This article looks to answer a very specific legal question which arises when an Assessee, who has filed an appeal against an Assessment order, before the Commissioner of Income Tax (Appeals) (“CIT(A)”) but subsequently files an application for revision u/s 264 of the Income Tax Act, 1964 (“ITA”), thereafter, the Assessee has filed a withdrawal application before the concerned CIT(A) for the dismal of the appeal as withdrawn, which stands pending. Therefore, in light of the situation above the legal question that needs to be answered is: whether the 264 revision petition is maintainable and whether the revision petition be disposed of while the appeal u/s 249 of the ITA is pending disposal for the withdrawal of appeal?
The above query is examined in light of the provisions of the Income Tax Act, 1964; the Central card of Direct Taxation( “CBDT”) circulars; Case laws:-
ITA Extract
Section 264 :
264. Revision of other orders :
(1) In the case of any order other than an order to which section 263 applies passed by an authority subordinate to him, the Commissioner may, either of his own motion or on an application by the assessee for revision, call for the record of any proceeding under this Act in which any such order has been passed 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.
(2) The Commissioner shall not of his own motion revise any order under this section if the order has been made more than one year previously.
(3) In the case of an application for revision under this section by the assessee, the application must be made within one year from the date on which the order in question was communicated to him or the date on which he otherwise came to know of it, whichever is earlier: Provided that the Commissioner may, if he is satisfied that the assessee was prevented by sufficient cause from making the application within that period, admit an application made after the expiry of that period.
(4) The Commissioner shall not revise any order under this section in the following cases-
(a) where an appeal against the order lies to the 3 Deputy Commissioner (Appeals)] 4 or to the Commissioner (Appeals)] or to the Appellate Tribunal but has not been made and the time within which such appeal may be made has not expired or, in the case of an appeal to the Commissioner (Appeals) or] to the Appellate Tribunal, the assessee has not waived his right of appeal; or
(b) where the order is pending on an appeal before the Deputy Commissioner (Appeals)]; or
(c) where the order has been made the subject of an appeal to the Commissioner (Appeals) or] to the Appellate Tribunal.
(5) Every application by an assessee for revision under this section shall be accompanied by a fee of twenty- five rupees Explanation 1-An order by the Commissioner declining to interfere shall, for the purposes of this section, be deemed not to be an order prejudicial to the assessee. Explanation 2.- For the purposes of this section, the 5 Deputy Commissioner (Appeals)] shall be deemed to be an authority subordinate to the Commissioner. F.- General
Interpretation of relevant clauses :
The ITA prescribes that the Commissioner shall not revise any order u/s 264 if any of the following conditions are fulfilled :
When the the time limit for filing an appeal before the CIT(A) or ITAT has not expired or;
When the Assessee has filed an appeal before before the CIT(A) or ITAT but has not waived off his right of Appeal or;
Where the order is pending before the DCIT(A) or;
When the order has been made the subject of an appeal before the CIT(A) or ITAT
If the provisions of section 264(4) of the ITA are read in tandem, it is noticed that each condition are directions given to the commissioner processing the revision application, and the each condition is followed with the word - “or”. Thus the Assessee needs to ensure that it complies with or satisfies all the provisions of section 264(4) in order for the commissioner to successfully complete the revision.
At the outset it is clearly established that points number i) and iii) are not applicable or have been satisfied in the case of the Assessee. For the issue of points number ii) and iv) we will go deeper into the same along with relevant case laws and CBDT circulars in determining application of the same to the case at hand.
ii) WHEN THE ASSESSEE HAS FILED AN APPEAL BEFORE THE CIT(A) OR ITAT BUT HAS NOT WAIVED OFF HIS RIGHT OF APPEAL
In the instant case of the Assessee, the Assessee had filed an appeal before the CIT(A) and was pending disposal, when they filed a 264 application for revision. However, the Assessee had, in order to comply with the provisions of 264(4) of the ITA, also filed an application of withdrawal before the CIT(A) and is since pending disposal.
