T.SHERRAFFUDDIN vs. COMMISSIONER OF INCOME TAX

The appellant herein is an assessee before the Assistant Commissioner of Income Tax, Central Circle, Kozhikode. The assessment of the appellant with reference to the assessment year 2003-04 was completed under Section 143(3) of the Income Tax Act by an order dated 20th January, 2006. 3. Subsequently, the appellant received a notice from the Commissioner of Income Tax, Kozhikode invoking the authority of the Commissioner under Section 263 of the Income Tax Act. The said notice was served on the appellant on 17.1.2008. The appellant herein gave an appropriate reply explaining his case. However, by - 2 - order dated 5.3.2008, the Commissioner set aside the assessment order referred to above and remitted the matter to the assessing authority for denovo consideration. The operative portion of the order reads as follows: “In the circumstances the assessment order dated 20.01.2006 for the asst. year 2003-04 is set aside and the issue of the genuineness of the credits to the tune of Rs.21,00,000/- and Rs.8,00,000/- appearing in the names of Shri Abdul Rahiman and Shri Manzoor Ali respectively are restored to the file of the Assessing Officer for denovo consideration and for making a fresh assessment after affording necessary opportunities to the assessee and in accordance with law.”

Aggrieved by the same, the appellant unsuccessfully carried the matter to the Income Tax Appellate Tribunal by way of an appeal which was dismissed by order dated 25th September, 2009 and hence the present appeal before this Court.

Sri.Anil D.Nair, learned counsel for the appellant submitted that the juri iction under Section 263 of the Income Tax Act is conditional upon the existence of an erroneous order of assessment which is prejudicial to the interest of the Revenue. The Section does not authorise exercise of revisional power merely because a view other than the one taken by the assessing authority on the materials available before the assessing authority is possible. According to the appellant, in the instant case, the Commissioner exercised the authority under Section 263 only because he took a view different from the one taken by the assessing authority on the material available before the assessing authority.

In Malabar Industrial Co. Ltd. v. Commissioner of Income-Tax [(2000) 243 ITR 83], the Supreme Court considered the scope of juri iction under Section 263 of the Income Tax Act and the relevant portions of the said judgment - 4 - read as follows: “There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it it only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind.”........... “The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income-tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue.”

Applying the above principle of law laid down by the Supreme Court on the facts of the instant case, the dispute in the instant case appears to be that the appellant introduced credits of Rs.29,00,000/- in favour of two of his brothers (details - 5 - of which are contained in the revisional order). The assessing authority proceeded to make the assessment accepting the claim of the above mentioned credits of the appellant.

The Commissioner, on the other hand, set aside the assessment order on the ground of non application of mind which according to the aforesaid judgment of the Supreme Court is a relevant consideration for exercise of the juri iction under Section 263 of the Income Tax Act. The non application of mind, according to the Commissioner, is that the facts asserted by the appellant as to the credits referred to above were accepted on the mere claim without conducting any further examination as to the genuineness of the claim. The assessment order produced as Annexure A to the present appeal is a cryptic order running to quarter of a page. Though it is not the length of the order which determines its quality, on a perusal of the contents of the order, we see no reason to take a view different - 6 - from the one taken by the Commissioner that the order is too cryptic and does not disclose proper application of mind, more specifically in the light of the reasons given by the Commissioner which are referred to above. In the circumstances, we do not see any substantial question of law arising for consideration by this Court. The appeal is, therefore, dismissed at the admission stage.