Commissioner of Income Tax vs Soble and Miglani

The income tax Appellate Tribunal, Delhi referred the following question of law u/s 256(1) of the income tax Act, 1961, hereinafter referred to as ''the Act'' for opinion to this Court. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in cancelling the order of the Commissioner of Income- tax passed u/s 263 of the Act treating it as without jurisdiction?

The reference relates to the assessment year 1978-79. The assessment for the assessment year 1978-79 was completed on 27th March, 1981. The respondent, which is a registered firm, filed an appeal before the Commissioner (Appeals), which has been decided on 16th December, 1982. There-after the Commissioner of income tax examined the record and was of the opinion that the assessment order, which has not been the subject-matter of appeal, was prejudicial to the interest of the Revenue. He initiated the proceedings u/s 263 of the Act and after giving opportunity of hearing to the assessee had set aside the assessment order with the direction to the income tax Officer to pass afresh assessment order. Feeling aggrieved by the aforesaid order the assessee preferred an appeal before the Tribunal. The Tribunal relying upon the decision of this Court in the case of J.K. Synthetics Ltd. Vs. Additional Commissioner of Income Tax and Another, quashed the order passed u/s 263 of the Act on the ground that the assessment order has got merged in the appellate order, therefore, the assessment order could not have been revised u/s 263 of the Act.

Heard Sri A.N. Mahajan, learned Standing Counsel appearing for the Revenue. Nobody has appeared for the assessee.

It may be mentioned here that clause (c) of the Explanation to section 263(1) of the Act has been amended by the Finance Act, 1989 w.e.f. 1-6-1988 and the words "filed on or before or after the 1st day of June, 1988" and "and shall deemed always to have extended" has been inserted therein. The effect of the aforesaid amendment came up for consideration before the Apex Court in the case of COMMISSIONER OF Income Tax Vs. SHRI ARBUDA MILLS LTD., and the Apex Court has held as follows:-

The consequence of the said amendment made with retrospective effect is that the powers u/s 263 of the Commissioner shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in an appeal. Accordingly, even in respect of the aforesaid three items, the powers of the Commissioner u/s 263 shall extend and shall be deemed always to have extended to them because the same had not been considered and decided in the appeal filed by the assessee. This is sufficient to answer the question which has been referred." (p. 52)

Thus, the Commissioner was well within his jurisdiction u/s 263 of the Act in cancelling that part of the assessment order which was not subject-matter of appeal. In view of the foregoing discussion, we answer the question referred to us in negative i.e., in favour of the Revenue and against the assessee. However, there shall be no order as to costs.