee also argued that appeal was filed by the assessee, against the addition made by the Assessing Officer, before the Ld. CIT(A) on 21.01.2020 and after filing the said appeal, the Ld. PCIT has revised the order passed by the Assessing Officer on 17.02.2022. The issue raised by the Ld. PCIT in his order under section 263 of the Act, has already been the subject matter of appeal before Ld. CIT(A). Therefore, there is a merger of the order of Ld. PCIT with Ld. CIT(A). Both the officers, that is, PCIT and CIT(A), having same rank, hence on the very same issue, which is the subject matter of appeal before the Ld. CIT(A), cannot revised by ld PCIT. Hence, the jurisdiction exercised by the Ld. PCIT is null and void, therefore, the order passed by the Ld. PCIT may be quashed. The ld. Counsel relied on many judgements and filed before us case law compilation which we have gone through. 15. On the other hand, Learned Commissioner of Income Tax – Departmental Representative (Ld. CIT-DR) for the Revenue submitted that the vouchers of Labour expenses to the tune of Rs. 2,42,01,603/- were made by the assessee, during the assessment proceedings, by hand, Page | 8 ITA No.121/RJT/2022 Prakashbhai G. Togadiya immediate and there were many defects and irregularities were noticed by the Ld PCIT. All the vouchers were bogus and out of the bogus vouchers, the assessing officer made the disallowance on estimated basis, therefore, since all the vouchers were bogus, hence it was not necessary for the assessing officer to make the disallowance on estimated basis, rather entire expenses should have been disallowed. The assessee submitted the bills and invoice of sub-contract expenses which were pertaing to 2019 and bill number and the invoice number and the quantity were not mentioned, likewise the supervisory salary vouchers were also bogus. The assessing officer has not brought out his view to restrict the disallowance of the bogus expenses of Rs.37,24,305/- out of the total labour expenses of Rs.2,42,01,603/-. Moreover, when other labour work bills submitted were also freshly prepared and having various discrepancies with regard to the year of bill, absence of the details of the quantity and type of labour work etc. The Assessing Officer could have examined in detail the entire claim of labour expenses through enquiries which has not been done in the assessment proceedings. Further, the assessee failed to rebut the queries with corroborative evidences in the assessment proceedings and the assessee did not have any documents to substantiate its claim that the same were made genuinely for the purpose of business. Therefore, Ld. PCIT, was correct in exercising the jurisdiction under section 263 of the Act. 16. The Learned Commissioner of Income Tax – Departmental Representative (Ld. CIT-DR) for the Revenue further submitted that order passed by the Ld. PCIT under section 263 of the Act, has not been merged with the order of the Ld. CIT(A). Therefore, Ld. CIT-DR pointed out that Explanation 1 (C)of section 263(1) of the Act, provides as follows: Page | 9 ITA No.121/RJT/2022 Prakashbhai G. Togadiya “Where any order referred to in this sub-section, and passed by the assessing officer, [or the transfer pricing officer, as the case maybe], had been the subject matter of any appeal, [filed on or before, or after the first day of June, 1988], the powers of the [principal Commissioner or], commissioner under this sub-section, shall extend,[ and shall be deemed always to have extended], to such matters as had not been considered and decided in such appeal.” Therefore, Ld. DR for the Revenue stated that in the assessee’s case under consideration, ld PCIT has exercised his jurisdiction, on such addition and issue, which were not the subject matter of appeal before the CIT (A). Therefore, ld PCIT has rightly exercised his jurisdiction, as per clause (C) of Explanation-1 of section 263 of the Act. That is, the power of the PCIT in this sub-section shall extend and shall be deemed always to have extended to such matter, as had not been considered and decided in appeal by CIT(A). Therefore, Ld. CIT-DR pointed out that the case laws relied on by the assessee, is contradictory to the provisions of the law and hence there is no merger, so far revision proceeding under section 263 of the Act is concerned,for that, the Ld. CIT-DR for the Revenue relied on the following judgments: CIT vs. Shri Arbuda Mills Ltd. (1998) 98 Taxman 457 (SC) Babulal S. Solanki vs. ITO, in ITA No.3493/Ahd/2016 J R Industries vs. PCIT, (2021)132 taxmann.com 302 (Jaipur – Trib.) 17. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. PCIT and other material brought on record. We note that Assessing Officer has issued the notice under section 142(1) of the Act, [paper book page no.140], on 01.12.2019, wherein the Assessing Officer has raised the following questions: “3 kindly provide ledgers along with bills and vouchers in original for following expenses: Page | 10 ITA No.121/RJT/2022 Prakashbhai G. Togadiya 1. Labour expenses. 2. Subcontract expenses 3. Cement purchase 4. Steel purchase 5. Sand purchase 6. Supervisor salary expenses.” 18. In response to the notice under section 142(1) of the Act, above, the assessee submitted its reply dated 04.12.2019. The reply submitted by the assessee is reproduced below: With reference to above-mentioned subject and reference, I am herewith submitting the following details/information and explanations for finalization of assessment proceedings: 1. I am enclosing herewith the copy of unaudited balance sheet, profit and account and capital account for FY. 2016-17 and audit report for F.Y, 2016-17 at Annexure-G. 2. Details in respect of source of increase in capital, I submit that I have introduced the capital in Patel Construction Co., through bank and same is offered for tax, I have attached herewith capital accounts in the books of Pate! Construction Co at Annexure-H, and computation of income has beers already submitted in my earlier submission. 3. Details in respect of ledger accounts along with bills vouchers in original as required by your authority, I submit that ledger accounts along with bills and vouchers in original will be produced for verification in our next hearing. 