2015 (5) TMI 615 - HC - Income Tax

Revision u/s 263 - whether Tribunal was right in coming to the conclusion that the basis of intervention by the Commissioner should be part of the records in the assessment proceedings of the assessee and the statements in the search operations regarding the son of the assessee could not be considered as forming part of assessment of the assessee and thus the action was invalid? - Held that - As regards the reasoning which appealed to the Tribunal, the word therein is not necessarily capable of the interpretation which appealed to the Tribunal. When the Commissioner examines the record of search and seizure operations in respect of any person, say the respondent assessees son as in the instant case, and finds that such person had attributed some undisclosed income to the assessee, it is open to the Commissioner to call for the record in the assessee s case. The exercise of power by the Commissioner under Section 263(1) is obviously in respect of the assessee s case but for the purpose of exercising that power, the examination by the Commissioner is not required to be confined to the record of that assessee s case as such record could be any record relating to any proceeding under the Income-tax Act. There is nothing in the provisions of Section 263(1) to take such a narrow view of the powers of the Commissioner. Any doubt which could arise has been removed by the legislature by inserting through the Finance Act, 1988 an explanation and further amending it by Finance Act, 1989. The interpretation of the provisions of Section 263(1) read with explanation thereto by the Apex Court in light of the legislative intent leaves no room for doubt. Once there is a pronouncement of the highest Court of the land, the same is binding on all Courts, Tribunals and all authorities in view of Article 141 of the Constitution and it is not open to distinguish the same by referring to certain words of those provisions which were very much before the Supreme Court merely on the ground that some other arguments could have been urged which were not considered by the Supreme Court. - Decided in favour of the revenue.

Summary

Issues:
1. Interpretation of Section 263 of the Income Tax Act regarding the Commissioner's intervention in assessment proceedings.
2. Consideration of statements in search operations in assessment proceedings.
3. Jurisdiction of the Commissioner under Section 263 based on the correctness of the Assessing Officer's order.

Analysis:
1. The High Court was tasked with interpreting Section 263 of the Income Tax Act concerning the Commissioner's authority to intervene in assessment proceedings. The Court considered whether the basis of intervention by the Commissioner should be part of the records in the assessment proceedings of the assessee and if statements in search operations regarding the son of the assessee could be deemed as forming part of the assessment. The Court analyzed if the action was valid in this context.

2. Initially, a Division Bench of the Court had differing opinions on the matter. One judge believed the issue was covered by a Supreme Court decision and suggested remanding the case for further consideration. However, the other judge opined that the Commissioner can assume jurisdiction under Section 263 if the Assessing Officer's order is both erroneous and prejudicial to the revenue's interest. The matter was then referred to a third judge for resolution.

3. The third judge concurred with the view that the word "record" in Section 263 should be interpreted broadly. The judge highlighted that the Commissioner's power under Section 263 is not limited to the record of the assessee's case but extends to any record relating to proceedings under the Income Tax Act. The judge emphasized that the legislative intent and the Supreme Court's interpretation leave no room for doubt in this regard.

4. Consequently, the question was answered in favor of the revenue and against the assessee. The Court quashed and set aside the impugned judgments and orders passed by the Tribunal, directing the Tribunal to hear the appeals against the Commissioner's order on merits on the remaining grounds. The majority view of the judges led to the disposal of both references in favor of the revenue.

5. In conclusion, the High Court's judgment clarified the scope of the Commissioner's jurisdiction under Section 263, emphasizing a broad interpretation of the term "record" and affirming the Commissioner's authority to intervene based on the correctness of the Assessing Officer's order. The judgment provided clarity on the application of the law in assessment proceedings under the Income Tax Act.