2012 (12) TMI 903 - HC - Income Tax

Commissioner's revisional jurisdiction denied over approved assessment order

R. Srinivasan Versus The Asst. /Deputy Commissioner of Income Tax, Central Circle  I Coimbatore

The High Court held that the Commissioner of Income Tax could not exercise revisional jurisdiction under Section 263 for an assessment order passed under ... Validity of order u/s 263 - Block assessment - Chapter XIVB - Whether revision u/s 263 is possible for block assessment order when the same has been passed with previous approval of Commissioner. Held that:- Following the decision in case of Smt. Annapoornamma Chandrashekar (2011 (10) TMI 475 - KARNATAKA HIGH COURT) that the act of approval is not for a mere passing of an order u/s 158BC, but an approval which takes note of the subject matter of assessment and there is application of mind before granting the approval. When approval is given it means the approving authority has full knowledge about the contents of what is approved and confirmed authoritatively the order of the lower authority Therefore, on the approval given by the Commissioner, the order to be passed u/s 158BC and the Commissioner cannot exercise jurisdiction u/s 263 to revise the order of assessment passed under Chapter XIV B. Appeal decides in favour of assessee Issues Involved:1. Validity of the Commissioner's revisional powers under Section 263 after granting approval under Section 158BG for an assessment order under Section 158BC.Detailed Analysis:Issue 1: Validity of the Commissioner's Revisional Powers under Section 263The primary legal question addressed in this case is whether the Commissioner of Income Tax (CIT) can exercise revisional powers under Section 263 of the Income Tax Act, 1961, after having granted statutory approval under Section 158BG for an assessment order passed under Section 158BC, following a search and seizure action initiated under Section 132 of the Income Tax Act, 1961.Background and Facts:The assessee was assessed under Chapter XIVB for the block period 1987-88 to 1996-97 following a search on 13.2.1996. The assessment was completed on 28.2.1997 with the approval of the CIT under Section 158BG. The CIT later initiated revisional proceedings under Section 263, claiming the assessment order was erroneous and prejudicial to the Revenue's interests. The assessee contended that the CIT could not invoke Section 263 after granting approval under Section 158BG.Tribunal's Decision:The Tribunal upheld the CIT's revisional jurisdiction under Section 263, reasoning that the CIT's powers under Section 263 are broad and can be applied to orders under Section 158BC, even if previously approved by the CIT under Section 158BG. The Tribunal cited the case of CIT v. Shree Manjunathesware Packing Products and Camphor Works, asserting that the CIT could revise the block assessment order.Assessee's Argument:The assessee relied on the Karnataka High Court's decision in CIT v. Smt. Annapoornamma Chandrashekar, which held that once the CIT has granted approval under Section 158BG, revisional jurisdiction under Section 263 cannot be exercised. The Karnataka High Court emphasized that the approval under Section 158BG implies the CIT's satisfaction with the assessment order, and thus, the same authority cannot revise it under Section 263.Court's Analysis:The High Court agreed with the Karnataka High Court's reasoning. It noted that the approval under Section 158BG involves the CIT's application of mind and is not a mere formality. The Court highlighted that the amendment to Section 158BG in 1997, which substituted the CIT's approval with that of the Joint Commissioner for searches initiated after 1.1.1997, supports the view that the CIT's approval for assessments before this date is comprehensive and precludes revisional jurisdiction under Section 263.Key Legal Principles:- Approval under Section 158BG: The Court emphasized that the approval required under Section 158BG is substantive, involving the CIT's detailed examination and satisfaction with the assessment order.- Revisional Jurisdiction under Section 263: The Court held that revisional powers under Section 263 cannot be exercised by the same authority that granted approval under Section 158BG, as it would undermine the finality of the approval process.- Amendment and Legislative Intent: The amendment to Section 158BG in 1997, which changed the approving authority from the CIT to the Joint Commissioner, indicates that the CIT's approval for pre-1997 assessments was intended to be conclusive.Conclusion:The High Court concluded that the CIT could not exercise revisional jurisdiction under Section 263 for an assessment order passed under Section 158BC, which had already received the CIT's approval under Section 158BG. The Court set aside the Tribunal's order and allowed the assessee's appeal.Result:The Tax Case (Appeal) was allowed, and the CIT's revisional action under Section 263 was invalidated. No costs were awarded.This judgment underscores the significance of the CIT's approval under Section 158BG and limits the scope of revisional powers under Section 263 when such approval has been granted.