4. I am enclosing herewith short term capital gain during the year under consideration as below and copy purchase deed and sale will be submit as soon as possible. STATEMENT OF SHORT TERM CAPITAL GAIN Particular Sates Price/Year Purchase Cost/Year Transfer Expenses Cost of improv ement Exempt Capital Gain RADHA PARK 400000.00 (20/07/2016) 259545.00 (24/03/2015) 0.00 0.00 0.00 140465.00 Total 400000.00 259545.00 0.00 6.56 0.00 140455.00 I have submitted all the details/information and explanation as desired by you. If you need any further information or clarifications, please feel free to ask me Page | 11 ITA No.121/RJT/2022 Prakashbhai G. Togadiya it will be pleasure for us to submit you. In hope of quick proceedings from your side, thanking you.” 19. The Assessing Officer has issued further show cause notice dated 26.12.2019, which is placed at paper book page no.143 and in response to the said notice, the assessee submitted its reply dated 27.12.2019, which is placed at paper book page no.148. 20. We note that assessee submitted copy of unaudited balance sheet, profit and account and capital account for financial year (FY) 2016-17, hence, veracity of vouchers, expenses and bills were not examined by the assessing officer in right perspective.We note that as per para no.3 of the show cause notice, the assessee had been questioned on the discrepancies in the bills of Rs.2,42,01,603/- along with various bills of labour expenditure amounting of Rs.37,24,305/-, which were stated to be bogus, due to discrepancies in signature, PAN and year etc., in the bills. It is to be noted that other labour work bills submitted during the course of assessment proceedings were also freshly prepared and stated the same dates and bill number and the same discrepancies, as stated above. However, the assessing officer has not disallowed the same. Hence, it is a non- application of mind on the part of the assessing officer, which renders the assessment order erroneous and prejudicial to the interest of revenue. 21. We also note that the year mentioned in several bills was 2019, which do not fall in the assessment year 2017-18, under consideration, hence, again, there is non-application of mind on the part of the assessing officer.This proves that the bills were made by assessee. Moreover, there was no description on the bills/ invoices, with respect to quantity and type of labour work done by them. We know that if any particular bill and Page | 12 ITA No.121/RJT/2022 Prakashbhai G. Togadiya invoice does not contain the quantity and the type of labour work done, such bill and invoice would be a bogus bill and invoice and hence it should not be relied on. The assessing officer during the scrutiny assessment, under section 143(3) of the Act, has not examined these aspectsand discrepancies in bills/Vouchers, as the purpose of the scrutiny assessment under section 143(3) of the Act, is to examine bills and invoices with reference to quantity and the type of labour work done, which the assessing officer has failed to do so. If on the invoices/bills, the quantity and the labour work done, are not mentioned, then such type of invoices and bills would be incomplete and thus treated as bogus bills/vouchers, and the assessing officer has not examined these aspects and discrepancies and hence the order passed by him is not only erroneous but prejudicial to the interest of the revenue, also.Thus, in view of the above narrated facts it proves that the expenses incurred by the assessee were bogus in nature. It is well settled law that the assessing officer is not only an adjudicator but also an investigator. He cannot "remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word 'erroneous' in section 263 emerges out of this context. It is because it is incumbent on the assessing officerto further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word 'erroneous' in the section 263 includes the failure to make such an inquiry becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct.Hence, going by the facts narrated above, the language of the Provisions of Section 263 of the Act, and the interpretation placed on these provisions by the various Courts, the order of the assessing Page | 13 ITA No.121/RJT/2022 Prakashbhai G. Togadiya officerfalls within the category of being an order which is erroneous as well as prejudicial to the interest of the revenue, for this reliance is placed on decision of the Hon'ble Delhi High Court delivered in the case of Gee Vee Enterprises vs Add.CIT(1975) 99 ITR 375 (Delhi). 22. The same view has also been held by the Hon'ble Supreme Court in the case of Malabar Industrial Company Ltd vs. CIT 243 ITR 83 (SC).Therelevant portion of this judgment which supports our view is reproduced 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." We note that in assessee’s case under consideration, the assessment order was framed by the assessing officer without application of mind.Further, it is also important to mention here that the provisions of section 263 of the Act, can be invoked even where full facts are disclosed by assessee but the assessing officer has not examined these details as per correct provisions of law. In support of this proposition, we place reliance on the decision of the Hon'ble Rajasthan High Court delivered in the case of CIT Vs. Emery Stone Manufacturing Company, 213 ITR 843 (Rajasthan).Therefore, based on these facts and circumstances, the order passed by the assessing officer, is erroneous and prejudicial to the interest of the revenue, therefore Ld.PCIT has rightly exercised his jurisdiction under section 263 of the Act. 23. Coming to the other arguments, advanced by Learned Counsel for the assessee, to the effect that order passed by the Ld. PCIT under section 263 of the Act, has been merged with the order of the Ld. CIT(A), Page | 14 ITA No.121/RJT/2022 Prakashbhai G. Togadiya therefore, Ld. PCIT cannot exercise his jurisdiction under section 263 of the Act. We find that as per Explanation 1 (C) of section 263(1) of the Act, where any order referred to in this sub-section, and passed by the assessing officer, had been the subject matter of any appeal before ld CIT(A), the powers of the principal Commissioner of Income Tax, under this sub-section, shall extend,and shall be deemed always to have extended, to such matters as had not been considered and decided in such appeal. We note that before us as the Ld Counsel for