However, if the provision of 264(4)(a) and 264(4)(b) are read together the following conclusions can be made
That the in case an appeal has been filed, the Assessee only needs to waive the right of appeal which in the following case has been done vide application of withdrawal of appeal.
That 264(4)(b) explicitly restricts revisions of orders which are under pending appeal before the DCIT(A) but no such restriction is made for pending appeals before the CIT(A).
That the application of withdrawal of the appeal that was filed before the CIT(A) satisfies the condition laid under section 264(4)(a).
However to further understand and substantiate the above laid proposition, it is pertinent for one to look at the judicial approach towards the said issue.
JUDICIAL PRONOUNCEMENTS
Some of the judiciary pronouncements on the issues under section 264(4) are:-
The relevant para of the Division Bench of the Gujarat High Court’s judgement is reproduced : “9. In terms of clause (a) of sub-section (4) of section 264, revisional powers would not be exercised, inter alia, in a case 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, we find that the assessee had clearly made a choice to persuade the Commissioner of Income Tax to exercise his revisional powers under section 264 of the Act and not pursue his appeal before the Appellate Commissioner.”
2. Ajaypat Singhania vs Gift Tax Officer And Ors. on 13 January AIR 1964 All 557, 1964 52 ITR 780 All
The relevant para of the Allahabad High Court’s judgement is reproduced : “10. The learned Standing Counsel, however attempted to distinguish the Bombay case by saying that the revision to the Commissioner in the present case was filed simultaneously or earlier on the same day than the application for withdrawal before the Tribunal and therefore, at the point of time when the revision was filed an appeal was in fact pending and has not vet been withdrawn. To my mind this technicality makes little or no difference. It is true that the revision had already been filed before the Commissioner and later on the same day an application was moved before the Tribunal for permission to withdraw that appeal The fact that a Revision has been filed was brought to the notice of the Tribunal in the very application for withdrawal. No secret was made of it and the Tribunal knowing that, granted per-mission to withdraw the appeal. In any event on the day when the Commissioner came to decide the revision there was no appeal pending before the Tribunal and therefore rightly the Commissioner did not make any point of the fact that the revision was filed earlier on the same day when an application for withdrawal of the appeal had not yet been moved and much less granted by the Tribunal. The Commissioner dismissed the revision in limine on the short ground that as an appeal had once been filed to the Tribunal and even if it was permitted to be withdrawn by the Tribunal his jurisdiction to entertain the revision stood irrevocably barred The distinction sought to be drawn is in my judgment, a distinction without a difference.
11. Apart from authority I would also have been inclined to hold that the assessee had a right either to have his grievance ventilated and determined on merits by the Tribunal on appeal or by the Commissioner by way of revision The choice necessarily must be only that of the assessee and if he asks for permission to withdraw his appeal, filed before the Tribunal and that permission is granted there is a clear indication that he does not want his grievance ventilated and determined by the Tribunal but by the Commissioner. That right or choice cannot be denied to him on any technical or critical grounds So long as no decision has been given on the merits or even on the question of limitation by the Tribunal, the case cannot in my judgment be said to have formed the subject matter of an appeal to the Tribunal.”
3. Mr.Pallavarajha vs PCIT (Madras High Court)
In the Present case, Justice K.Ravichandrabaabu held that “ I have already pointed out that the very issue against the maintainability of the revision before the first respondent, having not been raised by the Revenue before the first respondent, the same cannot be raised now before this Court at first time.”
Therefore in effect, the Madras high court had held the issue of withdrawal of appeal and application of 264 revision petition in favour of the Assessee and stated that if the department had any issue with the dismissal of the appeal because of withdrawal application, the same needs to be contented before an appellate authority and not after the revision is disposed off.
Conclusion : With detailed reading and scrutiny of the following judgments it is held that the Assessee is allowed to follow a 264 revision application after application of the appeal withdrawal is duly filed before the Appellate authority, as the same constitutes as waiver of right of appeal and satisfies the condition precedent in section 264(4) of the ITA.
iii) When the order has been made the subject of an appeal before the CIT(A) or ITAT.
