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TMI Blog2017 (10) TMI 381X X X X Extracts X X X X X X X X Extracts X X X X ..... itiated. All transactions of sale of agricultural produce were in cash. Income declared was (a) disproportionately high only with respect to the relevant year and never in the preceding or succeeding years, (b) investment of huge amount of ₹ 3.8 crore was carried out by the Assessee himself, be from whatever source and there was no reference thereof in the original return. As such, omission or wrong statement cannot be said to be bonafide. Prima facie returns, being invalid, ought to have been rejected. The case in hand being that of no inquiry, and the amplitude of the powers of the Commissioner being wide enough to pass “such order” as the circumstances of the case justify, including (a) cancelling the assessment, (b) modifying the order of assessment, (c) directing fresh assessment, as such, the Commissioner was well within his right to pass an appropriate order of remission. Scope of the Tribunal to examine correctness of the exercise of jurisdiction by the Commissioner is wide enough and not limited and restricted to the record as defined under clause (b) of sub-section (1) of Section 263 of the Act. In any case, even this definition is inclusive. It includes all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and considering the additional evidences in gross violation of the procedure laid down in ITAT Rules and in violation of principles of natural justice and fair play, is illegal and bad in law? 3. The facts, leading to the filing of the instant appeal are as under. 4. The Assessee is regularly assessed to income tax. On 19.7.2010, Assessee filed a Return, declaring net taxable income, for the Financial Year 2009-2010 - Assessment Year 2010-2011 (hereinafter referred to as the relevant year) to be ₹ 7,22,943/- (Page-262). In the said Return, income from the source of agriculture, germane to present proceedings, he disclosed a sum of ₹ 15,00,000/-. Perusal of the Return (Page-265) reveals the Assessee to have also generated income from the source of LIC. 5. Such return was selected for scrutiny assessment through CASS. Hence, on 24.8.2011, statutory notice under Section 143(2) of the Act was issued. 6. However, on 2.3.2012, Assessee filed a Revised Return, declaring his income from the agricultural source (hereinafter referred to as agricultural source ), enhancing it from ₹ 15,00,000/- to ₹ 2,80,92,500/- (Page-265). 7. Vide order dated 28.3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. With above remarks the taxable income of the assessee is computed as under: (All figures in INR) Taxable income as declared by the assessee. Rs.44,67,584/- Add Income from undisclosed sourced as discussed para 15 Rs.2,65,92,550/- Taxable Income Rs.3,10,60,134/- Agriculture income is assessed at ₹ 15,00,000/- as per original return filed on 29.07.2010. (Emphasis supplied) 11. It is a matter of record that now such order of assessment is pending adjudication before the Commissioner of Income Tax (Appeals). 12. However, pursuant to order of re-assessment and pending consideration of said appeal, Assessee filed the instant appeal on 18.1.2017, in which notice was issued on 20.1.2017. 13. Parties insisted on the hearing of the appeal and as such, they have addressed on various issues touching the substantial questions of law. 14. On behalf of the Assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 263 of the Act; in such a case rule permitting filing of additional evidence does not apply. In the present case, ITAT erred in permitting the additional evidence while examining the correctness of jurisdiction of the CIT under section 263 of the Act. Proposition IV: Without prejudice to proposition III, the ITAT erred in permitting new and additional evidence because it was: (a) in gross violation of Rule 29 of the ITAT Rules; (b) without passing a separate speaking order allowing the additional evidence; (c) without granting opportunity to the appellant to rebut the additional evidence or to cross-examine the person making ex-parte statements. 16. In support, reliance is sought on the following decisions rendered by different Courts of the land: (1) Malabar Industrial Co. Ltd. v. Commissioner of Income Tax, Kerala State, (2000) 2 SCC 718; (2) Commissioner of Income Tax v. Kwality Steel Suppliers Complex, (2017) 395 ITR 1 : AIR 2017 SC 2949; (3) Commissioner of Income Tax v. Gabriel India Ltd., (1993) 203 ITR 108; (4)Commissioner of Income-Tax v. Sunbeam Auto Ltd., (2011) 332 ITR 167; (5) Income-Tax Officer v. DG Housing Projects Ltd., (20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duct of the Assessee, who, according to the Revenue, has not only tried to procrastinate the proceedings of assessment but suppressed, misled and mis-stated true facts. Also, an endeavour is made to resort to multiple proceedings and remedies, with a view to confuse the issue and abuse the process of law. Our attention is invited to the fact that in the present appeal, Assessee failed to disclose that against the order of remand dated 18.3.2014, though an appeal was filed but no application seeking stay of the order passed by the Commissioner was filed. For more than one and a half years, hearing of the appeal was allowed to be delayed. In the meanwhile, a fresh order pursuant to remand was passed, against which also an appeal was preferred. Though the appellant could have sought stay of the proceedings but deliberately chose not to do so, for he was forum hunting. By taking a calculated risk, in fact as a gamble, he waited for the authorities to pass an order. Now finding the same not to his liking, he has pursued the appeal, and that too without disclosing such facts. As such, he is guilty of suppressio veri, expressio falsi. Reference is made to Sasi Enterprises (supra). 22. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deemed necessary, pass any order, enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. 33. Clause (b) of sub-section (1) of Section 263 of the Act itself defines record to mean that record shall include and be deemed always to have included all records relating to any proceeding under the Act available at the time of examination by the Principal Commissioner or Commissioner. 34. Further remedy is by way of an appeal to the Tribunal (Sections 253/254) and thereafter an appeal, on a substantial question of law, to the High Court under the provisions of Section 260A of the Act. Certain Facts 35. It is a matter of record that in relation to three Assessment Years, i.e. 2008, 2009 and 2011, the Assessee and his family members made investments in the policies of Life Insurance Corporation (LIC) worth ₹ 6.18 crores. It is also an undisputed fact that in the relevant year (2009-10), Assessee and his family members made investments in purchase of LIC Policies for an amount, in excess of the income declared from the agricultural source in the relevant year. Following are such investments indicated in a tabulated form: R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al funds, schemes of LIC; (e) which was actually so done by him; (f) In the year 2011-12, when accounts were settled, professional advise was sought and (g) since there was no regular assessment and there being a mistake/defect/omission in the original return, a revised return was filed within the stipulated period of time. 38. The Assessing Officer has observed that: (a) notices were issued to the Agent who appeared and placed on record documents i.e. (i) his Income Tax Return for the relevant year, (ii) copies of account of gross apple receipts for the relevant year, and (iii) copies of bills of sale proceeds of horticulture produce issued by the vendor, i.e. M/s Universal Apple Association, Parwanoo; also explained the shortfall in the income, in the relevant year, matching it with the investment made in the LIC, to be routed through one Shri M.R. Chauhan (such amount is more than ₹ 1 crore); and (b) information with respect to assessment proceedings of the Agent was sought for verification from his Assessing Officers. 39. Thus, finding the Assessee to have established that the agriculture income disclosed in the revised return of income pertains to the sale pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to be completed by the applicant (purchaser of the policy). It is not the case of Assessee that anyone of his family members is a minor or that no forms were filled up by the respective purchasers. 45. What is contended is that in relation to the income in question, Assessee was adopting mercantile system of accounting and as such exact amount of income could be ascertained only with the settlement of account, after a period of three years, which was sometime in the month of September, 2011. 46. At this juncture, one fact, which is not disputed, to which our attention is invited by the Revenue, is that in relation to the years preceding and succeeding to the relevant year, income from agricultural source, is marginal, bordering what was originally declared by the Assessee. Income, grossly disproportionate is only with respect to the relevant year. 47. As we have already observed, in the instant case, Assessee did file his return, under Section 139 of the Act. However, only when notice under Section 143(2) was issued, he filed a revised return, in exercise of his right under sub-section (5) of Section 139, which came to be assessed, under Section 143(3) of the Act. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atement therein. The use of the word discovers , in our view, connotes discovery of some omission or wrong statement in the return, of which the assessee was not aware at the time of filing of the original return. It cannot cover a case where the omission or wrong statement contained in the first return is deliberate, for, in that case, it cannot be said that the revised return was filed by the assessee on discovery of any omission or wrong statement, as he would all the time have knowledge of the omission or wrong statement in the original return. This being so, on the language of Section 139(5), an assessee who had deliberately made any omission or wrong statement in his original return cannot avail himself of the advantage given by this subsection of filing a revised return. In cases where an assessee has deliberately omitted particulars of his income or made wrong statement in the return, the revised return filed by him would be outside the pale of section 139(5) of the Act, and it would not be a revised