2018 (12) TMI 1345 - HC - Income Tax

Revision u/s 263 - revised return were accepted on the date they were submitted and without following the procedure prescribed under Section 143(3) - Held that - Assessing Officer by virtue of the provision of Section 143(3) has been empowered by an order in writing, to make an assessment of the total income or loss of the assessee, and to determine the sum payable by him on the basis of such assessment and that in doing so he has to consider the evidence as the assessee may produce or that may be required by him and after taking into account all relevant material which he has gathered. In the instant case, the assessment was made on or after the date specified in the notice on the basis of the relevant material collected. Therefore, there appears to be no infringement of the procedure as prescribed under subsection (3) of Section 143 of the Act. The CIT(C) in its order has clearly recorded that the assessee had attended the proceedings and had not challenged the same. In view of the above finding, we are unable to appreciate the argument advanced on behalf of the Revenue that the procedure prescribed under Section 143(3) of the Act was not followed by the Assessing Officer and, therefore, the CIT(C) had rightly exercised the revisional power. The assessment orders clearly indicate the manner of computation of the income of the assessee for the purposes of tax and refers to the details of the queries and the material gathered. The appellate tribunal in its impugned order repelled the argument that the Assessing Officer accepted the revised returns without properly examining the seized material on the ground that the order of the CIT(C) is factually incorrect and that the assessment orders are not erroneous and, at the same time, are not prejudicial to the interests of the Revenue. The aforesaid finding of the tribunal is a pure finding of fact and is not liable to be disturbed. In regard to admissibility of deductions under Sections 80HH and 80HHA, the appellate tribunal clearly recorded that this point was never considered by the CIT(C) in passing the revisional order and, therefore, there is no point in considering the validity of the revisional order on the above score. In view of the above and the fact that though as per the notice the orders of the Assessing Officer were sought to be revised, inter alia, on the above ground, but since in the final analysis the revisional order was not based upon it, we do not think that the order of the appellate tribunal can be faulted with. - decided against revenue

Summary

Issues:
Appeals by Revenue under Section 260 A of the Income Tax Act, 1961 against the common order of the Income Tax Appellate Tribunal for assessment years 1987-88, 1988-89, and 1989-90.

Analysis:
The respondent-assessee filed returns of income for the relevant years, which were accepted after search and seizure operations. The Commissioner of Income Tax issued a notice under Section 263 of the Act, setting aside the assessment orders and directing re-assessment. The Tribunal allowed the appeals challenging this order. The Revenue proposed substantial questions of law regarding the jurisdiction of the CIT(C) under Section 263 of the Act.

The High Court noted that the Revenue's contention was primarily about the correctness of the appellate tribunal's decision in setting aside the CIT(C)'s order. The Court emphasized that this was a mixed question of fact and law, not a substantial question of law. The Court allowed arguments on facts and law to identify any substantial question of law.

The arguments presented by the Revenue included the acceptance of revised returns without proper assessment under Section 143(3) of the Act and the simultaneous allowance of deductions under Sections 80HH and 80HHA. The Court highlighted the mandatory conditions for revision under Section 263, emphasizing the need for both error and prejudice to the Revenue.

The Court referenced the Malabar Industrial Co. Ltd. case, stating that revisional jurisdiction requires both error and prejudice. It was argued that the revised returns were accepted based on relevant material collected, and the CIT(C) found no procedural irregularities. The Court cited precedents to support the position that mere brevity in the assessment order or failure to discuss queries does not make it erroneous.

The appellate tribunal's decision was upheld, emphasizing that the CIT(C) did not consider the admissibility of deductions under Sections 80HH and 80HHA. Since the revisional order was not based on this ground, the tribunal's decision was found to be valid. Ultimately, the Court found no merit in the appeals, as no substantial question of law arose, and dismissed them with no order as to costs.