Revision u/s 263 of Income Tax Act not permissible on debatable issues: ITAT

It was submitted by ld A.R. of the assessed that the Pr. CIT, Bhubaneswar-1 has made adjustments to the prior period expenses, which had already been considered by the Assessing Officer and which was also the subject matter of appeal before the ld CIT(A). It was the submission that the Assessing Officer, in the course of original assessment proceedings, had made the addition of Rs.3,12,09,792/- in the form of disallowance of prior period expenses. It was the submission that the Pr. CIT had proposed to enhance the same to Rs.6,29,79,923/- by including accumulated depreciation in respect of earlier assessment years. It was the submission that the issue of prior period expenses itself was already in appeal before the Tribunal and the Pr. CIT after proposing this addition further goes on to say in para 7.4 that “ since the issue is already in appeal, he does not propose to go into the merit of the disallowance, which constitutes a matter to be adjudicated by the appellate authority”. It was the submission that it has been admitted by the Pr. CIT that the issue constitutes the matter to be adjudicated by the appellate authority. It was the submission that thus it is a clear admission that the issue is a debatable issue. It was the submission that the Co-ordinate Bench of this Tribunal in assessee’s own case in ITA No.49/CTK/2008 for the A.Y. 1991-92 order dated 12.6.2009 had following the decision of the Co-ordinate Bench in assessee’s own case for the assessment years 1988-89 & 1989-90, deleted the disallowance made under the head “prior period expenses” after giving specific direction. It was the submission that as the issue itself a debatable issue, the provisions of section 263 for the purpose of revision do not apply in the case of the assessee, of the issues for which the Pr. CIT has sought to revise.

Contention of Department

In reply, ld CIT DR vehemently supported the order of the Pr. CIT. It was the submission that the each assessment year is separate assessment year and that just because the issue has been decided in earlier year in favour of the assessee, it cannot be said that it is a law precedent for every year. It was the submission that the facts need to be verified. It was the submission that the issue was pending before the ld CIT(A) and the powers of the Pr. CIT for revision u/s.263 of the Act would be curtailed on the issue only if the ld CIT(A) had passed an order. During the pendency of the appeal before the ld CIT(A), the powers of the Pr. CIT to invoke the revision would not curtail. Ld CIT DR relied on the decision of the Co-ordinate Benches of the Kolkata Tribunal in the case of J.K.Tyre & Industries Ltd vs CIT (2012) 19 TAXMANN.COM 277 (Kol).

ITAT Order:

5. We have considered the rival submissions. At the outset, it is admitted by Pr. CIT that he is not going into the merits of the addition as the issue constitute a matter to be adjudicated by the appellate authority. Thus, it is clearly shows that the issue is a debatable issue and it is recognized by the Pr. CIT. On a debatable issue, admittedly, revision u/s.263 of the Act is not permissible. This being so, as the issue, as proposed by the pr. CIT, is a debatable issue, and as admitted by Pr. CIT in the impugned order, the order passed u/s.263 stands quashed. 

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