2014 (5) TMI 939 - HC - Income Tax

Court upholds CIT's power to direct reassessment under Section 263, setting aside Tribunal decision.

The High Court upheld the CIT's power under Section 263 to direct a re-examination of the assessment, disagreeing with the Tribunal's view that such ... Revision u/s 263 - Liability to deduct TDS u/s 194C of the Act – Payment made to transport contractors – ITAT rejected the order of revision u/s 263 passed by the CIT remanding the matter back to AO - appeal of the assesseee against the original assessee is still pending before CIT(A) - Held that:- CIT had in fact by the order under Section 263 remanded the matter directing the Assessing Officer to make the assessment afresh which the CIT was entitled to do. The learned Tribunal erred in not taking into account the order passed by the CIT in its entirety. The CIT has demonstrated reasons as to why is the order of the Assessing Officer erroneous and prejudicial to the interest of the revenue. It is the substance and not the form of the order which is material. We are as such unable to agree with the views expressed by the learned Tribunal. The apprehension expressed by the assessee, that in the event the order of the Tribunal is set aside, the pending appeal by the assessee against the order of assessment would become nugatory, is also without any foundation - The appeal preferred by the assessee stood automatically allowed by the order of the CIT u/s 263 of the Act - the object of the assessee was achieved - order of CIT restored – Decided in favour of Revenue. Issues involved:1. Validity of the order passed under section 263 by the CIT.2. Assessment order dated 29th December, 2009 being erroneous and prejudicial to the interest of the revenue.3. Direction by the CIT to the Assessing Officer to re-examine and re-verify the assessment.Analysis:1. The CIT passed an order under Section 263, deeming the assessment order as erroneous and prejudicial to the revenue's interest. The CIT noted that the assessing officer had bifurcated a reimbursed amount into two components, one attracting Section 194C of the Income Tax Act. The CIT found fault with the disallowance made under section 40a(ia) and directed a re-examination of the case. The CIT's power to set aside the assessment for re-examination was challenged by the revenue.2. The Income Tax Appellate Tribunal, in its judgment, highlighted that the CIT's direction for re-verification was unwarranted as the assessing officer had already examined the issue. The Tribunal emphasized that the CIT's powers under Section 263 cannot be used for directing a re-verification when an opinion has been formed by the assessing officer. The Tribunal cited a previous case to support its decision to quash the revision order passed by the CIT under Section 263.3. The High Court considered the arguments presented by both parties. It upheld the submission that the CIT was within the permissible limits of Section 263 in directing a re-examination of the assessment. The Court emphasized that investigation and verification are essential steps in making an assessment under Section 143. The Court disagreed with the Tribunal's view that the CIT's order was erroneous, stating that the CIT had provided reasons for deeming the assessment order as prejudicial to the revenue's interest.4. The Court addressed the concern raised by the assessee's advocate regarding the pending appeal against the assessment order. The Court clarified that setting aside the Tribunal's order would not render the appeal nugatory. The Court reinstated the order of the CIT under Section 263, allowing the appeal and directing the Assessing Officer to re-assess the case. The Court emphasized that the assessee would have the opportunity to present their case during the reassessment process.In conclusion, the High Court set aside the Tribunal's order and restored the order of the CIT under Section 263, allowing the appeal and directing a fresh assessment by the Assessing Officer.