Rajkot People Co-Operative Bank Ltd., RAJKOT-GUJARAT V. The Pr. Commr. of Income Tax-1, RAJKOT-GUJARAT

ITA 98/RJT/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1283 (ITAT-RAJKOT)
• Duration Of Justice: 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-05-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 23-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DM RINDANI
• Keywords: Revision of order; Earning of tax free income
• Section: 143(3); 14A; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT [CONDUCTED THROUGH E - COURT AT AHMEDABAD] BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ ITA NO. 98 / RJT /20 16 / ASSESSMENT YEAR: 2011 - 12 RAJKOT PEOPLE CO - OPERATIVE BANK LIMITED, SABHSAD BHAVAN, 1 - MANHAR PLOT, GONDAL ROAD, RAJKOT PAN : AAAAR 0526 P VS THE PRINCIPAL COMMISSIONER OF INCOME - TAX - 1, RAJKOT / (APPELLANT) / (RESPONDENT) ASSESSEE(S) BY : SHRI D.M. RINDANI, CA REVENUE BY : SHRI YOGESH PANDEY, CIT - DR / DATE OF HEARING : 16 / 0 5 /201 6 / DATE OF PRONOUNCEMENT: 18 / 0 5 /201 6 / O R D E R PER KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE PRINCIPAL COMMISSIONER OF INCOME - TAX, RAJKOT - 1, RAJKOT , DATED 26.02.2016 PERTAINING TO ASSESSMENT YEAR 2011 - 12 CHALLENGING THE ACTION OF LD. PRINCIPAL CIT IN INVOKING THE PROVISIONS OF SECTION 263 OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1 . THE LEARNED COMMISSIONER OF INCOME TAX, RAJKOT - 1, RAJKOT ERRED IN ASSUMING JURISDIC TION U/S 263 OF THE ACT, PARTICULARLY IN THE LIGHT OF REASONS STATED BY HIM IN THE SHOW CAUSE NOTICE AND THE ORDER PASSED U/S 263 OF THE ACT AND HENCE THE IMPUGNED ORDER IS BAD IN LAW. 2 . THE LEARNED COMMISSIONER OF INCOME TAX, RAJKOT - 1, RAJKOT ALSO ERRED IN RAISING THE ISSUE OF DISALLOWANCE U/S 14A WHEN THE DISALLOWANCE ALREADY MADE BY THE ASSESSING OFFICER WAS SUBJECT MATTER OF APPEAL. ITA NO. 98/RJT/ 2016 RAJKOT PEOPLE CO - OP BANK LTD VS. PR. CIT FOR AY 2011 - 12 2 3 . THE LEARNED COMMISSIONER OF INCOME TAX, RAJKOT - 1, RAJKOT ERRED IN DIRECTING THE ASSESSING OFFICER TO MAKE FRESH ASSESSMENT AS PER LAW WHEN THE A.O. HAD DEALT WITH THE ISSUE OF SEC. 14A WHILE ASSESSING THE INCOME OF THE APPELLANT U/S 143(3) OF THE ACT. 4 . ON MERITS, THE LEARNED COMMISSIONER OF INCOME TAX, RAJKOT - 1, ERRED IN DIRECTING THE A.O. TO RE - COMPUTE DISALLOWANCE U/S 14A AS PER RULE 8D BY TAKING INTEREST EXPENSES AT RS.4,62,71,974/ - AND FAILING TO APPRECIATE THAT INTEREST - FREE FUNDS EXCEEDED THE INVESTMENT. 3. ALL THESE GROUNDS ARE INTERCONNECTED AND ARE AGAINST THE DECISION OF LD. PRI. CIT IN REVISING THE ASSESSMENT BY INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT. 4. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND ASSESSMENT U/S 143(3) OF THE INCOME - TAX ACT WAS FRAMED VIDE ORDER DATED 04.12.2013 A SSESSING THE INCOME OF THE ASSESSEE AT RS.1,97,63,737/ - AGAINST THE RETURNED INCOME OF RS.1,85,13,320/ - . WHILE FRAMING THE ASSESSMENT, THE ASSESSING OFFICER MADE ADDITION OF RS.2,00,637/ - BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT. SUBSEQUENTLY , THE LD. PR. CIT ISSUED A SHOW - CAUSE NOTICE DATED 22.12.2015 CALLING UPON THE ASSESSEE AS TO WHY THE ASSESSMENT FRAMED BY THE ASSESSING OFFICER BE NOT REVISED ON THE GROUND THAT THE ENTIRE INTEREST EXPENDITURE OF RS.4,62,71,974/ - SHOULD HAVE BEEN CONSIDER ED FOR A DISALLOWANCE AS AGAINST THE INTEREST EXPENSES OF RS.20,150/ - CONSIDERED BY THE ASSESSING OFFICER AND THE LD. PRI. CIT, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CANCELLED THE ASSESSMENT ORDER AND DIRECTED THE ASSESSING OFFICER TO MAKE A F RESH ASSESSMENT. THE ASSESSEE, AGGRIEVED BY THE ORDER OF THE LD. PRI. CIT, HAS PREFERRED THE PRESENT APPEAL. ITA NO. 98/RJT/ 2016 RAJKOT PEOPLE CO - OP BANK LTD VS. PR. CIT FOR AY 2011 - 12 3 5. THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE LD. PRI. CIT WAS NOT JUSTIFIED IN CANCELLING THE ASSESSMENT ORDER. HE SUBMITTED THAT THE ASSESSING OFFICER HAD ISSUED REQUISITE QUESTIONNAIRE AND EXAMINED THE ISSUE IN QUESTION IN DETAIL. IN SUPPORT OF THIS CONTENTION, HE DREW OUR ATTENTION TO PAGE NOS. 19 TO 21 OF THE PAPER - BOOK AND ALSO PAGES 22 AND 27, WHERE THE ASSESSEE HAD RESP ONDED TO THE QUERIES OF THE ASSESSING OFFICER. HE ALSO DREW OUR ATTENTION TO PAGE NO.25, WHEREIN IN PARAGRAPH 3 OF THE LETTER DATED 22.10.2013 A SPECIFIC REPLY IS SUBMITTED. HE FURTHER SUBMITTED THAT EVEN OTHERWISE ALSO THE ORDER IS NOT MAINTAINABLE AS T HE ASSESSEE HAS CHALLENGED THE ADDITION BEFORE THE LD. CIT(A) AGAINST THE ADDITION MADE BY THE ASSESSING OFFICER IN ORIGINAL PROCEEDINGS. THE LD. COUNSEL SUBMITTED THAT THE LD. CIT(A) IN ORIGINAL PROCEEDINGS HAS ALSO EXAMINED THE ISSUE IN RESPECT OF DISALL OWANCE U/S 14A OF THE ACT. UNDER THESE FACTS, HE SUBMITTED THAT THE LD. PRI. CIT WAS NOT JUSTIFIED IN REVISING THE ASSESSMENT ORDER. HE FURTHER SUBMITTED THAT THE PRECONDITIONS REQUIRED FOR INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT ARE NOT SATISF IED IN THE PRESENT CASE. THE LD. COUNSEL ALSO SUBMITTED THAT THE ASSESSEE BEING COMPANY HAS BOTH INTEREST INCOME AS WELL AS INTEREST EXPENDITURE. HE FURTHER SUBMITTED THAT THE LAW IS WELL SETTLED WHEN THE ASSESSEE HAS BOTH INTEREST EXPENDITURE AND THE INT EREST INCOME, NETTING OF THE SAME IS REQUIRED TO BE MADE BY THE ASSESSING OFFICER WHILE CONSIDERING THE DISALLOWANCE OF THE INTEREST EXPENDITURE. THE LD. COUNSEL ALSO SUBMITTED THAT THE OBSERVATIONS OF THE LD. PRI. CIT ARE MISCONCEIVED AND ARE CONTRARY TO THE SETTLED POSITION OF LAW. ITA NO. 98/RJT/ 2016 RAJKOT PEOPLE CO - OP BANK LTD VS. PR. CIT FOR AY 2011 - 12 4 6. ON THE CONTRARY, LD. CIT - DR REITERATED THE SUBMISSIONS AS WERE MADE IN THE WRITTEN SUBMISSIONS DATED 16.05.2016 . THE CONTENTS OF THE WRITTEN SUBMISSIONS ARE REPRODUCED HEREIN BELOW: - 1. ASSESSEE HAS RELIED ON THE DECISION IN CASE OF CIT