the assessee, submitted Form No. 35 only and stated that appeal has not been adjudicated by the ld CIT (A). Therefore, we are of the view that since the ld CIT(A) has not adjudicated the issue, therefore, order of Ld CIT(A) has not been merged with the order of ld PCIT. Reliance in this regard is placed on the judgement of Hon’ble Supreme Court in the case of Shri Arbuda Mills Ltd,[1998] 98 Taxman 457 (SC), wherein it was held that in view of amendment in section 263 by the Finance Act, 1989, with retrospective effect, powers of Commissioner under section 263 of the Act, would extend and would be deemed always to have extended to those items because same had not been considered and decided in appeal by ld CIT(A). The findings of the Hon’ble Court are reproduced below: “1. The Tribunal has referred under section 257 of the Income-tax Act, 1961 ('the Act'), the following question of law for decision by this Court, namely : "Whether, on the facts and in the circumstances of the case, the order of assessment passed by the Income-tax Officer under section 143(3), read with section 144B, of the Income-tax Act, 1961 on July 31, 1978, had merged with that of the Commissioner (Appeals) dated December 15, 1979, in respect of the three items in dispute so as to exclude the jurisdiction of the Commissioner under section 263 ?" 2. The assessee is a company. The relevant assessment year is 1975-76 ending on 31- 12-1974. The assessment was completed under section 143(3), read with section 144B of the Act on 31-3-1978, in which the net business loss was computed at Rs. 3,61,086 and the income under the head 'Capital gains' at Rs. 38,874. The ITO had made certain additions and disallowances while computing the loss and income as above and had also accepted, inter alia, the following three claims : Page | 15 ITA No.121/RJT/2022 Prakashbhai G. Togadiya (i) Deduction of a sum of Rs. 23,82,621 by way of provision for gratuity; (ii) Depreciation on Rs. 4,21,000 which was paid by the assessee to United Textile Industries as consideration for transfer of installed property of 17,480 spindles and 400 looms of Old Manek Chowk Mills; (iii) Loss on account of difference in exchange rate which was referable to the purchase of machinery, etc., as revenue expenditure. 3. For the purposes of the present matter, it is only these three items of claim which are relevant. In the appeals filed by the assessee, the items in respect of which the decision was in its favour were not the subject-matter of the appeals. In respect of these three items, the Commissioner exercised his power under section 263 of the Act. The above question arises in this context. 4. The main contention of the assessee which was considered by the Tribunal was whether or not the order of the ITO regarding the said three items in respect of which the assessee had no occasion to prefer an appeal had merged in that of the Commissioner (Appeals) so as to exclude the jurisdiction of the Commissioner under section 263. 5. We may refer to the amendment made in section 263 by the Finance Act, 1989, with retrospective effect from 1-6-1988. The relevant part thereof for the present case is as under : "Explanation.—For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,— (a )and (b) ** ** ** (c)where any order referred to in this sub-section and passed by the Assessing Officer had been the subject-matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal." The consequence of the said amendment made with retrospective effect is that the powers under section 263 of the Commissioner shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in an appeal. Accordingly, even in respect of the aforesaid three items, the powers of the Commissioner under section 263 shall extend and shall be deemed always to have Page | 16 ITA No.121/RJT/2022 Prakashbhai G. Togadiya extended to them because the same had not been considered and decided in the appeal filed by the assessee. This is sufficient to answer the question which has been referred. 6. The question referred is, therefore, answered in the negative, in favour of the revenue and against the assessee.” 24. Similar view has been taken by the Coordinate Bench of ITAT Jaipur in the case of JR Industries, [2021] 132 taxmann.com 302 (Jaipur - Trib.), wherein it was held that Ld PCIT can assume jurisdiction under section 263 during pendency of appeal before Commissioner (Appeals); in view of Explanation (c) to section 263(1), Commissioner can assume jurisdiction under section 263 in respect of issues which have not been considered and decided by Commissioner (Appeals). The detailed findings of the Coordinate Bench is reproduced below: “9. The ld. AR appearing on behalf of the assessee has reiterated the same arguments as were raised before the ld. PCIT and also submitted that the assumption of jurisdiction u/s 263 of the Act by the ld. PCIT is illegal as the appeal of the assessee was pending before CIT(A). In this regard, the ld AR has drawn our attention towards Explanation 1(c) to section 263(1) of the Act, which is reproduced below: "Where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal "filed on or before or after the 1st day of June, 1988"], the powers of the [Principal Commissioner or] Commissioner under this sub-section shall extend [and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal." It was further argued by the ld. AR that once the appeal is filed by the assessee against the order of A.O. then in that eventuality, he surrenders himself to the jurisdiction of ld. CIT(A). Thus, this surrender is unconditional and the assessee in that eventuality, has no right to withdraw the appeal or to take U-turn. It was further submitted by the ld AR that power of enhancement to CIT(A) are akin to powers of revision to PCIT conferred u/s 263 of the Act. Thus, in this regard, the ld. AR also placed reliance on the following judicial pronouncements in support of his contentions: (1) CIT v. Rai Bahadur Hardutroy Motilal Chamaria[1967] 66 ITR 443 (SC). (2) CIT v. McMillan & Co. [1958] 33 ITR 182 (SC). (3) ACIT v. Pawan Kumar Singhal [2019] 183 DTR 161 (Delhi) (Trib.). Further the ld. AR has also relied upon the gist of submissions as follows: Page | 17 ITA No.121/RJT/2022 Prakashbhai G. Togadiya "1. Section 251 of the 1961 Act corresponds to section 31(3) of the 1922 Act. The