Procedural Justice Prevails: Kerala High Court Restores Appeal in Malabar Institute of Medical Sciences Ltd. Vs DCIT (Kerala High Court); ITA No. 11 of 2025; 17/03/2025; 2006-07
Introduction
The Kerala High Court recently addressed important procedural questions regarding appeals following remand orders in the case of Malabar Institute of Medical Sciences Ltd. v. DCIT. The Court overturned the Income Tax Appellate Tribunal’s dismissal of the assessee’s appeal, clarifying no separate challenges to revisionary order passed by commissioner under section 263 is necessary for assailing the revised assessment order passed by the AO as a consequence of such revisionary order passed by the Commissioner.
Facts of the Case
For the assessment year 2006-2007, the Commissioner of Income Tax (CIT) invoked revisional powers under Section 263 of the Income Tax Act, 1961, concluding that the Assessing Officer had not properly examined the assessee’s claim for set-off of carry-forward depreciation in computing book profit under Section 115JB. By order dated March 3, 2014, the CIT set aside the assessment and remanded the matter for fresh assessment.
The Assessing Officer passed a revised assessment order on October 24, 2014. The assessee appealed to the CIT (Appeals), assailing the revised assessment order passed by the AO on merits, but CIT(A) dismissed the appeal on March 4, 2023. When the assessee further appealed to the Income Tax Appellate Tribunal, the Tribunal dismissed it as “not maintainable,” ruling that the assessee should have first challenged the CIT’s original Section 263 order, else the commissioner’s order is sort of a closed remand and without the same being agitated against separately and initially, no further challenge lies against the revised assessment order passed by AO in pursuance of the revisionary order passed by the Commissioner.
Issues Before the High Court
The High Court considered whether:
- The Tribunal was correct in dismissing the appeal as not maintainable
- It was necessary for the assessee to separately and initially challenge the CIT’s Section 263 order
- The CIT’s order constituted a “closed remand” binding the Assessing Officer
High Court’s Decision
The Court, comprising Justice A.K. Jayasankaran Nambiar and Justice Easwaran S., held that:
- The CIT’s order under Section 263 was an “open remand” rather than a “closed remand”
- The assessee was not required to challenge the Section 263 order separately
- Since the CIT (Appeals) had decided the assessee’s appeal against the revised assessment on merits, the Tribunal should have done the same
Justice Easwaran S., writing for the bench, noted: “We are of the view that the tribunal erred egregiously in dismissing the appeal preferred by the assessee as ‘not maintainable’.”
Significance
This judgment clarifies important procedural aspects of tax appeals in the case of invocation of revisionary powers by the commissioner under section 263 and rights and option available to the asseessee :
- It distinguishes between “open” and “closed” remands in tax proceedings
- It establishes that when a CIT remands a matter for fresh assessment, taxpayers need not separately challenge the remand order
- It reinforces that appellate authorities should decide appeals on merits when lower authorities have done so
The High Court set aside the Tribunal’s order and restored the appeal to the Tribunal for consideration on merits. This decision provides taxpayers with clearer guidance on appellate procedures following remand orders under Section 263 of the Income Tax Act.
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