2013 (5) TMI 668 - HC - Income Tax

Revisionary proceeding u/s 263 - scope of the remand order - whether open or not - to pass fresh order or not - Held that - The Income Tax Officer in para 3(i) of the impugned order has made reference to paras-2.2, 2.3 & 2.5 in particular and other paragraphs of the order passed by C.I.T. to support his view that the remand order passed by the C.I.T. was an open remand order. Meaning thereby, the assessment order was set aside in its entirety. No such thing in the order of the C.I.T. suggesting that the entire assessment order is being set aside. As discussed herein above, subject matter of revisional order was the income drawn from the cattle feed and green vegetable business and not other income. The Income Tax Officer was not justified in coming to the conclusion that he is also required to pass fresh assessment order for mentha business. To this extent, the impugned order cannot be allowed to stand and is hereby, set aside. However, by way of clarification, it may be added that it shall be open to the AO to raise all such queries which according to him, are relevant to determine the income of the assessee with regard to the cattle feed and green vegetable business. Thus by way of clarification it may be added that the petitioner cannot refuse to give the reply to the queries raised by the Assessing Authority. However, AO shall bear in mind the dictum of law as indicated above. Merits in the present writ petition. The writ petition is allowed rejecting the contention of the petitioner that the scope of order passed under Section 263 of the Act is confined to the determination of income of cattle feed and green vegetable business only.

Summary

Issues:
1. Dispute over assessment proceedings for the assessment year 2006-07 under the Income Tax Act, 1961.
2. Scope of inquiry after remand order under Section 263 of the Act confined to determination of income from Cattle Feed and Green Vegetable business only.
3. Legal challenge to the order rejecting the contention that the scope of the order under Section 263 is limited to certain businesses.

Analysis:
1. The petitioner was engaged in two distinct lines of businesses, namely Mentha business and Cattle Feed and Green Vegetable business. Separate profit and loss accounts were maintained for each. The assessment proceedings for the year 2006-07 were initiated, leading to a notice under Section 263 of the Act by the Commissioner of Income Tax. The subsequent revision of the assessment order under Section 263 focused on the income from Cattle Feed and Green Vegetable business, leading to a legal challenge regarding the scope of the revision.

2. The petitioner argued that the inquiry after the remand order was confined to the determination of income from the Cattle Feed and Green Vegetable business only. The petitioner contended that the assessment order's finality regarding the Mentha business precluded further queries in that regard. Legal counsel for the petitioner cited relevant case law to support this position, emphasizing that the assessment order's revision was limited to specific business aspects.

3. On the other hand, the respondents argued that the fresh assessment proceedings post-remand were not restricted to specific business segments but encompassed the entire income and expenditure of the petitioner. The court considered the submissions of both parties and examined the record to determine the scope of the revision under Section 263. It was observed that the Commissioner's order and subsequent proceedings primarily focused on the Cattle Feed and Green Vegetable business, indicating a limited scope for inquiry.

4. The court analyzed the Commissioner's order and the subsequent actions of the Assessing Officer, concluding that the revisional proceedings were indeed confined to the Cattle Feed and Green Vegetable business. The court found merit in the petitioner's argument regarding the limited scope of the revision under Section 263 and set aside the impugned order dated 02.03.2010. However, it clarified that the Assessing Officer could raise relevant queries related to the Cattle Feed and Green Vegetable business for determining the petitioner's income in that regard.

5. Ultimately, the court allowed the writ petition, quashing the impugned order dated 02.03.2010 and affirming the limited scope of the revision under Section 263 concerning the specific businesses in question. The decision highlighted the importance of adhering to the legal principles governing the scope of revisionary proceedings under the Income Tax Act, 1961, in cases involving multiple business lines maintained separately for accounting purposes.