IMPORTANT POINT
Initiation of revisional proceedings u/s 263 of Income Tax Act cannot be held to have become bad in law only because an order of rectification was passed.

Headnote:Income Tax Act, 1961—Sections 154 and 263—Proceedings for rectification of an order of assessment and power of revision—Two powers and proceedings were distinct and different—Jurisdiction u/s 154 of the Act is to be exercised only when there is an error apparent on face of record and it does not confer power of review—However only because an order of assessment had undergone rectification at the hands of Assessing Officer, same would not mean that revisional authority shall be denuded of exercising its revisional jurisdiction—Respondent assessee filed return for assessment year 1992-93 declaring income at Rs. 26,66,355/—Order of assessment was completed on 10.3.1995 u/s 143(3) of the Act opining that assessable income was Rs. 35,40,414/- Commissioner of Income Tax invoking revisional jurisdiction u/s 263 of the Act set aside the assessment order excluding certain amounts towards transport receipts to extent of Rs. 27,62,982/- and interest amounting to Rs. 1,41,878/- from assessee’s income and directed Assessing Officer to make fresh order of assessment—Assessee filed appeal before Tribunal on ground that after order of assessment was passed and Notice of Rectification thereof having been issued wherein no modification/amendment having been made, Commissioner of Income Tax had no authority to initiate proceedings—Tribunal upheld the contention—High Court dismissed the application for direction to Tribunal for reference of questions—Appeal—Initiation of proceedings u/s 263 of the Act could not be held to have become bad in law only because an order of rectification was passed—Impugned order was liable to be set aside and matter remanded to Commissioner of Income Tax.
       Held : The scope and ambit of a proceeding for rectification of an order under Section 154 and a proceeding for revision under Section 263 are distinct and different. Order of rectification can be passed on certain contingencies. It does not confer a power of review. If an order of assessment is rectified by Assessing Officer in terms of Section 154 of the Act, the same itself may be a subject matter of a proceeding under Section 263 of the Act. The power of revision under Section 263 is exercised by a higher authority. It is a special provision. The revisional jurisdiction is vested in the Commissioner. An order thereunder can be passed if it is found that the order of assessment is prejudicial to the Revenue. In such a proceeding, he may not only pass an appropriate order in exercise of the said jurisdiction but in order to enable him to do it, he may make such inquiry as he deems necessary in this behalf.
       When different jurisdictions are conferred upon different authorities to be exercised on different conditions, both may not be held to be overlapping with each other. Jurisdiction under Section 154 of the Act is only to be exercised by him when there is an error apparent on the face of the record. It does not confer any power of review. An order of assessment may or may not be rectified. If an order of rectification is passed by the Assessing Authority, the rectified order shall be given effect to. However, only because an order of assessment has undergone rectification at the hands of the Assessing Officer, in our opinion, the same would not mean that revisional authority shall be denuded of exercising its revisional jurisdiction. Such an interpretation, in our opinion, would run counter to the scheme of the Act.(Para 12)
       Initiation of a proceeding under Section 263 of the Act cannot be held to have become bad in law only because an order of rectification was passed. No such hard and fast rule can, in our opinion, be laid down. Each case is required to be considered on its own facts. In a given situation, the High Court may be held to be entitled to set aside both orders and remit the matter for consideration of the matter afresh. But in our opinion, it would not be correct to contend that only because a proceeding for rectification was initiated subsequently, the revisional jurisdiction could not have been invoked under any circumstances whatsoever. If such a proceeding was initiated, in our opinion, the contesting parties could bring the same to the notice of the Commissioner so as to enable him to take into consideration the subsequent events also. It goes without saying that if and when the Commissioner of Income Tax takes up for consideration a subsequent event, the assessee would be entitled to make its submission also in regard thereto. For the reasons aforementioned, the impugned judgment cannot be sustained. It is set aside accordingly. Our attention has been drawn to the fact that Assessing Officer had allegedly taken into consideration the application of Sections 80 HHC and 80-I of the Act. In our opinion, therefore, interest of justice would be met if the Commissioner of Income Tax is directed to have a fresh look at the matter in the light of the order of rectification passed by the assessing authority.(Paras 15 and 16)

JUDGMENT

S.B. Sinha, J.—Leave granted.