power of enhancement as contained in section 251(1)(a) were similarly there in section 31(3)(a). The relevant sections are enclosed, copied from Income-tax Commentary of Mr. Sampath Iyengar's, Volume 9, and Page 14047 (12th Edition) (Compilation Page 1 & 3) 2. Similarly, present powers of revision contained in section 263 of the 1961 Act correspond to section 33B of the 1922 Act. The relevant sections are enclosed, copied from Income-tax Commentary of Mr. Sampath lyengar's, Volume 9, and Pages 14570 (12th Edition) (Compilation Pages 5 -9) 3. Once an appeal is filed by the assesse against the order of AO, he surrenders himself to the jurisdiction of CIT(A). This surrender is unconditional and the assesse has no right to withdraw the appeal or to take the U-turn. Needless to submit that power of enhancement to CIT(A) are akin to powers of revision to CIT conferred u/s 263. Reliance is placed on the following judicial pronouncements: a. Hon'ble Supreme Court of India in the case of CIT v. Rai Bahadur Hardutroy Motilal Chamaria[1967] 66 ITR 443 (Compilation Page 14) Relevant portion of the order is reproduced below: "It is also well-established Page | 18 ITA No.121/RJT/2022 Prakashbhai G. Togadiya that an assessee having once filed an appeal cannot withdraw it. In other words, the assessee having filed an appeal and brought the machinery of the Act into working cannot prevent the AAC from ascertaining and settling the real sum to be assessed, by intimation of his withdrawal of the appeal. Even if the assessee refuses to appear at the hearing, the AAC can proceed with the enquiry and if he finds that there has been an under- assessment, he can enhance the assessment [see CIT v. Nawab Shah Nawaz Khan [1938] 6 lTR 370 (SC) : TC7R.233]. In this context reference may be made to the decision of the Court of Appeal in King v. Income-tax Special Commissioners (1936) 1 KB 487 in which the taxpayer sought to withdraw a notice of appeal which had been given on his behalf against an additional assessment under Schedule D. The Commissioners of Inland Revenue were not satisfied that the assessment was adequate. The Special Commissioners then proposed to proceed with the hearing of the appeal in the ordinary way. At that stage the taxpayer sought a writ of prohibition to prohibit the Special Commissioners from hearing the appeal. It was held by the Court of Appeal that notice of appeal having once been given, Page | 19 ITA No.121/RJT/2022 Prakashbhai G. Togadiya the Commissioners were bound to proceed in accordance with the IT Acts and determine the true amount of the assessment. At page 493 of the report, Lord Wright observed as follows: "...in making the assessment and in dealing with the appeals, the Commissioners are exercising statutory authority and a statutory duty which they are bound to carry out. They are not in the position of judges deciding an issue between two particular parties. Their obligation is wider than that. It is to exercise their judgment on such material as comes before them and to obtain any material which they think is necessary and which they ought to have, and on that material to make the assessment or the estimate which the law requires them to make. They are not deciding a case inter parties; they are assessing or estimating the amount on which, in the interests of the country at large, the taxpayer ought to be taxed." b. Hon'ble Supreme Court of India in the case of CIT v. McMillan & Co. [1958] 33 ITR 182 (Compilation Page 23) Relevant portion of the order is reproduced below: "Lastly, it seems to us clear that the answer to the question is provided by the language of s. 31. As observed by Chagla, C.J., in NarrondasManordass v. Page | 20 ITA No.121/RJT/2022 Prakashbhai G. Togadiya CIT (1957) 31 lTR 909 (Bom) the language is wide enough to enable the AAC to "correct the ITO not only with regard to a matter which has been raised by the assessee but also with regard to a matter which has been considered by the ITO and determined in the course of the assessment." We are unable to accept the argument that the proviso to s. 13 imposes a limitation on the powers of the AAC under s. 31. No doubt, the two sections must be read harmoniously; but s. 13 and its proviso contain no words of limitation or qualification upon the power of the AAC in enhancing the assessment or setting aside the assessment and directing a fresh assessment to be made by the ITO. Dealing with the powers of the AAC, Chagla, C.J., in Narrondas's case (supra) said : "It is clear that the AAC has been constituted a revising authority against the decision of the ITO ; a revising authority not in the narrow sense of revising what is the subject-matter of the appeal, not in the sense of revising those matters about which the assessee makes a grievance, but a revising authority in the sense that once the appeal is before him he can revise not only the ultimate computation arrived at by the ITO but he can revise Page | 21 ITA No.121/RJT/2022 Prakashbhai G. Togadiya every process which led to the ultimate computation or assessment. In other words, what he can revise is not merely the ultimate amount which is liable to tax, but he is entitled to revise the various decisions given by the ITO in the course of the assessment and also the various incomes or deductions which came in for consideration of the ITO." We are in agreement with these observations." c. Hon'ble ITAT Delhi Bench 'F' in the case of ACIT v. Pawan Kumar Singhal (2019) 183 DTR 0161 (Del.) (Trib.) (Compilation Pages 46 & 47). Relevant portion of the order is reproduced below: "On cumulative consideration the provisions U/s 250(6) read with sections 250(4), 250(5), 251(1)(a), 251(1)(b) and Explanation of section 251(2) of I.T. Act, we come to the conclusion that the Ld. CIT(A) is not empowered to dismiss the appeal for non-prosecution of appeal and is obliged to dispose of the appeal on merits. Once the Assessee files an appeal U/s 246A of I. T. Act, the Assessee sets in motion the machinery designed for disposal of the appeal under sections 250 and 251 of 1.T. Act. If the appeal filed by the assessee fulfils the requirements of maintainability and admissibility prescribed under sections 246, 246A, 248 and 249 of I.T. Act; Page | 22 ITA No.121/RJT/2022 Prakashbhai G. Togadiya neither the Assessee can stop the