2011 (10) TMI 475 - HC - Income Tax

Whether revision u/s 263 is possible for block assessment order when the same has been passed with previous approval of Commissioner - search conducted on 12.12.1995 - Held That - When commissioner has looked into record applied his mind and agreed with the order of the Assessing Authority this power of revision under Section 263 is not available to him after according approval to such order. therefore. Tribunal was justified in holding that Commissioner had no jurisdiction to exercise his power u/s 263 in respect of searches initiated prior to 1st day of January 1997 - Decided against Revenue.

Summary

Issues Involved:
1. Jurisdiction of the Commissioner under Section 263 in respect of block assessment orders.
2. Nature of approval under Section 158BG.
3. Applicability of Section 158BH to block assessment orders.
4. Interpretation of the term "approval" in the context of the Income Tax Act.
5. Amendment of Section 158BG and its implications on the Commissioner's powers.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Commissioner under Section 263 in respect of block assessment orders:
The primary issue is whether the Commissioner can exercise revisional jurisdiction under Section 263 of the Income Tax Act, 1961, in respect of block assessment orders passed under Section 158BC with the prior approval of the Commissioner as required by Section 158BG. The Tribunal held that the Commissioner lacked jurisdiction to revise such orders, a decision which the revenue challenged.

2. Nature of approval under Section 158BG:
Section 158BG mandates that block assessment orders cannot be passed without the previous approval of the Commissioner. The revenue argued that this approval is administrative, not precluding the Commissioner from exercising quasi-judicial power under Section 263. In contrast, the assessee contended that the approval implies the Commissioner has already scrutinized and validated the order, making subsequent revision under Section 263 inappropriate.

3. Applicability of Section 158BH to block assessment orders:
Section 158BH states that all other provisions of the Act apply to block assessments unless otherwise provided. The revenue argued that this includes the Commissioner's revisional powers under Section 263. However, the court noted that the phrase "save as otherwise provided" indicates that not all provisions apply automatically, particularly when specific provisions like Section 158BG require prior approval.

4. Interpretation of the term "approval" in the context of the Income Tax Act:
The court examined the meaning of "approval" through various legal dictionaries and precedents. Approval implies agreement with full knowledge and authoritative confirmation. The court concluded that prior approval under Section 158BG involves the Commissioner applying his mind to the draft order, thus precluding subsequent revision under Section 263 for the same order.

5. Amendment of Section 158BG and its implications on the Commissioner's powers:
The court noted that Section 158BG was amended to shift the approval authority from the Commissioner to the Joint Commissioner or Joint Director for searches conducted after January 1, 1997. This amendment allows the Commissioner to exercise revisional powers under Section 263 for orders approved by the Joint Commissioner or Joint Director, addressing the legislative gap for searches conducted before this date.

Conclusion:
The court upheld the Tribunal's decision, stating that the Commissioner, having accorded prior approval under Section 158BG, cannot subsequently revise the same order under Section 263. The substantial question of law was answered in favor of the assessee, and both appeals were dismissed.