1996 (9) TMI 625 - AT - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Commissioner under Section 263 of the Income-tax Act, 1961.
2. Validity of directions issued by the Commissioner to the Assessing Officer.
3. Authority of the successor Commissioner to revise an assessment order passed in pursuance of directions from the predecessor Commissioner.

Detailed Analysis:

1. Jurisdiction of the Commissioner under Section 263 of the Income-tax Act, 1961:
The primary issue in this case was whether the Commissioner of Income-tax had the jurisdiction to revise an assessment order under Section 263 of the Income-tax Act, 1961. The assessee challenged the jurisdiction of the Commissioner, arguing that the assessment order was passed based on specific directions from the Commissioner, and thus, could not be revised by another Commissioner. The Tribunal upheld the assessee's claim, stating that the successor Commissioner is not empowered to revise an order that was made following the directions of his predecessor. This conclusion was drawn based on the principle that revising such an order would effectively mean revising the directions of the predecessor Commissioner, which is not permitted under Section 263.

2. Validity of directions issued by the Commissioner to the Assessing Officer:
The Tribunal examined the validity of the directions issued by the Commissioner to the Assessing Officer. The directions were explicit, instructing the Assessing Officer not to multiply the figures in the seized documents by hundred and to accept the returned income. The Tribunal noted that these directions were followed by the Assessing Officer, who had no scope for further examination. The Tribunal referred to the Supreme Court decision in Sirpur Paper Mills Ltd. v. CWT, which held that a superior authority could not issue directions regarding the manner of framing an assessment, and any such directions would invalidate the assessment order. However, in this case, since the directions were issued by a Commissioner of equal rank, the Tribunal found that the successor Commissioner could not revise the order based on those directions.

3. Authority of the successor Commissioner to revise an assessment order passed in pursuance of directions from the predecessor Commissioner:
The Tribunal addressed whether the successor Commissioner had the authority to revise the assessment order passed in compliance with the predecessor Commissioner's directions. The Tribunal cited several cases, including Trustees of Parsi Panchayat Funds & Properties v. Director of Income-tax (Exemption) and Kiron & Co. v. ITO, which established that an assessment order made following the directions of a Commissioner could not be revised by another Commissioner of equal rank. The Tribunal concluded that the successor Commissioner's attempt to revise the order under Section 263 was beyond his jurisdiction, as it would amount to revising the directions of his predecessor, which is not permissible.

Conclusion:
The appeal of the assessee was allowed on the jurisdictional ground, with the Tribunal holding that the successor Commissioner could not revise the assessment order passed in compliance with the predecessor Commissioner's directions. The Tribunal did not find it necessary to delve into the merits of the case, given the jurisdictional conclusion. The judgment emphasized the principle that a Commissioner's directions, when followed by the Assessing Officer, cannot be later revised by another Commissioner of equal rank under Section 263 of the Income-tax Act, 1961.