1996 (2) TMI 585 - HC - Income Tax

Summary

Issues:
Jurisdiction of the Commissioner to revise an assessment order passed by the ITO in accordance with the directions of the IAC under section 144B of the Income-tax Act, 1961.

Analysis:

The case involved a dispute regarding the jurisdiction of the Commissioner to revise an assessment order passed by the Income Tax Officer (ITO) in accordance with the directions of the Inspecting Assistant Commissioner (IAC) under section 144B of the Income-tax Act, 1961. The Commissioner initiated proceedings under section 263 of the Act, considering the assessment order erroneous and prejudicial to the revenue. The Commissioner directed the ITO to include certain amounts in the taxable income of the assessee. The assessee objected, arguing that since the assessment order was framed in conformity with the IAC's directions under section 144B, the Commissioner had no jurisdiction to resort to section 263. The Tribunal upheld the assessee's objections, ruling that the Commissioner lacked jurisdiction to revise the assessment order under section 263. The Tribunal partially allowed the appeal, prompting the revenue to file an application under section 256(1) for the High Court's opinion on the matter.

The High Court referred to section 263(1) of the Income-tax Act, which empowers the Commissioner to revise any order passed by the Assessing Officer if it is deemed erroneous and prejudicial to the revenue. The Court noted that an Explanation inserted in 1984 clarified that an order passed by the Assessing Officer includes an order made based on directions issued by the Deputy Commissioner under section 144A or section 144B. The Court highlighted that section 144B, which was inserted in 1976, was omitted in 1989 by an amendment. Citing a Supreme Court case, the Court emphasized that the Explanation aimed to remove doubts regarding the scope of the Commissioner's revisional jurisdiction.

The High Court relied on a previous decision in CIT v. Vithal Textiles, where it was held that the Commissioner can revise an assessment order passed by the ITO in accordance with the directions of the IAC under section 144B. The Court concluded that the Tribunal erred in holding that the Commissioner lacked jurisdiction to revise the assessment order. Considering the clarificatory nature of the Explanation and the precedent set by earlier decisions, the High Court ruled in favor of the revenue and against the assessee. The question was answered in the negative, affirming the Commissioner's jurisdiction to revise the assessment order. The reference application was decided without costs, but a counsel fee for the applicant was fixed at a specified amount.