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TMI Blog2012 (4) TMI 222X X X X Extracts X X X X X X X X Extracts X X X X ..... more than 30 times in one year. The Commissioner of Income Tax (CIT) held the order to be erroneous and prejudicial to the interest of revenue and exercised suo motu revisional jurisdiction under Section 263 of the Act. It was, inter alia, observed that while accepting genuineness of the share transaction, the AO failed to make any enquiry which, in the facts and circumstances, would normally be made to ascertain the capital gain in question. The assessee was not a habitual operator of share market and had no share of any other company; share was not of a well known company; the price jumped from Rs. 6 per share to Rs. 200/- per share within a short span of thirteen months without any apparent reason. The AO could have obtained annual accounts of the company to satisfy himself whether the commercial activities of the company justified such a jump in price. He could have obtained price quotations of the shares on few dates to examine reasonableness of the jump. The alleged sellers and buyers should have been examined. Accordingly, the order was held to be erroneous and prejudicial to the interest of the Revenue. The AO was directed to re-frame the assessment after conducting necessa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be made in a situation where relevant materials have been ignored at the time of making of assessment, resulting in an erroneous order. The Division Bench, while deciding ITA No.1/05 and other connected cases has also overruled two decisions rendered by two separate single Benches of this Court in BRPL vs Union of India, reported in 2006 (287) ITR 120; and in SS Agarwal vs. State of Assam, reported in 2003(1) GLR 448. The aforesaid decisions of the Single Benches in BRPL (supra) and in SS Agarwal (supra), we have noticed, were rendered after following an earlier Division Bench judgment of this Court in Rajendra Singh vs. Superintendent of Taxes, reported in 79 STC 10. In the aforesaid judgment, the Division Bench has clearly held that an erroneous order would be one which is plainly contrary to law and the error must pertain to one of jurisdiction. It therefore, appears that two different Division Benches have taken two different views on an identical subject matter. Which of the two views would be correct cannot be gone into by a co-ordinate Bench. We therefore, direct the office to place this matter before the Hon'ble Chief Justice for consideration as to whether this income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 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 Revenue Administration." In our view this interpretation is too narrow to merit acceptance. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income Tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue." 10. We may now consider the view taken in the two judgments of this Court in Rajendra Singh and Daga Entrade P. Ltd. 11. In Rajendra Singh (supra), the issue arose in the context of Section 21 of the Tripura Sales Tax Act, 1976, which provided for suo motu revisional jurisdiction, which is in pari materia with Section 263 of the Act. The Commissioner observed that it was not necessary that the order to be revised should be erroneous. The same could be also revised if it was prejudicial to the interest of the revenue. This Court held: "7. The power of suo motu revision under Sub-section (1) is in the nature of supervisory juri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case and determines the turnover either by accepting the accounts or by making some estimates himself. The Commissioner on perusal of the records may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the turnover at a higher figure than the one determined by the assessing officer. That would not vest the Commissioner with power to re-examine the accounts and determine the turnover himself at a higher figure. It is because the officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interest of the revenue. But that by itself will not be enough to vest the Commissioner with the power of suo motu revision because the first requirement, namely, that the order is erroneous, is absent. Similarly if an order is erroneous but not prejudicial to the interest of the revenue, then also the power of suo motu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated it is quasi-judicial power hedged with limitation and has to be exercised subject to the same and within its scope and ambit. So far as calling for the records and examining the same is concerned, undoubtedly it is an administrative act, but on examination "to consider" or in other words, to form an opinion that the particular order is erroneous in so far as it is prejudicial to the interest of the revenue, is a quasi-judicial act because on this consideration or opinion the whole machinery of re-examination and reconsideration of an order of assessment, which has already been concluded and set at rest, is set in motion. It is an important decision and the same cannot be based on the whims or caprice of the revising authority. There must be materials available from records called for by the Commissioner." 