ITAT New Delhi Quashes NIIT Revision, Says Action Was Triggered By Higher Authorities' 'Pressures'

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) on 8 July held that revision proceedings under Section 263 of the Income Tax Act cannot be sustained when the Commissioner of Income Tax acts under the pressure of higher authorities instead of independently applying his mind.

Judicial Member Satbeer Singh Godara and Accountant Member M. Balaganesh partly allowed NIIT Ltd.'s appeals for Assessment Years 2000-01 to 2005-06 and quashed the revision proceedings initiated against the company. The Bench also dismissed the Revenue's appeal for Assessment Year 2002-03, noting:

“We have no hesitation to conclude that the entire revision proceedings under section 263 of the Act had been triggered only based on the dictates / pressures from the higher authorities and not based on any independent application of mind by the Learned CIT in the manner known to law.”

The appeals arose from revision orders passed by the Commissioner of Income Tax under Section 263 of the Income Tax Act, which empowers the Commissioner to revise an assessment order that is considered erroneous and prejudicial to the interests of the Revenue.

Proceedings followed search assessments conducted against NIIT Ltd. The company challenged the Commissioner's jurisdiction, arguing that the Assessing Officer had conducted detailed enquiries during the assessment proceedings and that the revision proceedings amounted to the Commissioner substituting his own view for that of the Assessing Officer.

During the hearing, NIIT Ltd. relied on fresh inter-departmental correspondence that was not available when the Tribunal had earlier decided the company's appeal for Assessment Year 1999-2000.

The Revenue argued that the Tribunal's earlier order for Assessment Year 1999-2000 governed the dispute. It contended that the Supreme Court's decision in Abhisar Buildwell did not change the legal position and that the Commissioner was justified in invoking Section 263 where the Assessing Officer had failed to make proper enquiries after incriminating material was found during the search.

After examining the additional correspondence, the Tribunal found that the factual position in the present appeals was different from the earlier proceedings concerning Assessment Year 1999-2000. It observed that the documents placed on record showed continued communications from higher departmental authorities, which had not been considered earlier. It observed:

“The fresh inter departmental correspondences placed on record only during the present proceedings before us, clearly distinguish the Tribunal order for Assessment Year 1999-2000. Hence we hold that the Tribunal order for Assessment Year 1999-2000 is factually distinguishable qua this aspect of the issue.”

The Tribunal held that the assumption of revisional jurisdiction itself was invalid and accordingly quashed the proceedings under Section 263 for the assessment years under consideration. It observed that NIIT Ltd.'s remaining grounds challenging the additions on merits and the absence of incriminating material had become academic and were left open.

In the connected Revenue appeal for Assessment Year 2002-03, the Bench upheld the deletion of disallowance of purchases made from NETG. It held that the Revenue failed to establish that the purchases were non-genuine merely because they were made after the expiry of the agreement, particularly when the business use of the products and the purchase price were not disputed. It observed:

“In view of the aforesaid cumulative reasons, there existed no basis to doubt the genuineness of purchases made from NETG during the relevant previous year. Accordingly, the action of the Learned AO in disallowing the entire purchases merely on the ground that such purchases were effected after the expiry of the agreement is wholly untenable.”

Accordingly, the ITAT dismissed the Revenue's appeal for Assessment Year 2002-03 while partly allowing NIIT Ltd.'s appeals for the remaining assessment years.

For Assessee: Shri Ajay Vohra, Senior Advocate; Shri Rohit Jain, Advocate; Ms. Tejsvi Jain, Advocate; and Shri Jitendra Bhati, CA

For Revenue: Shri G.C. Srivastava, Special Counsel; Shri Kalrav Malhotra, Advocate; Shri Subham Bansal, Advocate; and Shri Pushpak Garg, CA