Commissioner Of Income-Tax vs K.L. Ahuja
2000 Latest Caselaw 1294 Del

JUDGMENT

Arijit Pasayat, C.J.

1. At the instance of the Revenue, the Income-tax Appellate Tribunal, Delhi Bench-D (in short, "the Tribunal"), has referred

the following question, under Section 256(1) of the Income-tax Act, 1961 (in short "the Act"), for the opinion of this court :

"Whether, on the facts and in the circumstances of the case, the Tribunal is legally correct in holding that the Commissioner of Income-tax had no jurisdiction under Section 263 to cancel the Income-tax Officer's order dated February 28, 1977, passed under Section 154 ?"

2. A brief reference to factual aspects would suffice :

The assessed, who was an employee of the Central Government, joined the Indian Oil Corporation Limited (in short "the 10C"), a public sector undertaking, where he was permanently absorbed. On his retirement from the Central Government Service, he received a sum of Rs. 9,714 towards the commuted value of l/3rd of the pension due to him plus a sum of Rs. 19,429 as terminal benefit calculated at twice the amount of the commuted value of pension. The Accounts Officer while paying terminal benefits deducted tax at the appropriate rate out of it. The assessed filed his return and was assessed treating terminal benefits as taxable. However, relief under Section 89 of the Act was allowed. The assessment was completed on 18th October, 1975. On 31st December, 1976, the assessed approached the Income-tax Officer for rectification of the order under Section 154 of the Act taking' the plea that terminal benefits were entirely exempted from tax in view of the decision of the Bombay Bench of the Tribunal in the case of one P. Muralidharan. Accepting the said contention, the Income-tax Officer passed an order on 28th February, 1977. As a result of the aforesaid exercise, the entire amount of terminal benefits was taken to be non-taxable and a refund order was issued. The Commissioner of Income-tax (in short, "the Commissioner"), after going through the order passed by the Income-tax Officer, was of the opinion that said order under Section 154 was erroneous and prejudicial to the interests of the Revenue. He, therefore, issued notice under Section 263 of the Act and passed an order cancelling the order passed under Section 154 of the Act. The assessed assailed the said order before the Tribunal. When the matter was heard, the assessed placed reliance on a Circular No. CIT/CT/M-1(69)/76-77/27141, dated 10th September, 1976, issued by the Commissioner of Income-tax. According to the said circular, the Central Board of Direct Taxes (in short, "the Board") had in their letter No. 173/126-76-II(AI). dated 30th May, 1976, accepted the decision of the Bombay Bench as laying down the correct position in law. The Commissioner of Income-tax had, therefore, directed that whenever an assessed applied under Section 154 pointing out the mistake in its assessment, the same should be rectified following' the instructions of the Board. Obviously, the Income-tax Officer followed the circular. Though there was no reference to the circular in the order under Section 154, obvious reference therein was to the decision in P. Muralidharan's case. It was observed by the Tribunal that the Income-

tax Officer was more or less copying the words in the circular of the Board which had been taken note of in the circular issued by the Commissioner of Income-tax. The Tribunal was of the view that it was a case where an order under Section 154 was passed by the Income-tax Officer under the directions of the Commissioner and, therefore, Section 263 of the Act will not be applicable. The Tribunal, inter alia, observed as follows :

"When the Income-tax Officer passes an order in his own discretion and that order is found to be erroneous or prejudicial to the interests of the Revenue under Section 263 is the power to the Commissioner of Income-tax to rectify it but when an Income-tax Officer passes an order not in his own discretion or wisdom but following the directions of the Commissioner of Income-tax who follows in turn the direction of the Central Board of Direct Taxes, to whom both' of them are subordinate, the Commissioner of Income-tax who succeeds the Commissioner of Income-tax who had issued the impugned instructions in a circular letter to the Inspecting Assistant Commissioner cannot treat the order of the Income-tax Officer as erroneous or prejudicial to the interests of the Revenue because it would in fact amount to reviewing his predecessor's order which is not permissible under Section 263. We accordingly hold that the impugned order passed by the learned Commissioner of Income-tax was without jurisdiction. Under the circumstances, we cancel the said order".

3. On being moved for reference the question as aforesaid has been referred for the opinion of this court.

4. We have heard learned counsel for the Revenue. There is no appearance on behalf of the assessed inspite of service of notice.

5. In view of the factual position highlighted by the Tribunal, the relevant portion of which has been quoted above, the decision of this court in C. K. Karunakaran v. Union of India [1981] 127 ITR 136 applies to the facts of the case. On the merits also the assessed has to succeed. The question referred is, therefore, of academic interest and we decline to answer the same.

6. The reference stands disposed of.