2017 (11) TMI 260 - HC - Income Tax

Revision u/s 263 - record to substantiate that the order passed by the assessing officer is erroneous or prejudicial to the interest of revenue - Held that - In the instant case in the order of the Commissioner of Income Tax, it is noticed that nowhere the Commissioner of Income Tax has recorded his satisfaction, rather the satisfaction was of the Income Tax Officer (Technical) who is not competent to revise the order under Section 263 of the Act. Admittedly, the show cause notice has been issued by the ITO(Technical) which also establishes that without examining the assessment order passed by the assessing officer, the show cause notice has been issued. Furthermore, nothing was brought on record to substantiate that the order passed by the assessing officer is erroneous or prejudicial to the interest of revenue. In the instant case neither the Commissioner of Income Tax has applied his mind nor he has brought on record that the assessment order was erroneous or prejudicial to the interest of revenue. Admittedly, the original order has been passed under Section 143(3) of the Act was an order passed by the assessing authority who is not below in rank of the Income Tax Officer (Technical), who has initiated the proceedings under Section 263 in the instant case. An order cannot be revised by the equally situated or equally ranked authority or by any authority who is not authorised under the law. In the instant case the authorised authority is none else but the Commissioner of Income Tax or Principal Commissioner of Income Tax. - Decided against revenue

Summary

Issues:
1. Jurisdiction of the Commissioner of Income Tax to revise orders under Section 263 of the Income Tax Act.
2. Validity of the order passed by the Income Tax Appellate Tribunal in setting aside the order under Section 263 of the Act.
3. Authority competent to initiate proceedings under Section 263 of the Act.
4. Requirement of recording satisfaction by the Principal Commissioner or Commissioner of Income Tax before initiating proceedings under Section 263.

Analysis:

1. The High Court analyzed the jurisdiction of the Commissioner of Income Tax to revise orders under Section 263 of the Income Tax Act. The Court referred to Section 263(1) of the Act, which vests the power to revise orders prejudicial to revenue solely with the Principal Commissioner or Commissioner of Income Tax. The Court emphasized that the Commissioner must examine the record of the proceeding and record satisfaction before initiating revision proceedings.

2. The Court examined the validity of the order passed by the Income Tax Appellate Tribunal in setting aside the order under Section 263. The Tribunal had held that the order of the CIT was void ab initio and deserved to be set aside. The Court noted that the Tribunal found the satisfaction for initiating proceedings under Section 263 was not recorded by the competent authority, rendering the order erroneous.

3. Regarding the authority competent to initiate proceedings under Section 263, the Court highlighted that the power is vested exclusively in the Principal Commissioner or Commissioner of Income Tax. In this case, the initiation of proceedings by the Income Tax Officer (Technical) was found to be unauthorized, as the satisfaction required for initiating revision was not recorded by the competent authority.

4. The Court emphasized the requirement of recording satisfaction by the Principal Commissioner or Commissioner of Income Tax before initiating proceedings under Section 263. It noted that in this case, the Commissioner failed to record satisfaction, and the initiation of proceedings by an unauthorized officer without examining the assessment order rendered the entire process invalid.

In conclusion, the High Court dismissed the appeal filed by the department, affirming the order passed by the Income Tax Appellate Tribunal. The Court held that the initiation of proceedings under Section 263 by an unauthorized officer without proper satisfaction recorded by the competent authority rendered the order erroneous and prejudicial to the interest of revenue, leading to the dismissal of the appeal.