COMMISSIONER OF INCOME TEX AP HYD. V. V.RAJIV HYD

RC/171/2000

AI Insights

The case involves M/s. R.C.R Trust and G.V. Family Trust, which filed separate returns for the assessment year 1988-89 showing income from trusts. The respondent also filed a separate return showing income from other sources. The Income Tax Officer processed the returns under Section 143(1) of the Income Tax Act, but the Commissioner of Income Tax later ordered a comprehensive assessment under Section 263, believing the returns should be clubbed together. The Tribunal initially upheld the Income Tax Officer's decision, leading to the revenue's reference to the court. The court, however, found the tax impact minimal and did not find it necessary to adjudicate further.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 739208 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 24-06-2014
• Assessment Year: misc
• Other Referred Cases: Malabar Industrial Co. Ltd. vs. Commissioner of Income-tax
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Assessment; Beneficiary; Erroneous; Income Tax; Prejudicial; Revenue; Trust
• Section: 143(1); 263; 268A

Judgement Text

" HON'BLE SRI JUSTICE L.NARASIMHA REDDY AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM REFERRED CASE No.171 OF 2000 ORDER:- (per Hon’ble Sri Justice L. Narasimha Reddy) This reference is made by the Hyderabad Bench-B of the Income Tax Appellate Tribunal through order dated 03.11.1998 in R.A.No.358/Hyd/1994 in I.T.A.No.923/Hyd/1991, at the instance of the revenue. 2) The facts in brief are that M/s. R.C.R Trust, and G.V. Family Trust, filed separate returns for the assessment year 1988-89 showing the income of the respondent from the trusts. The respondent in turn, filed a separate return showing his income from other sources. 3) Since all the three returns are in respect of the respondent, the Income Tax Officer has chosen to process the returns that reflected the income from the trust under Section 143(1) of the Income Tax Act (for short, “the Act”) and passed an order dated 25.10.1988. The Commissioner of the Income Tax however scrutinized the assessment order and took the view that the assessment ought to have been comprehensive in respect of all the three returns by clubbing together. Accordingly, he passed an order dated 21.3.1991, in exercise of the provisions under Section 263 of the Act. 4) Aggrieved by the order of the Commissioner, the respondent filed I.T.A.No.923/ID/Hyd/1991 before the Tribunal. In its order passed in the appeal, the Tribunal took the view that it is always open for the Income Tax Officer to process, either the returns filed on behalf of the Trust, or by the beneficiary and the occasion to reopen the same in exercise of power under Section 263 of the Act would arise only when the order of the Income Tax Officer is found to be erroneous and prejudicial, insofar as it has resulted in phenomenal loss to the revenue; and that such event did not take place in the instant case. Not satisfied with the outcome of the order of the Tribunal, the revenue sought reference and accordingly reference is made with the following questions of law:- 1. “Whether, on the facts and in the circumstances of the case, the ITAT was correct in law in canceling the order u/s 263 of the Income-tax Act passed by the CIT holding that the order u/s 143(1) was neither erroneous nor prejudicial to the interests of Revenue?” 2. “Whether, on the facts and in the circumstances of the case, the ITAT was correct in law in canceling the order u/s 263 of the Income-tax Act passed by the CIT and allowing the appeal of the assessee?” 5) Heard Sri S.R. Ashok, learned Senior Counsel for the revenue and Dr. C.P. Ramaswami, learned counsel for the respondent at length. The judgment of the Supreme Court reported in Malabar Industrial Co. Ltd., vs. Commissioner of Income-tax[1] was also cited before us. 6) However, we are of the view that the necessity to deal with the matter in detail is obviated on account of the fact that the tax impact in the instant case, even if the contention of revenue is accepted is less than Rs.8,000/-. In view of the circulars issued by the Central Board of Direct Taxes from time to time, and the mandates under Section 268A of the Act, the matter does not warrant adjudication. We therefore decline to answer the questions as unwarranted and unnecessary. 7) Accordingly, both the questions of law as set out above are declined to be answered. __________________________________ JUSTICE L. NARASIMHA REDDY ____________________________________ JUSTICE CHALLA KODANDA RAM Date:24.06.2014. Gk HON'BLE SRI JUSTICE L.NARASIMHA REDDY AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM REFERRED CASE No.171 OF 2000 Date:24.06.2014. Gk [1] Vol.243 (2000) page 83. "