1998 (8) TMI 39 - HC - Income Tax

Summary

Issues Involved:
The judgment addresses three questions referred to the court, one by the Revenue and two by the assessee, regarding the jurisdiction of the Commissioner of Income-tax under section 263 of the Income-tax Act for the assessment year 1978-79.

Question 1:
The first question raised by the Revenue was whether the Appellate Tribunal was correct in holding that the original assessment order merged with the appellate order of the Commissioner of Income-tax (Appeals), thus precluding the Commissioner's jurisdiction under section 263 of the Income-tax Act.

The court referred to the Supreme Court case of CIT v. Shri Arbuda Mills Ltd. [1998] 231 ITR 50, which established that the Commissioner can exercise revisional powers under section 263(1) even if the original assessments were not affected. Since the matter sought to be revised was not the subject of the appeal, the court ruled in favor of the Revenue and against the assessee on this question.

Question 2:
The second question raised by the assessee was whether the Commissioner had jurisdiction to revise the assessment, even though it was made in accordance with the directions of the Inspecting Assistant Commissioner under section 144B of the Act, and whether dropping proceedings under section 147 affected this jurisdiction.

Referring to the case of CIT v. V.V.A. Shanmugham [1999] 236 ITR 878 (Mad), the court held that the Commissioner indeed had the jurisdiction to revise the Income-tax Officer's order, even if the initial assessment was made as per the Inspecting Assistant Commissioner's directions. Therefore, the court answered this question in favor of the Revenue and against the assessee.

Question 3:
The third question involved whether dropping proceedings under section 147 constituted an order of reassessment, thereby affecting the Commissioner's jurisdiction under section 263.

The court agreed with the Tribunal's decision that dropping proceedings did not amount to reassessment. Therefore, the Commissioner retained jurisdiction to revise the original assessment order under section 263(2)(a) of the Act. The court ruled against the assessee and in favor of the Revenue on this question, directing the Tribunal to examine the case's merits.

This judgment clarifies the Commissioner's revisional jurisdiction under section 263 of the Income-tax Act in various scenarios, providing guidance on the interpretation and application of relevant provisions.