Supreme Court examines if CBDT circular binds income tax courts

The case concerns whether the Commissioner of Income Tax (CIT) could validly exercise revisional jurisdiction under Section 263 of the Income Tax Act, 1961, to set aside an assessment order that allowed a deduction under Section 80HHC based on a CBDT Circular, and whether the High Court correctly reversed the Tribunal's findings.

Who it concerns: Appellant: Orient Crafts Limited; Respondent: Commissioner of Income Tax, New Delhi; Bench: Justice S.V.N. Bhatti.

What the court decided

• The Court identified the core legal issue as the justifiability of the CIT's exercise of jurisdiction under Section 263 of the Income Tax Act, 1961.
• The Court summarized the legal principles from precedents (C.I.T. v. Max Limited and C.I.T. v. Amitabh Bachhan) stating that Section 263 requires the assessment order to be both 'erroneous' and 'prejudicial to the interest of the revenue'.
• The Court noted that where two views are possible and the Assessing Officer has taken one, the order cannot be treated as erroneous unless the view is entirely unsustainable in law.
• The Court noted that the validity of a revision order must be evaluated based on the law as it stood on the date the order was passed, not subsequent amendments.

Also in the document

• The judgment is marked as 'NON-REPORTABLE'.
• The provided text ends while summarizing legal precedents and does not contain the final operative order, relief granted, or dismissal/allowance of the appeal.
• The Court noted that the arguments were confined to Section 263 of the Act, 1961, despite the underlying dispute relating to Section 80HHC.