2009 (4) TMI 412 - HC - Income Tax

Revision- in this case the Commissioner (Appeals) passed the revision order under section 263 of the Act. But the contention of the assessee was that before exercising this power the Commissioner has to be satisfied that the order of the Assessing Officer is erroneous and it is prejudicial to the interest of revenue. Held that- the Tribunal found that the Assessing Officer made necessary enquiries before accepting the claim of the assessee with regard to the speculation profits. The Assessing Officer rightly while computing the income of the assessee first set off the profit from speculation business against the carried forward speculation loss. Thus dismiss the appeal of revenue.

Summary

Issues:
Appeal against ITAT order for assessment year 2003-04, Revision by CIT under section 263, Set off of speculation profits and losses, Applicability of Circular No. 23 (XXXIX-4) D of 1960, Interpretation of legal precedents, Power of revision under section 263, Quasi-judicial function of Assessing Officer, Interference by High Court under section 260A(3), Substantial question of law determination.

Analysis:
The case involves an appeal under section 260A of the Income-tax Act, 1961 against an order passed by the Income-tax Appellate Tribunal (ITAT) for the assessment year 2003-04. The Assessing Officer initially issued notices and conducted hearings before finalizing the assessment order on November 21, 2005, where the assessee showed nil income. Subsequently, the Commissioner of Income-tax exercised his power of revision under section 263, deeming the assessment order erroneous due to improper enquiry and incorrect set off of speculation profits against carried forward speculation loss.

The ITAT, in its order dated September 5, 2008, allowed the appeal, quashing the revision order and reinstating the assessment order. The tribunal found that the Assessing Officer had conducted necessary enquiries and correctly set off the speculation profits against the carried forward speculation loss as per Circular No. 23 (XXXIX-4) D of 1960 issued by the Central Board of Direct Taxes. Additionally, the tribunal relied on the decision in the case of CIT v. New India Investment Corporation Ltd. to support its findings on the treatment of speculation profits and losses.

The High Court emphasized that the power of revision under section 263 is not arbitrary and requires the Commissioner to establish that the Assessing Officer's order is both erroneous and prejudicial to the Revenue's interests. It noted that the Assessing Officer, acting in a quasi-judicial capacity, must adhere to binding decisions of superior courts, including the jurisdictional High Court, as seen in the Circular and legal precedent cited.

Regarding the interference by the High Court under section 260A(3), the court cited the Supreme Court's ruling in State Bank of India v. S. N. Goyal, stating that no substantial question of law arises when there is a clear and settled legal position. Consequently, as the tribunal correctly applied existing legal principles, the appeal was summarily dismissed, and the connected application was also dismissed accordingly. All parties were directed to act on a signed copy of the order.