TMI Blog2002 (12) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... e instance of the assessee. The assessee requested the Income-tax Appellate Tribunal to state a case and refer the following questions of law: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the order passed by the Commissioner of Income-tax under section 263 of the Income-tax Act, 1961, is valid? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Commissioner of Income-tax could validly invoke the provision of section 263 of the Act, even though the same does not accord to the instructions given by the Central Board of Direct Taxes in similar situations ?" The Appellate Tribunal, by order dated December 24, 1998, has stated a case and referred only the first question stated above. The Appellate Tribunal rejected the second question on the ground that it was only argumentative in nature and not fit for reference and that the assessee did not produce the Board's instructions before the Tribunal. The assessee, aggrieved by the order of refusal to refer the second question, approached this court by a writ petition in W. P. No. 12910 of 1997 and E. Padmanabhan J., who he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is for the assessee to prove that the conditions laid down in both the sections have been fulfilled and without being satisfied that the conditions have been complied with, the deduction under sections 80HH and 80HHC cannot be granted automatically. He therefore held that the Assessing Officer completed the assessment under section 143(1) of the Act even without looking into the question of eligibility of the deduction or the liability of receipt to tax and the assessment made is erroneous and prejudicial to the interests of the Revenue. After hearing counsel for the assessee, the Commissioner held that there were obvious mistakes in the order of assessment and set aside the order of assessment and restored the same to the Assessing Officer to enable him to look into the claims of the assessee and decide them in accordance with law. Aggrieved by the order passed by the Commissioner, the assessee preferred an appeal before the Appellate Tribunal. The Appellate Tribunal held that it is the duty of the Assessing Officer to verify whether the- conditions for allowing deduction under sections 80HH and 80HHC of the Act have been satisfied, and if it is allowable, how much is allowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de under section 143(1) of the Act. He therefore submitted that the Commissioner had no material at all to set aside the order of assessment passed by the Assessing Officer. Mrs. Pushya Sitharaman, learned senior standing counsel for the Revenue, on the other hand, submitted that the nature of the order passed by the Assessing Officer clearly shows that the Assessing Officer should not have passed the order under section 143(1) of the Act and the Commissioner was right in holding that without verification, the deduction ought not to have been granted and the power under section 143(1) of the Act should not have been resorted to by the Assessing Officer in completing the assessment. She therefore submitted that the Commissioner had necessary jurisdiction to invoke his powers under section 263 of the Act. We have carefully considered the submissions of learned counsel for the assessee and the learned senior standing counsel for the Revenue. The Commissioner, as seen from the facts detailed earlier, has set aside the order of assessment passed by the Assessing Officer under section 143(1) of the Act. The Commissioner has considered two aspects of the matter which were the subject- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axability of receipts from import entitlements and also from cash compensatory support as business income. The main submission of Mr. Jayakumar, learned counsel for the assessee, is that so far as sections 80HH and 80HHC of the Act are concerned, there are no materials for the Commissioner to hold that the deduction granted was erroneous. He submitted that it is not open to the Commissioner to direct the Assessing Officer to look into the question of eligibility and the power of revision cannot be exercised for directing the Assessing Officer to look into the matter afresh and decide the matter. We are unable to accept the submission of learned counsel for the assessee. Section 143(1)(a) of the Act was inserted by the Taxation Laws (Amendment) Act, 1970, with effect from April 1, 1971, and the section which was inserted, reads as under: "143. Assessment.-(1) (a) Where a return has been made under section 139, the Assessing Officer may, without requiring the presence of the assessee or the production by him of any evidence in support of the return, make an assessment of the total income or loss of the assessee after making such adjustments to the income or loss declared in the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the return was correct and complete in all respects. In making such a 'summary assessment', the Income-tax Officer has the authority to make certain adjustments to the income or loss declared in the return. These adjustments are by way of- (i) rectifying any arithmetical error in the return, accounts and documents, if any, accompanying it ; (ii) allowing any deduction, allowance or relief which, on the basis of information available in such return, accounts and documents is, prima facie, admissible though not claimed in the return ; (iii) disallowing any deduction, allowance or relief claimed in the return which, on the basis of the