Commissioner of Income Tax vs Kalyan Solvent Extraction Ltd.

A.M. Sapre, J.—This is an Income Tax reference made at the instance of the Revenue (Commissioner of income tax) u/s 256(1) of the Income Tax Act, 1961, by the Tribunal in R. A. No. 162/Ind of 1992 which in turn arose out of an order dated June 5, 1992, in I. T. A. No. 550/Ind of 1989 to answer the following question of law :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the order passed by the Commissioner of Income Tax u/s 263 was without jurisdiction ?"

The facts in brief as mentioned in the statement of case drawn by the Tribunal need mention infra.

For the assessment year 1984-85, the Assessing Officer passed an assessment order u/s 143(3) of the Act on March 13, 1987, in the case of the assessee. However, the Assessing Officer on March 14, 1989, rectified his original assessment order dated March 13, 1987, u/s 154 of the Act in relation to the applicability of Section 80HHC and claiming benefit of one item namely--extra shift allowance on transformers.

On March 21, 1989 (annexure C) the Commissioner in exercise of powers conferred u/s 263 of the Act set aside the original order of assessment passed by the Assessing Officer on March 13, 1987, giving rise to its challenge before the Tribunal by the assessee. The Tribunal by an order dated June 5, 1992 (annexure D), allowed the appeal and set aside the order of the Commissioner of Income Tax giving rise to this reference at the instance of the Commissioner on the question framed supra.

Heard Shri R. L. Jain, learned senior counsel with Ku. V. Mandlik, learned counsel for the Revenue.

Having heard learned counsel for the parties and having perused the record of the case, we answer the reference against the Revenue and in favour of the assessee.

It is not in dispute that on the date March 21, 1989, when the Commissioner sought to exercise his suo motu revisional powers u/s 263 of the Act against the assessment order dated March 13, 1987, the same was already rectified by the Assessing Officer on March 14, 1989, u/s 154 of the Act. In this view of the matter, the Commissioner had no jurisdiction to set aside that order which stood already rectified. In other words, the Commissioner could at best have invoked his suo motu powers u/s 263 of the Act as against the order dated March 14, 1989, passed by the Assessing Officer and not the one already passed and rectified, i.e., original assessment order dated March 13, 1987.

Once the original order stands rectified then it loses its identity at least to the extent it stood rectified. In such circumstances, the Commissioner should have invoked his suo motu powers u/s 263 of the Act against the subsequent rectified order dated March 14, 1989, if he was of the view that the same is erroneous and prejudicial to the interests of the Revenue.

We are, therefore, of the view that the Tribunal made no mistake in coming to the conclusion that the order of the Commissioner passed u/s 263 of the Act which had the effect of setting aside the assessment order dated March 13, 1987, is without jurisdiction.

Accordingly, and in view of the aforesaid discussion, we answer the reference against the Revenue and in favour of the assessee.

No costs.