2007 (11) TMI 89 - HC - Income Tax

Writ petition, against use of powers by AO beyond the scope of sec. 264, is maintainable as there is no bar in case of jurisdictional error direction by revisional authority (Comm. (A)) to AO were precise so AO can t expand the revisional order considering new issues

Issues Involved:
1. Legality of the block assessment order for the years 1989-90 to 1999-2000.
2. Jurisdiction and scope of the Assessing Officer's powers under section 264 of the Income-tax Act.
3. Validity of the revisional authority's directions and the subsequent actions of the Assessing Officer.
4. Maintainability of the writ petition under Article 226 of the Constitution of India.

Detailed Analysis:

1. Legality of the Block Assessment Order:
The petitioner, a small-scale gold jewellery trader, was apprehended with jewellery and cash, which were seized by the Income-tax Department. The petitioner filed a return of income and contended that the disclosed income prior to action under section 132A should not be considered "undisclosed income" as per section 158B(b) of the Income-tax Act. However, the Assessing Officer computed an undisclosed income of Rs. 2,79,087, including the income of the petitioner's sons, due to the lack of maintained books of account.

2. Jurisdiction and Scope of the Assessing Officer's Powers:
The petitioner argued that the revisional powers under section 264 prohibit the Commissioner from passing an order prejudicial to the assessee. It was contended that the Assessing Officer exceeded his jurisdiction by considering issues not part of the original assessment order, making the assessment order illegal. The revisional authority had directed the Assessing Officer to reconsider the matter after taking into account the assessee's version, but the Assessing Officer expanded the scope and assessed a higher total income of Rs. 6,55,540.

3. Validity of the Revisional Authority's Directions:
The revisional authority found that the Assessing Officer had not properly examined the petitioner's claims regarding the seized assets and directed a fresh adjudication. The Assessing Officer misinterpreted this direction as permission to re-examine all issues, resulting in a higher assessment. The court held that the Assessing Officer should have confined himself to the specific directions given by the revisional authority, which were precise and did not call for a complete reassessment.

4. Maintainability of the Writ Petition:
The court addressed the plea of an alternative remedy, stating that jurisdictional errors can be corrected under Article 226 of the Constitution. The court cited precedents where it was held that when an authority acts beyond its jurisdiction, the High Court can intervene. The court found that the Assessing Officer had transgressed his powers under section 264, making the writ petition maintainable.

Conclusion:
The court concluded that the Assessing Officer had exceeded his jurisdiction by expanding the scope of the reassessment beyond the specific directions of the revisional authority. The impugned order was set aside, and the matter was remitted back to the Assessing Officer to confine himself to the limited question addressed by the revisional authority and pass orders in accordance with the law, after giving the assessee an opportunity to be heard. The writ petition was allowed with no costs.

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