COMMISSIONER OF INCOME-TAX VS SHIVABHAI B. PATEL
2001 P T D 2758
[239 I T R 919]
[Gujarat High Court (India)]
Before R. Balia and A. R. Dave, JJ
COMMISSIONER OF INCOME‑TAX
versus
SHIVABHAI B. PATEL
Income‑tax Reference No. 112 of 1984, decided on 11/11/1998.
Income‑tax‑‑‑
‑‑‑‑Revision‑‑‑Assessments set aside by Commissioner under S.263 and I.T.O. directed to make fresh assessments‑‑‑Order of revision by Commissioner set aside by Tribunal‑‑‑ Order of Tribunal made subject‑matter of reference before High Court and reference application pending‑‑‑I. T. O. making fresh assessments in accordance with directions of Commissioner‑‑ Consequence of setting aside order of Commissioner is that order passed in consequence thereof also fails‑‑‑Consequential orders of I.T O. to give effect to order of Commissioner not valid‑‑‑Indian Income Tax Act, 1961, S.263.
For the assessment years 1975‑76 and 1976‑77, the Income‑tax Officer completed the original assessments. Those assessments were set aside by the Commissioner under section 263 of the Income Tax Act, 1961, and the Income‑tax Officer was directed to make fresh assessments. The order of the Commissioner under section 263 was set aside by the Tribunal. The order of the Tribunal setting aside the order of the Commissioner was made the subject‑matter of reference before the High Court and the reference application was pending. The Income‑tax Officer made fresh assessments in accordance with the directions contained in the order of the Commissioner which had been set aside. On appeal against the fresh assessment orders, the Commissioner of Income‑tax (Appeals) set aside the assessment orders on the ground that the order of the Commissioner of Income‑tax under section 263 had been cancelled. On further appeal, the Revenue contended that since the reference application was pending before the High Court, the order passed by the Income‑tax Officer ought not to be set aside. The Tribunal dismissed the appeals filed by the Revenue. On a reference:
Held, that once original assessments have come into force unless the same are set aside in accordance with law in appropriate proceedings, they hold the field and there cannot be two operative assessments at the same time. The effect of the order under section 263 made by the Commissioner of Income‑tax was that the original assessments stood set aside. However, once an order under section 263 was set aide, it resulted in restoration of the original assessments on record, and there cannot be any room for fresh assessment orders even if the same have come into existence in pursuance of a direction issued under section 263. It could not be said that by complying with the direction under section 263, the remedy of appeal or getting determination of the question by way of further proceedings, in accordance with the provisions of the Income‑tax tact, became redundant. Therefore, the Tribunal was right in holding that since it had found that the order under section 263 itself was bad, the consequential orders of the Income‑tax Officer to give effect to the order of the Commissioner under section 263 could riot be upheld.
Manish R. Bhatt for the Commissioner.
Nemo for the Assessee.
JUDGMENT
For the two assessment years 1975‑76 and 1976‑77, a composite statement of case has been submitted and the following questions of law have beets referred by the Income‑tax Appellate Tribunal, Ahmedabad Bench "C", arising out of its decision in Income‑tax Appeals Nos.2240 and 2241/Ahd. of 1981 as required by the Commissioner of Income‑tax, Ahmedabad:
"(1) Whether, on the facts and ill the circumstances of the case, the Tribunal was right in law in coming to the conclusion that the order, dated February 8, 1979, passed by the Commissioner of Income‑tax under section 263 of the Act was liable to be set aside?
(2) Whether, the Tribunal was right in law and in facts and circumstances of the case in coming to the conclusion that since they had found that the order under section 263 itself was bad, there was no question of upholding the consequential orders of the Income‑tax Officer to give effect to the order of the Commissioner under section 263?"
The facts relevant for the Present purposes and out of which reference has been made may be notice,
For the two assessment years in question, the Income‑tax Officer has completed the original assessments on December 4, 1977. Those assessments were set aside by the Commissioner in exercise of his powers under section 263 by holding the same to be prejudicial to the interest of the Revenue by his order, dated February 8, 1979, and the Income‑tax Officer was directed to make fresh assessments. The order under section 263 was ultimately set aside by the Tribunal. Against the order of the Tribunal setting aside the order under section 263 passed by the Commissioner of Income‑tax, the order of the Tribunal was made the subject‑matter of reference before this Court, and the Income‑tax Officer made fresh assessments in accordance with directions contained in the order of the Commissioner of Income‑tax which had been set aside. On appeal against the assessment orders, the Commissioner of Income‑tax (Appeals) set aside the fresh assessment orders on the ground that the order of the Commissioner of Income‑tax under section 263 having been cancelled, the consequential orders could not have been passed in pursuance of those directions. On appeal, the Revenue failed before the Tribunal also. The only ground raised before the Tribunal was that since reference application is pending before the High Court, the order passed by the Income‑tax Officer ought not to be set aside, until the decision of those reference applications.
The order of the Tribunal setting aside the order under section 263 was the subject‑matter of Income‑tax Reference No. 113 of 1982. The same has been decided by this Court on October 8, 1993, answering the questions in favour of the assessee and against the Revenue.
There cannot be any doubt about the proposition that once the original assessments have come into force unless the same are set aside in accordance with law in appropriate proceedings, they hold the field and there cannot be two operative assessments at the same time. The effect of the order under section 263 made by the Commissioner of Income‑tax was that the original assessment stood set aside. However, once an order under section 263 was set aside it resulted in restoration of the original assessments on record, there cannot be any room for fresh assessment orders even if the same have come into existence in pursuance of a direction issued under section 263. It cannot be said that by complying with the direction under section 263, the remedy of appeal or getting determination of the question by way of further proceedings in accordance with the provisions of the Income tax Act become redundant. The consequence of setting aside of an order under section 263 must follow, namely, the order passed in consequence thereof, must also fail. As has been noticed above, the order passed by the Commissioner under section 263 was set aside by the Tribunal and on further reference, the High Court has found the order of the Tribunal to be justified in that regard.
We, therefore, have no hesitation in answering the questions referred to us in the affirmative, that is to say, in favour of the assessee and against the Revenue.
No one appeared on behalf of the assessee
There shall be no order as to costs.
M.B.A./279/FCReference answered