12. Reference to the above quoted observations in the judgment shows that the exercise of the jurisdiction has not been limited to the defect of jurisdiction. It could extend to an order which may be found to be 'erroneous' or "not in accordance with law" for having been passed "without making any enquiry in undue haste". The 'jurisdictional' defect has been referred to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tend this list to be exhaustive." In the same case, Lord Pearce said: "Lack of jurisdiction may arise in various ways. There may be an absence of those formalities or things which are conditions precedent to the tribunal having any jurisdiction to embark on an enquiry. Or the tribunal may at the end make an order that it has no jurisdiction to make. Or, in the intervening stage while engaged on a proper enquiry, the tribunal may depart from the rules of natural justice; or it may ask itself the wrong questions; or it may take into account matters which it was not directed to take into account. Thereby it would step outside its jurisdiction. It would turn its inquiry into something not directed by Parliament and fail to make the inquiry which the Parliament did direct. Any of these things would cause its purported decision to be a nullity." The dicta of the majority of the House of Lords in the above case would show the extent to which `lack' and 'excess' of jurisdiction have been assimilated or, in other words, the extent to which we have moved away from the traditional concept of "jurisdiction". The effect of the dicta in that case is to reduce the difference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r ought to have submitted its audited accounts in support of its claim for deduction under sections 80HH and 80-I of the Act in respect of its new industrial undertaking from its gross total income. In view of the above determination, this Court also held against the assumption of jurisdiction by the Commissioner under Section 263 of the Act. This decision, as is submitted at the Bar, has remained unchallenged. On this ground alone, the impugned order is unsustainable. Apart thereform, the direction in the form issued by the Commissioner has the effect of predetermining the issue so much so that the proceeding before the Assessing Officer would be reduced to a formality. Assuming that the course sanctioned in the provisos to Sections 80HH(6) and 80-I(8) is adoptable in the instant case, the direction specifying the mode to be inflexibly observed by the Assessing Officer cannot be judicially countenanced, the same being in excess of the powers scriptable in Section 263 of the Act. Considering that the power of revision conferred on the Commissioner under the above provision of the Act is quasi-judicial in nature and not administrative, the impugned order is repugnant to the recogniz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us good reasons may be inclined to view an assessment order from a negative standpoint. The revisional authority may likewise disagree with the views of the primary authority in its interpretation of the law imposing the liability or the extent or quantum thereof. It may disagree with the primary authority with regard to the determination of the amount of tax to be paid. It may also disagree with the primary authority on matters relating to deductions allowable under the statute. All such situations as aforesaid may render the order of the primary authority wrong or erroneous as commonly understood. Such situations, however, would not be facets of an erroneous decision in so far as the meaning of the said expression as appearing in Section 36 of the Act is concerned. Judicial opinion is unanimous that the expression as appearing in Section 36 must be confined to jurisdictional errors otherwise there would be no distinction between the different aspects of the corrective power conferred by the provisions of the Act for application in different situation. No distinction between the power to reopen an assessment and the appellate or revisional power or the power to rectify would exist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reflect a defect which is jurisdictional in nature in the assessment/order which is sought to be revised. The power of suo motu revision, as held by this Court, would not be available to the Commissioner merely because the learned Commissioner disagrees with the views of the authority who had passed the order sought to be revised. Merely because the learned Commissioner is of the view that the order is incorrect or that a higher quantum of tax or penalty should have been levied would not make the order of the lower authority amenable to the suo motu revisional power. The order or decision of the lower authority must disclose some jurisdictional error and it is the aforesaid jurisdictional error that makes the order amenable to correction in exercise of the suo motu power of revision." 18. In above judgments, exercise of revisional jurisdiction was held to be limited to 'jurisdictional error' as against 'jurisdiction to substitute opinion of revisional authority for the opinion of primary authority', without excluding interference where there was "wrong or illegal exercise of jurisdiction". Expression 'jurisdictional error' cannot be understood in narrow sense. 19. We may now ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be by the Commissioner of Income Tax was correctly made. In a later case, the Supreme Court in Malabar Industrial Co. Ltd. [2000]243 ITR 83 held that pre-requisite for exercise of suo motu revisional jurisdiction by the Commissioner under Section 263 of the Income Tax Act is that, the order of the Income Tax Officer is erroneous in so far as it is pre-judicial to the interest of the Revenue and if the twin conditions, namely, (1) the order of the Assessing Officer sought to be revised is erroneous, and (2) it is prejudicial to the interests of the Revenue, the exercise of suo motu revisional power under Section 263(1) of the Act would be justified. The Supreme Court in the case of Smt.Tara Devi Aggarwal [1973] 88 ITR 323 held that even where an income has not been earned and is not assessable, merely because the assessee wants it to be assessed in his or her hands in order to assist someone else, who would have been assessed for a larger amount, an assessment so made can certainly be erroneous and prejudicial to the interest of the Revenue and in such a situation, the Commissioner has ample justification to exercise his revisional power to cancel the assessment and initiate proce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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