2012 (8) TMI 166 - HC - Income Tax

Writ petition on order barring the assessee from questioning the order passed by the CIT & staying the assessment proceedings before the AO and directing the Revenue to produce all the records pertaining to the assessments completed u/s 153A/ 143 (3) - Disallowance of the technical know-how fees - Held that - The order as barring the assessee from questioning the order passed by the CIT on the ground that he did not exercise his independent mind but merely proceeded on the lines as dictated by the CBDT would not be proper, for no Court can plausibly lay down the grounds on which an order, which is to be passed, can be challenged by the aggrieved party - as the assessee cannot also be prevented from taking up the plea in the appeals filed before the Tribunal against the orders passed by the CIT consequently, the Tribunal cannot be faulted for directing, by its order to the Revenue to produce the assessment records and the records relating to the proceedings under Section 263 for the relevant assessment years as unless these records are made available to the Tribunal, it will not be able to take a view on the assessee s challenge that the CIT did not exercise his independent mind while initiating proceedings under Section 263. Power of tribunal to stay - Held that - The order of the Tribunal in staying the assessment proceedings is well settled by the judgment in ITO v. Mohd. Kunhi, (1968 (9) TMI 5 - SUPREME COURT ) that while exercising its appellate powers under the Income Tax Act Tribinal has also the power to ensure that the fruits of success are not rendered futile or nugatory and for this purpose it is empowered, to pass appropriate orders including orders of stay - staying the assessment proceedings pending before the AO consequent to the directions of the CIT given in orders passed under Section 263 is part of the exercise of the appellate power of the Tribunal under Section 254 (1) with an aim to prevent multiplicity of proceedings and harassment to the assessee, with the possibility of the proceedings before the AO becoming meaningless if ultimately the order passed by the CIT is found to be invalid on grounds of jurisdiction or on merits - As it has not been shown before us by the petitioner as to what error was committed by the Tribunal in passing the stay orders, nor was it argued that the Tribunal did not exercise its discretion on the basis of settled parameters for granting stay of proceedings - writ petition dismissed.

Issues Involved:

1. Validity of the CIT's jurisdiction under Section 263 of the Income Tax Act.
2. Tribunal's authority to stay assessment proceedings.
3. Applicability of principles of res judicata and estoppel in jurisdictional challenges.
4. Requirement for independent application of mind by the CIT.
5. Tribunal's directive to produce assessment records.

Detailed Analysis:

1. Validity of the CIT's jurisdiction under Section 263 of the Income Tax Act:

The Commissioner of Income Tax (CIT) sought to revise the assessment order under Section 263 of the Income Tax Act on the grounds that it was erroneous and prejudicial to the interest of the Revenue. The assessee challenged this on the basis that the CIT did not independently apply his mind and acted on the dictates of superior authorities. The court noted that the principle of jurisdiction is fundamental and cannot be waived or conferred by consent. The High Court referenced the Supreme Court's judgment in Kiran Singh & Ors. v. Chaman Paswan & Ors., emphasizing that a decree passed without jurisdiction is a nullity and its invalidity can be raised at any stage. The court concluded that the assessee could challenge the CIT's jurisdiction at any point, including during collateral proceedings.

2. Tribunal's authority to stay assessment proceedings:

The Tribunal granted a stay on the assessment proceedings initiated by the Assessing Officer following the CIT's order under Section 263. The Tribunal reasoned that allowing the assessment proceedings to continue could lead to multiplicity of proceedings and potential prejudice to the assessee if the Tribunal later found the CIT's order to be invalid. The High Court upheld this stay, referencing the Supreme Court's decision in ITO v. Mohd. Kunhi, which established that the Tribunal has the power to pass appropriate orders, including stays, to ensure that the fruits of success are not rendered nugatory.

3. Applicability of principles of res judicata and estoppel in jurisdictional challenges:

The petitioner argued that the principle of res judicata barred the assessee from challenging the CIT's jurisdiction, as the issue had been previously adjudicated. The High Court rejected this argument, citing the Supreme Court's rulings that jurisdictional challenges can be raised at any time and are not subject to res judicata or estoppel. The court referenced the Gujarat High Court's decision in P. V. Doshi v. CIT, which held that the rule of res judicata does not apply to jurisdictional issues.

4. Requirement for independent application of mind by the CIT:

The court emphasized that the CIT must independently apply his mind when exercising powers under Section 263. The High Court's previous order had set aside the CIT's earlier order and directed a fresh consideration, explicitly stating that the CIT must act independently and not be influenced by higher authorities. The court reiterated that any order passed without independent application of mind is invalid.

5. Tribunal's directive to produce assessment records:

The Tribunal directed the Revenue to produce all records related to the assessments completed under Section 153A/143(3) and the proceedings under Section 263. The High Court upheld this directive, stating that the Tribunal needed these records to properly adjudicate the assessee's challenge to the CIT's jurisdiction. The court noted that without these records, the Tribunal could not assess whether the CIT had independently applied his mind.

Conclusion:

The High Court dismissed the writ petition, vacated all interim orders, and directed the Tribunal to proceed with the hearing of the appeals expeditiously. The court upheld the Tribunal's stay on the assessment proceedings and its directive to produce records, emphasizing the necessity of independent application of mind by the CIT and the inapplicability of res judicata and estoppel to jurisdictional challenges.

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