[Income Tax] Assessing Officer Not Only An Adjudicator But Also An Investigator, Cannot Remain Oblivious To Claim Without Enquiry: Kerala HC

The Kerala High Court stated that the Income Tax Commissioner can exercise Revisional Jurisdiction under Section 263 of the Income Tax Act, 1961. The Division Bench of Justices A.K. Jayasankaran Nambiar and Easwaran S. observed that “The role of the assessing officer under the Income Tax Act, 1961 is not only that of an adjudicator but also of an investigator and he cannot remain oblivious in the face of a claim without any enquiry.” Under Section 263 of The Income-tax Act, 1961, the Principal Commissioner or Commissioner has the authority to review any tax-related decision made by an Assessing Officer. In this case, the assessee/appellant, a domestic company engaged in operating and maintaining of the Cochin International Airport. For the assessment year 2012-13, the assessee declared a total income of Rs.134,43,40,439/- under Section 115-JB of the Income Tax Act, 1961. Since the tax payable under the regular provisions of the Act was lower and the assessee had claimed deduction under Section 80-IA of the Act in respect of the eligible activity of operating and maintaining the Airport, which is an infrastructure facility, it filed a revised return on 4.12.2013 declaring a taxable income of Rs.11,88,92,410/-. During the said financial year, the assessee debited to the profit and loss account an amount of Rs.1,00,33,280/- towards the provision for bad and doubtful debts and the said amount was reduced from the amount of trade receivables and short-term loans and advances. Since the Provision debited in the profit and loss account is simultaneously obliterated from the value of trade receivables and short-term loans and advances, the same was treated by the assessee as a write off in the income tax return. However, the Principal Commissioner of Income Tax-1, Kochi found that the said assessment was erroneous and prejudicial to the interest of the Revenue, and decided to invoke the jurisdiction under Section 263 of the Income Tax Act, 1961 and issued a notice proposing to revise the order of assessment. Aggrieved by the order, the assessee preferred an appeal before the Income Tax Appellate Tribunal, which was dismissed. The assessee submitted that the Principal Commissioner of Income Tax-1, Kochi had no jurisdiction to invoke Section 263 of the Income Tax Act, 1961 because it was basically due to a change of opinion that he decided to revise the order of assessment, which is impermissible under law. The bench noted that it is true that all orders, which are erroneous, are not liable to be subjected to proceedings under Section 263 of the Income Tax Act, 1961. To invoke Section 263, the Principal Commissioner of Income Tax must be satisfied that the erroneous order also causes prejudice to the Revenue. The bench further opined that the real purport of Section 263 is to remove the prejudice caused to the Revenue by the erroneous order passed by the assessing officer and it empowers the Commissioner to initiate suo motu proceedings, when either the assessing officer takes a wrong decision without considering materials available on record or renders a decision without enquiry. “We cannot find fault with the Principal Commissioner of Income Tax for having exercised his jurisdiction under Section 263 of the Income Tax Act, 1961. Consequently, the order passed by him after hearing the appellant and directing the assessing officer to re-examine the said issue is perfectly justifiable and legal.” added the bench. In view of the above, the bench dismissed the appeal. Case Title: Cochin International Airport Ltd v. The Assistant Commissioner Of Income Tax Case Number: ITA NO. 77 OF 2018Citation: 2025 LiveLaw (Ker) 47Counsel for Appellant/ Assessee: Joseph Markos, Abraham Joseph Markos, Issac Thomas, Haran Thomas George Counsel for Respondent/ Department: P.K.R. Menon, Jose Joseph, C.E. Unnikrishnan, Mohammed Rafiq Click Here To Read/Download The Order

[Income Tax] Assessing Officer Not Only An Adjudicator But Also An Investigator, Cannot Remain Oblivious To Claim Without Enquiry: Kerala HC

Mehak Dhiman

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