The Madras High Court held that the assessing officer cannot go beyond the directions of the Commissioner of Income-tax (CIT), even though during the course of fresh assessment proceedings, it is open to the assessing officer to examine any items.
The Commissioner of Income Tax (CIT) is aggrieved with an order of the Income Tax Appellate Tribunal allowing the appeal filed by the assessee challenging an order passed under section 263 of the Income Tax Act, 1961.
The issue raised in this case was Whether on the facts and in the circumstances of the case the Income-tax Appellate Tribunal was right in law in dismissing the revenue’s appeal on the ground, the assessing officer can not go beyond the directions of the Commissioner of Income tax, even though during the course of fresh assessment proceedings, it is open to the assessing officer to examine any items other than specific item examine to have the proper income assessed as prospective.
The Court clarified that Section 263 empowers the Commissioner of Income tax to revise an order of assessment if the order in question is erroneous and prejudicial to the interests of the revenue, both conditions to be satisfied concurrently.
The Court said that The action of the assessing officer, though prejudicial, can hardly be termed as ‘erroneous’ insofar as the officer has followed the dictum laid down by the Supreme Court in the case of Indian Shaving products.
Thus, the court held that in the absence of concurrent satisfaction of the two conditions under section 263 of the Act, the action of the CIT was contrary to statute and liable to be set aside.
The Court while taking the note of the factual and legal position dismissed the appeal filed by the Revenue.
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