Case Note & Summary
The appeal by the Revenue under Section 260A of the Income Tax Act, 1961, challenged the order of the Income Tax Appellate Tribunal which had set aside the Commissioner's order under Section 263. The case pertains to Assessment Year 1998-99. The assessee, M/s Hindustan Lever Ltd., filed a return of income claiming deductions under Sections 80I, 80IA, and 80HH. The Assessing Officer completed the assessment under Section 143(3). Subsequently, the Commissioner issued a notice under Section 263 on 21 March 2003, stating that certain expenditures (R&D revenue and capital, interest paid, agency commission) had not been allocated to the units claiming deductions, resulting in underassessment of Rs.9.87 crores. The assessee replied on 25 March 2003, and the Commissioner passed an order on 28 March 2003, holding that the research expenditure was linked to the business and should have been allocated. The Tribunal set aside the Commissioner's order, holding that the jurisdiction under Section 263 was not properly invoked. The High Court admitted the appeal on question (a) only, as both counsel agreed it was determinative. The Court noted that the Commissioner issued the notice on 21 March 2003, the assessee replied on 25 March 2003, and the Commissioner passed the order on 28 March 2003, without making any inquiry. The Court held that the Commissioner must conduct a proper inquiry before invoking Section 263, and since no inquiry was conducted, the Tribunal's order was correct. The appeal was dismissed.
Headnote
A) Income Tax - Revision under Section 263 - Jurisdiction - Proper Inquiry - The Commissioner must conduct a proper inquiry before invoking revisional jurisdiction under Section 263 of the Income Tax Act, 1961. In this case, the Commissioner issued a notice and passed an order within a week without making any inquiry, and the Tribunal set aside the order. Held that the Commissioner's order was unsustainable as no inquiry was conducted (Paras 5-6).
Issue of Consideration
Whether the Tribunal was right in setting aside the order passed by the Commissioner under Section 263 of the Income Tax Act, 1961, holding that the jurisdiction under Section 263 has not been invoked properly.
Final Decision
The appeal is dismissed. The order of the Tribunal is confirmed. No order as to costs.
Law Points
- Section 263 jurisdiction requires proper inquiry
- revision cannot be based on mere change of opinion
- allocation of common expenditure for deduction under Sections 80I
- 80IA
- 80HH
