THE COMMISSIONER OF INCOME TAX (CENTRAL) vs. M/S.PARTHAS, POWER HOUSE BOARD

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ITA/198/2013HC KeralaKLHC01026083201320 November 2013Bench: HONOURABLE MR.JUSTICE A.M.SHAFFIQUE,HONOURABLE THE CHIEF JUSTICE DR. MANJULA CHELLUR4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Income Tax Appellate Tribunal's order was well-reasoned and did not find any good ground to interfere with it. The Tribunal had relied on the Supreme Court's decision in Malabar Industrial Co. Ltd. v. CIT and the Bombay High Court's decision in Grasim Industries Ltd. v. CIT. These precedents establish that Section 263 of the Income Tax Act cannot be invoked to correct every type of mistake or error by the Assessing Officer. The provision is attracted only when an order is erroneous, which can arise from an incorrect assumption of fact or incorrect application of law. The Tribunal, applying these principles, found no justification for the Commissioner to add ₹39,30,732 and set aside the revisional order. The High Court agreed with the Tribunal's reasoning and dismissed the appeal. No issues were expressly left undecided.

What were the facts?

The Commissioner of Income Tax (Central), Kochi, initiated proceedings under Section 263 of the Income Tax Act, 1961, against M/s. Parthas, a partnership firm engaged in the textile business. This followed a search under Section 132 on October 11, 2007, which allegedly revealed incriminating documents indicating suppressed income. The assessee had filed a return declaring a total income including an offer of ₹1.21 crore to cover potential omissions. The Assessing Officer completed the assessment under Section 143(3) on December 31, 2009, determining the total income at ₹8,41,37,212. The Commissioner found the Assessing Officer's order erroneous and prejudicial to the revenue, setting it aside. The assessee appealed to the Income Tax Appellate Tribunal (ITAT), which, referencing the Bombay High Court's decision in Grasim Industries Ltd. v. CIT and the Supreme Court's ruling in Malabar Industrial Co. Ltd. v. CIT, held that the Commissioner was unjustified in adding ₹39,30,732 and accepted the Assessing Officer's assessment. The department has appealed this ITAT order.

What were the issues?

1. Whether the Income Tax Appellate Tribunal was justified in holding that the Commissioner of Income Tax (Central) was not justified in invoking the revisional powers under Section 263 of the Income Tax Act, 1961, to add an amount of ₹39,30,732 to the income assessed by the Assessing Officer? Assessee's Contentions (as inferred from the Tribunal's decision): The assessee contended that the Commissioner's order under Section 263 was not sustainable. The Tribunal, in its decision, relied on the Supreme Court's judgment in Malabar Industrial Co. Ltd. v. CIT and the Bombay High Court's decision in Grasim Industries Ltd. v. CIT, which clarified the scope of Section 263. These judgments indicate that Section 263 cannot be invoked for every mistake but only when an order is erroneous and prejudicial to the revenue. The Tribunal found that the Commissioner's addition was unjustified based on these precedents. Revenue's Contentions: The revenue, represented by the Commissioner, argued that the Assessing Officer's order was erroneous and prejudicial to the interest of the revenue, justifying the invocation of Section 263. The revenue's specific arguments leading to the addition of ₹39,30,732 are not detailed in the judgment, but their appeal to the High Court suggests disagreement with the Tribunal's finding that the addition was unjustified.

Which sections of the Income-tax Act were involved?

Section 263,Section 132,Section 143(2),Section 143(3)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE WEDNESDAY, THE 20TH DAY OF NOVEMBER 2013/29TH KARTHIKA, 1935 ITA.No. 198 of 2013 () ----------------------- AGAINST THE ORDER/JUDGMENT IN ITA 142/2012 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 11-01-2013 APPELLANT(S)/RESPONDENT: ------------------------ THE COMMISSIONER OF INCOME TAX (CENTRAL), KOCHI. BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S)/APPELLANT: ------------------------ M/S.PARTHAS, POWER HOUSE ROAD, TRIVANDRUM-695036. THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 20-11-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

MANJULA CHELLUR, C.J & A.M.SHAFFIQUE, J. ---------------------------------------------- I.T.A.No. 198 of 2013 ---------------------------------------------- Dated this the 20th November, 2013 JUDGMENT Manjula Chellur, C.J. Heard learned Standing Counsel for the appellant. We have also gone through the records. 2. The department is before us aggrieved by the order of the Tribunal setting aside the order under Section 263 of the Income Tax Act passed by the Commissioner of Income Tax exercising suo motu revisional powers. The assessee is a partnership firm engaged in textile business at Thiruvananthapuram. A search came to be conducted under Section 132 of the Income Tax Act at the premises of the assessee on 11.10.2007. According to the department, certain incriminating documents disclosing suppression of income were revealed and the same was seized during the course of search operation. Return of income came to be filed declaring total income on 30.9.2008, which includes income offered by the assessee amounting to 1.21 crore to cover ₹ any possible omissions and commissions. After issuing notice

ITA.No.198/13 2 under Section 143(2), assessment came to be completed under sub-section (3) of Section 143 on 31.12.2009 determining the total income of 8,41,37,212/-. The Commissioner of Income Tax ₹ (Central) found that the order passed by the Assessing Officer was erroneous and prejudicial to the interest of the revenue, therefore, proceeded to set aside the order passed by the Assessing Officer after issuing show cause notice and hearing the assessee as required under the procedure. Aggrieved by the same, the assessee approached Appellate Tribunal and the Appellate Tribunal, by referring to the judgment of the Bombay High Court so far as the scope of revisional proceedings in the case of Grasim Industries Ltd. v. CIT (321 ITR 92), which refers to the law laid down by the Apex Court in Malabar Industrial Co. Ltd. v. CIT [(2000)243 ITR 83], proceeded to hold that there was no justification on the part of the Commissioner of Income Tax to add an amount of 39,30,732/- and accept the assessment ₹ proceedings of the Assessing Officer. Aggrieved by the same, the department is before us. 3. It is not in dispute that at the request of the assessee, to telescope the above additional amount the voluntary offer of 1.21 crore ₹ , the assessing officer proceeded to accept the claim

ITA.No.198/13 3 of the assessee. While dealing with the scope of revisional proceedings initiated under Section 263 of the Act, Supreme Court made it clear that the provisions of Section 263 of the Act cannot be invoked to correct each and every type of mistake or error committed by the assessing officer and it is only when the order is erroneous, the section will be attracted. An incorrect assumption of fact or incorrect application of law will satisfy the requirements of the order being erroneous, was the opinion of the Apex Court. Placing reliance on this, the Bombay High Court decided the case in Grasim Industries Ltd.'s case (Supra), which was relied upon by the Tribunal in the present case. 4. We find no good ground to interfere with the said opinion of the Tribunal, which is a well reasoned order by referring to the law laid down by the Apex Court. Accordingly, the Appeal is dismissed. MANJULA CHELLUR, CHIEF JUSTICE A.M.SHAFFIQUE, JUDGE vgs20.11

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