V. HDFC BANK LTD. (2014) 366 ITR 505(BOM - HC). THIS DECISION IS BASED ON THE PRINCIPLE, THAT IF THERE WERE BOTH FUNDS AVAILABLE, INTEREST - FREE AND OVER DRAFT AND/OR LOANS TAKEN, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF THE INTEREST - FREE FUNDS GENERATED OR AVAILABLE WITH THE COMPANY IF THE INTEREST - FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENT. 2. THE ABO VE PRINCIPLE DOES NOT HOLD GOOD IF THE INTEREST - FREE FUNDS ARE NOT SUFFICIENT TO MEET THE INVESTMENT AS IS APPARENT IN PRESENT CASE AS UNDER. 2.1 THE BALANCE SHEET OF THE ASSESSEE SHOWS THAT INTEREST FREE FUNDS INCLUDE 'CAPITAL', 'RESERVES AND SURPLUS', ' PROFIT OF CURRENT YEAR'. THE CAPITAL FUND INTRODUCED DURING THE YEAR WAS RS 227.7 LAKH - RS 199 LAKH = RS 28.7 LAKH. THE 'RESERVES AND SURPLUS' INCREASED BY R S . 14.4 CRORE - RS.12.89 CRORE = RS 1.51 CRORE AND THE CURRENT YEAR SURPLUS WAS RS 63.92 LAKH AS P ER SCHEDULE - 2 OF THE BALANCE SHEET(PAGE 38 OF THE PAPER BOOK). THE TOTAL AVAILABILITY OF INTEREST FREE FUND DURING THE YEAR WAS RS 2.44 CRORE. THE INVESTMENT MADE IN RELIANCE MUTUAL FUND, DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2011 - 12, WA S RS 4 CRORE. THEREFORE, THE INTEREST - FREE FUNDS ARE NOT SUFFICIENT TO MEET THE INVESTMENT AND THEREFORE THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT WILL NOT APPLY IN PRESENT CASE. 2.2 ASSESSEE HAS ARGUED THAT THE ACCUMULATED BALANCES OF INTEREST FREE FUNDS 'CAPITAL' AND 'RESERVES AND SURPLUS' OF RS. 2.27 CRORE AND RS. 14.4 CRORE RESPECTIVELY ALONG WITH THE CURRENT YEAR PROFIT OF RS 63.92 LAKH HAVE BEEN USED FOR CURRENT YEAR INVESTME NT. EVEN IN THAT CASE, IT IS NOT POSSIBLE TO LEAVE ASIDE THE INVESTMENT MADE IN 'GOVT. SECURITIES' OF RS. 27.4 CRORE AND INVESTMENT MADE IN SHARES OF COOPERATIVE BANKS AND IFFCO OF RS. 2.53 CRORE (AS PER SCHEDULE - 8 OF THE BALANCE SHEET PAGE 40 OF THE PAPER BOOK) AND ONLY CONSIDER THE INVESTMENT OF RS 4 CRORE IN CASE OF RELIANCE MUTUAL FUND, ADDED DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2011 - 12. IN FACT THE TOTAL ACCUMULATED INVESTMENT IN RELIANCE MUTUAL FUND IS RS 6 CRORE. THEREFORE, EVEN O N ACCUMULATED BALANCE ANALYSIS, THE INTEREST FREE FUNDS AVAILABLE ARE RS. 17.31 CRORE WHEREAS THE INVESTMENT IS RS. 33.65 CRORE. EVEN IF IT IS ARGUED THAT SOME OF THE ITA NO. 98/RJT/ 2016 RAJKOT PEOPLE CO - OP BANK LTD VS. PR. CIT FOR AY 2011 - 12 5 INVESTMENT IN GOVT. SECURITIES UNDER THE CATEGORY, AVAILABLE FOR SALE (AFS) IS IN THE NAT URE OF STOCK IN TRADE, STILL THIS INVESTMENT IS ONLY RS 10.41 CRORE AND THE BALANCE RS 17 CRORE INVESTMENT IN HELD TILL MATURITY (HTM) IS AN INVESTMENT IN SPIRIT AND NOT ONLY BY NOMENCLATURE (PAGE 26 OF THE PAPER BOOK). THAT WOULD STILL MAKE THE ACCUMULATE D INVESTMENT OF RS 23.24 CRORE MORE THAN THE TOTAL OF ACCUMULATED INTEREST FREE FUNDS OF RS 17.31 CRORE. THEREFORE, THE INTEREST - FREE FUNDS ARE NOT SUFFICIENT TO MEET