2010 (10) TMI 1052 - HC - Income Tax

Whether the Income Tax Appellate Tribunal is justified in cancelling the order of Commissioner of Income Tax passed under Section 263 of the Income Tax Act, 1961 ? - Held that - In the present case, there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings which would show that the relief under Section 80 HHC was erroneous. In such a case, the A.O. while passing the assessment order under Section 153A read with Section 143(3) could not have disturbed the assessment order finalised on 29.12.2000 relating to Section 80 HHC deduction and consequently the C.I.T. could not have invoked jurisdiction under Section 263 of the Act. In the facts of the present case, no fault could be found with the A.O. in giving effect to the order of CIT (A). Consequently, the CIT could not invoke jurisdiction under Section 263 of the Income-tax Act on the ground that the assessment under Section 153A read with Section 143 (3) was erroneous or prejudicial to the interests of revenue. Thus decision of the Tribunal in quashing the order of C.I.T. passed under Section 263 of the I.T. Act cannot be faulted. Appeal dismissed.

Summary

Issues:
1. Justification of canceling the order of Commissioner of Income Tax under Section 263 of the Income Tax Act by the Income Tax Appellate Tribunal.

Analysis:
The judgment revolves around the primary issue of whether the Income Tax Appellate Tribunal was correct in canceling the order of the Commissioner of Income Tax passed under Section 263 of the Income Tax Act. The case pertains to the assessment year 1998-99, where the initial assessment order determined a loss of Rs. 43,02,246. Subsequently, a search action led to the Assessing Officer determining concealed income at Rs. 89,19,477. The Commissioner of Income Tax (A) later deleted the concealed income, restoring the total income at the original loss amount. However, the Commissioner of Income Tax invoked Section 263, contending errors in computation under Section 115JA and Section 80HHC of the IT Act in the assessment order passed under Section 153A. The Income Tax Appellate Tribunal set aside the Commissioner's order, leading to the present appeal by the revenue.

The crux of the matter lies in the interpretation of Section 153A of the Income-tax Act. The court delves into the legislative intent behind the introduction of Sections 153A, 153B, and 153C by the Finance Act, 2003, to streamline assessment/reassessment procedures in search cases. Section 153A mandates the Assessing Officer to issue notices for six preceding assessment years post a search or requisition. The court clarifies that finalized assessments/reassessments do not abate under Section 153A, as confirmed by CBDT circular No. 8 of 2003. In the present case, the assessment for 1998-99 was finalized before the search, thus not impacted by Section 153A.

Further, the court emphasizes that once an assessment attains finality, deductions allowed and losses computed also gain finality. In absence of new evidence contradicting prior reliefs, the Assessing Officer cannot disturb finalized assessments during Section 153A proceedings. The court finds no material suggesting errors in the Section 80HHC deduction, thereby invalidating the Commissioner's invocation of Section 263. Additionally, since the concealed income addition was deleted without directions on computing book profits, the Assessing Officer was bound to adhere to the Commissioner's order, precluding jurisdiction under Section 263.

In conclusion, the court dismisses the appeal, upholding the Tribunal's decision to quash the Commissioner's order under Section 263. The judgment underscores the importance of adhering to statutory provisions and finalized assessments, barring unwarranted interference based on unsubstantiated claims of errors in deductions or income computations.