Section 264(4)(c) states - where the order has been made the subject of an appeal to the CIT(A) and ITAT the commissioner cannot revise such an order. In the instant case of the Assessee, the Assessee has filed a case before the CIT(A) against the assessment order, but subsequently filed an revision petition u/s 264 of the ITA seeking revision of the order. Therefore it is pertinent to understand what is the definition of the term “subject of an appeal”, to understand whether the Commissioner is restricted u/s 264(4) from revising the order.
In order to ascertain the answer to the above question it is pertinent for one to look at the CBDT circulars and the judicial approach towards the said issue.
CBDT CIRCULARS
Vide circular No 367 dt 26.7.’83, the CBDT clarified the scope of the expression ‘Subject of an appeal’ as used in u/s 264(4)(c). The aforesaid circular is reproduced as follows :
“Section 264(4)(c) if the Income-Tax Act, 1961, provides that the Commissioner shall not revise any order under that section where the order has been made the subject of an appeal to the Commissioner (Appeals) or to the Appellate Tribunal. A doubt has been raised whether in the following situations the order can be said to have been made ‘subject of an appeal’:
Where the appeal was withdrawn by the assessee and it was dismissed as such;
Where the appeal was dismissed on the ground that the appeal was incompetent;
Where the appeal was dismissed on ground of limitation.
b) The Board are of the view that the order cannot be said to have been made ‘subject of an appeal’ if the appeal has been disposed of by the Commissioner (Appeals) or the Appellate Tribunal, without passing an order under section 251(1) or 254(1) on merits.”
Therefore as per the above mentioned CBDT order, if the CIT(A) or the ITAT has not passed an order on merits u/s 251(1) or 254(1), then such an order cannot be said to be a subject to an appeal.
JUDICIAL PRONOUNCEMENTS
Ajaypat Singhania vs Gift Tax Officer And Ors. on 13 January AIR 1964 All 557, 1964 52 ITR 780 All
The relevant para of the Allahabad High Court’s judgement is reproduced : “Apart from authority I would also have been inclined to hold that the assessee had a right either to have his grievance ventilated and determined on merits by the Tribunal on appeal or by the Commissioner by way of revision. The choice necessarily must be only that of the assessee and if he asks for permission to withdraw his appeal filed before the Tribunal and that permission is granted there is a clear indication that he does not want his grievance ventilated and determined by the Tribunal but by the Commissioner. That right or choice cannot be denied to him on any technical or theoretical grounds. So long as no decision has been given on the merits or even on the question of limitation by the Tribunal, the case cannot, in my judgment, be said to have formed the subject matter of an appeal to the Tribunal.”
Conclusion : With detailed reading and scrutiny of the following CBDT circular and judgment it is held that if the CIT(A) or the ITAT has not passed an order on merits u/s 251(1) or 254(1), then such an order cannot be said to be subject to an appeal.
OPINON :
In light of the definitions covered above, CBDT circulars and judicial pronouncements, we are of the opinion :
That the Assessee has filed the 264 application only after the stated expiration of the appeal limitation period.
That the appeal is not pending before the DCIT(A).
That pending appeal before CIT(A) is not a bar for the commissioner for revising the order, as long as the Assessee has satisfactorily waived off his right of Appeal. This waiver can be observed through the letter for withdrawal of appeal filed before the CIT(A).
That as there is an express bar for revising orders for pending appeals before the DCIT(A), therefore, it can be argued that- as there is no such express provision for pending appeal before the CIT(A), there is no bar on revising such orders.
That only if an appeal order is passed on the merits, can the same be subjected to the provision of 264(4)(c). However, if no decision has been given on the merits or even on the question of limitation by the CIT(A), then the same cannot be said to have formed the subject matter of an appeal to the CIT(A) or the Tribunal.
Therefore, keeping the above conclusions in mind, it is opined that the Commissioner can revise the order as all the conditions stipulated u/s 264 have been satisfactorily met, even as the appeal is still pending before the CIT(A).
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