Income Tax Commissioner Can Exercise Revisional Jurisdiction: Kerala High Court Dismisses Cochin International Airport’s Appeal

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The Kerala High Court while dismissing the appeal filed by the Cochin International Airport Ltd. held that the Income Tax Commissioner can exercise revisional jurisdiction.

The bench of Justice A.K.Jayasankaran Nambiar and Justice Easwaran S. has observed that the assessing officer did not show any application of mind and mechanically accepted the statement of the assessee.

The bench noted that in the assessment order, the assessing officer has not stated any reason as to why the claim for deduction was accepted. Therefore, the said order was palpably wrong and falls within the meaning of “error”.

The appellant, a domestic company engaged in operating and maintaining of the Cochin International Airport, is an assessee under the provisions of the Income Tax Act, 1961. For the assessment year 2012-13, the appellant declared a total income 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 appellant 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 declaring a taxable income. 

The return was selected for scrutiny under Section 143(3) of the Income Tax Act, 1961 and was completed by order dated 27.3.2015. Since the 1st respondent-Department did not accept the claim of deduction under Section 80-IA and also made various other disallowances, the appellant preferred appeal against the order and the same is stated to be pending. 

During the said financial year, the appellant 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 appellant as a write off in the income tax return. In the assessment proceedings, however, the Department examined this aspect and called for the break up of the provision for bad and doubtful debts vide letter dated 3.2.2015. 

The appellant contended that it is after considering the reply that the assessing authority decided to accept the explanation and proceeded to issue the assessment order. 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. The appellant showed cause by its reply. 

However, the reply was found to be unsatisfactory and therefore, the Principal Commissioner of Income Tax-1, Kochi directed the assessing authority to re-examine the issue. Aggrieved by the order, the appellant preferred an appeal before the Income Tax Appellate Tribunal, which was dismissed by order dated 15.3.2018, which is impugned in the present appeal. 

While the appeal was pending, the assessing authority passed revised orders of assessment under Section 143 of the Income Tax Act, 1961 disallowing the deduction of the claim of doubtful debts.

The assessee contended 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 issue raised was whether the Commissioner can exercise revisional jurisdiction under Section 263 of the Income Tax Act, 1961, if he is satisfied that the order of the assessing officer sought to be revised is erroneous and also prejudicial to the interest of the Revenue? 

The court held that the Principal Commissioner of Income Tax has rightly 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 issue is perfectly justifiable and legal.

Read More: GST Dept. Failed To Prove Tax Evasion Intent Citing Delivery Note: Kerala High Court

Case Details

Case Title: Cochin International Airport Ltd. Versus ACIT

Case No.: ITA NO. 77 OF 2018

Date: 07/01/2025

Counsel For Petitioner: Joseph Markos 

Counsel For Respondent: P.K.R.Menon

Mariya Paliwala
Mariya Paliwalahttps://jurishour.in/
Mariya is the Senior Editor at JurisHour. She has 5+ years of experience on covering tax litigation stories from the Supreme Court, High Courts and various tribunals including CESTAT, ITAT, NCLAT, NCLT, etc. Mariya graduated from MLSU Law College, Udaipur (Raj.) with B.A.LL.B. and also holds an LL.M. She started as a freelance tax reporter in the leading online legal news companies like LiveLaw & Taxscan.

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