further working of that machinery as a matter of right by withdrawing the appeal, or by not pressing the appeal, or by non- prosecution of the appeal; nor the first appellate authority, CIT(A) in this case, can halt this machinery by ignoring either the procedure in appeal prescribed U/s 250 of I. T. Act or powers of Commissioner (Appeals) prescribed U/s 251 of I. T. Act. CIT(A), the first appellate authority, cannot dismiss assessee's appeal in limine for non- prosecution without deciding the appeal on merits through an order in writing, stating the points of determination in the appeal, the decision thereon and the reason for the decision. It is well- settled that powers of Ld. CIT(A) are co-terminus with powers of the Assessing Officer. Useful reference may be made to order of Apex Court decision in CIT v. Kanpur Coal Syndicate 53 ITR 225 (SC) in which it was held that AAC has plenary powers in disposing off an appeal; that the scope of his power is co-terminus with that of the ITO, that he can do what the ITO can do and also direct him to do what he failed to do. In this context, useful reference may also be made to Apex Court's decisions in the cases of CIT v. Rai Bahadur Hardutroy Motilal Page | 23 ITA No.121/RJT/2022 Prakashbhai G. Togadiya Chamaria 66 1TR 443 and CIT v. B.N. Bhattachargee [1979] 118 ITR 461 (SC) for the proposition that an assessee having once filed an appeal, cannot withdraw it and even if the assessee refuses to appear at the hearing, the first appellate authority can proceed with the enquiry and if he finds that there has been an under- assessment, he can enhance the assessment. Just as, once the assessment proceedings are set in motion, it is not open to the Assessing Officer to not complete the Assessment Proceedings by allowing the Assessee to withdraw Return of Income; it is similarly, by analogy, not open for Ld. CIT(A) to not pass order on merits on account of non-prosecution of appeal by the Assessee or if the Assessee seeks to withdraw the appeal or if the assessee does not press the appeal." 4. Explanation 1(c) to section 263(1) does not, in any case, explain that even if appeal is pending before CIT(A), revisional jurisdiction u/s 263 can be assumed. The Explanation 1(c) only explains the extent of merger of the order of AO with that of CIT(A) and explains that issues which have not so merged can be subjected to revisional jurisdiction u/s 263. This explanation had to be introduced to clarify the confusion which were prevailing about the Page | 24 ITA No.121/RJT/2022 Prakashbhai G. Togadiya section 263 jurisdiction when appellate order was passed. One view was that entire order of AO merges with CIT(A) and, therefore, revisional jurisdiction u/s 263 against such entire order cannot be assumed even if the specific issues were not decided in the appeal. 5. Under the scheme of the Act and otherwise also, no assessee can be subjected to multiple jurisdiction for the same aspect. 10. On the other hand, the ld. CIT-DR has relied on the order passed by the ld. Pr.CIT and also relied upon the notes on Clauses Finance Bill, 1988, which is at page No. 1-2 of the department's paper book, memorandum of Finance Bill, 1988, which is page No. 3 of the department's paper book. Section 31 of the Income-tax Act, 1922 which is at page No. 4-5 of the department's paper book. Section 31A of the Income-tax Act, 1922, which is at page No. 6 of the department's paper book and the ld. CIT-DR has also relied on the decision of the Coordinate bench of this Tribunal in ITA No. 255/JP/2020 dated 25/03/2021. The ld. CIT-DR has further relied on the following judicial pronouncements: (i) CIT v. Shri Arbuda Mills Ltd. [1998] 98 Taxman 457/231 ITR 50 (SC) (ii) CIT v. RatilalBacharilal& Sons [2006] 153 Taxman 86/282 ITR 457 (Bom.) (iii) CIT v. South India Shipping Corpn. Ltd. [2000] 111 Taxman 58 (Mad.). (iv) CIT v. Carborandum Universal Ltd. [1999] 240 ITR 99 (Mad.) (v) CIT v. Shree Durga Agencies Ltd. [1999] 239 ITR 484 (Cal.) (vi) Aditi Technologies (P.) Ltd. v. ITO [2014] 47 taxmann.com 166/149 ITD 515 (Bang.-Trib) (vii) CIT v. Ganesh Steel Industries [2009] 184 Page | 25 ITA No.121/RJT/2022 Prakashbhai G. Togadiya Taxman 220/[2010] 325 ITR 99 (Punj. & Har.) (viii) CIT v. Indo Persian Rugs [2007] 160 Taxman 127/[2008] 299 ITR 300 (All.) (ix) CIT v. Soble & Miglani [2005] 145 Taxman 353 (All.) 11. We have heard the rival contentions of both the parties and have perused the material placed on record. We have also deliberated upon the decisions cited in the orders passed by the authorities below as well as cited before us and we have also gone through the orders passed by the revenue authorities. From the facts of all these cases, we noticed that the main contention of the ld. AR that if an appeal against the assessment order passed by the AO is filed by the assesssee and is pending before CIT(A), then the PCIT has no jurisdiction u/s 263 of the Act as the C1T(A) can enhance income u/s 251 of the Act. In this context, it would be appropriate to reproduce clause (c) of Explanation 1 of section 263 of the Act, as amended from time to time, as under: "263(1)(c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal [filed on or before or after the 1st day of June, 1988], the powers of the [Principal Commissioner or Commissioner under this sub-section shall extend [and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal.]" It would be appropriate to reproduce hereunder the relevant clauses of Notes on Clauses and Memorandum to Finance Bill 1988 relating to the amendments in section 263 of the Act by the Finance Act, 1988 through which the above Explanation was introduced as under: "Notes on Clauses to Finance Bill, 1988 "Clause (c) of the Explanation clarifies that where any order passed by the Assessing Officer has merger with the order of Commissioner(Appeals) or the Appellate Tribunal, the Commissioner and revise that part of the order which has not been considered and pronounced upon by the appellate authority." Memorandum to Finance Bill, 1988 48(b) Regarding the circumstances under which order of an Assessing Officer merges with that of an appellate authority: Here again, there have been conflicting decisions on the question as to whether the entire order of assessment passed by an Assessing Officer merges with the order of the first