CIT can’t invoke Revisionary Jurisdiction If conditions prescribed under Sec 263 of Income Tax Act are not fulfilled: Madras High Court [Read Judgment]

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Section 263 - CIT - Revisionary Jurisdiction - Sec 263 of Income Tax Act - Madras High Court - Taxscan

The Madras High Court ruled that the Income Tax Appellate Tribunal (ITAT) rightly set aside the order passed under Section 263 of the Income Tax Act on the ground that CIT lacks jurisdiction.

The Assessing Officer completed the assessment under Section 143 (3), assessing a total income of Rs.40,72,410/-. The assessment was done by resorting to Section 263 observing that the source for the investment Rs.1.73 crores in immovable property were not verified and that there were huge unsecured loans, were not properly enquired by the Assessing Officer. The Assessing Officer had completed the assessment under Section 143 (3) read with Section 263, assessing the total income at Rs.1,27,41,000/-.

On appeal by the assessee, Y.V.Subramaniam against the order of CIT passed under Section 263 of the Income Tax Act held that the order was passed after making full verification and no reasons were given and had given an abrupt finding that assessment order was erroneous insofar as prejudicial to the interest of the revenue and that there were confirmation letters available before the Assessing Officer and therefore, the order passed lacks jurisdiction.

In these circumstances, the Tribunal allowed the appeal filed by the assessee. Aggrieved by the order passed by the Income Tax Appellate Tribunal, the Department filed appeal.

The Tribunal, while allowing the assessee’s appeal, observed that the assessment order was passed after making full verification and the order of the CIT is based on no reason and he has simply given an abrupt finding that the assessment order is erroneous insofar as it is prejudicial to the interest of the Revenue.

The Tribunal observed that complete details were filed in the form of confirmation letters before the Assessing Officer and he has examined and investigated the same in its correct perspective. The Tribunal found no error in the assessment order and also found that the CIT lacks jurisdiction to revise the assessment order in question. Ultimately, the Tribunal set aside the order passed by the CIT under Section 263 and restored the order passed by the Assessing Officer.

The department raised the issue whether on the facts and in the circumstances of the case, the Income Tax Tribunal is right in setting aside the order passed under Section 263 of the Income Tax Act on the ground that CIT lacks jurisdiction.

The division bench of Justices M.Duraiswamy and T.V.Thamilselvi noted that the Tribunal has categorically held that the order passed by CIT is based on no reason and he has simply given an abrupt finding that the assessment order is erroneous.

“the Tribunal, taking into consideration all the materials available on record, found that the CIT lacks jurisdiction to revise the assessment order passed by the Assessing Officer. When the Tribunal has given a categorical finding with regard to the order passed by the CIT, we do not find any error or irregularity in the order passed by the Tribunal,” the court said.

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