2011 (10) TMI 465 - HC - Income Tax

Proceedings emanating from the revision order u/s 263 - Whether Tribunal is justified in allowing appeal of the Income-tax Department against the order of the CIT(Appeals) which has become non est and infructuous in law - Held That - Once the orders u/s 263 passed by the CIT have been set aside by the Tribunal, it could not have allowed the appeal of the Revenue arising out of the order of the CIT. The entire proceedings, after quashing the order under section 263 were infructuous - Decided in favor of assessee.

Summary

Issues:
Income-tax appeals for the assessment years 2001-02 and 2002-03 challenging the order of the Income-tax Appellate Tribunal, Delhi Bench allowing the appeal of the Revenue. Substantial questions of law regarding the justification of the Tribunal's decision, the impact of quashing the Commissioner's order under section 263, and the application of section 80-IA(9) to section 80-IB of the Income-tax Act, 1961.

Analysis:

1. The first issue raised in the judgment concerns the justification of the Income-tax Appellate Tribunal's decision in allowing the appeal of the Income-tax Department against the order of the Commissioner of Income-tax (Appeals). The appellant argued that the Tribunal, having quashed the Commissioner's order under section 263 of the Income-tax Act, lacked jurisdiction to allow the Revenue's appeal. Citing relevant case law, the appellant contended that the entire proceedings leading to the appeal were without jurisdiction once the Tribunal had quashed the Commissioner's orders.

2. The second issue revolves around the impact of quashing the order under section 263 of the Income-tax Act on subsequent proceedings and assessments. The appellant relied on case law to support the argument that once the Tribunal had canceled the orders under section 263, the assessment orders could not stand, rendering the subsequent proceedings infructuous. The standing counsel for the respondents acknowledged this position and suggested that the appellant could apply to the Tribunal to recall its order.

3. The third issue pertains to the application of section 80-IA(9) to section 80-IB of the Income-tax Act, 1961, specifically regarding the deduction under section 80HHC. However, due to the decisions in favor of the assessee on the first two questions, the court found that the third question did not require consideration.

4. Ultimately, the court decided in favor of the assessee and against the Revenue on questions one and two, leading to the setting aside of the Tribunal's orders dated February 21, 2008. Consequently, the income-tax appeals for the assessment years 2001-02 and 2002-03 were allowed based on the findings in favor of the assessee on the issues raised in the appeal.

This detailed analysis of the judgment addresses the key issues involved in the legal dispute, highlighting the arguments presented by both parties, relevant case law references, and the final decision rendered by the court.