appellate authority or the merger is only with respect to that part of the order of the Assessing Officer which relates to the matters considered and decided by the appellate authority. Some High Courts have held that there is complete merger once an appeal is decided against an order even on one or two points alone, while a number of High Courts have held that there is only partial merger and not the merger of the whole order in case where only one or some particular aspects have been contested. To eliminate litigation and to clarify the legislative Page | 26 ITA No.121/RJT/2022 Prakashbhai G. Togadiya intent in respect of the provisions in the three Direct Tax Acts, it is proposed to clarify the legal position in this regard in the Explanation to the relevant sections. The proposed amendments are intended to make it clear that "record" would include all records relating to any proceedings under the concerned direct tax laws available at the time of examination by the Commissioner. Further, as held by several High Courts, the Commissioner will be competent to revise an order of assessment passed by an Assessing Officer on all matter except those that have been considered and decided in appeal." 12. It is evident from the above, that the power of PCIT u/s 263 extends to such matters which had not been considered and decided in such appeal. The use of the word "considered and decided" leaves no room for doubt that if some issue is decided by CIT(A) in an appeal against the assessment order passed by the AO. Then, that issue cannot be subject matter of proceedings u/s 263 of the Act. Thus, it is evident from the above that the Explanation 1(c) is based on the Doctrine of Merger, according to which there cannot be more than one decree or an operative order governing the same subject-matter at a given point of time. The Doctrine of Merger can be better understood from the following observations of the Supreme Court in a landmark decision in the case Kunhayammed v. State of Kerala [2000] 113 Taxman 470/245 ITR 360 [1]. 1. Where an appeal or revision is provided before a superior forum against an order passed by a Court, Tribunal or any other authority and such superior forum modifies, reverses or affirms the decision put in issue before it, the decision by the subordinate forum merges with the decision by the superior forum and it is the latter which subsists, remains operative and is capable of enforcement in the eye of law. 2. The doctrine of merger is not a doctrine of universal or unlimited application. It will depend on the nature of jurisdiction exercised by the superior forum and the content or subject-matter of challenge. Thus, we are of the view that where an issue in the assessment order has neither been agitated before the Commissioner (Appeals) nor considered by him, in such a scenario that portion of the assessment order will not merge with the order of the Page | 27 ITA No.121/RJT/2022 Prakashbhai G. Togadiya Commissioner (Appeals) and therefore, the Commissioner will have the jurisdiction under section 263 to revise the assessment order with respect to that particular issue. To make it clear, let us assume that in a particular case, the AO had made addition on account of three issues A, B and C, against which the assessee filed appeal to CIT(A) on two issues i.e. B and C and the CIT(A) has also passed an appellate order. Thus, in view of the Explanation as reproduced above, the PCIT cannot assume jurisdiction in respect of issue Band C u/s 263 of the Act, however, the PCIT can assume jurisdiction in respect of issue A which has not been agitated before CIT(A) as the assessment order merge's with the order of CIT(A) in respect of issue B and C only but not in respect of the issue. If the contention of the ld. AR is accepted then during the pendency of the PCIT has no jurisdiction to cancel the assessment order even in respect of issue A also as the CIT(A) can enhance the income u/s 251 of the Act on issue A but after passing of the appellate order by the CIT(A), now the PCIT can assume jurisdiction u/s 263 of the Act as the Ld. CIT(A) has not considered and decided such issue A in the appellate order. This cannot be the intention of the legislature as time limit is there for passing order u/s 263 of the Act, whereas there is no such limit for the CIT(A) for adjudicating an appeal and this interpretation makes the provisions of section 263 of the Act practically redundant during the pendency of appeal before CIT(A). 13. In another circumstances, if an appeal, against the assessment order passed by the AO, has been filed with the CIT(A) but has not been decided and is pending before CIT(A), then the Doctrine of Merger will even otherwise not apply as there is no order of CIT(A) with which the assessment order could merge and thus, the PCIT will surely have jurisdiction u/s 263 of the Act in respect of all the issues whether contested before CIT(A) or not. Although, it was argued by ld. AR that once an appeal is filed by the assessee against the order of AO, then he surrenders himself to the jurisdiction of CIT(A). Thus, this surrender is unconditional and the assessee has no right to withdraw the appeal or to take a U-turn. The power of enhancement to CIT(A) are akin to powers of revision to PCIT conferred u/s 263 of the Act. In this regard, ld. AR has placed reliance on the following judicial pronouncements in support of these contentions: Rai Bahadur Hardutory Motilal Chamaria (supra) McMillan & Co. (supra) Pawan Kumar Singhal (supra) After analyzing the above decisions, we found that in these judgments, it has been held that the CIT(A) has power of enhancement and the assessee cannot withdraw appeal and the CIT(A) has to decide the appeal on merit and cannot dismiss the appeal in limine. We may point out that the two judgements of Hon'ble Apex Court as relied upon by the ld. AR are related to provisions of old Income-tax Act of 1922. It is important to mention that section 31 of 1922 Act corresponds to section 251 of 1961 Act and under section 31 of 1922 Act as well as under section 251 of the Act, the CIT(A) can enhance the income. Similarly, section 33A of 1922 Act corresponds to section 263 and 264 of 1961 Act and the provisions of section 33A of 1922 Act are not identical with the provisions of section 263 of the 1961 Act. Therefore, it would be appropriate to reproduce the relevant provisions of section 33A of 1922 Act which corresponds to section 263 of 1961 Act as under: "33A. Power of revision by Commissioner.