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2005 (6) TMI 211 - AT - Income TaxChallenged the Revision Order passed u/s 263 - barred by limitation - Powers Of Commissioner - Error in computation of tax - Mistake Apparent From Record - credit for Canadian tax - whether the claim is in accordance with relevant provision of DTAA with Canada and Thailand - Power u/s 154 invoked by AO - HELD THAT - It is settled policy of law that there must be point of finality in all legal proceedings, that settled issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi judicial controversies as it must in other spheres of human activity. These principles are required to be observed by all concerned in administration of statutory enactments. It is not the case that there is any mistake in giving effect to appellate order by Commissioner (Appeals). Thus, under section 263(2), an order sought to be revised cannot be so revised after expiry of two years from the end of the financial year in which such order was passed. We accordingly hold that since the CIT has sought to revise an assessment order dated 27-2-1997, the same is outside the limitation period prescribed u/s 263(2). In this case, it is seen that before the order u/s 143(3) was passed, the assessee was required to explain how he has claimed the credit in respect of Canadian tax and Thailand tax by its letter dated 17-3-1999. In revision, learned CIT has merely set aside the order to re-work the credit in respect of Canadian and Thailand tax claimed under DTAA provision without mentioning any error in the original order sought to be revised. In our opinion, this is not permissible course under the provision of section 263 of the Act. The order cannot be set aside for making roving enquiry without pointing any error in the order. Similar view has been adopted by the Hon'ble High Court of Bombay in the case of CIT v. Gabriel India Ltd. 1993 (4) TMI 55 - BOMBAY HIGH COURT . The power of revision is not meant to be exercised for the purpose of directing the officer to hold another investigation when the order of Assessing Officer is not found to be erroneous. Similar view has been adopted by the Hon'ble Madras High Court in the case of CIT v. Sakthi Charities 2000 (2) TMI 75 - MADRAS HIGH COURT . For making a valid order u/s 263(1), it is essential that Commissioner has to record an express finding to the fact that the order sought to be revised, is erroneous as well as prejudicial to the interest of the revenue. In absence of any such finding, the order u/s 263 is liable to be set aside. It is pertinent to note that the Assessing Officer has not given the credit without verifying the details. The Assessing Officer not only once but twice called for the details as well as to what extent the claim is allowable. After satisfying himself, the Assessing Officer has allowed the claim. It is a different thing that the Commissioner may not agree with such a view, but if the view adopted by Assessing Officer is one of the possible views, revision cannot be resorted to on the ground that the Commissioner do not accept such view or that necessary enquiry has not been made in this regard. An order of revision by Commissioner cannot be upheld on a different ground than the ground on which it has been revised. If the Commissioner has revised on the ground that the Assessing Officer has not verified the details and the facts reveal that the claim has been properly verified after necessary application of mind, the power of revision is not available. It is true that if a claim has been allowed without making necessary enquiry required for the purpose, the Commissioner can revise the order by setting aside the original order and directing the Assessing Officer to make further enquiries. However, if necessary enquiry has been made and satisfaction of Assessing Officer has been arrived at, though not clearly mentioned in the assessment order, such order cannot be revised on the ground that the claim has been allowed without verifying the relevant provision of law. We once again mention that without pointing out an error in the assessment order, the Commissioner is not justified in passing an order in revision directing the Assessing Officer to make further enquiries. We accordingly set aside the order of learned CIT for assessment year 1996-97. In the result, all the appeals are allowed.
Issues Involved:
1. Validity of the revision order under Section 263 of the Income-tax Act. 2. Limitation period for passing a revision order under Section 263. 3. Application and verification of Double Tax Avoidance Agreement (DTAA) provisions with Canada and Thailand. 4. Whether the Assessing Officer's order was erroneous and prejudicial to the interest of revenue. 5. The effect of the merger theory on the revision order. Issue-wise Detailed Analysis: 1. Validity of the revision order under Section 263 of the Income-tax Act: The appeals by the assessee contested the revision order by the learned CIT under Section 263, which proposed to revise the orders passed under Section 143(3) for the assessment years in question. The CIT's order was based on the opinion that the credit for tax paid in Canada and Thailand was granted erroneously without applying the relevant provisions of the DTAA. The assessee argued that the issuance of a second notice while the first notice was pending is bad in law, citing the case of Smt. Nilofer Hameed v. ITO [1999] 235 ITR 161 (Ker.). The Tribunal found that the CIT's order substituted his opinion for that of the Assessing Officer, which is not permissible under Section 263, as held in Blue Dart Express Ltd. v. Jt. CIT [2001] 71 TTJ (Mum.) 548. 2. Limitation period for passing a revision order under Section 263: The assessee contended that the revision order was time-barred as it was issued more than two years after the original assessment order was passed. The Tribunal noted that the time-limit for an action under Section 263 is binding and different from the rectification under Section 154. The Tribunal held that the order sought to be revised must be within the limitation period prescribed under Section 263(2). The Tribunal concluded that the CIT's order for the assessment year 1994-95 was outside the limitation period and thus invalid. 3. Application and verification of DTAA provisions with Canada and Thailand: The CIT's revision order directed the Assessing Officer to compute the DTA relief in accordance with Article 23(2) of the DTAA with Thailand and Article 23(3) of the DTAA with Canada. The Tribunal found that the Assessing Officer had already verified the claims for tax credits under the DTAA provisions, as evidenced by the detailed responses and documents submitted by the assessee. The Tribunal held that the CIT failed to demonstrate any error in the original order regarding the application of DTAA provisions. 4. Whether the Assessing Officer's order was erroneous and prejudicial to the interest of revenue: The Tribunal emphasized that for an action under Section 263, the order sought to be revised must be both erroneous and prejudicial to the interest of revenue. The Tribunal found that the CIT did not clarify how the order was erroneous and merely directed the Assessing Officer to make further enquiries. The Tribunal cited the case of CIT v. Kanda Rice Mills [1989] 178 ITR 446 (Punj. & Har.) to support that the CIT must demonstrate the error in the order. The Tribunal concluded that the Assessing Officer had applied his mind and formed an opinion after proper enquiry, and thus the order was not erroneous. 5. The effect of the merger theory on the revision order: The Tribunal discussed the theory of merger and its applicability under Section 263. The Tribunal noted that the merger theory explicitly provided for in Section 263 does not apply to the extent that the CIT cannot revise matters considered and decided by the CIT(A). The Tribunal held that the order of the Assessing Officer, which was not contested in appeal, did not merge with the appellate order, and thus the CIT's revision order was invalid. Conclusion: The Tribunal allowed the appeals, setting aside the CIT's orders under Section 263 for the assessment years 1994-95, 1995-96, and 1996-97. The Tribunal concluded that the CIT's orders were either time-barred or lacked the demonstration of any error in the original orders, and the Assessing Officer had properly applied the DTAA provisions after necessary verification.
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