return as contemplated by the Act. Once this position is reached the question of considering the revised return for the purposes of penalty would hardly arise, for, in the eye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiate proceedings for assessment under the provisions of the Act against some other assessee who according to the income-tax authorities is liable for the income thereof . [Emphasis supplied] 58. The Apex Court in Kwality Steel Suppliers Complex (supra), while reiterating the aforesaid principle, clarified that in exercise of its revisional jurisdiction, Commissioner must exercise proper application of mind. In the given facts, Court found the view taken by the Assessing Officer to be a plausible one, inasmuch as family business, with the death of one of the partners continued to be carried on by the son of the deceased with his mother being another partner, accepting the book value of the stock-in-trade to be plausible and permissible view. 59. A Division Bench of the Rajasthan High Court, in Emery Stone Mfg. Co. (supra), has observed that simply because facts were disclosed by the Assessee, it would not give immunity from exercise of any revisional jurisdiction, which the Commissioner can exercise in the amplitude of his statutory powers. 60. Mr. Chidambaram, learned Senior Counsel, invites our attention to the decision rendered by the High Court of Bombay in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner with the power of suo motu revision because the first requirement, viz., that the order is erroneous, is absent. Similarly, if an order is erroneous but not prejudicial to the interests of the Revenue, then also the power of suo motu revision cannot be exercised. Any and every erroneous order cannot be the subject matter of revision because the second requirement also must be fulfilled. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. 61. In Commissioner of Income-Tax v. Vikas Polymers, (2012) 341 ITR 537(Delhi), Court reiterated the principle of order of the Commissioner fulfilling the twin test of revising the order passed by the Assessing Officer. It must be erroneous and prejudicial to the interests of Revenue. The Commissioner can call for and examine the record and by giving an opportunity of hearing make such inquiry as is deemed necessary. The Court, by taking into account the decision referred to by the Bombay High Court in Gabriel India Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inter-linked and the authority exercising the powers under section 263 is under an obligation to consider the entire material about existence of income and the tax which is realizable in accordance with law and further what tax has in fact been realized under the assessment order. [Emphasis supplied] 63. The ratio and the decision stands reiterated subsequently in Commissioner of Income-Tax v. New Delhi Television Ltd., (2014) 360 ITR 44 (Delhi). 64. In Malabar Industrial Co. Ltd. (supra), the Apex Court (two-Judge Bench), clarified that pre-requisite for the Commissioner to suo motu exercise its jurisdiction is that the order of Income Tax Officer is erroneous, insofar as it is prejudicial to the interests of Revenue. The Court laid down twin conditions for the Commissioner to be satisfied (i) the order sought to be revised is erroneous and (ii) prejudicial to the interests of Revenue. It clarified that the power cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer. What is prejudicial to the interests of Revenue is to be understood in its ordinary meaning, for it is of wide import/amplitude and not confined to lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isional authority. This is a course of action that must be desisted from. However, the above is not the situation in the present case in view of the reasons stated by the learned C.I.T. on the basis of which the said authority felt that the matter needed further investigation, a view with which we wholly agree. Making a claim which would prima facie disclose that the expenses in respect of which deduction has been claimed has been incurred and thereafter abandoning/withdrawing the same gives rise to the necessity of further enquiry in the interest of the Revenue. [Emphasis supplied] 68. Applying the aforesaid principles, we further proceed to discuss facts. 69. Perusal of order dated 28.3.2013, passed by the Assessing Officer, reveals that the original return filed by the Assessee was selected for scrutiny assessment through CASS and notice under Section 143(2) of the Act issued and served upon the Assessee on 29.8.2011. On 2.3.2012, in exercise of his right under Section 139(5), Assessee filed a revised return. While assessing the same, notices under Section 142(1) and 143(2) were issued to the Assessee, to which he responded by placing on record Memorandum of Under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was such huge income from the orchard. Validity of the return, fulfilling the condition prescribed under Section 139(5) was not examined, more so in the factual backdrop when the revised return came to be filed only after issuance of notice for scrutiny. Also, what took the Assessee more than six months to revise the return was not considered. 