9911796707
TMI Blog2010 (5) TMI 643X X X X Extracts X X X X X X X X Extracts X X X X ..... k Misra C. J.- 1. By this writ petition preferred under article 226 of the Constitution of India, the petitioner has prayed for quashment of the order dated January 8, 2010, annexure 8, passed by the Commissioner of Income-tax-II, Patna, under section 263 of the Income-tax Act, 1961 (for brevity "the Act") whereby the said authority has cancelled the order dated March 30, 2009 (annexure 5) passed under section 271(1)(c) of the Act by the Assessing Officer and directed to proceed in accordance with law. 2. Filtering the unnecessary details, the facts which are essential to be stated are that the assessee-petitioner is a firm engaged in the dealership of Tata diesel vehicles servicing and the dealership of Bharat Petroleum Corporation Ltd. The order of assessment was framed for the assessment year 2004-05 and the Assessing Officer determined the tax liability at Rs.14,47,725 and in the course of assessment, initiated a proceeding under section 271(1)(c) of the Act on the ground that the assessee-petitioner had furnished inaccurate particulars of income which came in the compartment of concealment of income. The assessee-petitioner preferred an appeal, being I. T. A. No. 644/A- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the order passed by the Assessing Officer cannot be regarded to be erroneous and prejudicial to the interests of the Revenue. 7. The Commissioner, by the impugned order dated January 8, 2010, repelled the submissions holding, inter alia, that the language employed under section 263 of the Act could not be restricted to assessment or reassessment proceeding alone but would cover in its ambit and sweep proceeding for imposition of penalty. As far as the aspect "prejudicial to the interests of the Revenue" is concerned, the Commissioner opined that the order passed by the Assessing Officer dropping the penalty proceeding initiated under section 271(1)(c) of the Act is erroneous and also prejudicial to the interests of the Revenue. Being of this view, he annulled the order of the Assessing Officer dated March 30, 2009, dropping the penalty proceeding and directed him to pass a fresh order considering the entire material on record. 8. We have heard Mr. Krishna Nandan Singh, learned senior counsel for the petitioner, and Mr. Harshwardhan Prasad, learned senior standing counsel along with Mrs. Archana Sinha for the Revenue. 9. The two questions that emerge for considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation.-In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded." 11. In this regard, we may refer with profit to the decision of the Allahabad High Court in CIT v. Braj Bhushan Cold Storage [2005] 275 ITR 360 (All) wherein the Division Bench of the Allahabad High Court was dealing with the reference whether the Commissioner of Income-tax under section 263, can revise the order passed by the Income-tax Officer under section 271(1)(c) because he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the word 'assessment', their Lordships of the Supreme Court observed (at page 429) : 'A review of the provisions of Chapter IV of the Act sufficiently discloses that the word "assessment" has been used in its widest connotation in that Chapter. The title of the Chapter is "deductions and assessment". The section which deals with assessment merely as computation of income is section 23 ; but several sections deal not with computation of income, but determination of liability, machinery for imposing liability and the procedure in that behalf. Section 18A deals with advance payment of tax and imposition of penalties for failure to carry out the provisions therein. Section 23A deals with power to assess individual members of certain companies on the income deemed to have been distributed as dividend, section 23B deals with assessment in case of departure from taxable territories, section 24B deals with collection of tax out of the estate of deceased persons, section 25 deals with assessment in case of discontinued business, section 25A with assessment after partition of Hindu undivided families and sections 29, 31, 33 and 35 deal with the issue of demand notices and the filing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner was right in exercising jurisdiction conferred on him under section 263 of the Act." (emphasis supplied) 14. In CIT v. Narpat Singh Malkhan Singh [1981] 128 ITR 77 (MP), the Division Bench of the Madhya Pradesh High Court was dealing with the