Income Tax Act | Order Passed By Commissioner U/S 263 Can't Be Construed As Closed Remand, No Need To Challenge Order Separately: Kerala High Court

The Kerala High Court stated that the order passed by the Commissioner of Appeals under Section 263 of the Income Tax Act cannot be under any circumstances construed as a closed remand and there is no requirement to challenge the order under Section 263 separately. The Division Bench of Justices A.K. Jayasankaran Nambiar and Easwaran S. observed that “In as much as the Commissioner of Income Tax (Appeals) had decided the appeal preferred by the assessee against the revised assessment order on merits, it was incumbent upon the tribunal to have decided the appeal on merits rather than finding that the assessee ought to have questioned the order under Section 263 in a separate proceeding. Therefore, the tribunal erred egregiously in dismissing the appeal preferred by the assessee as 'not maintainable''. Section 263 of the Income Tax Act, 1961 empowers the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner to revise any order passed by the Assessing Officer if it is erroneous and prejudicial to the interests of the revenue. In this case, the assessment was completed under Section 143(3) read with Section 147 of the Income Tax Act, 1961. While so, the Commissioner of Income Tax invoked the suo moto revisional power under Section 263 of the IT Act on the issue that the assessing officer has not conducted proper enquiries with respect to the assessee's claim for set off, of carry forward depreciation while computing book profit under Section 115JB of the IT Act. Though the assessee/appellant preferred an objection to the proposal, the commissioner rejected the objection by order and held that the assessing officer had not conducted proper enquiry to examine the genuineness of the claim and accordingly held that the assessment order was erroneous and prejudicial to the interest of the revenue. Hence, the Commissioner of Income Tax, set aside the order of assessment and remanded the matter back to the assessing officer to make fresh assessment. On remand, the assessing officer passed a revised order of assessment. The assessee, aggrieved by the order of assessment, preferred an appeal before the Commissioner of Income Tax (Appeals) who, by order, dismissed the appeal. Against the order of the Commissioner of Income Tax (Appeals), the assessee preferred an appeal before the Income Tax Appellate Tribunal. The Tribunal was of the view that the assessee should have preferred an appeal against the findings of the Commissioner of Income Tax under Section 263 of the Income Tax Act and thus, the order having not been assailed, no independent challenge to the consequent proceedings would lie before the tribunal. Accordingly, the appeal was dismissed. The assessee submitted that the order passed by the Commissioner of Income Tax (Appeals) under Section 263 of the IT Act is not a closed remand but, an open remand, and therefore, the assessee felt that there is no requirement to challenge the order under Section 263 of the IT Act separately. The revenue submitted that in the absence of any challenge to the order passed by the Commissioner of Income Tax revising the order of assessment, the consequential order is not open for challenge. The bench opined that “the order passed by the Commissioner of Appeals under Section 263 of the IT Act cannot be under any circumstances construed as a closed remand. While exercising the suo moto power of revision under Section 263 of the IT Act, the Commissioner had found that the order of assessment is erroneous and prejudicial to the interest of the revenue and, therefore, set aside the order of assessment and remanded the matter back to the assessing authority for a fresh consideration on merits.” That be so, it is beyond one's comprehension as to how the tribunal could hold that the order of remand under Section 263 of the IT Act passed by the Commissioner of Appeals is a closed remand. Thus, the assessee need not have questioned the order under Section 263 in a separate proceeding, added the bench. In view of the above, the bench allowed the appeal. Case Title: Malabar Institute of Medical Sciences Ltd. v. The Deputy Commissioner of Income TaxCitation: 2025 LiveLaw (Ker) 219 Case Number: ITA NO. 11 OF 2025 Counsel for Appellant/ Assessee: Alexander Joseph Markos, Isaac Thomas and John Vithayathil Counsel for Respondent/ Department: P.G. Jayashankar and Keerthivas GiriClick Here To Read/Download The Order

Income Tax Act | Order Passed By Commissioner U/S 263 Can't Be Construed As Closed Remand, No Need To Challenge Order Separately: Kerala High Court

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Income Tax Act | Order Passed By Commissioner U/S 263 Can't Be Construed As Closed Remand, No Need To Challenge Order Separately: Kerala High Court

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