73. No doubt, views of the Officer assessing the Agent s income were solicited, but then such assessment could not be a binding precedent, for the Assessing Officer is obliged to independently inquire correctness of the returns of income declared by the Assessee. What is crucial is that in the return of the Assessee or the Agent, there is no reference of shortfall of ₹ 1 crore, which amount was routed through Shri M.R.Sharma, who also was not called during the course of inquiry. 74. Whether return filed was false or not, which fact was within the knowledge of the Assessee was not examined by the Assessing Officer. Similarly, plea of settlement of accounts after a period of three years was legally tenable or not, was not examined. Whether it was due to bonafide inadvertence or mistake, which fact never came to be disclosed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2010- 11. 1. Call for and examine the details of Income/ Expenditure Account in view of Col. 4 of M.O.U. 2. Coordinate the proceedings and share the information with ITO, Ward-1, Shimla regarding the investigation made by him in the case of Sh. Anand Chauhan, who as per MOU is looking after the Orchards of M/s Vir Bhadra Singh (HUF). 79. The said Officer in her report observed the Assessing Officer not to have conducted any independent inquiry, before accepting the return. Presumably, the Assessing Officer remained passive in his own inquiries and has relied only on the conclusions drawn by ITO, Ward-1, Shimla, in the case of Sh. Anand Chauhan . 80. Well, the observations of the Additional Commissioner of Income Tax have not weighed with us at all. 81. However, perusal of the order reflects the Commissioner to have carefully gone through the record , in correctly concluding that (a) in the given facts and circumstances, discovery of mistake or omission by the Assessee appears to be incorrect (Page- 200), for the assessee was fully aware that there was annual agricultural income being invested in LIC policies, (b) there were huge investments of more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nail v. Bilahari Investment (P) Ltd., (2008) 4 SCC 232) 84. If the method of accounting consistently followed by the Assessee is not emanating from the record, Assessing Officer was duty bound to adopt such appropriate method as may be found fit for determining the issue. [Commissioner of Income-tax, Calcutta v. M/s British Paints India Ltd., AIR 1991 SC 1338 : 1992 Supp (1) SCC 55; Sanjeev Woollen Mills v. Commissioner of Income Tax, Mumbai, (2005) 13 SCC 307; M/s Standard Triumph Motor Co. Ltd. v. Commissioner of Income Tax, Madras, 1993 Supp (3) SCC 315. 85. Emphatically, Mr.Chidambaram invites attention to the following reasons adopted by the Commissioner, emphasizing that the Officer passed the order without returning any positive findings, for he was too presumptuous and unsure with regard to the status of inquiries so conducted by the Assessing Officer. 86. In para-10 of the order (Page-248), the Commissioner has observed as under: From the above findings, it is hereby concluded that the A.O. has not made the required and essential enquiries as warranted by the facts of the case regarding the agriculture income and source of investment in LIC policy. He has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax, Shillong vs. Assam Travels Shipping Service, Dibhrugarh, 1993 Supp (4) SCC 206, wherein the Court categorically held that The expression as it thinks fit is wide enough to include the power of remand to the authority competent to make the requisite order in accordance with law in such a case even though the Tribunal itself could not have made the order enhancing the amount of penalty. 90. Ambit and scope of power exercised by the authorities under Sections 263 and 254 are totally different and distinct. We have already discussed the scope of the former and now proceed to discuss about the latter. 91. The Income Tax Appellate Tribunal is not a Court but is a Tribunal exercising judicial powers. The Tribunal s powers in dealing with the appeals are of the widest amplitude and have in certain cases held similar to and identical with the powers of an Appellate Court under the Civil Procedure Code. The Tribunal, for the purposes of discharging its functions, is vested with all the powers which are vested in the Income Tax authorities referred to in Section 131 of the Act. Any proceedings before the Tribunal are also deemed to be judicial proceedings within the meanin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2, the Appellate Tribunal is competent to pass such orders on the appeal as it thinks fit. There is nothing in the Income-tax Act which restricts the Tribunal to the determination of questions raised before the departmental authorities. All questions whether of law or of fact which relate to the assessment of the assessee may be raised before the Tribunal. If for reasons recorded by the Departmental authorities in rejecting a contention raised by the assessee, grant of relief to him on another ground is justified, it would be open to the Departmental authorities and the Tribunal, and indeed they would be under a duty to grant that relief. The right of the assessee to relief is not restricted to the plea raised by him. (Also: Shree Hari Chemicals Export Ltd. v. Union of India and another, (2006) 1 SCC 396) 95. In National Thermal Power Co. Ltd. v. Commissioner of Income Tax, (1997) 7 SCC 489, the Apex Court (three-Judge Bench) has held that: 4. Under Section 254 of the Income Tax Act the Appellate tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the tribunal in deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tribunal also. 6. