The court ruled that the Principal Commissioner of Income Tax improperly assumed jurisdiction under Section 263, as the issues had already been addressed in the original assessment, invoking the doctrine of merger.

ORDER :

BHARGAV D. KARIA, J.

ORDER IN SPECIAL CIVIL APPLICATIONS :-

1. Rule returnable forthwith. Learned Senior Standing Counsel Ms.Maithili Mehta waives service of Rule for the respondent.

2. Having regard to the controversy in narrow compass arising in these petitions, with the consent of the learned advocates appearing for the respective parties, the matters were taken up for hearing.

3. Heard learned advocate Ms.Shrunjal T.Shah for the petitioner and learned Senior Standing Counsel Ms.Maithili Mehta for the respondent.

4. By these two petitions under Articles 227 of the Constitution of India, the petitioner has challenged the order dated 30^th March, 2021 passed by the respondent no.1 under Section 263 of the Income Tax Act 1961 (For short ‘The Act) for Assessment Years 2012-13 and 2014-15.

5. The petitioner filed return of income for Assessment Year 2012-13 on 29/9/2012 declaring total income of Rs.2,82,34,740/-. The Assessing Officer passed Assessment Order under Section 143 (3) of the Act on 26-3-2015 accepting the return income as assessed income after complete scrutiny.

6. The petitioner filed return of income for Assessment Year 2014-15 on 31-12-2015 declaring total income of Rs.5,37,42,938/-. The Assessing Officer passed Assessment Order under Section 143 (3) of the Act on 19-12-2016 accepting the return income as the assessed income.

7. It is the case of the petitioner that subsequently, because of the search in the Venus Group, notice for reopening under Section 148 of the Act was issued by the respondent no.1. Thereafter, the Assessment Order was passed under Section 143 (3) read with Section 147 of the Act by making addition of Rs.7.50 crore for Assessment Year 2013-14 and for Rs. 3 crore for Assessment Year 2014-15 under Section 68 of the Act by order dated 29-12-2017.

8. It appears that the petitioner filed appeal before the CIT (Appeals) against the additions made by the Assessing Officer in re-assessment proceedings. The CIT (Appeals), by order dated 22/8/2019, deleted the additions. Being aggrieved, the petitioner has preferred the appeals before the Income Tax Appellate Tribunal, which are pending for adjudication. The respondent no.1 – The Principal Commissioner of Income Tax issued show-cause notices dated 19^th March 2021 for both the years to the petitioner to show cause as to why the order dated 29-12- 2017 passed under Section 143 (3) read with Section 147 of the Act, is not erroneous in so far as it is prejudicial to the interest of revenue under Section 263 of the Act and why disallowance under Section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 should not be made.

9. The petitioner filed reply dated 23^rd March, 2021 contending inter-alia that the show-cause notice is beyond the period of limitation from the date of the Assessment Order passed under Section 143 (3) of the Act as the issue of disallowance under Section 14A of the Act was already processed by the Assessing Officer in the regular assessment proceedings. It was further contended that the assuming for a while that the impugned show-cause notice was within the period of limitation, the CIT (Appeals) - the respondent no.1 could not have assumed the jurisdiction under Section 263 of the Act as it would amount to mere change of opinion. It was also contended that against the order passed by the Assessing Officer, the petitioner had preferred an appeal before the CIT (Appeals) and as such, the Assessment Order has merged with the order of the CIT (Appeals), more particularly when the order of the CIT (Appeals) is prior in point of time.

10. However, the respondent no.1 passed the impugned orders dated 29^th December, 2017 and dated 30^th March, 2021 holding that the Assessment Orders under Section 143 (3) of the Act read with Section 147 of the Act dated 29^th December, 2017 passed by the Assessing Officer is erroneous so far as it is prejudicial to the interest of the revenue as per the explanation 2 of Section 263 (1) of the Act as the