Law: Income Tax Act, 1961

Section: 143,144,144B,263

(a) Income-tax----Revision---Powers of CIT---Order passed under S.143(3) read with S.144B---Order passed pursuant to direction of IAC---Order can be revised--­Income Tax Act, 1961, Ss. 143, 144B & 263. There is no inherent lack of jurisdiction in the Commissioner of Income-Tax to revise the order of the Income-tax Officer passed under section 143(3) read with section 144B of the. Income Tax Act, 1961. The order passed by the Income-tax Officer pursuant to the direction of the Inspecting Assistant Commissioner is still an order of assessment and the Commissioner of Income-tax has the jurisdiction under section 263 of the Act to interfere with the order passed by the Income-tax Officer as per the direction given by the Inspecting Assistant Commissioner. CIT v. V.V.A. Shanmugham (1999) 236 ITR 878 (Mad.) fol. The assessee-company filed its return for the assessment year 1978-79. The Income-Tax Officer, .on scrutiny-of the accounts, found that the additions and disallowances exceeded Rs.1,00,000 and hence, a draft assessment order was issued to the assessee under section 144B of the Act. The assessee filed its objections and the case was referred to the Inspecting Assistant Commissioner. The Inspecting Assistant Commissioner, after hearing the objections of the assessee held that the assessee was entitled to deduction of a sum of Rs.50,000 being the contribution made to the Labour Welfare Fund and a sum of Rs.1,01,485 paid by the assessee to its employees as gift for strike-free services. On the basis of the directions given by the Inspecting Assistant Commissioner, the Income-Tax Officer completed the assessment on July 3, 1981. The Commissioner of Income-tax exercising his power under section 263 of the Act, was of the opinion that the allowance of Rs.50,000 being the amount transferred to a welfare fund and the payment of Rs.1,01,485 made as gift to the employees for strike-free services were not allowable expenditure. He, therefore, issued a show-cause notice to the assessee and after hearing the objections preferred by the assessee, held that both the amounts should be regarded as bonus and the amounts in question exceeded the limit prescribed under…

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