Case Note & Summary
The case involves two Tax Appeals filed by Gigabyte Technology (India) Private Ltd (the Assessee) against the Commissioner of Income Tax (the Revenue). The Assessee is engaged in trading of computer components and peripherals. For the Assessment Year 2006-07, the Assessee filed a return of income on 27/11/2006. Notices under Sections 143(2) and 142(1) of the Income Tax Act, 1961 were issued on 25/10/2007. On 27/3/2008, the return was processed under Section 143(1). The matter was referred to the Transfer Pricing Officer as the Assessee had entered into international transactions. The Assessing Officer passed an assessment order. Subsequently, the Commissioner of Income Tax (CIT) invoked revisionary jurisdiction under Section 263 of the Act, holding that the assessment order was erroneous and prejudicial to the interests of the Revenue, and directed the Assessing Officer to frame a de novo assessment. The Assessee appealed to the Income Tax Appellate Tribunal (ITAT), which upheld the CIT's action. Aggrieved, the Assessee filed Tax Appeal No.77/2015, which was admitted on 11/2/2016 on two substantial questions of law: (1) whether the Tribunal erred in holding that there was no infirmity in assuming revisionary jurisdiction by the CIT under section 263, without appreciating that the assessment order sought to be revised was itself bad in law and void ab initio; and (2) whether the Tribunal erred in upholding the CIT's action under section 263 without appreciating that such action directing de novo assessment would result in extending the period of limitation under section 153. The parties agreed that the decision in Tax Appeal No.77/2015 would govern Tax Appeal No.78/2015. The Court heard the learned Counsel for the parties. The Court analyzed the substantial questions of law and held that the assessment order being void ab initio, the CIT could not exercise revisionary jurisdiction under Section 263 to validate it. Further, directing de novo assessment would impermissibly extend the limitation period under Section 153. Accordingly, the Court allowed Tax Appeal No.77/2015 and, consequently, Tax Appeal No.78/2015, setting aside the impugned orders.
Headnote
A) Income Tax - Revisionary Jurisdiction - Section 263 of Income Tax Act, 1961 - Void Assessment Order - The issue was whether the CIT could exercise revisionary jurisdiction under Section 263 to set aside an assessment order that was itself void ab initio. The Court held that revisionary jurisdiction cannot be exercised to validate a void order, and directing de novo assessment would impermissibly extend limitation under Section 153. (Paras 3-4) B) Income Tax - Limitation - Section 153 of Income Tax Act, 1961 - De Novo Assessment - The Court considered whether the CIT's direction to frame de novo assessment would extend the period of limitation under Section 153. Held that such direction would result in extending limitation, which is impermissible. (Paras 3-4)
Issue of Consideration
Whether the Tribunal erred in holding that there was no infirmity in assuming revisionary jurisdiction by the CIT under section 263 of the Act, without appreciating that the assessment order which was sought to be revised was itself bad in law and void ab initio; and whether the Tribunal erred in upholding the action of the CIT under section 263 without appreciating that such action directing the AO to frame de novo assessment would result in extending the period of limitation as provided in section 153 of the Act.
Final Decision
The High Court allowed Tax Appeal No.77/2015 and consequently Tax Appeal No.78/2015, setting aside the impugned orders of the Tribunal and the CIT under Section 263.
Law Points
- Revisionary jurisdiction under Section 263 of Income Tax Act cannot be exercised to validate a void assessment order
- directing de novo assessment would extend limitation under Section 153
- assessment order void ab initio cannot be revised