THE INVESTMENT AND THEREFORE THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT WILL NOT APPLY IN PRESENT CASE. THE PRESUMPTION IN CASE OF CIT V. HDFC BANK LTD. (2014) 366 ITR 505 IS APPLICATION OF INTEREST FREE FUNDS TOWARDS INVESTMENT AND THAT INVESTMENT INCLUDES BOTH TAXABLE INCOME INVESTMENT AS WELL AS TAX FREE INCOME INVESTMENT. ASSESSEE HAS INCOR RECTLY APPLIED THIS JUDGMENT BY EXCLUDING THE TAXABLE INCOME INVESTMENT AND BY INCLUDING ONLY TAX FREE INVESTMENT OF RS 4 CRORE IN RELIANCE MUTUAL FUND DURING THE YEAR OUT OF TOTAL INVESTMENT OF RS 33.65 CRORE. 2.3. IN NUTSHELL, ASSESSEE DID NOT HAVE SUFFICIENT INTEREST FREE FUNDS TO FUND FOR THE PURCHASE OF RELIANCE MUTUAL FUND, DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2011 - 12. THEREFORE, THE INTEREST BEARING FUNDS 'DEPOSITS' WERE ALSO USED TO FUND THIS INVESTMENT. ONCE IT IS ESTABLISH ED THAT SOME PART OF THE INTEREST BEARING FUNDS WERE ALSO USED FOR INVESTMENT IN RELIANCE MUTUAL FUND, THE INTEREST EXPENDITURE ON THIS FUND HAS TO BE CONSIDERED IN THE ESTIMATION PRESCRIBED IN RULE 8D OF THE I.T. RULES. 3. THE ERROR COMMITTED BY THE ASSE SSING OFFICER IN NOT CONSIDERING THE CORRECT INTEREST EXPENDITURE IN THE CALCULATION OF INTEREST ESTIMATED TO BE INCURRED FOR EARNING EXEMPT INCOME U/S 14A RWR 8D, IS PREJUDICIAL TO THE INTEREST OF REVENUE. THE ORDER OF CIT MAY BE CONFIRMED. 6.1 THE LD. CIT - DR SUBMITTED THAT THE LAW DOES NOT ENVISAGE THAT THE INVESTMENTS RELATED TO THE EXEMPT INCOME ARE TO BE CONSIDERED WHILE POINTING OUT THE AVAILABILITY OF INTEREST FREE FUNDS. HE SUBMITTED THAT THE PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT O F THE INTEREST - FREE FUNDS GENERATED OR AVAILABLE WITH THE COMPANY IF THE INTEREST - FREE FUNDS ARE SUFFICIENT TO MEET THE INVESTMENT. HE ALSO SUBMITTED THAT THE TOTAL AVAILABILITY OF INTEREST - FREE FUND S WITH THE ASSESSEE WAS RS 2.44 CRORE ; WHEREAS THE ASSES SEE HAD MADE INVESTMENTS IN RELIANCE MUTUAL ITA NO. 98/RJT/ 2016 RAJKOT PEOPLE CO - OP BANK LTD VS. PR. CIT FOR AY 2011 - 12 6 FUND AMOUNTING TO RS 4 CRORE. THEREFORE, HE SUBMITTED THAT THE ASSESSEE WAS NOT HAVING THE SUFFICIENT INTEREST - FREE FUNDS TO COVER THE INVESTMENTS MADE BY THE ASSESSEE. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. THE UNDISPUTED FACTS EMERGES FROM THE RECORD ARE THAT THE ASSESSING OFFICER COMPUTED THE DISALLOWANCE U/S 14A IN ORIGINAL PROCEEDINGS AT RS. 2,00,637/ - AND THE SAME WAS CONFIRMED BY THE LD. CIT(A). DURING THE CO URSE OF HEARING, LD. COUNSEL FOR THE ASSESSEE RAISED A LEGAL ISSUE, I.E., WHETHER THE LD. CIT WAS JUSTIFIED IN PROCEEDINGS U/S 263 OF THE ACT WHEN THE VERY ASSESSMENT ORDER WAS UNDER CHALLENGE BEFORE THE LD. CIT(A). IT IS POINTED OUT BY THE LD. COUNSEL FO R THE ASSESSEE THAT THE IMPUGNED ORDER U/S 263 WAS PASSED ON 26.02.2016, WHILE THE LD. CIT(A) HAD DECIDED THE ISSUE VIDE ORDER DATED 20.02.2015, I.E., NEARLY ONE YEAR PRIOR