2007 (1) TMI 184 - SC - Income Tax

Jurisdiction under s.154 and s.263 can coexist; s.154 rectifies apparent errors, does not bar s.263 revision

SC held that jurisdiction under s.154 (rectification) and s.263 (revision) are distinct and can coexist; s.154 allows correction of apparent errors but is ... Scope and ambit of a proceeding for rectification of an order under section 154 and a proceeding for revision under section 263 - Commissioner of Income-tax invoked his jurisdiction under section 263 - no modification/amendment made in regard to the purported exclusion of income under sections 80HH and 80-I on account of non-inclusion of transport receipts and interest on the total income - HELD THAT:- When different jurisdictions are conferred upon different authorities to be exercised on different conditions, both may not be held to be overlapping with each other. Jurisdiction under section 154 of the Act is only to be exercised by him when there is an error apparent on the face of the record. It does not confer any power of review. An order of assessment mayor may not be rectified. If an order of rectification is passed by the assessing authority, the rectified order shall be given effect to. However, only because an order of assessment has undergone rectification at the hands of the Assessing Officer, in our opinion, the same would not mean that the revisional authority shall be denuded of exercising its revisional jurisdiction. Such an interpretation, in our opinion, would run counter to the scheme of the Act. In our opinion, it would not be correct to contend that only because a proceeding for rectification was initiated subsequently, the revisional jurisdiction could not have been invoked under any circumstances whatsoever. If such a proceeding was initiated, in our opinion, the contesting parties could bring the same to the notice of the Commissioner so as to enable him to take into consideration the subsequent events also. It goes without saying that if and when the Commissioner of Income-tax takes up for consideration a subsequent event, the assessee would be entitled to make its submission also in regard thereto. The impugned judgment is set aside accordingly - appeal is allowed. Issues:Interpretation of provisions of section 154 vis-a-vis section 263 of the Income-tax Act.Analysis:The case involved a dispute regarding the jurisdiction of the Commissioner of Income-tax under sections 154 and 263 of the Income-tax Act. The respondent, an assessee, had filed its return for the assessment year 1992-93, and the order of assessment was completed under section 143(3) of the Act. Subsequently, the Commissioner invoked his jurisdiction under section 263 to set aside the order of assessment, excluding certain amounts towards transport receipts and interest from the total income based on sections 80HH and 80-I of the Act. The Tribunal upheld the assessee's contention that a notice of rectification under section 154 had been issued by the Assessing Officer, and therefore, the Commissioner lacked jurisdiction to initiate proceedings under section 263. The High Court, relying on precedent, held that no substantial question of law arose for reference to the Tribunal.The Supreme Court clarified the distinction between the proceedings for rectification under section 154 and revision under section 263. It emphasized that rectification does not confer a power of review and is limited to correcting mistakes apparent on the face of the record. On the other hand, revision under section 263 is a special provision vested in the Commissioner to correct orders prejudicial to the Revenue. The Court highlighted the principle of judicial discipline, stating that lower authorities are bound by orders of higher authorities.The Court criticized the High Court's reliance on certain decisions, stating that the power of review or rectification is not akin to an administrative power but a statutory one. It clarified that the doctrine of merger does not apply to orders subject to revision under section 263. The Court emphasized that the initiation of a proceeding under section 263 does not become invalid solely due to a subsequent rectification order. Each case must be considered based on its own facts, and the Commissioner has the authority to consider subsequent events during revision proceedings.Ultimately, the Supreme Court set aside the High Court's judgment, directing the Commissioner to re-examine the matter in light of the rectification order. The appeal was allowed with no order as to costs.This detailed analysis of the judgment clarifies the legal principles surrounding the interpretation of sections 154 and 263 of the Income-tax Act and the respective powers of rectification and revision conferred upon the authorities involved in the assessment process.