2020 (1) TMI 335 - HC - Income Tax

Revision u/s 263 - Whether the order u/s. 263 passed by the Principal Commissioner of Income Tax who has validly assumed jurisdiction within two years from the end of the financial year in which the impugned order under reference was passed? - HELD THAT - It appears from the finding recorded by the appellate tribunal that as the reassessment proceedings came to be quashed and the same has been accepted by the department, according to the appellate tribunal, there is no scope now for the Commissioner to exercise any power under Section 263 of the Act, 1961. Having heard the learned senior counsel Mr. Bhatt appearing for the revenue and having gone through the materials on record, we are of the view that there is no substantial question of law involved in this appeal. Although Mr. Bhatt tried to persuade us to take the view that the two issues on which the power is required to be exercised under Section 263 of the Act. As the reassessment proceedings came to be quashed and the same has been accepted, no useful purpose would now be served to permit the Commissioner to exercise power under Section263 - Decided against revenue.

Summary

Issues:
Tax appeal under Section 260A of the Income Tax Act, 1961 against the order passed by the Income Tax Appellate Tribunal for the A.Y. 2009-10. The main question is whether the Appellate Tribunal erred in quashing the order u/s.263 of the Act passed by the Principal Commissioner of Income Tax.

Analysis:
The Appellate Tribunal's decision was based on the interpretation of Section 263 of the Income Tax Act, 1961. The Tribunal highlighted that the Commissioner can only exercise power under Section 263 if the order passed by the Assessing Officer is found to be erroneous and prejudicial to the interest of the Revenue. In this case, the Commissioner took cognizance of the reassessment order, which was later quashed by the CIT(A) in May 2016. The Tribunal noted that since the order had been quashed and was no longer in existence, it could not be considered as erroneous or prejudicial to the Revenue's interest. Additionally, the action under Section 263 was contemplated in March 2017, which was beyond the two-year limit from the end of the financial year in which the original order was passed, making it legally unsustainable.

The Appellate Tribunal emphasized that once the reassessment proceedings were quashed and accepted by the department, there was no scope for the Commissioner to exercise power under Section 263 of the Act. The Tribunal found no substantial question of law involved in the appeal, as the issues for which the power was to be exercised under Section 263 were no longer valid due to the quashing of the reassessment proceedings.

After hearing arguments from the revenue's senior counsel and reviewing the records, the High Court concurred with the Tribunal's findings. The Court held that since the reassessment proceedings had been quashed and accepted, allowing the Commissioner to exercise power under Section 263 would serve no useful purpose. Therefore, the Court found no infirmity in the Tribunal's decision and dismissed the appeal accordingly.