1986 (2) TMI 115 - AT - Income Tax

Summary

Issues:
Jurisdiction of Commissioner under section 263 of the Income-tax Act, 1961

Analysis:
The appeal was directed against the order of the Commissioner made under section 263 of the Income-tax Act, 1961, relating to the assessment year 1979-80. The first issue raised was whether the Commissioner had the jurisdiction to revise the order of the IAC under section 263. The assessee argued that the Commissioner exceeded his authority as the IAC was not mentioned in section 263. The assessee relied on Special Bench judgments of the Tribunal to support this argument. However, the departmental representative contended that an Explanation to section 263(1) clarified that orders made by the ITO included orders based on directions issued by the IAC. The department relied on judgments from the Kerala High Court and the Bombay High Court to support their position.

Upon careful consideration, the Tribunal found that the Commissioner lacked lawful authority to revise the order made by the IAC under section 263. The Tribunal analyzed sections 125, 125A, and 263 of the Act and concluded that the Commissioner could only exercise powers under section 263 in relation to specific orders mentioned therein, which did not include orders made by the IAC.

Regarding the argument that the Explanation added to the section changed the position, the Tribunal noted that the Explanation was effective from 1-10-1984 and did not indicate any retrospective nature. The Tribunal emphasized that the statute did not confer the ITO's powers upon the IAC. Even if the Explanation was considered a parliamentary exposition of existing law, the Tribunal found it contradictory to make it retrospective, as it was effective from a specific date.

The Tribunal held that the order of the Commissioner was null and void in law on multiple grounds. Even if the Explanation was considered retrospective, the Tribunal applied the principle that favors the citizen in construing fiscal statutes and concluded that the Commissioner's order was a nullity and vacated it.

In conclusion, the Tribunal allowed the appeal, emphasizing that the Commissioner's order was non est in law due to lack of jurisdiction under section 263.