Revisiting the Scope of "Record" u/s 263: Embracing Subsequent Records

Deciphering Legal Judgments: A Comprehensive Analysis of Apex Court's Judgment on CIT's Power to Consider Subsequent Records u/s 263

Reported as:

1997 (12) TMI 4 - Supreme Court

Here is a detailed article covering all the relevant issues in the given Supreme Court judgement:

Introduction

The Supreme Court, in a significant judgement, has clarified the scope of the Commissioner's power u/s 263(1) of the Income Tax Act, 1961, to consider records that were not available to the Assessing Officer at the time of passing the assessment order. The case revolves around the interpretation of the term "record" in Section 263(1) and the extent to which the Commissioner can rely on subsequent records while exercising revisional jurisdiction.

Arguments Presented

The Revenue contended that, in light of the amendments made to Section 263(1) by the Finance Acts of 1988 and 1989, the term "record" should be interpreted to include all records relating to the proceeding available at the time of examination by the Commissioner. Consequently, the Commissioner was entitled to consider the valuation report submitted by the Departmental Valuation Officer after the assessment order was passed.

The assessee, on the other hand, argued that the amendments introduced in 1988 and 1989 could not have a retrospective effect to validate the Commissioner's order, which was illegal when passed. According to the assessee, the correct position of law at the time of passing the order was that the Commissioner could only consider the record available to the Assessing Officer when the assessment order was made.

Discussions and Findings of the Court

The Supreme Court delved into the legislative history of Section 263(1) and the amendments introduced by the Finance Acts of 1988 and 1989. The court observed that the Legislature, through these amendments, intended to clarify the legislative intent and eliminate litigation regarding the interpretation of the term "record."

The court referred to the decision of the Calcutta High Court in Ganga Properties v. ITO  [1979 (2) TMI 84 - CALCUTTA HIGH COURT], which had interpreted the term "record" narrowly to mean only the record available to the Assessing Officer at the time of passing the assessment order. However, the Supreme Court disagreed with this narrow interpretation, considering the wide amplitude of the revisional power conferred upon the Commissioner u/s 263(1).

The court also analyzed the decision of the Calcutta High Court in CIT v. S. M. Oil Extraction Pvt. Ltd. [1990 (10) TMI 33 - CALCUTTA HIGH COURT], which had taken a broader view of the term "record," allowing the Commissioner to consider records that became available after the assessment order was passed.

Analysis and Decision by the Court

The Supreme Court held that it was open to the Commissioner to consider all records available at the time of examination, including records that became available subsequent to the passing of the assessment order. The court emphasized that the revisional power u/s 263(1) is of wide amplitude, enabling the Commissioner to make or cause to be made such inquiries as deemed necessary.

The court further stated that if the Commissioner could take into account new material obtained through an inquiry, there was no reason to exclude material that had already come on record, albeit after the assessment order was passed. The court relied on the clear language of clause (b) of the Explanation to Section 263(1), which states that "record" shall include and shall be deemed always to have included all records relating to any proceeding under the Act available at the time of examination by the Commissioner.

The Supreme Court also referred to its earlier decisions in CIT v. Shri Arbuda Mills Ltd. [1996 (1) TMI 11 - SUPREME COURT] and South India Steel Rolling Mills v. CIT [1997 (2) TMI 10 - SUPREME COURT], which had upheld the applicability of the amendments to orders passed before June 1, 1988.

Consequently, the Supreme Court allowed the appeal, set aside the High Court's judgment, and answered the referred question in favor of the Revenue, holding that the Commissioner's order was legal and valid.

Doctrine or Legal Principle

The Supreme Court's judgment reinforces the principle that the Commissioner's revisional power u/s 263(1) is broad and encompasses the consideration of all records relating to the proceeding, including those that became available after the assessment order was passed. The court upheld the legislative intent behind the amendments to Section 263(1), which aimed to clarify the scope of the term "record" and eliminate litigation on this issue.

Comprehensive Summary

The Supreme Court, in this landmark judgment, has clarified the scope of the Commissioner's power u/s 263(1) of the Income Tax Act, 1961. The court held that the term "record" in Section 263(1) includes all records relating to the proceeding available at the time of examination by the Commissioner, even if those records were not available to the Assessing Officer when the assessment order was passed.

The court upheld the legislative intent behind the amendments made to Section 263(1) by the Finance Acts of 1988 and 1989, which aimed to eliminate litigation and clarify that the Commissioner could consider subsequent records. The court rejected the narrow interpretation of the term "record" and emphasized the wide amplitude of the revisional power conferred upon the Commissioner.

By allowing the Commissioner to consider subsequent records, the court has reinforced the principle that the revisional jurisdiction u/s 263(1) is broad and encompasses a comprehensive examination of all relevant records, irrespective of their availability at the time of the assessment order.

Full Text:

1997 (12) TMI 4 - Supreme Court