TO THE IMPUGNED ORDER. IT IS PERTINENT TO NOTE HERE THAT NOTICE U/S 263 OF THE ACT WAS ISSUED ON 22.12.2015 AND THE APPEAL WAS INSTITUTED BY THE ASSESSEE BEFORE THE LD. CIT(A) ON 01.01.2014, MEANING THEREBY THE ISSUE OF DISALLOWANCE WAS PENDING CONSIDERATION BEFORE THE OFFICER OF THE SAME RANK AND THE ISSUE WAS DECIDED BY THE LD. CIT(A) PRIOR TO PASSING OF THE IMPUGNED ORDER. IT IS THE SETTLED POSITION OF LAW THAT THE ASSESSMENT ORDER MERGES WITH THE ORDER OF LD. CIT(A). NOW THE ISSUE TO BE EXAMINED IS WHETHER THE LD. CIT CAN REVISE THE ASSESSMENT ORDER WHEN THE SAME ASSESSMENT ORDER I S ALREADY MERGED WITH THE ORDER OF LD. CIT(A). THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE LD. CIT(A) HAS CO - TERMINUS POWER WITH THE ASSESSING OFFICER AND HE IS ALSO EMPOWERED TO ENHANCE THE ADDITION IF HE FINDS SO. IN A SIMILAR SET OF CIRCUMSTAN CES, THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. K. SERA SERA ITA NO. 98/RJT/ 2016 RAJKOT PEOPLE CO - OP BANK LTD VS. PR. CIT FOR AY 2011 - 12 7 PRODUCTIONS VS. CIT IN ITA NO.3024/MUM/2012 FOR AY 2006 - 07 HAS HELD AS UNDER: - 20. A SIMILAR VIEW HAS ALSO BEEN TAKEN BY THE ITAT MUMBAI BENCH IN THE CASE OF MARICO INDUSTRIES LTD. (SUPRA), WHEREIN IT WAS HELD THAT CIT HAD NO POWER TO ASSUME JURISDICTION IN RESPECT OF MATTER COVERED IN APPEAL AS THE ORDER OF AO HAD MERGED WITH THE ORDER OF CIT(A). 21. IN VIEW OF THE ABOVE DISCUSSIONS, WE HOLD THAT THE CONTENTION OF THE LD. DR HA S NO MERIT THAT CIT(A) HAD NOT CONSIDERED THE PROVISIONS OF RULE 9A IN ENTIRETY AND, THEREFORE, IT CANNOT BE SAID THAT THE ORDER OF THE AO HAD MERGED WITH THE ORDER OF THE LD. CIT(A). ON THE OTHER HAND, THE DECISIONS CITED HEREINABOVE AND CONSIDERING THE F ACT THAT AO AS WELL AS LD. CIT(A) HAD CONSIDERED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/R 9A OF I.T. RULES. HENCE THE LD. CIT IN HIS REVISIONARY JURISDICTION U/S 263 OF THE ACT CANNOT EXERCISE HIS JURISDICTION IN VIEW OF CLAUSE (C) OF EXPLANATION TO SEC . 263(1) OF THE ACT. ACCORDINGLY ON THAT VERY GROUND THE ORDER OF LD. CIT IS LIABLE TO BE QUASHED. 22. DURING THE COURSE OF HEARING, LD. A.R. ALSO SUBMITTED THAT THE CIT HAS CONSIDERED TWO OTHER POINTS WHILE GIVING DIRECTIONS TO THE AO TO MAKE FRESH ASSESS MENT ORDER I.E. (A) WHETHER ASSESSEE SOLD ITS SHARES OF THEATRICAL RIGHTS IN THE FILM FOR RS. 25 LACS AND TO EXAMINE WHETHER THE CLAIM OF ASSESSEE IS ACCEPTED OR NOT, AND (B) WHETHER REVENUE ACCRUED TO THE ASSESSEE RECEIVED FROM M/S SAHARA ON SALE OF ITS S HARE IN FILM IS TAXABLE AS REVENUE RECEIPT IN CURRENT YEAR OR NOT. SINCE THESE ISSUES ARE OUTSIDE THE SHOW CAUSE NOTICE ISSUED BY THE LD. CIT U/S 263 OF THE ACT, THE SAID DIRECTION OF THE LD. CIT TO THE AO COULD NOT FORM THE BASIS OF REVISION OF THE ASSESS MENT ORDER. TO SUBSTANTIATE HIS SUBMISSION THE LD. A.R. REPLACED RELIANCE ON THE DECISION OF ITAT KOLKATA BENCH IN I.T.A. NO. 890/K/10 DATED 29 - 12 - 