1991 (7) TMI 135 - AT - Income Tax

Appellate Authority, Assessment Order, Deduction In Respect, Orders Prejudicial To Interests, Revenue Receipt, Sales Tax

Summary

Issues:
1. Whether the order passed by the Assessing Officer was erroneous and prejudicial to the interests of revenue due to unpaid sales-tax and disallowance under sections 43B and 37(2A) to 37(3D) of the Income-tax Act, 1961.
2. Whether the Commissioner had jurisdiction under section 263 to revise an order that had been the subject of appeal.

Analysis:

Issue 1:
The appeal was against the CIT's order under section 263, contending that the Assessing Officer's order was not erroneous. The CIT found the order prejudicial to revenue due to unpaid sales-tax and non-disallowance under sections 43B and 37(2A) to 37(3D). The Assessee argued that the Assessing Officer followed Tribunal decisions and that subsequent law amendments should not render the order erroneous. However, the retrospective amendment to section 43B made the order erroneous. The Tribunal held that the retrospective legislation must be considered, and the Assessing Officer should have disallowed unpaid sales-tax as per the amended law, justifying the CIT's intervention under section 263.

Issue 2:
The Assessee contended that the CIT lacked jurisdiction under section 263 for orders subject to appeal. The insertion of Explanation C to section 263 empowered the CIT to consider matters not decided in appeals filed before or after June 1, 1988. The Bombay High Court held that Explanation C applies only post-June 1, 1988. However, there was a divergence in High Court opinions on the merger of orders subject to appeal. The Tribunal followed cases supporting partial merger, allowing the CIT to invoke section 263 for matters not considered by appellate authorities. As the CIT had not acted on matters in appeal, the Tribunal upheld the CIT's order under section 263, dismissing the Assessee's appeal.