1980 (7) TMI 73 - HC - Income Tax

Summary

Issues:
1. Competency of the Additional Commissioner to pass an order under section 263 of the Income Tax Act.
2. Interpretation of the provisions of section 263(2)(a) regarding the revision of reassessment orders.
3. Determination of whether the Additional Commissioner had the authority to revise the order in question.

Detailed Analysis:
1. The case involved a question regarding the competency of the Additional Commissioner to pass an order under section 263 of the Income Tax Act. The Additional Commissioner issued a notice to the assessee for the assessment year 1965-66, questioning the allowance of a payment made to a non-resident without deduction of tax at source. The Tribunal later canceled the Additional Commissioner's order, stating that it was revising the reassessment order, which was beyond its competence. The Tribunal found that the subject matter of the proceedings under section 263 was the original assessment order and not the subsequent reassessment order, which was a separate proceeding. The Tribunal held that the Additional Commissioner did not have the authority to pass the order under section 263.

2. The interpretation of section 263(2)(a) was crucial in this case. Section 263(1) allows the Commissioner to examine any order passed by the Income Tax Officer (ITO) and revise it if deemed erroneous and prejudicial to the revenue's interests. However, section 263(2)(a) specifically prohibits the revision of reassessment orders made under section 147. The Tribunal correctly pointed out that the Additional Commissioner should have considered the implications of the reassessment proceedings and the decision made by the ITO regarding the specific item in question. As per the provisions of section 263(2)(a), the Commissioner did not have the power to revise the reassessment order, leading to the cancellation of the order under section 263.

3. Ultimately, the Tribunal's decision to cancel the Additional Commissioner's order under section 263 was upheld by the High Court. The Court agreed with the Tribunal's reasoning that the Additional Commissioner exceeded his authority by attempting to revise the reassessment order, which was not permissible under the relevant provisions of the Income Tax Act. Therefore, the Court answered the question referred to them in favor of the assessee, holding that the Additional Commissioner was not competent to pass the order in question. The Court also directed the Commissioner to pay the costs of the reference to the assessee, concluding the matter in favor of the assessee.