2. Interpretation of the provisions of Section 154 vis-`-vis 263 of the Income Tax Act calls for consideration in this Appeal which arises out of a Judgment and Order dated 15th December, 2003 passed by the High Court of Madhya Pradesh at Jabalpur in ITR No.19/1999. The fact of the matter is not much in dispute. The Respondent is an assessee under the Income Tax Act. It filed its return for the assessment year 1992-93 declaring its income at Rs.26,66,355/-. The order of assessment was completed on or about 10.3.1995 under Section 143(3) of the Act opining that the assessable income as against the assessee was Rs.35,40,414/-. The Commissioner of Income Tax invoked its jurisdiction under Section 263 of the Act by setting aside the order of assessment excluding certain amounts towards transport receipts to the extent of a sum of Rs.2762982/- and interest amounting to Rs.141878/- from the assessees total income in the light of the provisions of Section 80HHC and Section 80-I of the Act. The Assessing Officer was directed to make a fresh order of assessment.

3. Appeal was preferred thereagainst by the assessee before the Income Tax Appellate Tribunal. It was, inter alia, contended that after the order of assessment under Section 143 (3) of the Act was passed, a Notice of Rectification of the Order of Assessment under Section 154 thereof having been issued by the Assessing Officer on 26.10.1995, wherein no modification/amendment was made in regard to the purported exclusion of income under Sections 80HH and 80-I of the Act on account of non-inclusion of transport receipts and interest on the total income and, thus, the Commissioner of Income Tax has no authority to initiate any proceedings under Section 263 thereof or otherwise.

4. The said contention of the assessee was upheld by the Tribunal, inter alia, relying on or on the basis of a decision of the Madhya Pradesh High Court in Commissioner of Income-tax v. Vippy Solvex Products Pvt. Ltd. reported in (1997) 228 ITR 587. The Tribunal was furthermore of the opinion that the Order passed under Section 154 of the Act having been made upon due consideration of the explanation of the assessee for the proposed rectification on the point of excess deduction under Section 80HH and 80-I, the Commissioner lacked jurisdiction to make may order under Section 263 thereof.

5. An application in the aforementioned premise was filed before the High Court for a direction upon the Tribunal for reference of the following questions to it for its opinion: -

"1.Whether on the facts and in the circumstance of the case, the Honble ITAT was justified in law in holding that the CIT lacked jurisdiction to revise the order of assessment u/s 263 of the I.T. Act?

2.Whether on the facts and in the circumstances of the case, the Honble ITAT was Justified in holding that the issue of excess deduction u/s 80HH & 80 I contained in the order u/s 143 (3) was merged with the order u/s 154 particularly when no rectification u/s 154 was made in this regard.

3.Whether the view taken by the Honble ITAT that the AO did not consider the issue of excess deductions u/s 80HH and 80 I for rectification in his order u/s 154 after due application of his mind, could in law justify its conclusion that there was no jurisdiction u/s 263 in respect of the said issue in terms of the assessment order dated 10-03-95."

6. Relying on a decision of the High Court in Chunnilal Onkarmal Pvt. Ltd. v. Commissioner of Income Tax reported in 1997 ITR (224) 233, the High Court opined that no substantial question of law arises for directing Tribunal to refer any question to the said Court.

7. Sub-sections (1) and (6) of Section 154 and Sub-section (1) of Section 263 of the Act reads as under: -

"154. (1) With a view to rectifying any mistake apparent from the record an income-tax authority referred to in section 116 may,-

(a) amend any order passed by it under the provisions of this Act;

(b) amend any intimation or deeme

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2007 Supreme(SC) 13

IMPORTANT POINTInitiation of revisional proceedings u/s 263 of Income Tax Act cannot be held to have become bad in law only because an order of rectification was passed.

Cases Referred (4)

IMPORTANT POINT
Initiation of revisional proceedings u/s 263 of Income Tax Act cannot be held to have become bad in law only because an order of rectification was passed.