Bhartia Industries Ltd. Vs CIT (Kolkata High Court)- The Commissioner of Income-tax initiated proceedings under Section 263 of the Act questioning the allowance of the said payments made on account of VRS by the Assessing Officer and an order under Section 263 of the Act dated March 4, 2003 was passed by the Commissioner under Section 263 of the Act. In the said order the Commissioner observed that the Assessing Officer was bound by the Circular dated January 23, 2001 issued by the Board as to the eligibility of deduction of such payment on account of VRS and he should not have allowed such payment. The Commissioner set aside the entire assessment for being made de novo and directed the Assessing Officer to make fresh assessment in the light of the said Circular of the Board.
Being dissatisfied, the appellant preferred an appeal before the Income-tax Appellate Tribunal and by the order impugned herein the said Tribunal has affirmed the order passed by the Commissioner under Section 263 of the Act. The Tribunal held that the Assessing Officer was duty bound to follow the instruction of the Central Board of Direct Taxes and non-compliance of such instructions amounted to dereliction of duty and subordination.
Being dissatisfied, the appellant has preferred appeal with Honourable High Court.
It was held by Honourable high court that Tribunal has committed substantial error of law in approving the reopening of the assessment on the basis of the circular and thus, they aside the order of the Tribunal and the order passed under Section 263 of the Act.