jurisdiction of the Commissioner under section 263 of the Act as to whether the Commissioner can set aside the order passed by the Assessing Officer and direct him to initiate a penalty proceeding after the order passed by the Income-tax Officer had merged with the order of the Appellate Assistant Commissioner. In that context, G. P. Singh, C. J., speaking for the court, opined thus (page 81) : "The Income-tax Officer's jurisdiction to impose penalty under section 273(c) of the Act arises if he 'in the course of any proceeding in connection with the regular assessment' is satisfied that the assessee has without reasonable cause failed to furnish an estimate of the advance tax payable by him in accordance with the provisions of subsection (3A) of section 212. The words 'in the course of any proceeding' have been the subject-matter of interpretation by the Supreme Court and it is settled that the necessary satisfaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the order of assessment that circumstances existed which made out a case for the initiation of penalty proceedings." 15. In CIT v. Sara Enterprises [1997] 224 ITR 169 (Mad), the Division Bench of the Madras High Court was dealing with the questions with reference to section 256(1) of the Income-tax Act, 1961, whether, on the facts and in the circumstances of the case and having regard to the provisions of section 263 read with section 275 of the Income-tax Act, 1961, the Appellate Tribunal was justified in cancelling the order passed by the Commissioner of Income-tax under section 263 of the Income-tax Act, 1961, and whether the bar of limitation contained under section 275 of the Income-tax Act, 1961, would attenuate or curtail the powers of the Commissioner of Income-tax, vested in him under section 263 of the said Act. In the said case, the Income-tax Officer, during the course of the assessment proceeding, initiated penalty proceedings under section 271(1)(c) of the Act. Subsequently, the Income-tax Officer dropped the penalty proceedings. The Commissioner of Income-tax (Administration), on scrutiny of the order passed by the Income-tax Officer, came to the conclusion th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso in a case where addition of concealed income reduces the returned loss and finally the assessed income is also a loss or minus figure. Their Lordships opined that even during the period between April 1, 1976, and April 1, 2003, the position was that penalty was leviable even in a case where the addition of concealed income reduces the returned loss. This view was expressed by holding that Explanation 4 to section 271(1)(c)(iii) regarding the imposition of penalty even if the returned income is a loss is clarificatory and not substantive. 19. In this context, we must note a few decisions which have taken a different view. In Addl. CIT v. J. K. D' Costa [1982] 133 ITR 7 (Delhi), a Division Bench of the Delhi High Court was dealing with the questions, whether, on the facts and in the circumstances of the case, the Tribunal was right in coming to the conclusion that the Additional Commissioner could not pass an order under section 263 relating to penalties and whether, on the facts and in the circumstances of the case, the Tribunal was right in modifying the order of the Additional Commissioner passed under section 263 setting aside the assessments in question and in that conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ability of penalty cannot be said to be a factor vitiating the assessment order in any respect. An assessment cannot be said to be erroneous or prejudicial to the interests of the Revenue because of the failure of the Income-tax Officer to record his opinion about the leviability of penalty in the case. We, therefore, answer the first question referred to us in the affirmative and in favour of the assessee." 