2020 (11) TMI 229 - HC - Income Tax

Revision u/s 263 - AO allowed the claim of carried forward of losses u/s 72A based on an incorrect assumption of facts - Whether Income-tax Appellate Tribunal was right in law in dismissing the revenue's appeal on the ground, the assessing officer can not go beyond the directions of the Commissioner of Income tax, even though during the course of fresh assessment proceedings, it is open to the assessing officer to examine any items other than specific item examine to have the proper income assessed as prospective? - HELD THAT -We need not labour much to decide the Substantial Question of Law raised by the appellant / Revenue in this appeal on account of the fact that the order, which is impugned before us passed by the Tribunal is as a result an order passed by the Commissioner of Income Tax u/s 263 of the Act. This order was on the subject matter of consideration in the assessee's own case for the earlier Assessment Year, which travelled up to the Hon'ble Division Bench of this Court 2019 (2) TMI 1780 - MADRAS HIGH COURT and the appeal filed by the Revenue was dismissed. This judgment was followed by the Hon'ble Division Bench of this Court in the assessee's own case for the Assessment Year 2005-06 2020 (2) TMI 96 - MADRAS HIGH COURT wherein held the view taken by the Assessing Authority to the effect that the claim of the assessee is liable to be allowed in the light of the provisions of section 32(2) of the SICA and its interpretation by the Supreme Court is thus, the correct one. Jurisdiction exercised by the CIT to correct the alleged error in assessment was in terms of section 263 of the Act. Section 263 empowers the Commissioner of Income tax to revise an order of assessment if the order in question is erroneous and prejudicial to the interests of the revenue, both conditions to be satisfied concurrently. The jurisdiction exercised by the CIT to correct the alleged error in assessment was in terms of section 263 of the Act. Section 263 empowers the Commissioner of Income tax to revise an order of assessment if the order in question is erroneous and prejudicial to the interests of the revenue, both conditions to be satisfied concurrently. The action of the assessing officer, though prejudicial, can hardly be termed as erroneous in so far as the officer has followed the dictum laid down by the Supreme Court in the case of Indian Shaving products ( 1996 (1) TMI 375 - SUPREME COURT ) . Thus, in the absence of concurrent satisfaction of the two conditions under section 263 of the Act, the action of the CIT was contrary to statute and liable to be set aside. - Decided against revenue

Issues Involved:
1. Whether the Income Tax Appellate Tribunal was correct in dismissing the Revenue's appeal on the grounds that the assessing officer cannot go beyond the directions of the Commissioner of Income Tax during fresh assessment proceedings.

Issue-wise Detailed Analysis:

1. Tribunal's Dismissal of Revenue's Appeal:
The core issue revolves around whether the Income Tax Appellate Tribunal (the Tribunal) was right in law in dismissing the Revenue's appeal on the grounds that the assessing officer cannot go beyond the directions of the Commissioner of Income Tax (CIT) during fresh assessment proceedings. This appeal by the Revenue was filed under Section 260A of the Income Tax Act, 1961, challenging the Tribunal's order dated 23.12.2010 for the Assessment Year 2005-06.

2. Reference to Previous Judgments:
The judgment under appeal was influenced by an earlier order passed by the CIT on 09.06.2008 under Section 263 of the Act. This order had already been considered in the assessee's own case for an earlier Assessment Year, which had been adjudicated up to the Hon'ble Division Bench of the High Court in the case of The Commissioner of Income Tax-II Vs. Lakshmi Machine Works Limited in T.C.A.No.747 of 2009 dated 13.02.2019. The appeal filed by the Revenue in that case was dismissed. This precedent was followed by the Division Bench in the assessee's case for the Assessment Year 2005-06 in T.C.A.No.1199 of 2010.

3. Examination of Section 263 and Section 72A:
The CIT had revised the initial assessment order under Section 263 on the grounds that there was no application of mind by the Assessing Authority while allowing the assessee's claim for set-off of carried forward loss and unabsorbed depreciation. The Tribunal, however, quashed the CIT's order, holding that the BIFR’s sanction of the rehabilitation scheme implied compliance with Section 72A of the Act, and no further compliance was necessary.

4. Supreme Court's Interpretation:
The Tribunal’s decision was supported by the Supreme Court’s judgment in Indian Shaving Products Ltd. V. BIFR, which held that the BIFR’s sanction of a rehabilitation scheme implies that the conditions of Section 72A are met. The Tribunal also referenced Circulars Nos.523 and 576, which minimize the impact of statutory provisions in cases where the BIFR has sanctioned a scheme of rehabilitation.

5. CIT's Jurisdiction under Section 263:
The CIT's jurisdiction under Section 263 requires that an order be both erroneous and prejudicial to the interests of the Revenue. In this case, the Tribunal found that the Assessing Officer's order was not erroneous as it followed the Supreme Court’s dictum. Hence, the CIT’s action to revise the assessment was contrary to statute and was set aside.

6. Revenue's Contemplation of Review:
The Revenue's counsel submitted that they were contemplating filing a Review Application before the Hon'ble Division Bench. However, no such review had been filed against the judgment dated 13.02.2019 in T.C.A.No.747 of 2009, nor an appeal against the judgment dated 28.01.2020 in T.C.A.No.1199 of 2010.

Conclusion:
Given the factual and legal positions as established in the assessee's own case and the precedent set by the High Court and the Supreme Court, the appeal by the Revenue was dismissed. The substantial question of law was answered against the Revenue, affirming that the Tribunal was correct in its decision. No costs were awarded.

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