1983 (3) TMI 117 - AT - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Commissioner u/s 263 to revise an assessment order passed in accordance with directions of the IAC u/s 144B.
2. Entitlement of the assessee to a weighted deduction u/s 35B of the Income-tax Act, 1961.

Summary:

Issue 1: Jurisdiction of the Commissioner u/s 263
The primary issue was whether the Commissioner had jurisdiction to revise an assessment order passed by the ITO in accordance with the directions of the IAC u/s 144B. The Tribunal examined the provisions of sections 144A, 144B, 263, and 264 of the Income-tax Act, 1961. It was argued that the ITO's order, which followed the IAC's directions, could not be said to be erroneous, and thus, the Commissioner could not exercise revisional powers u/s 263. The Tribunal held that the ITO, while complying with the IAC's directions, was not acting on his own discretion but was bound by the statutory requirements. Consequently, such an order could not be revised by the Commissioner under section 263. The Tribunal emphasized that the IAC's directions under section 144B were binding on the ITO and that the assessment order, in such cases, was partly that of the IAC and partly that of the ITO. Therefore, the Commissioner's revisional jurisdiction under section 263 did not extend to orders passed in compliance with section 144B directions.

Issue 2: Entitlement to Weighted Deduction u/s 35B
The assessee claimed a weighted deduction u/s 35B, including ocean freight expenses. The ITO initially allowed the claim, but the Commissioner, in revisional proceedings u/s 263, held that the assessee was not entitled to the weighted deduction for ocean freight. The Tribunal noted that the issue of weighted deduction on merits was covered by an earlier decision of the Tribunal, which held that the assessee was not entitled to such deduction for ocean freight. However, due to the Tribunal's decision on the jurisdiction issue, the merits of the weighted deduction claim became irrelevant for the current assessment year.

Conclusion
The Tribunal concluded that the Commissioner did not have jurisdiction u/s 263 to revise the assessment order to the extent it was based on the IAC's directions u/s 144B. Consequently, the appeal by the assessee was allowed.