The Commissioner of Income Tax vs The South Indian Bank Ltd.

C.N. Ramachandran Nair, J.—The questions raised in the four connected appeals, two filed by the assessee, and two filed by the revenue, relate to revision of assessments issued by the Commissioner of Income Tax u/s 263 of the Income Tax Act and consequential orders issued by the assessing officer revising the assessments. Original assessment for 1998-99 was completed without making disallowance u/s 14A of the I.T. Act, though the assessee had incurred interest liability and administrative charges on capital borrowed for making investment in tax free bonds and securities. Since the assessing officer committed omission, the Commissioner issued suo motu proceedings u/s 263 of the Act ordering revision of assessment and again ordered revision of revised assessment for making disallowance u/s 14A. In the first round, the Tribunal dismissed the appeal against Section 263 order, against which assessee has filed appeals.

However, the appeal filed against Section 263 order issued against revised order was allowed by the Tribunal against which revenue has filed appeals. The challenge in I.T.A. No. 1708 of 2009 filed by the assessee pertains to levy of interest in the revised assessment u/s 234B of the Act. After hearing both sides, we find that jurisdictional issue, that is the authority of the Commissioner to order revision of assessment u/s 263 for making disallowance u/s 14A of the Act is covered by our decision in I.T.A. No. 587 of 2009 dated 14.1.2010 wherein we held that the proviso to Section 14A applies even to suo motu revisional power of the Commissioner conferred u/s 263 of the Act. So much so, both the orders issued u/s 263 for the assessment year 1998-99 are not tenable. The balance issues raised are only against consequential orders issued demanding tax and interest. Following our judgment above referred, we declare that Section 263 order issued by the Commissioner revising the original assessment and the second round order issued u/s 263 directing revision of revised assessment are unsustainable. Consequently we dismiss the departmental appeals sustaining the orders impugned therein and allow the assessee''s appeals by reversing the impugned orders of the Tribunal.