2002 (3) TMI 38 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Assessing Officer in including sales tax liability u/s 263.
2. Tribunal's dismissal of the departmental appeal without addressing the correctness of the Commissioner of Income-tax (Appeals) findings.

Summary:

Issue 1: Jurisdiction of the Assessing Officer in Including Sales Tax Liability u/s 263
The Tribunal held that the Assessing Officer exceeded his jurisdiction by including a sales tax liability of Rs. 32,40,408 in the order of the Commissioner of Income-tax u/s 263. The Tribunal noted that the Commissioner's order was on the limited issue of recomputation of relief u/s 80HH and did not explicitly address the sales tax matter. The High Court agreed with the Tribunal, stating that the Income-tax Officer must adhere to the specific directions of the superior authority and cannot independently alter matters not addressed by the Commissioner. The High Court referenced the cases of Katihar Jute Mills (P.) Ltd. v. CIT and Surrendra Overseas Ltd. v. CIT to support this view.

Issue 2: Tribunal's Dismissal of the Departmental Appeal
The Tribunal dismissed the departmental appeal by accepting the cross-objection of the assessee without deciding on the correctness of the Commissioner of Income-tax (Appeals) findings. The High Court observed that the Commissioner of Income-tax (Appeals) had dismissed the appeal for statistical purposes, as the original assessment order had been set aside by the Commissioner in revision. The High Court emphasized that if the original section 154 order was not sustainable, it remains subject to challenge even when repeated in a fresh assessment. The Tribunal must now examine on merits whether the sales tax receipts should be included in the assessee's income.

Additional Observations:
The High Court clarified that if the Commissioner in revision finds that section 154 was wrongly invoked, he should explicitly state so and cancel the section 154 order. The Commissioner should then direct the addition of the amount if justified, ensuring that the fresh assessment does not repeat the flawed section 154 order. This approach would prevent future issues similar to the present case.

Conclusion:
Both questions were answered in the negative. The Tribunal is directed to rehear the matter concerning the sales tax addition and section 43B, and decide on the merits and in law whether the addition should be maintained or deleted.