TMI Blog2010 (9) TMI 355X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing questions of law are referred for the opinion of this court: "1. Whether on the facts and in the circumstances of the case the ITAT was correct in holding that the CIT(A) cannot revise under Section 263 an order of the IAC under Section 143(3), made by him by virtue of the jurisdiction conferred upon him under Section 125, especially when sub-section (2) of Section 125 clarifies that a reference to the ITO in the Act shall be deemed to be a reference to the IAC? 2. Whether on the facts and in the circumstances of the case, the ITAT was correct in holding that the Commissioner of Income-tax wrongly directed setting aside of the assessment framed by the IAC(A)?" 2. The assessment pertains to the assessment year 1979-80. The assessment was completed under Section 143(3) of the Income-tax Act, 1961 by the Inspection Assistant Commissioner of Income-tax (Asstt.), Range-III ["the IAC(A)"] on 27th February, 1982. The income of the assessee-company was determined by the IAC(A) at Rs. 45,23,972/- against the declared income of Rs. 35,46,190/-. Interest under Section 216 was not charged while making the assessment. Aggrieved by the aforesaid order, the assessee-company filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and examine the records of any proceedings under this Act, and if he considered that any order passed therein "by the Income-tax Officer was erroneous in so far as it was pre-judicial to the interest of the Revenue, he could, after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deemed necessary, pass such order thereon as the circumstances of the case justified." 7. By virtue of Section 47 of the Taxation Laws Amendment Act, 1984, reported in 149 ITR (St.) 97, however, the legislature with effect from the 1st day of October, 1984, inserted an Explanation at the end of Sub-Section (1) of Section 263 as follows: - "Explanation.-For the removal of doubts, it is hereby declared that, for the purposes of this sub-section, an order passed by the Income-tax Officer shall include- (a) an order of assessment made on the basis of directions issued by the Inspecting Assistant Commissioner under section 144A or section144B; and (b) an order made by the Inspecting Assistant Commissioner in exercise of the powers or in performance of the functions of an Income-tax Officer conferred on, or assigned to, him under clause (a) of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r passed by the IAC (A) in view of the clear-cut provisions of Section 125(1) / 125(2)(a) / 125A (4) (a). According to her, by virtue of the provisions of Section 125 (2A) reference to Income Tax Officer in Section 263 (1) shall be deemed to be reference to the IAC. 10. The contention of Mr. Ajay Vohra, the learned counsel for the respondent, on the other hand, was that action under Section 263 of the Act by the Commissioner (Appeals) was not warranted, inter alia, on the ground that the assumption of jurisdiction by the Commissioner (Appeals) has to be decided vis- -vis the law on the date when the Commissioner (Appeals) passed the order under Section 263 of the Act, i.e. on 25th February, 1984. The amendment made by the Taxation Laws Amendment Act, 1984, by insertion of Clause (b) of Explanation with effect from 1st October, 1984 could not validate jurisdiction assumed by the Commissioner (Appeals), which was lacking at the time when action was taken under the said Section. He contended that the issue whether an order passed by the IAC(A) could be rectified under Section 263 was clearly debatable and it is settled law that action under Section 263 of the Act cannot be taken in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as inserted by the Taxation Laws (Amendment) Act, 1984 47. Amendment to section 263. - In section 263 of the Income-tax Act, with effect from the 1st day of October, 1984, - (a) In sub-section (1), the following Explanation shall be inserted at the end, namely: Explanation.-For the removal of doubts, it is hereby declared that, for the purposes of this sub-section, an order passed by the Income-tax Officer shall include- ITR (a) an order of assessment made on the basis of directions issued by the Inspecting Assistant Commissioner under section 144A or section144B; and (b) an order made by the Inspecting Assistant Commissioner in exercise of the powers or in performance of the functions of an Income-tax Officer conferred on, or assigned to, him under clause (a) of sub-section (1) of section 125 or under sub-section (1) of section 125A."; XXXX XXXX XXXX XXXX XXXX The Explanation as inserted by the Finance Act, 1989 which made the amendment operative from 1st June, 1988 (b) for sub-section (2), the following sub-section shall be substituted, namely: - "(2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel for the revenue. 8. Thus within the same provision, that is, the Explanation to section 263, two different types of languages are used. The words "shall be deemed always to have extended to such matters" occurring in clause (c) is absent in clause (a). It was the presence of those words in clause (c) that persuaded the Supreme Court in Shri Arbuda Mills Ltd.'s case (supra) to hold that clause (c), which was introduced by the 1989 Amendment was retrospective, that is, even prior to the date of the said amendment. On the other hand, apart from the fact that such words are absent in clause (a), the opening line of section 47 of the Amendment Act of 1984 indicates that such provision has been inserted only with effect from 1-10-1984. Recognition of this fact is of crucial importance. 9. We, have examined the decisions cited by learned counsel for the revenue. We may straightway point out that the decision in K.C. Rangaiah Co.'s case (supra) deals with the subsequent amendment concerning clause (b) of the Explanation and therefore is not immediately relevant for the present case. However, what is significant is that even in clause (b), the words "shall include and shall b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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