2006 (6) TMI 106 - HC - Income Tax

CIT invoked his jurisdiction conferred upon him u/s 263 and denied deduction to assessee u/s 80HHA & 80I by holding that AO committed an error of law in granting the deduction hence commissioner set aside the order of assessing officer since no appeal regarding these deduction was filed to commissioner (Appeals) assessee s contention that order of commissioner has merged with order of AO is not acceptable revisionery order of CIT is justified

Summary

Issues:
- Interpretation of section 263 of the Income-tax Act, 1961 regarding revisional jurisdiction.
- Application of the law laid down by the Supreme Court in the case of Venkateswara Hatcheries P. Ltd. [1999] 237 ITR 174 on the eligibility of deductions under sections 80HHA and 80-I for businesses like "hatching of eggs."

Analysis:

Issue 1: Interpretation of section 263 of the Income-tax Act, 1961 regarding revisional jurisdiction.

The appellant filed an appeal under section 260A of the Income-tax Act, 1961, challenging an order passed by the Income-tax Appellate Tribunal. The substantial question of law raised was whether the Tribunal was justified in upholding the Commissioner of Income-tax's order under section 263, which revised the assessment order. The appellant argued that once the assessment order merged into the appellate order, the Commissioner had no jurisdiction to invoke revisional powers. However, the court held that the Commissioner was within his jurisdiction to invoke suo motu revisional powers under section 263 to ensure conformity with the law laid down by the Supreme Court. The court emphasized the importance of adhering to Supreme Court decisions to avoid errors in orders.

Issue 2: Application of the law laid down by the Supreme Court in the case of Venkateswara Hatcheries P. Ltd. [1999] 237 ITR 174 on the eligibility of deductions under sections 80HHA and 80-I for businesses like "hatching of eggs."

The case revolved around the eligibility of deductions under sections 80HHA and 80-I for the appellant, engaged in the business of "hatching eggs." The Assessing Officer initially allowed deductions under these sections but later, the Commissioner of Income-tax invoked section 263, setting aside the benefit granted by the Assessing Officer. The court noted that the Supreme Court's decision in Venkateswara Hatcheries P. Ltd. clarified that businesses like "hatching of eggs" did not qualify as industrial activities for these deductions. Therefore, the Commissioner's action to set aside the benefit was deemed appropriate to align the assessment with the Supreme Court's interpretation. The court rejected the appellant's argument that the Commissioner's action was unwarranted due to the merger of orders, explaining that the issue was not subject to appeal and fell within the Commissioner's revisionary powers.

In conclusion, the court dismissed the appeal, upholding the Tribunal's decision and the Commissioner's order under section 263. The judgment emphasized the importance of aligning assessments with legal precedents set by the Supreme Court to avoid erroneous decisions and ensure consistency in tax matters.