The Commissioner Of Income Tax Ward Ii(4), Chennai Appellant v. Tax Case Appeal Filed Under Section 260-A Of The Income Tax Act, 1961 Against The Order Of The Income Tax Appellate Tribunal 'C' Bench, Chennai Dated 19.06.2009

Dated : 07.12.2009Coram : THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIANandTHE HONOURABLE MR.JUSTICE M.M.SUNDRESH T.C.(A) No.1310 OF 2009 The Commissioner of Income TaxWard II(4), Chennai Appellant v. Smt.Tasneem Z MadraswalaOld No.8, New No.19,4th Main RoadGandhi NagarAdayar, Chennai 20. Respondent Tax case appeal filed under Section 260-A of the Income Tax Act, 1961 against the order of theIncome Tax Appellate Tribunal 'C' Bench, Chennai dated 19.06.2009 passed inITA.No.2140/Mds/2007. For Appellant : Mr.Patty B.JaganathanFor Respondent : Mr.J.Balachander JUDGMENT(Judgment of the Court was delivered byM.M.SUNDRESH, J.) The revenue has come on appeal against the order passed by the Tribunal inI.T.A.No.2140/Mds/2007 for the assessment year 2004-05 by framing the following substantialquestions of law:- "1. Whether on the facts and circumstances of the case, the Tribunal was right in holding that CITcannot give direction to the Assessing Officer to complete the assessment afresh where it isprejudicial to the revenue? 2. Whether on the facts and circumstances of the case, the Tribunal was right in deciding that CIThas only power to set aside the denovo assessment with absolute discretion to the Assessing Officer?3. Whether on the facts and circumstances of the case, Sec.263 of the Income Tax Act confers powerto CIT to revise any proceedings of the Assessing Officer where it is prejudicial to revenue or not?". 2. The brief facts of the case are as follows:- (i)The assessee filed her return of income on 15.12.2004 admitting a total income of Rs.7,77,440/-for the assessment year 2004-05. The same was processed under Section 143(1) of the Income TaxAct on 20.06.2005. Thereafter, the case was taken up for scrutiny and the regular assessment underSection 143(3) was completed on 20.11.2006, determining the total income at Rs.8,02,440/-. (ii) By exercising the power under Section 263 of the Income Tax Act, 1961, the Commissioner ofIncome Tax (Appeals), Chennai VI, has set aside the order passed by the Assessing Officer andfurther directed the Assessing Officer to pass a fresh assessment order by following the procedurecontemplated under Section 50 C (2)(b) of the Income Tax Act. (iii) Challenging the above said order, the assessee filed a further appeal before the Tribunal and theTribunal by an order dated 19.06.2009 has allowed the appeal filed by the assessee in part bydeleting the direction given by the Commissioner of Income Tax (Appeals) by invoking the procedurecontemplated under Section 50 C (2)(b) of the Act to value the capital asset in a particular manner.(iv) Challenging the same, the revenue has filed the present appeal by formulating the above statedsubstantial questions of law. 3. The learned counsel for the revenue submitted that the assessment order is erroneous andprejudicial to the interest of the Revenue. The Commissioner of Income Tax (Appeals) has correctlyinvoked the power available to him under Section 263 of the Income Tax Act, 1961. The learnedcounsel also submitted that the power is available to the Commissioner of Income Tax (Appeals) toissue such a direction for the purpose of conducting fresh assessment. 4. The suo-motto power conferred under Section 263 of the Income Tax Act, 1961 can be exercisedby the Commissioner when the order of the Assessing Officer is erroneous and prejudicial to theinterests of the revenue. While exercising the said power, the Commissioner will have to satisfy thetwin conditions, namely, the order of the Assessing Officer which is sought to be revised iserroneous and also prejudicial to the interests of the revenue. The said power is of wide import. Thephrase, "prejudicial to the interests of the revenue" has to be read in conjunction with an erroneousorder passed by the Assessing Officer. 4. The suo-motto power conferred under Section 263 of the Income Tax Act, 1961 can be exercisedby the Commissioner when the order of the Assessing Officer is erroneous and prejudicial to theinterests of the revenue. While exercising the said power, the Commissioner will have to satisfy thetwin conditions, namely, the order of the Assessing Officer which is sought to be revised iserroneous and also prejudicial to the interests of the revenue. The said power is of wide import. Thephrase, "prejudicial to the interests of the revenue" has to be read in conjunction with an erroneousorder passed by the Assessing Officer. 5. In the present case on hand, the Commissioner has correctly exercised the power, since basedupon the records he found that the order passed by the Assessing Officer is erroneous andprejudicial to the interests of the revenue. In the judgment reported in (2000) 243 INCOME TAXREPORTS 83 [MALABAR INDUSTRIAL CO. LTD. v. COMMISSIONER OF INCOME TAX], the Hon'bleApex Court was pleased to hold that the power under Section 263 is rather wide provided theCommissioner will have to satisfy himself with the order passed by the Assessing Officer is botherroneous and prejudicial to the interests of the revenue. Therefore, there is no difficulty inaccepting the contention of the revenue that exercising the power under Section 263 of the IncomeTax Act, 1961 is correct and proper. However the question to be considered in the present case is asto whether while exercising such a power, the Commissioner can direct the Assessing Officer tocomplete the assessment in a particular manner in accordance with law with the directions. 6. The contention of the learned counsel for the revenue cannot be accepted for the reason thatwhile cancelling the order of assessment, there is no power vested with the Commissioner of IncomeTax (Appeals) to direct the Assessing Officer to complete the assssment in a particular manner.Therefore, the Tribunal has correctly set aside that portion of the order passed by the Commissionerof Income Tax (Appeals), who directed the Assessing Officer to complete the assessment by takingrecourse to the provisions contained under Section 50 C (2)(b) of the Act. 7. In this connection, it is useful to refer to the analogous provision contained in the Central Excisesand Salt Act (1 of 1944). The Supreme Court, while considering the above said provision held that the authority while exercising such power cannot direct the lower authority to complete theassessment in a particular manner. The observation of the Apex Court in the case of Union of Indiaand others vs. Tata Engineering & Locomotives co. Ltd etc. reported in AIR 1998 SUPREME COURT287 is as follows:- "4. In our view, this writ petition should not have been entertained by the High court at all. TheAssistant Collector is entitled to complete the assessment as he thinks fit in exercise of the Judgmentand according to his understanding of the law and facts. For this purpose, he can call for andexamine whatever documents he considers relevant. If the Assistant Collector fails to follow anyjudgment of the High Court or this court, the assessee had adequate statutory remedies by way of anappeal and revision against the assessment order. The Court should not try to control the mode andmanner in which an assessment should be made. If the Assistant Collector is of the view thatenquiries are necessary to be made as to the price at which trucks were sold at the Regional SalesOffices, the court cannot stop him from making such enquiries". 8. A reading of the above said Judgment would clearly show that while remanding the matter, theCommissioner of Income Tax (Appeals) ought not to have given a specific direction to complete theassessment in a particular manner. Further, the Tribunal has only set aside the above said directionby which the Assessing Officer was directed to complete the assessment by following Section 50 C(2)(b) of the Act. We do not find any error in the order passed by the Tribunal. The questions of lawraised by the revenue is answered against the revenue. Accordingly the tax case appeal is dismissed.No costs. rg To The Income Tax Appellate Tribunal'C' Bench,Chennai