In _Malabar Industrial Co. Ltd._ v. I.t.a

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HON'BLE THE CHIEF JUSTICE MR.J.CHELAMESWAR & THE HONOURABLE MR. JUSTICE P.R.RAMAN TUESDAY, THE 23RD MARCH 2010 / 2ND CHAITHRA 1932 ITA.No. 51 of 2010 ---- -------------------- ITA.579/COCH/2008 OF THE INCOME TAX APPELLATE TRIBUNAL,COCHIN BENCH .................... APPELLANT/APPELLANT IN ITA ---------------------------------------------- T.SHERAFFUDIN, THEYYAMPATTIL HOUSE,TIRUR BY ADV. SRI.ANIL D. NAIR SMT.NIVEDITA A.KAMATH RESPONDENT/ RESPONDENT IN ITA ---------------------------------------------------- COMMISSIONER OF INCOME TAX, KOZHIKODE. BY STANDING COUNSEL, GOVT. OF INDIA (TAXES) SRI.JOSE JOSEPH THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 23/03/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: J.Chelameswar, C.J. & P.R.Raman, J. ------------------------------------------ I.T.A. No.51 of 2010 ------------------------------------------ Dated this the 23[rd ] day of March, 2010 JUDGMENT J.Chelameswar, C.J. This is an appeal under Section 260A of the Income TaxAct, 1961 against an order dated 25[th]September, 2009 inI.T.A.No.579/Coch/2008 of the Income Tax Appellate Tribunal. 2. The appellant herein is an assessee before theAssistant Commissioner of Income Tax, Central Circle, Kozhikode.The assessment of the appellant with reference to the assessmentyear 2003-04 was completed under Section 143(3) of the IncomeTax Act by an order dated 20[th] January, 2006. 3. Subsequently, the appellant received a notice from theCommissioner of Income Tax, Kozhikode invoking the authority ofthe Commissioner under Section 263 of the Income Tax Act. Thesaid notice was served on the appellant on 17.1.2008. The appellantherein gave an appropriate reply explaining his case. However, by I.T.A.No.51 of 2010 - 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 theorder reads as follows: “In the circumstances the assessment order dated20.01.2006 for the asst. year 2003-04 is set aside andthe issue of the genuineness of the credits to the tune ofRs.21,00,000/- and Rs.8,00,000/- appearing in thenames of Shri Abdul Rahiman and Shri Manzoor Alirespectively are restored to the file of the AssessingOfficer for denovo consideration and for making afresh assessment after affording necessaryopportunities to the assessee and in accordance withlaw.” 4. Aggrieved by the same, the appellantunsuccessfully carried the matter to the Income Tax AppellateTribunal by way of an appeal which was dismissed by orderdated 25[th] September, 2009 and hence the present appeal beforethis Court. I.T.A.No.51 of 2010 5. Sri.Anil D.Nair, learned counsel for the appellant submitted that the jurisdiction under Section 263 of the IncomeTax Act is conditional upon the existence of an erroneous orderof assessment which is prejudicial to the interest of the Revenue.The Section does not authorise exercise of revisional powermerely because a view other than the one taken by the assessingauthority on the materials available before the assessingauthority is possible. According to the appellant, in the instantcase, the Commissioner exercised the authority under Section263 only because he took a view different from the one taken bythe assessing authority on the material available before theassessing authority. 6. In Malabar Industrial Co. Ltd. v. Commissionerof Income-Tax [(2000) 243 ITR 83], the Supreme Courtconsidered the scope of jurisdiction under Section 263 of theIncome Tax Act and the relevant portions of the said judgment read as follows: 6. In Malabar Industrial Co. Ltd. v. Commissionerof Income-Tax [(2000) 243 ITR 83], the Supreme Courtconsidered the scope of jurisdiction under Section 263 of theIncome Tax Act and the relevant portions of the said judgment read as follows: “There can be no doubt that the provisioncannot be invoked to correct each and every type ofmistake or error committed by the Assessing Officer,it it only when an order is erroneous that the sectionwill be attracted. An incorrect assumption of facts oran incorrect application of law will satisfy therequirement of the order being erroneous. In the samecategory fall orders passed without applying theprinciples of natural justice or without application ofmind.”........... “The scheme of the Act is to levyand collect tax in accordance with the provisions ofthe Act and this task is entrusted to the Revenue. Ifdue to an erroneous order of the Income-tax Officer,the Revenue is losing tax lawfully payable by aperson, it will certainly be prejudicial to the interestsof the Revenue.” 7. 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 introducedcredits of Rs.29,00,000/- in favour of two of his brothers (details I.T.A.No.51 of 2010 of which are contained in the revisional order). The assessingauthority proceeded to make the assessment accepting the claimof the above mentioned credits of the appellant. 8. The Commissioner, on the other hand, set asidethe assessment order on the ground of non application of mindwhich according to the aforesaid judgment of the SupremeCourt is a relevant consideration for exercise of the jurisdictionunder Section 263 of the Income Tax Act. The non applicationof mind, according to the Commissioner, is that the factsasserted by the appellant as to the credits referred to above wereaccepted on the mere claim without conducting any furtherexamination as to the genuineness of the claim. The assessmentorder produced as Annexure A to the present appeal is a crypticorder running to quarter of a page. Though it is not the lengthof the order which determines its quality, on a perusal of thecontents of the order, we see no reason to take a view different I.T.A.No.51 of 2010 - 6 - from the one taken by the Commissioner that the order is toocryptic and does not disclose proper application of mind, morespecifically in the light of the reasons given by theCommissioner which are referred to above. In the circumstances, we do not see any substantialquestion of law arising for consideration by this Court. Theappeal is, therefore, dismissed at the admission stage. J.Chelameswar, Chief Justice P.R.Raman, Judge vns