1998 (10) TMI 57 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the Income-tax Appellate Tribunal's decision to vacate the order u/s 263.
2. Legality of an assessment u/s 143(3) resulting in a refund post-April 1, 1989.

Summary:

Issue 1: Validity of the Income-tax Appellate Tribunal's Decision to Vacate the Order u/s 263
The Commissioner of Income-tax (CIT) initiated revisional proceedings u/s 263 to set aside the assessment order made by the Assessing Officer (AO) u/s 143(3), arguing that the AO's determination of taxable income at a figure lower than the returned income was contrary to the instructions of the Central Board of Direct Taxes (CBDT). The CIT directed the AO to modify the assessment so that the income determined would not be less than the returned income, thereby preventing any further refund. The Income-tax Appellate Tribunal, however, allowed the appeal filed by the assessee-company, setting aside the CIT's order. The Tribunal held that the AO's assessment was in accordance with law and that the assessee was entitled to the refund arising from the assessment.

Issue 2: Legality of an Assessment u/s 143(3) Resulting in a Refund Post-April 1, 1989
The Revenue contended that with effect from April 1, 1989, the power of the AO to grant refunds while completing assessments u/s 143(3) had been withdrawn. The Revenue argued that the AO could not assess income at a figure lower than the returned income nor grant refunds beyond what was allowed in the provisional assessment u/s 143(1)(a). The Tribunal rejected this contention, stating that the assessment u/s 143(3) is a final assessment, and the AO is entitled to determine the tax liability, including refunds, based on the claims and deductions made by the assessee.

The High Court examined the provisions of section 143 and concluded that the AO has the authority to determine refunds in a regular assessment u/s 143(3). The Court emphasized that the provisions of section 143(3) should not be interpreted narrowly to preclude the AO from granting refunds. The Court also noted that the instructions issued by the CBDT cannot override the statutory provisions of the Income-tax Act.

Conclusion:
The High Court held that no referable question of law arises from the Tribunal's decision, and the Tribunal rightly rejected the Revenue's request to refer the questions of law to the High Court. The Court affirmed that the AO is entitled to determine refunds in a regular assessment u/s 143(3) and rejected the Revenue's contentions. The ITC was accordingly dismissed with no costs.