information available in such return, accounts and documents, is, prima facie, inadmissible; and (iv) giving due effect to the deductions and allowances brought forward from earlier years, namely, unabsorbed depreciation (section 32(2)) ; unabsorbed investment allowance (section 32A(3)(ii)) ; unabsorbed development rebate (section 33(2)(ii)) ; unabsorted development allowance (section 33A(2)(ii)) ; unabsorbed amount of capital expenditure incurred on scientific research (section 35(2)(i)) ; capital expenditure on acquisition of patent rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C are complied with, the assessee would be entitled for the grant of deduction. In other words, the deduction under sections 80HH and 80HHC cannot be granted automatically, nor can it be disallowed automatically. The Assessing Officer, either for granting or disallowing the deduction should be satisfied after due enquiry that the assessee is eligible or not eligible for deduction. We are of the view that the order of the Assessing Officer granting deduction without an enquiry is plainly erroneous and prejudicial to the interests of the Revenue. Learned counsel for the assessee referred to a number of cases and we are of the view that it is not necessary to consider all the decisions as the decision of the Supreme Court in Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 would govern the facts of the case. The Supreme Court in Malabar Industrial Co.' s case [2000] 243 ITR 83 considered the jurisdiction of the Commissioner under section 263 of the Act. The Supreme Court, while considering the question whether the order of the Assessing Officer is erroneous and prejudicial to the interests of the Revenue, considered the phrase, "prejudicial to the interests of the Revenue" and h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udicial to the assessee. In this case, without any proper verification, the Income-tax Officer has given relief, and that such an order being an order prejudicial to the Revenue, it could properly form the subject matter of the revision under section 263 of the Income-tax Act by the Commissioner. The mere fact that subsequently the Tribunal modifies the order of the Commissioner as one remitting the matter to the Income-tax Officer will not mean that the Commissioner has no jurisdiction to deal with the matter earlier under section 263 of the Income-tax Act. We are, therefore, in entire agreement with the view of the Tribunal that the Commissioner had jurisdiction to deal with the matter under section 263 of the Income-tax Act" A similar view was taken by this court in K. A. Ramaswamy Chettiar v. CIT [1996] 220 ITR 657 wherein this court held as under: ". . . the Income-tax Officer is expected to make an enquiry before taxing the particular item of income or before granting deduction of a particular item of expenditure and if he does not make such an enquiry as expected, that would be a ground for the Commissioner of Income-tax to interfere under section 263 of the Act." Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of this court in CIT v. Smt. D. Valliammal [1998] 230 ITR 695. It was a case of undisclosed income and the Income-tax Officer completed the assessment on the basis of accounts, but the Commissioner set aside the order passed by the Income-tax Officer on the ground that the verification of accounts was needed. That case turned on the facts of its own case and not a case of statutory deduction without verification. The decision of this court in CIT v. Amalgamations Ltd. [1999] 238 ITR 963 is also not applicable. In that case, there was no material before the Commissioner to show that the rent paid was too low and the annual rent determined by the Assessing Officer was erroneous. This court held that in the absence of any material on record, the exercise of revisional power by the Commissioner was not warranted. Learned counsel for the assessee placed strong reliance on the decision of the Madhya Pradesh High Court in Nazir Singh v. CIT [2001] 252 ITR 820, particularly the following observations : "Section 147 indicates that the case pertaining to the period ranging between seven and ten years can be reopened. But there is a limit to it. It is not to be applied in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case. In the present case, Shri Nazir Singh quoted his income earned as income from dearness allowance and ad hoc dearness allowance. However, he claimed the deduction and exemption from the liability of paying the tax. There was no case of concealment of the income or evasion of tax. In Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 (SC), the case was not permitted to be reopened after the lapse of time of four years." We are of the view that the observations have no application to the facts of the case after the decision of the Supreme Court in Malabar Industrial Co. Ltd.'s case [2000] 243 ITR 83. We therefore hold that the Appellate Tribunal was correct in holding that the Commissioner has exercised his jurisdiction on proper and valid grounds and he has exercised his jurisdiction properly when he found that the Assessing Officer had granted deduction under sections 80HH and 80HHC of the Act without verifying the same. We do not find any infirmity in the order of the Appellate Tribunal and accordingly, we answer the question of law referred to us in the affirmative, against the assessee and in favour of the Revenue. No costs. - - TaxTMI - TMITax - Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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