2016 (2) TMI 44 - HC - Income Tax

Revision u/s 263 - Whether Hon ble Tribunal was right in law in quashing the order of the Commissioner of Income Tax under Section 263 of the Act which is as per law as the provisions of Section 14A are applicable to the total income under the Income tax Act and the fact whether the income of the assessee is computed as per Section 11 or not is of no relevance? - Held that - The undisputed facts are that the assessment order under Section 143(3) of the Act was pass d by the Assessing Officer on 27.12.2009, subsequent to the registration under Section 12AA of the Act, granted to the assessee on 27.07.2009 with effect from 01.04.2003. The revision filed by the assessee under Section 264 of the Act was allowed accepting the claim of the assessee and the matter was remanded to the Assessing Officer to compute the income of the assessee in terms of the order of revision under Section 264 of the Act. The said order was given effect to by the Assessing Officer vide order dated 27.05.2011. Thus, it is clear that the order dated 27.12.2009 passed by the Assessing Officer is no longer in existence. CIT exercising the powers under Section 263 of the Act revised the non-existing order dated 27.12.2009, the Tribunal having considered this factual position arrived at a conclusion that CIT had no jurisdiction to revise the order which was not in existence. The order passed by the CIT, revising the non-existing order is void ab-initio and is a nullity in the eye of law. As such, the Tribunal setting aside the said void order passed under Section 263 of the Act, cannot be found fault with. It is pertinent to note that the computation of the income of the assessee has been done in accordance with Chapter III of the Act, the second question of law arises on the points urged in the cross-objection filed by the revenue before the Tribunal, which has been rejected. In the present case, the revenue has filed cross objections under Section 253(4) of the Act raising the points involved in second question of law now raised, in an appeal preferred by the assesee against the order of the revisional authority exercising the powers under Section 263 of the Act. No such cross objections are maintainable in an appeal filed against the order of revision in terms of Section 253(4) of the Act. Given the circumstances, the Tribunal rejecting the cross objections filed by the revenue as not maintainable is justifiable. - Decided in favour of the assessee

Summary

Issues:
Challenging order under Section 263 of the Income Tax Act for assessment year 2007-08.

Analysis:
The case involved the revenue filing appeals under Section 260-A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal (ITAT) related to the assessment year 2007-08. The assessee, a trust under the Major Port Trust Act, applied for registration under Section 12A of the Act, which was initially denied by the Commissioner of Income Tax (CIT). However, the ITAT directed the CIT to grant registration under Section 12AA to the assessee with effect from 01.04.2003. Subsequently, there were various orders passed by the authorities, including revision under Section 264 and 263 of the Act. The revenue challenged the order passed under Section 263 before the ITAT, which set aside the CIT's order and the cross objections filed by the revenue.

The first substantial question of law raised by the revenue was whether the assessment order passed on 29.12.2009 merged with the order dated 27.05.2011, which was giving effect to the CIT's order under Section 264. The second question pertained to quashing the CIT's order under Section 263, citing the applicability of Section 14A to the total income under the Income Tax Act. The revenue contended that the CIT had the power to revise the assessment order, while the assessee argued that the order dated 27.12.2009 no longer existed after subsequent orders.

After considering the submissions, the High Court observed that the order passed by the Assessing Officer on 27.12.2009 ceased to exist after subsequent actions and revisions. The CIT's revision under Section 263 of the Act on a non-existing order was deemed void ab-initio and a nullity in the eye of the law. The Tribunal's decision to set aside the void order was upheld. Additionally, the computation of the assessee's income was done in accordance with the Act, and the rejection of cross objections by the revenue was justified under Section 253(4) of the Act.

In conclusion, the substantial questions of law were answered in favor of the assessee, leading to the dismissal of the appeals filed by the revenue.