2010 (11) TMI 157 - HC - Income Tax

Revision - Rectification of mistakes - The Tribunal cancelled the order issued by the Commissioner on the ground that original assessment only could be revised under section 263 - There is no bar in section 263 restricting the power of the Commissioner by limiting his jurisdiction to revise only original orders issued by the Assessing Officer - In fact any proceedings issued by the Assessing Officer whether it be original assessment or revised assessment issued under section 147 or even a rectification order issued under section 154 could be revised in exercise of powers under section 263 if the order is erroneous or is prejudicial to the interest of the revenue. - The assessee having not challenged the revised assessment cannot also contest validity of that proceedings before the Tribunal in an appeal filed against the order issued under section 263. The Tribunal being the 2nd appellate authority cannot consider validity of an assessment or reassessment order while considering the appeal filed against an order issued under section 263. So much so the order of the Tribunal is liable to be vacated.

Summary

Issues:
1. Whether the Tribunal was justified in cancelling the suo motu revisional order issued by the Commissioner of Income-tax under section 263 of the Income-tax Act.
2. Whether the Tribunal has the power to consider the validity of a revised assessment order while reviewing an order issued under section 263.

Analysis:

Issue 1:
The High Court considered whether the Tribunal was correct in canceling the revisional order issued by the Commissioner under section 263. The Tribunal had canceled the Commissioner's order on the basis that only the original assessment could be revised under section 263. The High Court disagreed with this reasoning, stating that there is no restriction in section 263 limiting the Commissioner's power to revise only original orders. The Court held that any proceedings issued by the Assessing Officer, including revised assessments under section 147 or rectification orders under section 154, could be revised under section 263 if found to be erroneous or prejudicial to revenue. Consequently, the High Court allowed the appeal by reversing the Tribunal's decision and reinstating the Commissioner's order under section 263.

Issue 2:
Regarding the second appeal, the Tribunal had interfered with the section 263 order issued for the year 1992-93 on the grounds that the revised assessment under section 147, subject to revision under section 263, was invalid. The High Court ruled that the Tribunal did not have the authority to assess the validity of the revised assessment while reviewing an order under section 263. The Court emphasized that the assessee, by not challenging the revised assessment, could not contest its validity during the appeal against the section 263 order. Furthermore, as the Tribunal is the second appellate authority, it cannot assess the validity of an assessment or reassessment order in an appeal against a section 263 order. Consequently, the High Court allowed this appeal as well by vacating the Tribunal's order and reinstating the Commissioner's order under section 263.

In conclusion, the High Court allowed both appeals by reversing the Tribunal's decisions and reinstating the Commissioner's orders under section 263 in both cases.