20. In Addl. CIT v. Achal Kumar Jain [1983] 142 ITR 606 (Delhi), the question that arose for consideration was whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in vacating the Additional Commissioner of Income-tax's direction to the Income-tax Officer to initiate penalty proceedings under sections 271(1)(a) and 273 of the Income-tax Act, 1961. Their Lordships referred to the decisions in Indian Pharmaceuticals [1980] 123 ITR 874 (MP) ; Addl. CIT v. Kantilal Jain [1980] 125 ITR 373 (MP) ; Addl. CWT v. Nathoolal Balaram [1980] 125 ITR 596 (MP) ; C. A. Abraham v. ITO [1961] 41 ITR 425 (SC) ; CIT v. Bhikaji Dadabhai and Co. [1961] 42 ITR 123 (SC) ; CIT v. Narpat Singh Malkhan Singh [1981] 128 ITR 77 (MP) and placing reliance on the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record his satisfaction with regard to penalty before completing the assessment or in the assessment order, when on the facts it is patent that such a satisfaction should exist, it will not make the assessment order erroneous and prejudicial to the Revenue. The Commissioner's jurisdiction in the present case is confined to the assessment order/proceedings and he can revise an order, should he find any error which results in a prejudice to the Revenue. Under section 263, he can set aside the order of the Income-tax Officer and direct him to make a fresh assessment in accordance with law." 21. After so holding, their Lordships concurred with the view expressed in J.K. D' Costa [1982] 133 ITR 7 (Delhi) and proceeded to state that the Commissioner is (not ?) entitled to bring within his scope and deal with penalty proceedings and orders (which are admittedly connected but distinct) while calling for and examining the record of the assessment proceedings and orders. 22. In P. C. Puri v. CIT [1985] 151 ITR 584 (Delhi), it has been held that an assessment cannot be said to be prejudicial to the interests of the Revenue because of the failure of the Income-tax Officer to record hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired to be taken note of are that it may be "any order" and the same might be one passed by the Assessing Officer "in any proceeding" under the Act. As has been held in Narpat Singh Malkhan Singh [1981] 128 ITR 77 (MP) that the words "in the course of any pro-ceeding" has a wide connotation. The High Court of Rajasthan in H. H. Rajdadi Smt. Badan Kanwar Medical Trust v. CWT [1995] 214 ITR 130 (Raj) has held that recording of the words "proceedings are dropped" amounted to an order and such order can be revised by the Commissioner of Income-tax even if the same has not been communicated to the assessee. Thus, section 263 would take within its ambit and sweep even the orders whereby either proceedings are dropped and proceedings are filed. In New Jagat Textile Mills P. Ltd. v. CIT [2006] 282 ITR 399 (Guj) ; [2005] 196 CTR 110 (Guj), it has been observed that the settled legal position is that even if the proceedings are dropped and terminated or filed, any such noting would amount to an order and it would be open to the Revenue to initiate reassessment proceedings or revisional proceedings upon the necessary conditions being fulfilled in the exercise of jurisdiction under one or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity (see Parashuram Pottery Works P. Ltd. v. ITO [1977] 106 ITR 1 (SC) at page 10). As observed in Sirpur Paper Mills Ltd. v. ITO [1978] 114 ITR 404 (AP) by Raghuveer J. (as his Lordship then was), the Department cannot be permitted to begin fresh litigation because of new views they entertain on facts or new versions which they present as to what should be the inference or proper inference either of the facts disclosed or the weight of the circumstances. If this is permitted, litigation would have no end, 'except when legal ingenuity is exhausted'. To do so, is '. . . to divide one argument into two and to multiply the litigation'. The power of suo motu revision under sub-section (1) is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dinary meaning it is of wide import and is not confined to loss of tax. The High Court of Calcutta in Dawjee Dadabhoy and Co. v. S. P. Jain [1957] 31 ITR 872, the High Court of Karnataka in CIT v. T. Narayana Pai [1975] 98 ITR 422, the High Court of Bombay in CIT v. Gabriel India Ltd. [1993] 203 ITR 108 and the High Court of Gujarat in CIT v. Smt. Minalben S. Parikh [1995] 215 ITR 81 treated loss of tax as prejudicial to the interests of the Revenue. Mr. Abraham relied on the judgment of the Division Bench of the High Court of Madras in Venkatakrishna Rice Co. v. CIT [1987] 163 ITR 129 interpreting 'prejudicial to the interests of the Revenue'. The High Court held (page 138) : 'In this context, it must be regarded as involving a conception of acts or orders which are subversive of the administration of the Revenue. There must be some grievous error in the order passed by the Income-tax Officer, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the Commissioner might think to be prejudicial to the interests of the Revenue administration'. In our view, this interpretation is too narrow to merit acceptance. The scheme of the Act is to levy ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
