Section 263: Commissioner – Revision of orders prejudicial to revenue – Scope of power – Subsequent amendement. [ Section 6(a)]

6.  CIT-26 vs. Mihir Doshi [ Income tax Appeal no
196 of 2016, Dated: 23^rd August, 2018 (Bombay High Court)]. 

[Mihir Doshi vs. DCIT; dated
30/08/2013 ; ITA. No 4403/Mum/2010, Mum. 
ITAT Mum.  ITAT ]

Section 263: Commissioner – Revision of orders prejudicial to
revenue – Scope of power – Subsequent amendement. [ Section 6(a)]

The assessee has been serving in
‘Morgan Stanley International (Inc)’ of the USA. He was on deputation to India.
He filed return of income for Assessment Year 2003- 2004 on 19^th
October, 2004, claiming the status of a ‘Resident’, but ‘not ordinarily
resident’ within the meaning of section 6 sub-section 6 clause (a) of the I.T
Act. He offered the salary earned in India to the extent of Rs.3,23,23,506/- to
tax. He offered further income under the head ‘Short Term Capital Gain’ and
‘Bank Interest’ on his own, which the A.O brought to tax by his Assessment
Order of 24^th January, 2006. The said proceedings resulted from the
refund sought by this assessee and the A.O modified his order by invoking
section 154 of the Act. Admittedly the A.O was possessed of this power and he
modified or corrected his order to the extent of the amount of income which
could be brought to tax.

The Commissioner was of the view
that the A.O did not examine the legal status of the assessee in the course of
the assessment proceedings and, hence, initiated action u/s. 263 of the Act.
That is on the footing, namely, the unamended section 6 sub-section 6 clause
(a) of the Act. It is said that the A.O gave effect
to the order of the Commissioner, but when the assessee asked for rectification
of that order to exclude double addition, the A.O surprisingly passed another
order dated 24^th February, 2009 deleting the entire amount. It is in
these circumstances that the records were again summoned by the Commissioner of
Income Tax and he returned the finding that the order of the A.O is erroneous
in so far as it is prejudicial to the interest of Revenue. Not only the salary,
but his perquisites also should be brought to tax was the view of the
Commissioner.

The aggrieved assessee approached
the Tribunal and the Tribunal considered both issues in the backdrop of the
peculiar facts and came to the conclusion that there could not be prejudice
caused to the Revenue as the A.O not only brought to tax the Indian component,
but the global component of the salary. That was a mistake and he, therefore,
made this correction so as to pass an Assessment Order in tune with the law. It
does not mean that the Commissioner was authorised by the same legal provision,
namely, section 263 of the Act to raise the issue of taxability. Firstly, all
proceeds of the entire tax deducted at source and secondly, that part of the
refund which was granted to the assessee on the basis that the sum refunded,
does not belong to the assessee, but to his employer. The main issue was
whether there was indeed any mistake in the Assessment Order and whether that
justified exercise of powers by the A.O conferred vide section 154 of the Act.
The Tribunal considered the factual and legal position and a judgment of the
Hon’ble Supreme Court in the case of Pradip J. Mehta vs. Commissioner of
Income Tax (300 ITR 231) and arrived at the conclusion that the amendment
to section 6 sub-section 6 clause(a) has been brought into effect from 1^st
April, 2004. That was not applicable to the Assessment Year under
consideration. The existing law was considered by the Hon’ble Supreme Court in
the aforesaid judgment and the Hon’ble Supreme Court’s judgment would bind the
A.O. That part of the income earned outside India would have to be excluded and
the assessee would have to be taxed to the extent of the income earned in
India. That has admittedly been done.

Being aggrieved with the order of the ITAT, the Revenue filed the
Appeal before High Court. The Court find that, in such circumstances, there was
no prejudice caused and this was not a fit case, therefore, to exercise the
powers u/s. 263 of the Act. Such a conclusion is imminently possible in the
peculiar facts of this case. The assessee’s status, the nature of his income
and the legal provision then prevailing having been correctly applied, the
order under Appeal does not suffer from perversity or any error of law apparent
on the face of the record. Accordingly, 
dept appeal was dismissed.