2008 (1) TMI 264 - HC - Income Tax

Validity of suo motu revisional proceedings completed by the Commissioner u/s. 263 - If 90 per cent. of the expenses was allowed in the computation of income from contract, then the further claim of assessee of 90 per cent. against the arbitration award amount is not tenable - If the Commissioner has not exercised the suo motu revisional power, then the consequence would have been loss of revenue revision is valid

Summary

Issues:
Validity of suo motu revisional proceedings under section 263 of the Income-tax Act, 1961.

Analysis:
The appeal raised concerns about the Commissioner's suo motu revisional proceedings under section 263 of the Income-tax Act, 1961, which were completed and upheld by the Tribunal. The appellant, a contractor engaged in civil work, had a dispute in arbitration resulting in an award confirmed by the sub-court. The appellant returned 10% of the arbitration award amount as income, following the income estimation from the original contract receipt. The Assessing Officer accepted this, but the Commissioner reversed the order under section 263, remanding the matter for income computation. The Tribunal affirmed the Commissioner's decision, leading to the current appeal.

The High Court noted that the assessment was merely set aside and remanded by the Commissioner under section 263, allowing the appellant to contest the income estimation. The Court rejected the appellant's argument that the Commissioner's order was not prejudicial to the Revenue's interests. It emphasized that if 90% of expenses were already allowed in the income computation from the contract, claiming a further 90% against the arbitration award was not valid. The Court highlighted that failure to invoke section 263 would result in revenue loss, justifying the Commissioner's actions. As the determination of additional income from the arbitration award was unresolved, the Court dismissed the appeal, granting the appellant the freedom to contest the matter on its merits.