2001 (6) TMI 16 - HC - Income Tax

Summary

Issues Involved:
The judgment involves the exercise of revisional power u/s 263 of the Income-tax Act, 1961 by the Commissioner of Income-tax for the assessment year 1977-78, regarding the allowance of development rebate at a higher rate than deemed appropriate.

Revisional Power u/s 263:
The Commissioner exercised revisional power u/s 263 as he believed the Revenue's interests were prejudiced by the Income-tax Officer's order allowing development rebate at a rate higher than warranted. The Commissioner directed the Income-tax Officer to provide the assessee an opportunity to present further materials to establish eligibility for the rebate.

Contentions Before Tribunal:
The assessee contended before the Tribunal that the Commissioner should have accepted the material provided, specifically a report of the directors, and not referred the matter back to the Income-tax Officer. Additionally, the assessee argued that the order of assessment should be considered merged with the order under appeal, thus depriving the Commissioner of revisional jurisdiction.

Director's Report and Lack of Conclusive Evidence:
The directors' report submitted by the assessee did not definitively establish the dates of machinery installation or production commencement. The Commissioner requested a certificate under the Factories Act, which the assessee failed to produce. Consequently, the Commissioner directed the Income-tax Officer to allow the rebate based on eligible criteria after the assessee presented all relevant materials.

Merger of Orders and Tribunal's Decision:
The Tribunal rejected the assessee's claim of merger between the assessment order and the order under appeal, as the issue of development rebate was not raised before the Commissioner (Appeals). The Tribunal affirmed that the Commissioner acted within his jurisdiction and correctly exercised his power u/s 263. It was determined that no merger occurred, and the Tribunal's decision was upheld, finding prejudice to the Revenue's interests due to the Income-tax Officer's order.

Conclusion:
Ultimately, the High Court upheld the Tribunal's decision, ruling in favor of the Revenue and against the assessee. It was affirmed that the Commissioner acted lawfully and within his jurisdiction in exercising revisional power u/s 263 to rectify the prejudicial impact of the Income-tax Officer's order on the Revenue's interests.