2010 (11) TMI 682 - HC - Income Tax

Block assessment - Revision - Search and seizure - Appeal - When assessee did not take any step for stay of the order of the Assessing Officer pursuant to the impugned order of the Commissioner under Section 263 and after having participated in the hearing of the assessment proceedings and consequently preferring appeal, we think it would not be proper for this Court at this stage to decide issue raised before us. - The provision of the appeal is very exhaustive and all points can be taken including the question of jurisdiction as taken here - We therefore, dispose of the present appeal keeping all points open holding that since the regular appeal has already been preferred this appeal has factually become infructuous.

Summary

Issues:
Appeal against Tribunal's judgment on taxability of received sum. Validity of CIT's exercise of power under Section 263 of Income Tax Act, 1961. Jurisdiction of CIT to revise block assessment. Reopening of assessment based on seized document KP-19. Application of Section 263 and explanation C. Consideration of audit report for determining loss. Validity of CIT's order under Section 263. Applicability of twin conditions for Section 263. Prejudicial impact on revenue. Relevance of Supreme Court decisions in similar cases. Infructuous nature of present appeal.

Analysis:
The appeal was filed against the Tribunal's judgment on the taxability of a received sum, specifically Rs. 254,32,93,100. The CIT exercised power under Section 263 of the Income Tax Act, 1961, to reconsider the block assessment due to unconsidered transactions in seized document KP-19. The CIT's order was challenged, arguing that the assessment was merged with an earlier order and thus not subject to revision. The appellant contended that the audit report should be the basis for determining loss, and Section 263 should only apply if the assessment is both erroneous and prejudicial to revenue.

The appellant relied on Supreme Court decisions to support their arguments, emphasizing that not all erroneous orders are prejudicial to revenue. The Tribunal upheld the CIT's order under Section 263 regarding the Rs. 254,32,93,100 sum. The respondent argued that the Tribunal correctly upheld the CIT's decision, and since an appeal was already pending, the present proceeding was rendered infructuous. The Court considered whether the block assessment order had become final and binding, and if the appellant's arguments should be decided in the appeal.

The Court found that the Calcutta Discount case cited by the appellant was not applicable to the present case, as the jurisdiction of the CIT was not lacking. The Court concluded that the appeal had become factually infructuous but not legally, as all points could still be raised in the pending regular appeal. Therefore, the present appeal was disposed of, keeping all points open for consideration in the ongoing appeal, and no costs were awarded.

In summary, the Court addressed the validity of the CIT's exercise of power under Section 263, the jurisdiction to revise the block assessment, and the application of relevant legal provisions and precedents. The decision emphasized the need for a comprehensive review of all aspects before rendering a final judgment, ensuring that all legal points remain open for further consideration in the pending regular appeal.