1993 (12) TMI 89 - AT - Income Tax

Assessment Order Assessment Year Industrial Undertaking Orders Prejudicial To Interests Original Assessment Sales Tax Liability

Issues Involved:
1. Validity of the order under section 263 of the Income-tax Act, 1961.
2. Scope of the Income Tax Officer's (ITO) reassessment authority under section 263.
3. Inclusion of sales tax liability under section 43B.
4. Computation of relief under section 80HH.
5. Impact of the CIT(A)'s order dismissing the appeal against the ITO's order under section 154.

Detailed Analysis:

1. Validity of the order under section 263 of the Income-tax Act, 1961:

The judgment begins by addressing the order passed by the Commissioner of Income Tax (CIT) under section 263 of the Income-tax Act, 1961. The CIT issued a notice on two grounds: excessive relief under section 80HH and non-inclusion of sales tax receipts in the assessee's income. However, the CIT's final order focused solely on the relief under section 80HH, deeming the original assessment prejudicial to the interests of revenue. The CIT directed the ITO to pass a fresh assessment order considering all revenue aspects. The Tribunal noted that the CIT did not base his order on the second ground regarding sales tax receipts.

2. Scope of the Income Tax Officer's (ITO) reassessment authority under section 263:

The Tribunal examined whether the ITO exceeded his authority by including the sales tax liability under section 43B in the reassessment. The Tribunal emphasized that the CIT's order under section 263 should be limited to the specific error identified, i.e., the relief under section 80HH. The Tribunal cited the Delhi High Court's decision in Addl. CIT v. J.K. D'Costa, which held that a wholesale cancellation of the assessment is not justified for a minor error. The Tribunal concluded that the ITO's reassessment should be restricted to recomputing the relief under section 80HH and not extend to other matters like sales tax liability.

3. Inclusion of sales tax liability under section 43B:

The Tribunal addressed the department's appeal against the CIT(A)'s order, which deleted the addition of Rs. 32,40,408 under section 43B. The Tribunal agreed with the assessee's contention that the ITO exceeded his authority by including the sales tax liability, as the CIT's order under section 263 did not cover this aspect. The Tribunal emphasized that the CIT's order must be understood in the context of the grounds for which the notice was issued and the final order passed.

4. Computation of relief under section 80HH:

The Tribunal highlighted that the CIT's order under section 263 was limited to the computation of relief under section 80HH. The CIT had directed the ITO to re-compute the relief in accordance with the law, and there was no mention of sales tax receipts or section 43B in the CIT's order. The Tribunal held that the ITO's reassessment should be confined to the issue of relief under section 80HH and not extend to other matters.

5. Impact of the CIT(A)'s order dismissing the appeal against the ITO's order under section 154:

The Tribunal addressed the department's argument that the assessee could not challenge the scope of the CIT's order due to the CIT(A)'s dismissal of the appeal against the ITO's order under section 154. The Tribunal rejected this argument, stating that the CIT(A)'s order dismissing the appeal as "infructuous" did not prevent the assessee from contending that the CIT's order was limited to section 80HH. The Tribunal emphasized that the CIT(A) did not adjudicate on the scope of the CIT's order, and the issue was properly before the Tribunal in the current appeal.

Conclusion:

The Tribunal allowed the assessee's cross-objection and upheld the CIT(A)'s deletion of the addition under section 43B. The Tribunal dismissed the department's appeal, concluding that the ITO exceeded his authority by including the sales tax liability in the reassessment, as the CIT's order under section 263 was limited to the computation of relief under section 80HH.

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