Law:

Section:

Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue - Assessment year 2005-06 - Whether where Commissioner, while exercising powers under section 263, sets aside order of Assessing Officer on merits as well and gives his categorical finding on issue involved, Tribunal will be within its right to examine as to whether decision on said issue was proper or not and for this purpose Tribunal itself would be entitled to examine issue on merits - Held, yes - Whether however, where issue was not examined by Assessing Officer and on this ground Commissioner revised order without giving his own findings, but directed Assessing Officer to do necessary exercise, it was not proper for Tribunal to decide same, converting itself to a Court of first instance and deciding factual aspect on which neither Assessing Officer nor Commissioner had returned any findings - Held, yes [In favour of assessee] FACTS The assessee-company filed its return for the the assessment year 2005-06 claiming deduction under section 80-IB along with audit report wherein it was mentioned that operation of the assessee commenced in financial year 1995-96 and the initial assessment year from which deduction was claimed was assessment year 1996-97. The Assessing Officer allowed the deduction. However, the Commissioner while exercising powers under section 263, observed that the assessee had commenced its operations from the financial year 1994-95 and, accordingly, it could have claimed deduction only up to assessment year 2004-05 and since the Assessing Officer had not applied his mind on the issue as to in which year, the assessee commenced its operation the Commissioner directed the Assessing Officer to make assessment afresh. On appeal, the Tribunal set aside the order of the Commissioner holding that year of commencement of operation was the financial year 1995-96 and, therefore, the impugned order of the Assessing Officer for the assessment year 1996-97 was neither erroneous nor prejudicial to the interest of the revenue. On revenue's appeal to the High Court : HELD The year of commencement of operation would be relevant to find out as to whether the…

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