Record [section 263(1)] - Definition / Legal Terminology - Income Tax

Interpretation of the term 'Record' [section 263(1)] By the Taxation Laws (Amendment) Act, 1984, an Explanation was added to section 263(1) for removal of certain doubts but it is not necessary to refer to that Explanation as it related to the meaning of the expression order passed by the Assessing Officer and, therefore, is not relevant for the purpose of this case. By the Finance Act, 1988, the said Explanation was substituted with effect from June 1, 1988. The reason why the Legislature had to make that amendment is stated in the Memorandum Explaining the Provisions in the Finance Bill of 1988. We will refer to only that part which is relevant for us. It was observed by the Legislature that the provision, as it stood then, had given rise to judicial controversy in respect of the following: 48 . . . (a) On the interpretation of the term 'record' : It has been held in some cases that the word 'record' in section 263(1) could not mean the record as it stood at the time of examination by the Commissioner but it meant the record as it stood at the time when the order was passed by the Assessing Officer. Such an interpretation is against the legislative intent and defeats the very objective sought to be achieved by such provisions, since the purpose is to revise the order on the basis of the record as is available to the Commissioner at the time of examination. To eliminate litigation and to clarify the legislative intent in respect of the provisions in the three Direct Tax Acts, it is proposed to clarify the legal position in this regard in the Explanation to the relevant sections. The proposed amendments are intended to make it clear that 'record' would include all records relating to any proceedings under the concerned direct tax laws available at the time of examination by the Commissioner. The relevant part of the Explanation after its substitution read as follows : Explanation.---For the removal of doubts, it is hereby declared that, for the purposes of this sub-section, . . . (b) 'record' includes all records relating to any proceeding under this Act available at the time of examination by the Commissioner; . . . Thus, by this amendment, the definition of the term record for the purpose of section 263, was provided by the Legislature. But a doubt regarding the meaning of the term record still persisted and, therefore, a further amendment was made by the Legislature while enacting the Finance Act of 1989. The Memorandum Explaining the Provisions in the Finance Bill, 1989, makes that clear. Paragraph 28 of the said memorandum reads as under : 28. Under the existing provisions of section 263 of the Income-tax Act and corresponding provisions of the Wealth-tax Act and the Gift-tax Act, the Commissioner of Income-tax is empowered to call for and examine the record of any proceeding and if he considers that the order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of Revenue, he may pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the same or directing a fresh assessment. By the Finance Act, 1988, an Explanation was substituted with effect from June 1, 1988, to the relevant sections of the Income-tax Act, Wealth-tax Act and Gift-tax Act to clarify that the term 'record' would include all records relating to any proceeding available at the time of examination by the Commissioner. Further, it was also clarified that the Commissioner is competent to revise an order of assessment passed by an Assessing Officer on all matters except those which have been considered and decided in an appeal. The above Explanation was incorporated in the Finance Act, 1988, to clarify this legal position to have always been in existence. Some appellate authorities have, however, decided that the Explanation will apply only prospectively, i.e., only to those orders which are passed by the Commissioner after June 1, 1988. Such an interpretation is against the legislative intent and it is, therefore, proposed to amend section 263 of the Income-tax Act, so as to clarify that the provisions of the Explanation shall be deemed to have always been in existence. Amendments on the above lines have been proposed in section 25 of the Wealth-tax Act and section 24 of the Gift-tax Act also. After that amendment, the relevant part of the Explanation reads as under : Explanation.---For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,---. . . (b) 'record' shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner; [CIT VERSUS SHREE MANJUNATHESWARE PACKING PRODUCTS AND CAMPHOR WORKS- 1997 (12) TMI 4 - SUPREME COURT]