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2008 (5) TMI 35 - HC - Income TaxOrder passed under revisional jurisdiction of commissioner u/s 263 could not be said to be without jurisdiction mere for the fact that Commissioner accepted application under Kar Vivad Samadhan Scheme (KVSS)
Issues:
1. Jurisdiction of the Commissioner of Income-tax under section 263 of the Income-tax Act, 1961 after settlement under the Kar Vivad Samadhan Scheme (KVSS) 1998. 2. Validity of the order under section 263 of the Income-tax Act, 1961 in relation to the KVSS settlement. 3. Authority of the Commissioner of Income-tax to substitute the view of the Assessing Officer after settlement under the KVSS. Analysis: Issue 1: Jurisdiction of the Commissioner under section 263 post-KVSS settlement The case involved an appeal against the order of the Income-tax Appellate Tribunal (ITAT) allowing the respondent/assessee's appeal and setting aside the Commissioner of Income-tax's order under section 263 of the Income-tax Act. The key question was whether the Commissioner could exercise revisional powers post the settlement under the KVSS. The court analyzed the relevant provisions of the Finance (No. 2) Act, 1998, specifically sub-sections (3) and (4) of section 90, which stated that matters covered under the KVSS settlement cannot be reopened. The court held that the revisional jurisdiction of the Commissioner under section 263 was not considered as "other proceedings" under the direct tax Act, and thus, the Commissioner was within his jurisdiction to issue the notice challenging the settlement. Issue 2: Validity of the order under section 263 in relation to the KVSS settlement The court considered arguments from both sides regarding the validity of the Commissioner's order under section 263. The Revenue contended that the order was justified as the KVSS settlement did not prevent authorities from addressing concealed income. However, the court found that the order passed by the Commissioner of Income-tax was not erroneous in law and did not meet the criteria for cancellation under section 263. The court referred to legal precedents, such as Killick Nixon Ltd. v. Deputy CIT and Malabar Industrial Company Ltd. v. CIT, to support its decision. It concluded that there was no material to cancel the assessment made by the Assessing Officer, and thus, the order of the ITAT setting aside the Commissioner's order under section 263 did not require interference. Issue 3: Authority of the Commissioner to substitute the view of the Assessing Officer post-KVSS settlement The court also addressed the question of whether the Commissioner could substitute the view of the Assessing Officer after the settlement under the KVSS. It noted that the Commissioner's power under section 263 was to examine records for errors in law prejudicial to Revenue. The court found that the Commissioner's order was not without jurisdiction, and the ITAT's decision on this point was unsustainable. The court upheld the Revenue's appeal on this issue. In conclusion, the court dismissed the appeal, upholding the Commissioner's jurisdiction to issue the notice under section 263 post-KVSS settlement. However, it found no grounds to interfere with the ITAT's decision setting aside the Commissioner's order under section 263, as it did not meet the legal criteria for cancellation.
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