2007 (1) TMI 89 - SC - Income Tax

Merely because a rectification proceedings was initiated subsequently by AO it could not be said that reversionary power by Comm(A) could not be invoked such reversionary power can be held bad in law only in administrative jurisdiction not in judicial jurisdiction

Summary

Issues involved:
Interpretation of provisions of Section 154 vs. 263 of the Income-tax Act.

Detailed Analysis:
The case involved the interpretation of the provisions of Section 154 vis-a-vis Section 263 of the Income-tax Act. The Respondent, an assessee under the Act, had filed its return for the assessment year 1992-93, declaring its income at a certain amount. The order of assessment was completed under Section 143(3) of the Act, determining the assessable income to be different from the declared amount. The Commissioner of Income-tax invoked jurisdiction under Section 263 to set aside the order of assessment, excluding certain amounts towards transport receipts and interest from the assessee's total income based on provisions of Section 80HHC and Section 80-I of the Act. The Assessing Officer was directed to make a fresh order of assessment.

The assessee contended that a Notice of Rectification of the Order of Assessment under Section 154 had been issued by the Assessing Officer, but no modification was made regarding the exclusion of income under Sections 80HH and 80-I. The Tribunal upheld the assessee's contention, relying on a decision of the Madhya Pradesh High Court. The High Court opined that no substantial question of law arose for reference to it based on a previous decision.

The Supreme Court highlighted the distinction between the proceedings for rectification under Section 154 and revision under Section 263. It emphasized that the power of revision under Section 263 is vested in the Commissioner, who can pass orders if the assessment is found to be prejudicial to the Revenue. The Court reiterated the importance of judicial discipline, stating that subordinate authorities must abide by orders of higher authorities.

The Court further clarified that the jurisdiction under Section 154 is limited to rectifying errors apparent on the face of the record and does not confer a power of review. It held that the revisional authority can still exercise its jurisdiction even if an order of assessment has been rectified. The Court also addressed the application of the doctrine of Merger in such cases, stating that it does not apply to orders subject to revision under Section 263.

In conclusion, the Supreme Court set aside the impugned judgment and directed the Commissioner of Income Tax to reconsider the matter in the light of the order of rectification passed by the assessing authority. The appeal was allowed with this direction, and no costs were awarded based on the facts and circumstances of the case.