High Court rules against revoking Commissioner's approval under Income-tax Act, deems successor's notice unsustainable.

The High Court of Madras, with Judge R. Jayasimha Babu presiding, ruled that attempting to revise an order based on consequences not considered at the time of granting permission under section 263 of the Income-tax Act was unjust. The Court held that the Commissioner's approval could not be revoked due to subsequent realizations by a successor Commissioner. The notice issued by the successor Commissioner was deemed unsustainable, leading to the quashing of the notice, allowing the writ petition, and dismissing the related application as unnecessary.

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Issues involved: Interpretation of powers u/s 263 of the Income-tax Act, 1961 and validity of revising a previous order based on prior permission granted.

In this judgment, the High Court of Madras, with Judge R. Jayasimha Babu presiding, addressed a situation where the Commissioner of Income-tax had initially granted permission to change the previous year u/s 263 of the Income-tax Act. Subsequently, after three years, the Commissioner attempted to interfere with the Income-tax Officer's order, which was in line with the earlier permission granted. The order in question, dated March 11, 1988, explicitly approved the change in the accounting year and directed the Assessing Officer to impose only legal conditions. The Income-tax Officer then imposed conditions that were not objected to by the Commissioner. The successor Commissioner sought to revise this order u/s 263, citing loss of revenue due to skipping the assessment for 1986-87 as grounds for considering the previous order erroneous and prejudicial to revenue.

The Court found that the attempt to revise the order based on consequences that were not considered at the time of granting permission was unjust. The Commissioner's approval could not be revoked based on subsequent realizations by the successor Commissioner. The Court deemed the notice issued by the successor Commissioner unsustainable and quashed it, ultimately allowing the writ petition and dismissing the related application as unnecessary.

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