— Page | 28 ITA No.121/RJT/2022 Prakashbhai G. Togadiya (1) The Commissioner may of his own motion call for the record of any proceeding under this Act in which an order has been passed by any authority subordinate to him and may make such inquiry or cause such inquiry to be made and, subject to the provisions of this Act, may pass such order thereon, not being an order prejudicial to the assessee, as he thinks fit: Provided that the Commissioner shall not revise any order under this sub-section if— (a) where an appeal against the order lies to the Appellate Assistant Commissioner or to the Appellate Tribunal, the time within which such appeal may be made has not expired, or (b) the order is pending on an appeal before the Appellate Assistant Commissioner or has been made the subject of an appeal to the Appellate Tribunal, or (c) the order has been made more than one year previously." 14. Thus, it is evident from the above that in view of the proviso to section 33A of 1922 Act. the PCIT cannot exercise jurisdiction u/s 33A of the Act, (a) if the appeal against the order lies to CIT(A)/ITAT and the time to file such appeal has not expired or (b) the order is pending on an appeal before the CIT(A) or has been made the subject of an appeal to the ITAT or (c) the order has been made more than one year previously. It may be mentioned that the above proviso to section 33A of 1922 Act is conspicuous by its absence in section 263 of the Act of 1961. Thus, these judicial pronouncements of Hon'ble Apex Court as relied upon by the ld. AR are of no help to the assessee. In the case of Shri Arbuda Mills Ltd. (supra), the assessment of the assessee-company was completed under section 143(3) read with section 144B wherein the ITO made certain additions and disallowances and also accepted certain claims relating to three items. The assessee-company filed an appeal and the three items in respect of which the decision was in its favour were not the subject-matter of the appeals. In respect of these three items, the Commissioner exercised his power U/s 263. The assessee contended that the order of the ITO regarding the said three items in respect of which the assessee had no occasion to prefer an appeal had merged in that of the Commissioner (Appeals) so as to exclude the jurisdiction of the Commissioner under section263. The Hon'ble Apex Court after considering the Explanation 1(c) to section 263 of the Act has held as under: "The consequence of the said amendment made with retrospective effect is that the powers under section 263 of the Commissioner shall extend and shall he deemed always to have extended to such matters as had not been considered and decided in an appeal. Accordingly, even in respect of the aforesaid three items, Page | 29 ITA No.121/RJT/2022 Prakashbhai G. Togadiya the powers of the Commissioner under section263 shall extend and shall be deemed always to have extended to them because the same had not been considered and decided in the appeal filed by the assessee. This is sufficient to answer the question which has been referred. 6. The question referred is, therefore, answered in the negative, in favour of the revenue and against the assessee." In the case of RatilalBacharilal& Sons (supra) it has been held by the Hon'ble High Court that: "21. Having said so, turning to the facts of this case, so far as allowance under section 35B to the extent it was allowed by the ITO is concerned, the powers of the Commissioner under section 263 shall extend and shall be deemed always to have extended to such matter because the same had not been considered and decided in the appeal filed by the assessee. At the instance of the assessee, the allowance on the sum of Rs. 5,63,350 could not have been the subject-matter of appeal before the CIT(A) as the assessee was never aggrieved with that part of the order. In other words, solar as weighted deduction under section 35B in the sum of Rs. 5,63,350 is concerned, the same was 7201 a subject-matter of the appeal before the CIT(A). Factually in this case, the doctrine of merger could not, have been applied by the Tribunal to that part of the order, which was not a subject- matter of appeal as indicated, so as to exclude revisional jurisdiction of the Commissioner of Income-tax under section 263 of the Act. In the case of South India Shipping Corpn. Ltd. (supra) it has been held by the Hon'ble High Court that: "19. In so far as the second question of law is concerned, it relates to the question of merger. In our view, the order of the ITO which was the subject-matter of revision before the Commissioner under section 263 did not merge with the order of the first appellate authority as the subject-matter of appeal before the first appellate authority was different. Therefore, on the basis of the decisions of the Supreme Court in the case of CIT v. Shri Arhuda Mills Ltd. [1998] 231 ITR 50/98 Taxman 457 and Shree Manjunathesware Packing Products & Camphor Works case (supra), the Tribunal was not correct in holding that there was a merger of the order of the ITO with the order of Commissioner (Appeals) precluding the Commissioner from exercising his revisional powers. Our answer to the second question of law also is in the negative and in favour of the revenue." 