2018 (9) TMI 76 - HC - Income Tax

High Court upholds Assessing Officer's correction of income under Income Tax Act, 1961

The High Court dismissed the appeal regarding the interpretation of legal provisions under Section 263 of the Income Tax Act, 1961, finding no substantial ... Revision u/s 263 - Rectification of mistake - taxability of salary - whether there was indeed any mistake in the Assessment Order and whether that justified exercise of powers by the Assessing Officer conferred vide Section 154 - prejudice caused to the Revenue as the AO not only brought to tax the Indian component, but the global component of the salary that was rectified - Held that:- Tribunal considered the factual and legal position and a judgment of the Hon'ble Supreme Court in the case of Pradip J. Mehta vs. Commissioner of Income Tax [2008 (4) TMI 6 - SUPREME COURT] and arrived at the conclusion that the amendment to Section 6 sub-section 6 clause(a) has been brought into effect from 1st April 2004. That was not applicable to the Assessment Year under consideration. The existing law was considered by the Hon'ble Supreme Court in the aforesaid judgment and the Hon'ble Supreme Court's judgment would bind the Assessing Officer. That part of the income earned outside India would have to be excluded and the assessee would have to be taxed to the extent of the income earned in India. That has admittedly been done. In such circumstances, there was no prejudice caused and this was not a fit case, therefore, to exercise the powers under Section 263 of the Income Tax Act - decided in favour of assessee Issues:1. Interpretation of legal provisions under Section 263 of the Income Tax Act, 1961.2. Correct application of the status of the assessee for tax purposes.3. Examination of the Assessing Officer's powers under Section 154 of the Income Tax Act.Issue 1: Interpretation of legal provisions under Section 263 of the Income Tax Act, 1961:The High Court analyzed the Tribunal's reversal of the Commissioner's order under Section 263 of the Income Tax Act. The Commissioner initiated action under Section 263 as the Assessing Officer did not examine the legal status of the assessee during the assessment proceedings. The Court considered the legal provisions of Section 6 sub-section 6 clause (a) of the Income Tax Act, 1961, and whether the income brought to tax should be corrected. The Court observed that the Tribunal had the entire factual conspectus before it and concluded that there was no substantial question of law involved in the Appeal, ultimately dismissing it.Issue 2: Correct application of the status of the assessee for tax purposes:The Court examined the status of the respondent/assessee who was serving in 'M/S Morgan Stanley International (Inc)' of the USA on deputation to India. The assessee claimed the status of a 'Resident but not ordinarily resident' within the meaning of Section 6 sub-section 6 clause (a) of the Income Tax Act, 1961. The Assessing Officer brought certain income to tax, and the Commissioner directed corrections to be made. The Court considered the legal status of the assessee and the nature of income earned in India, ultimately concluding that the order under Appeal did not suffer from perversity or any error of law apparent on the face of the record.Issue 3: Examination of the Assessing Officer's powers under Section 154 of the Income Tax Act:The Court delved into the Assessing Officer's powers under Section 154 of the Income Tax Act, 1961, and the modifications made to the assessment order. It was noted that the Assessing Officer modified the order to the extent of the amount of income that could be brought to tax. The Court discussed whether there was indeed any mistake in the Assessment Order justifying the exercise of powers by the Assessing Officer under Section 154. The Tribunal considered the factual and legal position, including a judgment of the Hon'ble Supreme Court, and concluded that there was no substantial question of law involved in the Appeal, leading to its dismissal without any order as to costs.