By its judgment delivered on January 4, 2007 in the case of CIT v Ralson Industries Ltd [ Appeal (Civil) No 10 of 2007 ], the Supreme Court of India has pronounced upon the validity of a revision initiated by the Commissioner of Income-tax under Section 263 of the Income-tax Act, 1961 for revising the Assessment Order made under Section 143(3) by the Assessing Officer, after the Assessing Officer has initiated and completed proceedings for rectification under Section 154 of that Assessment Order on the very points on which the revision has been initiated by the Commissioner.
2. The facts of the case may now briefly be adverted to. In computing deductions claimed by it under Section 80-HHC and Section 80-I, the taxpayer apparently took into consideration transport receipts amounting to Rs 27,62,982 and interest receipts of Rs 1,41,878. The deductions so claimed were allowed by the Assessing Officer in his Assessment Order made under Section 143(3). Subsequently, the Assessing Officer issued a Notice to the taxpayer under Section 154, apparently proposing exclusion of the said two items of receipt in computing the two deductions. However, in the Order under Section 154, the Assessing Officer, after considering the taxpayer's response to the said Notice, did not disturb the deductions allowed in the Assessment Order. After the Order under Section 154 was made by the Assessing Officer, the Commissioner, by an Order made under Section 263, revised the Assessment Order by directing the Assessing Officer to exclude the said two items of receipt in computing the two deductions aforesaid.
3. The taxpayer thereupon preferred an appeal to the Income-tax Appellate Tribunal against the Commissioner's Order under Section 263. The Tribunal allowed the appeal of the taxpayer, for the following reasons :
(i) The matter had to be decided against the Revenue in view of the judgment of the jurisdictional Madhya Pradesh High Court in CIT v Vippy Solvex Products Pvt Ltd [1997] 228 ITR 587 (MP).
(ii) The Order under Section 154 having been made upon due consideration of the assessee's explanation for having included the said two items of receipt in computing the said two deductions, the Commissioner lacked jurisdiction to make any order under Section 263.
4. A reference to the Madhya Pradesh High Court at the instance of the Revenue was answered against the Revenue, the High Court holding, on the basis of its decision in Chunnilal Onkarmal Pvt Ltd [1997] 224 ITR 233 (MP), that no substantial question of law arose out of the order of the Appellate Tribunal.
5. Upon the Revenue carrying the matter in appeal to the Supreme Court, the Supreme Court held as follows :
(i) "The scope and ambit of a proceeding for rectification of an order under Section 154 and a proceeding for revision under Section 263 are distinct and different...... When different jurisdictions are conferred upon different authorities to be exercised on different conditions, both may not be held to be overlapping with each other. An order of assessment may or may not be rectified. If an order of rectification is passed by the Assessing Authority, the rectified order shall be given effect to. However, only because an order of assessment has undergone recification at the hands of the Assessing Officer, in our opinion, the same would not mean that revisional authority shall be denuded of exercising its revisional jurisdiction. Such an interpretation, in our opinion, would run counter to the scheme of the Act." (emphasis supplied)
(ii) The Appellate Tribunal's reliance on Vippy Solvex Products's Case (supra) was misplaced.
(iii)"The decision of the Madhya Pradesh High Court in Chunnilal Onkarmal (supra) is also not apposite. Initiation of a proceeding under Section 263 of the Act cannot be held to have become bad in law only because an order of rectification was passed. No such hard and fast rule can, in our opinion, be laid down. Each case is required to be considered on its own facts. In a given situation, the High Court may be held to be entitled to set aside both orders and remit the matter for consideration of the matter afresh. But in our opinion, it would not be correct to contend that only because a proceeding for rectification was initiated subsequently, the revisional jurisdiction could not have been invoked under any circumstances whatsoever. If such a proceeding was initiated, in our opinion, the contesting parties could bring the same to the notice of the Commissioner so as to enable him to take into consideration the subsequent events also. It goes without saying that if and when the Commissioner of Income Tax takes up for consideration a subsequent event, the assessee would be entitled to make its submission also in regard thereto." (emphasis supplied)
6. The judgment of the High Court was, accordingly, set aside by the Supreme Court, with the rider that the interests of justice would be met if the Commissioner was directed to have a fresh look at matter in the light of the the order of rectification passed by the Assessing Officer.
