2006 (4) TMI 103 - HC - Income Tax

Summary

Issues:
1. Jurisdiction to revise assessment order under section 263 of the Income-tax Act, 1961 after full and final settlement of tax arrears under section 90 of the Finance (No. 2) Act, 1998.
2. Jurisdiction to revise initial assessment order rectified under section 154 of the Income-tax Act, 1961.

Analysis:

Issue 1:
The appellant, a company engaged in manufacturing, filed an appeal under section 260A of the Income-tax Act, 1961, challenging the order of the Income-tax Appellate Tribunal regarding the assessment year 1995-96. The appellant rectified the assessment under section 154 of the Act due to a mistake in depreciation calculation. Subsequently, the appellant availed the Kar Vivad Samadhan Scheme, 1998, settling the tax arrears under section 90 of the Scheme. The designated authority accepted the declaration as full and final settlement, issuing a certificate and settling the matter. Despite this settlement, the Commissioner of Income-tax sought to reopen the assessment under section 263 of the Act. The appellant argued against this action, stating that the rectified order should prevail after the settlement under the KVS Scheme. The High Court held that, post-settlement under the KVS Scheme, it was impermissible to revise the assessment order under section 263 of the Income-tax Act. The Court found that the Tribunal erred in holding otherwise, allowing the appeal on this ground.

Issue 2:
The Commissioner of Income-tax, in the impugned order, recalculated deductions under sections 80HH and 80-I based on the Assessing Officer's dissatisfaction with the assessee's explanation. The Commissioner did not find any concealment of information warranting action under section 263 or suggesting cancellation of the KVS Scheme declaration. The High Court, after considering the circumstances, determined that revising the assessment order under section 263 post-KVS Scheme settlement was impermissible. As a result, the Court did not delve into the second issue raised in the appeal. Consequently, the appeal was allowed based on the findings related to the first issue, with no costs imposed.

This detailed analysis of the judgment from the High Court of Madhya Pradesh highlights the key legal issues, the parties involved, the relevant legal provisions, and the Court's reasoning leading to the final decision in the case.