1989 (4) TMI 111 - AT - Income Tax

Summary

Issues Involved:
1. Legality of the Commissioner's revision of assessment orders under section 263 of the Income-tax Act, 1961.
2. Interpretation of the Explanation to sub-section (1) of section 263, effective from 1-6-1988, regarding its prospective or retrospective application.

Detailed Analysis:

1. Legality of the Commissioner's Revision of Assessment Orders:
The primary issue raised by the assessee is whether the Commissioner of Income-tax had the authority to revise the assessment orders under section 263 of the Income-tax Act, 1961, given that these orders had already been appealed and decided by the Commissioner of Income-tax (Appeals). The assessee argued that the impugned orders by the Commissioner were contrary to the law laid down by the Hon'ble Bombay High Court in the case of CIT v. P. Muncherji & Co. [1987] 167 ITR 671/32 Taxman 551. The principle established by the High Court is that once an assessment order is confirmed by the Appellate Assistant Commissioner, it becomes final, and the Commissioner has no right to revise it. The only recourse available to the Department is to appeal to the Appellate Tribunal. The Tribunal agreed with the assessee, emphasizing that the Commissioner goes out of the picture once the Appellate Assistant Commissioner passes orders in appeal.

2. Interpretation of the Explanation to Sub-section (1) of Section 263:
The second issue revolves around whether the Explanation to sub-section (1) of section 263, which was substituted by the Finance Act, 1988, effective from 1-6-1988, applies retrospectively or prospectively. The assessee contended that this Explanation, being effective from 1-6-1988, could not be applied to actions taken by the Commissioner on 11-3-1988 and 26-2-1988. The revenue, on the other hand, claimed that the Explanation is declaratory and thus retrospective. The Tribunal examined the principles of statutory interpretation, citing the treatise by Shri N.S. Bindra, which states that statutory provisions creating or taking away substantive rights are ordinarily prospective unless explicitly stated otherwise. The Tribunal concluded that the Explanation is prospective, noting that the legislative intent was clear from the statute and the Finance Act, 1988, which specified the effective date as 1-6-1988. Therefore, the Tribunal held that the Commissioner did not have the jurisdiction to revise the orders for the assessment years in question under section 263.

Conclusion:
The Tribunal canceled the impugned orders of the Commissioner for both assessment years, holding that the Commissioner lacked jurisdiction to exercise revisionary powers under section 263 of the Act. The appeals were allowed, and the Tribunal did not address the merits of the assessee's other grounds, as the primary issue of jurisdiction was decisive.