COMMISSIONER OF INCOME TAX, BHOPAL versus RALSON INDUSTRIES LTD.

Citation: [2007] 1 S.C.R. 53 · Decided: 04-01-2007 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

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COMMISSIONER OF INCOME TAX, BHOPAL 
')" 
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v. 
RALSON INDUSTRIES LTD. 
JANUARY 4, 2007 
[S.B. SINHA AND MARKANDEY KA TJU, JJ.] 
B 
Income Tax Act, 1961-ss. 154 and 263-Proceedingsfor rectification 
and revision of assessment order-Scope and ambit of-Assessment of 
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income-Rectification thereof-Revision of the assessment order-
Permissibility of revision-Held: Order of assessment is subject to exercise 
of an order unde1 revisional jurisdiction-Rectification thereof does not c 
bar exercise of revisional jurisdiction-Scope and ambit of proceedings for 
rectification and proceedings for revision are distinct and different-Both 
the proceedings conferred on different authorities and are not overlapping 
each other-Doctrine of merger is not applicable in such cases-
Commissioner of Income tax directed to decide the matter afresh in the 
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light of rectification order. 
Principles/Doctrines: 
Principle of Judicial Review-Applicability of 
Doctrine of merger-Applicability of 
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Assessment of income of respondent-assessee was completed under 
Section 143 (3) oflncome Tax Act. Commissioner oflncome Tax invoking 
its jurisdiction under Section 263, set aside the order of assessment 
excluding certain amounts towards transport receipts and interest from the 
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assessee's total income and Assessment Officer was directed to make 
fresh order of assessment. Assessee filed an appeal before Income Tax 
Appellate Authority contending that the Commissioner of Income Tax had 
... 
no authority to initiate any proceedings under Section 263 as in Notice of 
Rectification of Order of Assessment under Section 154 issued by Assessing 
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Officer, no modification was made in regard to purported exclusion of 
income. Tribunal upholding the contention of the appellant, allowed the 
appeal. An application was filed before High Court for direction upon the 
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Tribunal for reference of certain questions in respect of the issue in 
question. High Court declined to give any direction opining that no 
substantial question of law arose for directing the Tribunal to refer any 
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53 
54 
SUPREME COURT REPORTS 
[2007] 1 S.C.R. 
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question. Hence the present appeal. 
Allowing the appeal, the Court 
HELD: I. The scope and ambit of a proceeding for rectification of an 
order under Section 154 of Income Tax Act and a proceeding for revision 
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under Section 263 are distinct and different. Order of rectification can be 
passed on certain contingencies. It does not confer a power of review. If an 
order of assessment is rectified by Assessing Officer in terms of Section 
154, the same itself may be a subject matter of a proceeding under Section 
263. The power of revision under Section 263 is exercised by a higher 
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authority. It is a special provision. The revisionaljurisdiction is vested in 
the Commissioner. An order thereunder can be passed if it is found that 
the order of assessment is prejudicial to the Revenue. In such a proceeding, 
he may not only pass an appropriate order in exercise of the said jurisdiction 
but in order to enable him to do it, he may make such inquiry as he deems 
necessary in this behalf. [Para 8] [58-E-G] 
2. When an order is passed by a higher authority, the lower 
authority is bound thereby keeping in view the principles of judicial 
discipline. [Para 9) [58-G-H] 
Bhopal Sugar Industries v. Income Tax Officer, Bhopal, AIR (1961) 
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SC 182; Dharam Chand Jain v. The State of Bihar, AIR (1976) SC 1433; 
Morgan Securities and Credit Pvt. Ltd v. Modi Rubber Ltd, (2006) (14) 
SCALE 267, relied on. 
3. When different jurisdictions are conferred upon different authorities 
to be exercised on different conditions, both may not be held to be overlapping 
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with each other. Jurisdiction under Section 154 is only to be exercised 
when there is an error apparent on the face of the record. It does not confer 
any power of review. An order of assessment may or may not be rectified. 
If an order of rectification is passed by the Assessing Authority, the 
rectified order shall be given effect to. However, only because an order of 
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assessment has undergone rectification at the hands of the Assessing 
Officer, the same would not mean that revisional authority shall be denuded 
of exercising its revisional jurisdiction. Such an interpretation, would ru.n 
counter to the scheme of the Act. [Para 12] [60-B-C] 
4. It is trite that when an authority having discretionary power 
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exercises the same for unauthorized purpose

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