THE COMMISSIONER OF INCOME TAX, COCHIN vs. SHRI. JACOB J.THALIATH, OCEAN BOUNTY

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ITA/1037/2009HC KeralaKLHC01025798200916 November 2010Bench: HONOURABLE MR.JUSTICE B.P.RAY,HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR4 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the Tribunal committed a patent error in cancelling the Section 263 orders. For ITA No. 1037/2009, the Court ruled that there is no bar in Section 263 restricting the Commissioner's power to revise only original orders. Any proceeding issued by the Assessing Officer, including original assessment, revised assessment under Section 147, or rectification order under Section 154, can be revised under Section 263 if erroneous or prejudicial to the Revenue. The Court allowed the appeal, reversing the Tribunal's order and restoring the Commissioner's Section 263 order. For ITA No. 1197/2009, the Court held that the Tribunal has no power to consider the validity of an assessment or reassessment order while adjudicating an appeal against a Section 263 order. The assessee, not having challenged the revised assessment, cannot contest its validity before the Tribunal in an appeal against the Section 263 order. The Court allowed the appeal, vacating the Tribunal's order and restoring the Commissioner's Section 263 order. The ratio is that Section 263 powers extend to revised assessments and rectification orders, and the validity of the underlying assessment cannot be questioned in a Section 263 appeal.

What were the facts?

The appeals by the Commissioner of Income Tax (Revenue) challenge orders of the Income Tax Appellate Tribunal (ITAT) that cancelled suo motu revisional orders passed by the Commissioner under Section 263 of the Income Tax Act, 1961. The ITAT had cancelled these orders on the grounds that the orders sought to be revised were either a revised assessment issued under Section 147, rectified under Section 154 for interest under Section 234D (for assessment year 1995-96), or an invalid revised assessment under Section 147 (for assessment year 1992-93). The Revenue contended that the ITAT erred in cancelling the Section 263 orders.

What were the issues?

1. Whether the Tribunal was justified in cancelling the suo motu revisional order issued by the Commissioner of Income Tax under Section 263 of the Income Tax Act, 1961, on the ground that the order sought to be revised was a revised assessment issued under Section 147, which was further rectified under Section 154 for modification of interest levied under Section 234D. 2. Whether the Tribunal was justified in cancelling the suo motu revisional order issued by the Commissioner of Income Tax under Section 263 of the Income Tax Act, 1961, for the assessment year 1992-93, on the ground that the revised assessment issued under Section 147, which was the subject matter of revision, was itself an invalid order. Assessee's Contention (implied from Tribunal's reasoning): The Tribunal argued that only original assessments could be revised under Section 263, and that a revised assessment or a rectification order could not be subjected to revision under Section 263. For ITA No. 1197/2009, the Tribunal also considered the validity of the revised assessment itself. Revenue's Contention: The Revenue argued that the Tribunal committed a patent error in cancelling the Section 263 orders on the stated grounds, asserting that Section 263 is not restricted to revising only original orders and that the Tribunal cannot consider the validity of an assessment order while deciding an appeal against a Section 263 order.

Which sections of the Income-tax Act were involved?

Section 263,Section 147,Section 154,Section 234D

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE B.P.RAY TUESDAY, THE 16TH NOVEMBER 2010 / 25TH KARTHIKA 1932 ITA.No. 1037 of 2009() ---------------------- AGAINST THE ORDER IN ITA.335/COCH/2006 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/ APPELLANT ----------------------------- THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES)

SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): / RESPONDENT --------------- MRS.JACOB J.THALIATH, PROP. OCEAN BOUNTY, 26/1994, NEAR ST.JOSEPH CHURCH, K.P.VALLON ROAD, KOCHI-682 020. ADV. SRI.P.BALAKRISHNAN (E) FOR R1 SRI.V.SREEKUMAR FOR R1 SRI.MOHAN PULIKKAL FOR R1 THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 16/11/2010, ALONG WITH ITA NO.1197/2009 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

C.N.RAMACHANDRAN NAIR & BHABANI PRASAD RAY, JJ. ---------------------------------- ITA Nos.1037 & 1197 of 2009 --------------------------------- Dated, this the 16th day of November, 2010 J U D G M E N T Ramachandran Nair, J. In these two appeals, the only question raised is whether the Tribunal was justified in cancelling the suo motu revisional order issued by the Commissioner of Income Tax under Section 263 of the Income Tax Act for the reason that the order sought to be revised was the revised assessment issued under Section 147, which was rectified under Section 154 for modification of interest levied under Section 234D. 2. The Tribunal cancelled the order issued by the Commissioner on the ground that original assessment only could be revised under Section 263. Admittedly, for the assessment year 1995-96, the Tribunal followed a decision of the Bhopal Bench of the Tribunal, which though was confirmed by the High Court, was later reversed by the Supreme Court. We feel the Tribunal has committed a patent error in cancelling

ITA Nos.1037 & 1197 of 2009 -2- a Section 263 order on the ground that original order got merged in revised assessment, which cannot be revised under Section 263. There is no bar in Section 263 restricting the power of the Commissioner by limiting his jurisdiction to revise only original orders issued by the Assessing Officer. In fact, any proceedings issued by the Assessing Officer, whether it be original assessment or revised assessment issued under Section 147 or even a rectification order issued under Section 154, could be revised in exercise of powers under Section 263, if the order is erroneous or is prejudicial to the interest of the Revenue. We, therefore, allow ITA No.1037/2009 by reversing the order of the Tribunal and by restoring the order issued by the Commissioner under Section 263. 3. In so far as ITA No.1197/2009 is concerned, the Tribunal interfered with Section 263 order issued for the year 1992-93 for the reason that the revised assessment issued under Section 147, that was the subject matter of revision under Section 263, itself is an invalid order. We do not think that the Tribunal has any such power to consider the validity

ITA Nos.1037 & 1197 of 2009 -3- of any such order, while considering the appeal filed against the order issued by the Commissioner under Section 263. The assessee having not challenged the revised assessment, cannot also contest validity of that proceedings before the Tribunal in an appeal filed against the order issued under Section 263. The Tribunal, being the 2nd appellate authority, cannot consider validity of an assessment or reassessment order while considering the appeal filed against an order issued under Section 263. So much so, the order of the Tribunal is liable to be vacated. Therefore, we allow ITA No.1197/2009 by vacating the order of the Tribunal and by restoring the order issued by the Commissioner under Section 263. These appeals are allowed as above. (C.N.RAMACHANDRAN NAIR, JUDGE) (BHABANI PRASAD RAY, JUDGE) jg

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