S. 263 of the Income-tax Act, 1961 — Power to revise AO’s
order — AO making certain additions to the income returned — Whether the
Commissioner has power to revise AO’s order in order to sustain the addition but
on different reasons — Held, No.
Per J. Sudhakar Reddy :
Facts :
In their return of income filed, both the assessees had
returned besides other income, income from agriculture. According to the AO, the
assessees had not proved with evidence that they were engaged in agricultural
activities. Therefore, the income so declared was treated by the AO as income
from other sources.
According to the CIT, the reasons for additions given by the
AO were grossly inappropriate and inadequate for sustaining the additions. In
order to strengthen the case of the Revenue, he held both the orders passed by
the AO as erroneous and prejudicial to the interest of the Revenue. Accordingly,
he directed the AO to make fresh assessment. The assessees challenged the orders
passed by the CIT before the Tribunal.
Held :
According to the Tribunal, the CIT wanted to indicate the
same thing what the AO had indicated, but for different reasons. It further
observed that an order u/s.263 cannot be passed for giving additional reasons or
substituting reasons by a higher authority to support the same cause. According
to it, when the AO had in fact rejected the claim of the assessee, it cannot be
said that any prejudice was caused to the Revenue. Merely because the CIT was
not happy with the reasons given by the AO, the same did not give jurisdiction
to invoke the powers conferred on him u/s.263. The Tribunal further observed
that once an addition was made, the issue if appealed against, travelled to the
First Appellate Authority whose powers were co-terminus with that of the
Assessing Officer. The first appellate authority, according to the Tribunal, can
always, if he feels that the reasoning given by the Assessing Officer was not
sufficient, strengthen the order by giving his own reasons, if the situation so
permitted. If the assessees did not carry the matter in appeal, the assessment
orders attain finality. Thus, it was noted that, in either case, the scheme of
the Act does not permit the supervisory Commissioner to give additional reasons
for supporting the same additions that had been made by the AO.
