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2010 (9) TMI 355 - HC - Income TaxSection 263 of the Income Tax Act, 1961 Whether Tribunal was correct in holding that the CIT(A) cannot revise under Section 263 an order of the IAC under Section 143(3), made by him by virtue of the jurisdiction conferred upon him under Section 125, especially when sub-section (2) of Section 125 clarifies that a reference to the ITO in the Act shall be deemed to be a reference to the IAC - Tribunal on identical facts had cancelled the order of the Commissioner (Appeals) on the ground of lack of jurisdiction Held that on the basis of precedent judgement that the Commissioner (Appeals) had no jurisdiction to revise the order of the Inspecting Assistant Commissioner (IAC) under Section 143(3) and therefore we do not propose to give any findings thereon
Issues Involved:
1. Whether the Commissioner of Income-tax (Appeals) [CIT(A)] can revise an order of the Inspecting Assistant Commissioner (IAC) under Section 263 of the Income-tax Act, 1961. 2. Whether the Commissioner of Income-tax wrongly directed the setting aside of the assessment framed by the IAC(A). Issue-wise Detailed Analysis: 1. Revising an Order under Section 263: The primary issue was whether the CIT(A) could revise an order made by the IAC under Section 143(3) by invoking Section 263. The assessment in question pertained to the year 1979-80, completed by the IAC(A) on 27th February 1982. The CIT(A) set aside this assessment on 25th February 1984, deeming it erroneous and prejudicial to the Revenue's interest due to the IAC(A)'s failure to charge interest under Sections 215, 216, and 139(8) and to initiate penalty proceedings under Sections 271(1)(a) and 273. The Tribunal vacated the CIT(A)'s order for three reasons: 1. A similar order for the assessment year 1977-78 had been vacated. 2. Explanation (1) to Section 263(1), effective from 1st October 1984, could not apply retroactively. 3. The IAC(A)'s order was already under appeal, thus Section 263 could not be invoked. The Tribunal's decision was supported by the Supreme Court's rulings in Malabar Industrial Co. Ltd. vs. CIT and CIT vs. Max India Ltd., which established that Section 263 could not be applied to debatable issues. 2. Direction to Set Aside the Assessment: The Tribunal also addressed the CIT(A)'s direction to initiate penalty proceedings, referencing the High Court's decision in P.C. Puri vs. CIT, which covered the issue directly. Relevant Legal Provisions and Amendments: The court examined Section 263 and its amendments. Initially, Section 263 allowed the Commissioner to revise any order passed by the Income-tax Officer if it was erroneous and prejudicial to the Revenue. However, the Taxation Laws Amendment Act, 1984, effective from 1st October 1984, added an Explanation to Section 263(1), clarifying that an order by the IAC under Sections 144A, 144B, 125(1)(a), or 125A(1) would be deemed an order passed by the Income-tax Officer. The Revenue argued that this Explanation was declaratory and retrospective, citing various High Court decisions. However, the respondent contended that the CIT(A) lacked jurisdiction when the order was passed on 25th February 1984, as the amendment was not yet effective. Judicial Precedents: The court referenced the ITAT's decision in Ms. Asha M. Primlani vs. IAC, which held that the Explanation to Section 263 could not be applied retroactively. This view was endorsed by the High Court in Commissioner of Income Tax vs. Smt. Asha M. Primlani, which compared the 1984 and 1989 amendments to Section 263, concluding that the 1984 amendment was not retrospective. The Supreme Court's decision in Commissioner of Income Tax vs. Shri Arbuda Mills Ltd. and subsequent cases reinforced that amendments without explicit retrospective language could not be applied to past actions. Conclusion: The court concluded that the CIT(A) had no jurisdiction to revise the IAC(A)'s order under Section 263 as of the date of the order (25th February 1984). Consequently, the answer to the first question was in the affirmative, favoring the respondent-assessee. The second question was deemed academic and was not addressed. Reference Answered Accordingly: The court answered the reference in favor of the respondent-assessee, holding that the CIT(A) lacked jurisdiction to revise the IAC(A)'s order under Section 263.
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