15. We noticed from perusal of the record that vide its letter dated 15-9-2021, the ld. AR has relied upon the following judicial pronouncements: CIT v. Vam Resorts & Hotels (P.) Ltd. [2019] 111 taxmann.com 62/418 ITR 723 (All.) Smt. Renuka Philip v. ITO [2019] 101 taxmann.com 119/[2018] 409 ITR 567 (Mad.) ACC Ltd. v. CIT (LTU) [IT Appeal No. 3576 (Mum.) of 2019, dated 8-7-2020. Page | 30 ITA No.121/RJT/2022 Prakashbhai G. Togadiya In this regard, we noticed that the judicial pronouncements as relied upon by the ld. AR, the important words "considered and decided in such appeal" appears to have skipped the attention of their lordships. In fact, it appears that in these judgements, the Notes on Clauses and Memorandum to Finance Bill, 1988 as reproduced earlier, were not placed before the Hon'ble Courts and consequently were not considered by the Hon'ble High Court. It is trite law that while interpreting provisions of a statute, no word should be added or omitted. We also noticed that the judgement of Hon'ble Apex Court in the case of CIT v. Shri Arbuda Mills Ltd. (supra) was not considered in these judgements. In our view, the legislative history of section 263 of the Act, viz-a-viz section 33A of the IT Act, 1922 as referred earlier was not placed before the Hon'ble Courts and consequently, was not considered in these judgements. We also reiterated that there is no proviso in section 263 of 1961 Act corresponding to proviso of section 33A of the old Act of 1922. It clearly reflects the intention of the legislature in the 1961 Act that even during the pendency of appeal before CIT(A), the PCIT can assume jurisdiction u/s 263 of the Act. Further, in view of the Explanation (c) to section 263(1) of the Act, the PCIT can assume jurisdiction u/s 263 of the Act in respect of the issues which have not been considered and decided by CIT(A). The coordinate Bench with the same combination in the case of Virendra Singh Bhadauriya v. Pr. CIT [IT Appeal No. 255 (JP) of 2020 wherein the similar ground was raised in appeal, vide order dated 25/03/2021 had decided the issue in favour of the revenue. It would be appropriate to reproduce the relevant ground of appeal in the said case as under: "Ground No. 4:-Assessee humbly prays that the order dt. 16-3-2020 passed by Ld. Pr. CIT--3, Jaipur u/s 263 of Income-tax Act, 1961 and its operation may he stayed as assessee has already preferred IT appeal against order dt. 26-12-2017 passed by ld. A0 u/s 143(3) and such appeal (IT No. 568/17-18) is being listed and pending hearing before ld. CIT(A)-3, Jaipur. It is further prayed that necessary order may be issued to ld. Pr. CIT-3, Jaipur and Dy. CIT, Circle -7, Jaipur." On page 19/20 of the above referred order, it has been held by the Coordinate Bench of the Tribunal that: "We had considered the said objection raised by the assessee before us. We are conscious of the fact that in respect of arguments of the assessee to the effect that he has already filed income tux appeal before the ld. CIT(A) against the order of the assessment dated 26/12/2017 and the entire issue was at large now before the Appellate Commissioner and that the ld. CIT(A) while hearing the assessee's appeal has power to enhance the assessment. If he was of the opinion that not only limited additions made by the A.O. but much larger additions were justified., then in that eventuality, he could have certainly exercised such powers by putting the assessee to notice. For ready reference, we reproduce clause (c) of Explanation 1 of section 263 of the Act as under: "263(1) (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal [filed on or before or after the 1st day of June, 1988], the powers of the [Principal Commissioner or] Commissioner under this sub-section shall extend [and shall he deemed always to have extended] to such matters as had not been considered and decided in such appeal.]" From the above proposition of law, we noticed that the power of ld. Pr.CIT or the ld. CIT under the provisions of Section 263 shall extend to such matters as had Page | 31 ITA No.121/RJT/2022 Prakashbhai G. Togadiya not been considered and decided in such appeal. Admittedly, the appeal filed by the assessee against the order of the assessment passed u/s 143(3) dated 26/12/2017 has so far not been considered or decided by the ld. CIT(A), therefore, the objection of the assessee that no proceeding u/s 263 of the Act can be initiated or taken when the appeal is pending before the ld CIT(A), is not sustainable and is thus, rejected." Thus, considering the entirety of facts and circumstances of the case and the discussions made above by us (supra), we are of the view that the ld. PCIT was well within his rights to invoke provisions of Section 263 of the Act under the facts of the present case. Thus, this ground of appeal raised by the assessee stands dismissed” 25. From the above judgment of Hon’ble Supreme Court in the case of Shri Arbuda Mills Ltd(supra) and the Decision of Coordinate Bench of ITAT Jaipur in the case of JR Industries(supra), it is vivid that theintention of the legislature in the Income Tax Act 1961, is that even during the pendency of appeal before CIT(A), the PCIT can assume jurisdiction u/s 263 of the Act. Further, in view of the Explanation (c) to section 263(1) of the Act, the PCIT can assume jurisdiction u/s 263 of the Act in respect of the issues which have not been considered and decided by CIT(A). We also find that Explanation 1(c) to section 263 of the Act, clearly states and hence there is no ambiguity. The consequence of the said amendment made with retrospective effect is that the powers under section 263 of the Commissioner shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in an appeal. We note that before us, Ld counsel for the assessee, submitted form No. 35, filed before the ld. CIT appeal and also stated that Ld. CIT(A) has not adjudicated and decided the assessee`s appeal yet, therefore, Ld. PCIT can exercise the jurisdiction under section 263 of the Act. Besides, in the assessee`s case the ld PCIT has exercised jurisdiction under and 263 of the Act, on that part of the addition, which has not been made by the assessing officer. The PCIT himself has stated in his order that he has exercised his jurisdiction, on that part of the addition which has not been made by the assessing officer deliberately. Therefore, the Page | 32 ITA No.121/RJT/2022 Prakashbhai G. Togadiya plea taken by the ld Counsel for the assessee that no proceeding u/s 263 of the Act, can be initiated or taken when the appeal is pending before the ld CIT(A), is not sustainable and therefore, we reject the same. Hence, considering the above facts and circumstances, we hold that Ld. PCIT has rightly exercised his jurisdiction under section 263 of the Act, hence, we dismiss the appeal of the assessee. 26. In the result, the appeal filed by the assessee is dismissed. Order is pronounced in the open court on 25/06/2024 Sd/- Sd/- (DINESH MOHAN SINHA) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Rajkot TRUE COPY दनांक/ Date: 25/06/2024 Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr. CIT 5. DR/AR, ITAT, Rajkot 6. Guard File By Order Assistant Registrar/Sr. PS/PS ITAT, Rajkot