When Order Passed By Commissioner Of Appeals U/S.263 Of Income Tax Act Is Not Closed Remand, Assessee Need Not Question Order In Separate Proceeding: Kerala High Court
The Income Tax Appeal before the Kerala High Court was preferred by the assessee against the Order of the Income Tax Appellate Tribunal, Cochin Bench.
The Kerala High Court has held that when the order passed by the Commissioner of Appeals under Section 263 of the Income Tax Act cannot be construed as a closed remand, the assesssee need not question the order under Section 263 in a separate proceeding.
The Income Tax Appeal before the High Court was preferred by the assessee against the Order of the Income Tax Appellate Tribunal, Cochin Bench.
The Division Bench comprising Justice A.K. Jayasankaran Nambiar and Justice Easwaran S. observed, “...the order passed by the Commissioner of Appeals under Section 263 of the IT Act cannot be under any circumstances construed as a closed remand. While exercising the suo moto power of revision under Section 263 of the IT Act, the Commissioner had found that the order of assessment is erroneous and prejudicial to the interest of the revenue and, therefore, set aside the order of assessment and remanded the matter back to the assessing authority for a fresh consideration on merits. That be so, it is beyond one’s comprehension as to how the tribunal could hold that the order of remand under Section 263 of the IT Act passed by the Commissioner of Appeals is a closed remand. Thus, we are of the view that the assessee need not have questioned the order under Section 263 in a separate proceeding.”
Advocate Alexander Joseph Markos represented the Appellant while Advocate P.G. Jayashankar represented the Respondent.
Factual Background
For the assessment year 2006-2007, the assessment was completed under Section 143(3) read with Section 147 of the Income Tax Act, 1961 (IT Act). While so, the Commissioner of Income Tax invoked the suo moto revisional power under Section 263 of the IT Act on the issue that the assessing officer had not conducted proper enquiries with respect to the assessee’s claim for set off, of carry forward depreciation while computing book profit under Section 115JB of the IT Act. The appellant preferred an objection to the proposal but the commissioner rejected the objection and remanded the matter back to the assessing officer to make a fresh assessment as per law on the point.
On remand, the assessing officer passed a revised order of assessment. The assessee’s appeal before the Commissioner of Income Tax (Appeals) was dismissed. The Income Tax Appellate Tribunal was of the view that the assessee should have preferred an appeal against the findings of the Commissioner of Income Tax under Section 263 of the Income Tax Act, and thus, the order having not been assailed, no independent challenge to the consequent proceedings would lie before the tribunal. Accordingly, the appeal was dismissed as not maintainable. Aggrieved by such dismissal, the assessee approached the High Court.
Reasoning
The Bench found that the order passed by the Commissioner of Appeals under Section 263 of the IT Act cannot be construed as a closed remand. It was also asserted that the assessee need not have questioned the order under Section 263 in a separate proceeding.
Considering the fact that the Commissioner of Income Tax (Appeals) had decided the appeal preferred by the assessee against the revised assessment order on merits, the Bench held that it was incumbent upon the tribunal to have decided the appeal on merits rather than finding that the assessee ought to have questioned the order under Section 263 in a separate proceedings.
“Therefore, we are of the considered view that the tribunal erred egregiously in dismissing the appeal preferred by the assessee as ‘not maintainable. Therefore, we are of the view that the order of the tribunal requires to be interfered with”, it stated.
Thus, setting aside the order on the files of the Income Tax Appellate Tribunal, Cochin Bench, the Bench allowed the Appeal by answering the questions of law raised in favour of the assessee and against the revenue. “The tribunal shall consider the appeal on merits and dispose of the same in accordance with law”, it concluded.
Cause Title: Malabar Institute of Medical Sciences Ltd. v. The Deputy Commissioner of Income Tax (Neutral Citation: 2025:KER:22638)
Appearance:
Appellant: Advocates Alexander Joseph Markos, Isaac Thomas, John Vithayathil
Respondent: Advocates P.G. Jayashankar, Keerthivas Giri, SC Jose Joseph