2014 (5) TMI 939 - HC - Income Tax

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

Commissioner of Income Tax, Burdwan Versus M/s. Rakshit Transport

Commissioner of Income Tax, Burdwan Versus M/s. Rakshit Transport - TMI 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.