1989 (2) TMI 31 - HC - Income Tax

Summary

Issues:
1. Whether an assessment made after reference to the Inspecting Assistant Commissioner under section 144B can be considered an order passed by the Income-tax Officer?
2. Whether an assessment order passed by the Income-tax Officer following the direction of the Inspecting Assistant Commissioner under section 144B is immune from revision by the Commissioner of Income-tax under section 263 of the Income-tax Act?

Analysis:
The High Court of Madhya Pradesh was presented with a reference under section 256(1) of the Income-tax Act, 1961, by the Income-tax Appellate Tribunal, Indore Bench, raising two questions of law for consideration. The first issue questioned whether an assessment made after reference to the Inspecting Assistant Commissioner under section 144B could be deemed an order passed by the Income-tax Officer. The second issue pertained to whether an assessment order passed by the Income-tax Officer following the direction of the Inspecting Assistant Commissioner under section 144B was beyond the scope of revision by the Commissioner of Income-tax under section 263 of the Income-tax Act.

In the case at hand, the Income-tax Officer, during the assessment for the year 1978-79, proposed additions exceeding Rs. 1 lakh to the declared income of the assessee. Subsequently, a reference under section 144B of the Act was made to the Inspecting Assistant Commissioner, whose directions were followed by the Income-tax Officer in passing the assessment order. The Commissioner of Income-tax, utilizing powers under section 263 of the Act, found the order prejudicial to revenue due to inadequate inquiries regarding a specific addition in the utensils account. Consequently, the Commissioner set aside the assessment order and directed a fresh assessment. The Tribunal, however, held that an assessment order made in accordance with the Inspecting Assistant Commissioner's directions under section 144B was not subject to revision under section 263 by the Commissioner.

Upon review, the High Court referred to a previous decision in CIT v. Vithal Textiles [1989] 175 ITR 629, where it was established that the Commissioner had jurisdiction under section 263 to revise an assessment order made by the Income-tax Officer based on the Inspecting Assistant Commissioner's directions under section 144B. Consequently, the High Court held that the Tribunal erred in its interpretation and ruled in favor of the Revenue, allowing the Commissioner's revisionary powers under section 263 to apply to such assessment orders.

In conclusion, the High Court provided negative answers to both questions raised by the Tribunal, asserting that the assessment order in question could be considered as one passed by the Income-tax Officer and was subject to revision by the Commissioner under section 263 of the Income-tax Act. The parties were directed to bear their own costs in the matter.