2015 (6) TMI 1153 - AT - Income Tax

Revision u/s 263 - wrong allowability of claim of tax credit under section 90 - residential status of assessee - Held that - When the order of the AO was set aside in respect of issue is relating to the claim of tax credit under section 90 AO went altogether into a different footing and changed the status of the assessee as non-resident. CIT has remitted the matter back to the Assessing Officer specifically with regard to the claim of tax credit under section 90 of the Act and when the information filed by the assessee was found false, again fresh information was filed and the Assessing Officer was directed to pass fresh assessment order after receiving details from Canada Revenue Agency. AO, without following the directions of the CIT, by simply changing the status of the assessee, allowed the claim of the assessee. The order of the CIT setting aside the assessment his direction to make a fresh assessment in accordance with law cannot be read in isolation, but, it must be read in the context in which the CIT has exercised his powers of revision. In the present case, the ld. CIT has exercised his power in the context of tax credit claimed by the assessee under section 90 of the Act. The status of the assessee as to whether resident or non-resident is not before the CIT. CIT correctly exercised his power under section 263 and again set aside the order passed by the Assessing Officer. - Decided against assessee.

Summary

Issues Involved:
1. Validity of tax credit claim under Section 90 of the Income Tax Act.
2. Determination of the assessee's residential status.
3. Jurisdiction and authority of the Assessing Officer under Section 263 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of Tax Credit Claim under Section 90 of the Income Tax Act:

A search and seizure operation under Section 132 was conducted at the assessee's residence. The assessee filed an initial return admitting an income of Rs. 1,45,000, claiming to be a Resident. Later, a revised return was filed admitting an income of Rs. 58,64,292, including foreign income from Canada. The assessee claimed tax credit under Section 90 based on the foreign income and taxes paid in Canada. The Assessing Officer initially allowed this claim based on the documentary evidence provided. However, the Commissioner of Income Tax (CIT) later found this claim to be false, and the assessee admitted to submitting incorrect information inadvertently. The CIT set aside the assessment for fresh consideration, directing verification from the Canada Revenue Agency.

2. Determination of the Assessee's Residential Status:

During the reassessment, the Assessing Officer changed the assessee's status from Resident to Non-Resident based on the period of stay in India and passport details. The CIT, however, noted that the reassessment was meant to address the tax credit claim and not to alter the residential status. The CIT held that changing the status was beyond the Assessing Officer's jurisdiction and prejudicial to the Revenue's interest. The Tribunal upheld this view, emphasizing that the reassessment should have focused solely on the tax credit issue as per the CIT's directive.

3. Jurisdiction and Authority of the Assessing Officer under Section 263:

The CIT exercised power under Section 263, finding the original assessment order erroneous and prejudicial to the Revenue. The CIT directed the Assessing Officer to reassess based on the verification from the Canada Revenue Agency. However, the Assessing Officer exceeded this mandate by changing the assessee's residential status. The Tribunal supported the CIT's stance, stating that the Assessing Officer's actions were beyond his jurisdiction and not in line with the CIT's specific directions under Section 263. The Tribunal concluded that the CIT correctly exercised his power under Section 263, and the reassessment order was rightly set aside.

Conclusion:

The Tribunal dismissed all the appeals filed by the assessee, upholding the CIT's orders. The Tribunal affirmed that the Assessing Officer's reassessment exceeded the scope of the CIT's directives under Section 263, and the focus should have been solely on the tax credit claim. The decision emphasized the importance of adhering to the specific issues remitted by the CIT in reassessment proceedings.