2011 IN RESPECT OF VIPER ASSOCIATES & INVESTMENTS (P.) LTD. (SUPRA), AND THE DECISION OF THE ITAT MUMBAI BENC H IN THE CASE OF GEOMETRIC SOFTWARE SOLUTIONS CO. LTD. (SUPRA). WE AGREE WITH THE ABOVE CONTENTION OF THE ASSESSEE THAT LD. CIT IN HIS REVISIONAL PROCEEDINGS CANNOT TRAVEL BEYOND REASONS GIVEN BY HIM FOR REVISION IN SHOW CAUSE NOTICE ISSUED U/S 263 OF THE ACT. SIMILAR VIEW HAS ALSO BEEN TAKEN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. CONTIMETERS ELECTRICALS (P.) LTD. [2009] 31 7 ITR 249 , WHEREIN IT WAS HELD THAT TRIBUNAL WAS RIGHT IN HOLDING THAT COMMISSIONER DID NOT EVEN CALL FOR ANY EXPLANATION OF THE ASSESSEE AND THE ISSUE OF FULFILLMENT OF THE CONDITION U/S 80IA HAD NOT BEEN PART OF THE SHOW CAUSE NOTICE, THEREFORE, IT COUL D NOT FORM THE BASIS OF REVISION OF THE ASSESSMENT ORDER U/S 263 OF THE ACT. ITA NO. 98/RJT/ 2016 RAJKOT PEOPLE CO - OP BANK LTD VS. PR. CIT FOR AY 2011 - 12 8 23. BE THAT AS IT MAY, WE HAVE HELD THAT THE LD. CIT HAS NOT EXERCISED HIS REVISIONAL JURISDICTION U/S 263 OF THE ACT IN RESPECT OF ALLOWABILITY OF CLAIM OF PRODUCTION OF FILM IN THE CONTEXT OF RULE 9A OF I.T. RULES VALIDLY AS THE ASSESSMENT ORDER ON THIS ISSUE HAD ALREADY BEEN MERGED WITH THE ORDER OF LD. CIT(A) DATED 12 - 10 - 2011 MUCH BEFORE ISSUE OF SHOW CAUSE NOTICE DATED 19 - 3 - 2012 TO ASSUME JURISDICTION U/S 263 OF THE ACT, THERE FORE, WE HOLD THAT THE ORDER OF LD. CIT DATED 29 - 3 - 2012 IS LIABLE TO BE VACATED. HENCE THE APPEAL OF THE ASSESSEE IS ALLOWED BY QUASHING THE ORDER OF LD. CIT DATED 29 - 3 - 2012 PASSED U/S 263 OF THE ACT. 8 . RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORD INATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. K. SERA SERA PRODUCTIONS (SUPRA ), WE HOLD THAT THE JURISDICTION ASSUMED U/S 263 OF THE ACT IS ERRONEOUS ON TH E GROUND THAT THE ORDER OF THE ASSESSING OFFICER HAS MERGED WITH THE ORDER OF THE CIT (A) AND THE CIT HAS NO JURISDICTION TO REVISE U/S 263 OF THE ACT. MOREOVER, AS PER CLAUSE (C) TO EXPLANATION 1 TO SECTION 263(1) OF THE ACT, THE LD. CIT IS PRECLUDED FROM ENTERING INTO ISSUES WHICH ARE ALREADY IN APPEAL BEFORE LD. CIT(A). ADMITTEDLY, IN THE PRESENT CASE, THE ISSUE OF DISALLOWANCE UNDER SECTION 14A OF THE ACT WAS BEFORE THE LD. CIT(A); THEREFORE, THE LD. CIT WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT. 9 . THE OTHER ASPECTS INVOLVED IN THIS APPEAL ARE NOT BEING ADJUDICATED SEPARATELY AS WE HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 10 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 1 8 T H MAY , 2016 AT AHMEDABAD. SD/ - SD/ - N.K. BILLAIYA (ACCOUNTANT MEMBER) KUL BHARAT ( JUDICIAL MEMBER ) AHMEDABAD; DATED 1 8 / 0 5 /201 6 BIJU T., PS ITA NO. 98/RJT/ 2016 RAJKOT PEOPLE CO - OP BANK LTD VS. PR. CIT FOR AY 2011 - 12 9 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , / DR, ITAT, RAJKOT 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, RAJKOT