1994 (1) TMI 35 - HC - Income Tax

High Court upholds Tribunal's decision on tax assessments, rejects Revenue's applications under section 263.

The High Court of Allahabad dismissed two connected applications filed by Revenue against a common order by the Income-tax Appellate Tribunal for ... Development Allowance, Expenditure Incurred, Weighted Deduction Issues involved: Two connected applications u/s 256(2) of the Income-tax Act, 1961 filed by Revenue against a common order by the Income-tax Appellate Tribunal for assessment years 1984-85 and 1985-86.Judgment Details:1. Issue 1 - Legality of Cancelling Commissioner's Order: The Commissioner of Income-tax set aside the assessments under section 263 of the Act for fresh inquiries, deeming the initial assessments as erroneous and prejudicial to Revenue's interests. However, the Income-tax Appellate Tribunal disagreed with this decision. The Tribunal held that the assessments completed under section 143(1) could not be revisited under section 263, citing Departmental instructions in Board's Circulars. Additionally, the Tribunal found the Commissioner's order unsustainable based on existing material and facts, noting that the required inquiry had already been conducted during a prior wealth-tax assessment. The Tribunal's decision was based on factual analysis and the Revenue did not challenge these findings. Thus, the Tribunal's decision did not raise any legal question.2. Issue 2 - Tax Effect and Precedent: The tax effect in the cases was minimal, with Rs. 80 for 1984-85 and Rs. 475 for 1985-86. Referring to a Bombay High Court case, it was highlighted that in instances where the tax effect is insignificant, policy decisions discourage reference applications. The Central Board of Direct Taxes' policy not to file references for cases with a tax effect below Rs. 30,000 per year was considered. Consequently, due to the nominal tax impact and policy guidelines, the applications were deemed meritless and rejected without costs.In conclusion, the High Court of Allahabad dismissed the applications, emphasizing the factual basis of the Tribunal's decision, the policy considerations regarding tax effect, and the lack of legal questions arising from the Commissioner's order.