2006 (1) TMI 67 - HC - Income Tax

Section 263 - summary assessment - Whether Tribunal was right in holding that the Commissioner of Income-tax Surat was not justified to pass the order under section 263 of the Income-tax Act 1961 in the case of the assessee relating to the assessment year 1986-87? The assessment year is 1986-87. Commissioner of Income-tax being bound by the directions of the Central Board of Direct Taxes could not have exercised powers under section 263 of the Act in the present case when the assessment in question was in the nature of a summary assessment - Considering the fact that the court has taken the view that the exercise of powers under section 263 of the Act was without jurisdiction it is not necessary to enter into the merits of the controversy. The question is accordingly answered in the affirmative i.e. in favour of the assessee and against the Revenue.

Summary

Issues:
1. Jurisdiction of the Commissioner of Income-tax to pass an order under section 263 of the Income-tax Act, 1961 for the assessment year 1986-87.

Analysis:
The High Court of Gujarat was tasked with determining whether the Tribunal was correct in holding that the Commissioner of Income-tax, Surat, was not justified in passing the order under section 263 of the Income-tax Act, 1961, for the assessment year 1986-87. The Commissioner of Income-tax had initiated proceedings under section 263 of the Act after finding the assessment order under section 143(1) to be erroneous and prejudicial to the interests of the Revenue. The Commissioner directed the Assessing Officer to add the sales tax benefit amount to the total income. However, the Tribunal, in its order, found that the assessment was a summary assessment as per the Circular issued by the Central Board of Direct Taxes, which stated that no remedial action was necessary in summary cases. The Tribunal concluded that the Commissioner could not have exercised revisional powers under section 263 in such cases. The High Court upheld the Tribunal's decision, stating that the Commissioner, bound by the Central Board of Direct Taxes' directions, could not have exercised powers under section 263 for a summary assessment.

Furthermore, the High Court emphasized that since the assessment was a summary one and the Commissioner was restricted by the Central Board of Direct Taxes' directions, there was no need to delve into the merits of the controversy. The Court, therefore, ruled in favor of the assessee, agreeing with the Tribunal that the Commissioner was not justified in passing the order under section 263 for the assessment year in question. The judgment was delivered in favor of the assessee, and the reference was disposed of with no order as to costs.