2008 (9) TMI 973 - AT - Income Tax

Summary

Issues Involved:
1. Condonation of Delay
2. Revision of Order u/s 263
3. Erroneous and Prejudicial to Revenue
4. Jurisdiction of Director of IT (Exemptions)

Summary:

Condonation of Delay:
The assessee filed an appeal against the order u/s 263 belatedly, citing unawareness of legal provisions. The Tribunal condoned the delay, noting that the appellant acted promptly upon receiving proper legal advice and was dependent on his counsel for taxation matters.

Revision of Order u/s 263:
The assessee contended that the noting in the order-sheet dropping action u/s 147 is not an order capable of revision u/s 263. The Tribunal held that the Director of IT (Exemptions) is authorized to revise an order where the AO dropped the proceedings, referencing the case of Esthuri Aswathiah vs. ITO.

Erroneous and Prejudicial to Revenue:
The AO dropped the proceedings u/s 147 after examining the submissions and considering the reply from the Dy. Director of IT (Exemptions), Mumbai. The Director of IT (Exemptions) considered the AO's order erroneous and prejudicial to the interest of Revenue due to the lack of proper explanation for the opening balance. The Tribunal found that the AO applied his mind based on the facts and concluded that no income had escaped assessment for the asst. yr. 1997-98. The Tribunal referenced the case of Malabar Industrial Co. Ltd. vs. CIT and held that the AO's view was one of the possible views, thus action u/s 263 could not be upheld. The order of the Director of IT (Exemptions) u/s 263 was cancelled.

Jurisdiction of Director of IT (Exemptions):
The appellant argued that the Director of IT (Exemptions) did not have the jurisdiction to pass an order u/s 263. The Tribunal noted a Notification dated 14th Sept., 2001, which directed the Director of IT (Exemptions), Bangalore, to perform all functions of CIT. Hence, the Tribunal held that the Director of IT (Exemptions) had the jurisdiction to pass the order u/s 263.

Conclusion:
The Tribunal cancelled the order u/s 263 and partly allowed the appeal.