2002 (7) TMI 49 - HC - Income Tax

Whether, on the facts and in the circumstances of the case, the Income tax Appellate Tribunal was right in law in holding that the Commissioner of Income-tax had no jurisdiction to pass an order under section 263 in view of the Karnataka High Court judgment in the case of CIT v. Hindustan Aeronautics Ltd., although the point involved was not the subject-matter of appeal? - In the present case, admittedly, the items relating to bad debts and deduction under section 80HHC of the Act were not the subject-matter of appeal before the Commissioner of income-tax (Appeals) and, therefore, the Commissioner of Income-tax was wholly within his jurisdiction to consider the same and give appropriate directions in that regard as has been done in the above case. - The question referred to us is therefore answered in the negative, i.e., against the assessee and in favour of the Revenue.

Summary

Issues:
Jurisdiction of Commissioner under section 263 of the Income-tax Act, 1961 based on a High Court judgment.

Analysis:
The case involved a question of law referred by the Income-tax Appellate Tribunal regarding the jurisdiction of the Commissioner of Income-tax under section 263 of the Income-tax Act, 1961. The assessee, a company deriving income from extracting iron ore, declared a loss for the assessment year 1983-84. The Assessing Officer completed the assessment, which was challenged by the assessee on various grounds, leading to an appeal before the Commissioner of Income-tax (Appeals) who remanded the matter for re-examination. Subsequently, the Commissioner of Income-tax invoked his power of suo motu revision under section 263 of the Act based on a claim for bad and doubtful debts and deduction under section 80HHC, which were not part of the appeal before the Commissioner of Income-tax (Appeals).

The Commissioner passed an order directing the Assessing Officer to reframe the assessment by disallowing the deductions claimed by the assessee. The assessee appealed this order before the Income-tax Appellate Tribunal, which set it aside citing a High Court judgment that limited the jurisdiction of the Commissioner under section 263. However, subsequent to the High Court judgment, Parliament had amended section 263 of the Act with retrospective effect, clarifying that the Commissioner's powers extended to matters not considered and decided in an appeal.

A Supreme Court judgment in the case of CIT v. Shri Arbuda Mills Ltd. further emphasized that the Commissioner's powers under section 263 would extend to matters not part of the appeal. In the present case, as the items of bad debts and deduction under section 80HHC were not the subject of the appeal before the Commissioner of Income-tax (Appeals), the Commissioner was within his jurisdiction to consider and give directions on these matters. Therefore, the question referred to the High Court was answered in the negative, against the assessee and in favor of the Revenue.

In conclusion, the High Court upheld the jurisdiction of the Commissioner under section 263 of the Income-tax Act, clarifying that the Commissioner's powers extended to matters not considered and decided in an appeal, as per the relevant amendments and judicial interpretations.