1983 (6) TMI 55 - AT - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Commissioner under Section 263.
2. Validity of the show-cause notice issued under Section 263.
3. Whether the Commissioner's order was influenced by the Revenue Audit Department.
4. Merger of the IAC's order with the appellate order of the CIT(A).

Issue-wise Detailed Analysis:

1. Jurisdiction of the Commissioner under Section 263:
The assessee challenged the jurisdiction of the Commissioner under Section 263 on the grounds that the Commissioner's order was bad in law as it was passed at the instance of the Revenue Audit Department and not in the exercise of the Commissioner's judgment and discretion. Additionally, it was argued that the IAC's order had already merged with the order of the CIT(A), and hence, the Commissioner had no jurisdiction to revise the assessment for the assessment year 1977-78. The Tribunal noted that the effective and operative order which the Commissioner proposed to revise was that of the CIT(A) and, therefore, the Commissioner had no jurisdiction to revise the assessment of the IAC.

2. Validity of the show-cause notice issued under Section 263:
The assessee argued that the show-cause notice dated 6th February 1982 did not specify the reasons for the Commissioner's satisfaction that the IAC's order of assessment was erroneous and prejudicial to the interests of the revenue. The Tribunal examined the content of the show-cause notice and found that it specified the reasons for the Commissioner's satisfaction, including the non-taxation of lb102,367 credited to the Profit & Loss Account and the incorrect application of Section 44C of the Act. The Tribunal concluded that the show-cause notice was not vague and contained sufficient reasons for the exercise of jurisdiction under Section 263.

3. Whether the Commissioner's order was influenced by the Revenue Audit Department:
The assessee contended that the Commissioner issued the show-cause notice at the instance of the Revenue Audit Department without exercising his own discretion. The Tribunal found no evidence to support this contention. It was noted that the ITO's enquiry letter dated 30th November 1981 contained only one of the items mentioned in the Commissioner's letter dated 6th February 1982. The Tribunal concluded that the Commissioner was satisfied on the basis of the ITO's/IAC's report and the scrutiny of records that the order sought to be revised was erroneous and prejudicial to the interests of revenue.

4. Merger of the IAC's order with the appellate order of the CIT(A):
The Tribunal found that the IAC's order had merged with the appellate order of the CIT(A) for the relevant assessment year. The Tribunal relied on the Special Bench Tribunal decision in the case of M/s Dwarkadas & Co. (I) Ltd., which held that the issues arising out of the assessment order decided by the ITO in favor of the assessee, over which the AAC had power to examine and pass appropriate orders, should be deemed to have been examined by the AAC. Consequently, the IAC's order merged with the appellate order of the CIT(A), and the Commissioner had no jurisdiction under Section 263 to revise the assessment.

Conclusion:
The Tribunal allowed the appeal, holding that the Commissioner had no jurisdiction under Section 263 to revise the IAC's order as it had already merged with the appellate order of the CIT(A). The Tribunal did not find it necessary to adjudicate on the other grounds regarding the merits of the Commissioner's order.