Law: Income Tax Act, 1961

Section: 263(1),Expln.,clause(b)

Income-tax----Revision---Powers of Commissioner---Material coming to light subsequent to passing of order by I.T.O. but before exercise of revisional power by Commissioner---Commissioner entitled to take into consideration such material for exercise of revisional power---Clause (b) of Explanation to S.263(1) is clarificatory in nature and retrospective in operation---Indian Income Tax Act, 1961, S.263(1), Expln., clause (b) [as substituted by Indian Finance Act, 1988, w.e.f. 1-6-1988]. For the assessment year 1980-81, the asses see-firm was granted registration under section 185 of the Income Tax Act, 1961. The Commissioner of Income-tax, in exercise of his powers of revision under section 263 of the Act, set aside the order granting registration to the firm. The Tribunal held that the Commissioner of Income-tax was in error in cancelling the registration granted to the firm. On a reference, the Revenue contended that in view of the amendment to section 263 by the insertion of the Explanation by the Taxation Laws (Amendment) Act, 1984, with effect from October 1, 1984, and amendment by the Finance Act, 1988, with effect from June 1, 1988, the exercise of power by the Commissioner was justified and the Tribunal was in error in coming to the conclusion that the material relied on by the Commissioner was not on record when the registration was granted to the assessee-firm and so it could not form the basis for cancellation of the registration. The assessee contended that, in exercise of power under section 263, the Commissioner could only rely upon the material available on record at the time of granting registration and that the amendment of the said provision was subsequent to the passing of the order of the Commissioner and, therefore, the amended provision would be of no avail to the Revenue: Held, (i) that the ambit of the word "record" in clause (b) of the Explanation to section 263(1) has been clarified to mean that it shall include and shall be deemed always to have included all records relating to any proceeding under the Act available at the time of examination by the Commissioner. (ii) That it has now to be taken as settled law after the decision of the…

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