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner of Income Tax (Appeals) takes too narrow a view of the powers of the Appellate Tribunal [vide e.g. CIT v. Anand Prasad, (1981) 128 ITR 388 (Del): CIT v. Karamchand Premchand (P) Ltd., (1969) 74 ITR 254 (Guj) and CIT v. Cellulose Products of India Ltd., (1985) 151 ITR 499 (Guj)]. Undoubtedly, the Tribunal will have the discretion a to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider the question of law arising from facts which are on record in the assessment proceedings we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. [Emphasis supplied] 96. The Apex Court (two-Judge Bench) in Goetze (India) Ltd. v. Commissioner of Income-Tax, (2006) 284 ITR 323, has held as under: The decision in question is that the power of the Tribunal under section 254 of the Income Tax Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Delhi High Court held the power of the Tribunal wide enough to admit additional evidence at its discretion for doing substantial justice in the matter. However, party intending to lead evidence before the Tribunal, for the first time, has to show that it was prevented by sufficient cause to do so and that it could have material bearing on the issue for just decision of the case and the ends of justice demands admission thereof. The Court on an undisputed statement held Rule 29 of the Rules, akin to Order 41 Rule 27 of the Code of Civil Procedure, and thus observed: 13. .This can be done even when application is filed by one of the parties to the appeal and it need not to be a suo motu action of the Tribunal. The aforesaid rule is made enabling the Tribunal to admit the additional evidence in its discretion if the Tribunal holds the view that such additional evidence would be necessary to do substantial justice in the matter. It is well settled that the procedure is handmade of justice and justice should not be allowed to be choked only because of some inadvertent error or omission on the part of one of the parties to lead evidence at the appropriate stage. Once it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el outside the record of the lower court and additional evidence, whether oral or documentary is not admitted, but Section 107 CPC, which carves out an exception to the general rule, enables an appellate court to take additional evidence or to require such evidence to be taken subject to such conditions and limitations as may be prescribed. These conditions are prescribed under Order 41 Rule 27 CPC. 108. A Division Bench of the Madras High Court in T.M.S. Mohamed Abdul Kader (supra), has held the expression such orders as it deems fit to be wide enough to call for fresh evidence from the authorities under the Act. To similar effect is the judgment rendered by a Division Bench of Andhra Pradesh High Court, in Thakur V. Hari Prasad (supra). 109. In Thakur V. Hari Prasad (supra), the Court observed that: Any material relevant to the point in controversy is evidence. The Supreme Court in D. M. Manasvi v. CIT , held that the findings given in assessment proceedings would be relevant and admissible material in penalty proceedings. Even the statements recorded under section 161, Criminal Procedure Code, during the investigation, though unsigned by the maker thereof, may be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aware that the Revenue had placed additional material in support of its case. No doubt, Assessee had protested, but then, himself took time to rebut the same. It is not that surreptitiously, such material came to be placed on record or accepted by the Tribunal. The matter was pending for more than 1 year and written submissions filed. The Chartered Accountant appearing for the Assessee took time to rebut the same. Thus, adequate opportunity was afforded to the Assessee. Enough time (more than a fortnight) was afforded to the Assessee to rebut the same, which, for unexplainable reasons he chose not to do so. And the protest is also not with vehemence. No written application was filed opposing the same. No other remedy was taken recourse to. We find the Tribunal to have extensively dealt with the issue of accepting the documents as additional evidence as also the need for passing an order prior to its decision. 112. Also in the instant case, what prejudice is caused to the Assessee, in accepting the documents as additional evidence, remains unexplained. We find the Tribunal to have decided all these issues in the first part of the order (Pages-78 to 93) and as such do not find a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that since it was a case of no inquiry , Commissioner rightly remitted the case back to the Assessing Officer, for carrying out assessment in accordance with law (Pages 153-158). 117. At this juncture, it be also observed that by the very same order, the Tribunal also decided the appeals filed by the Agent (Pages 159 to 200), inter alia, observing as under, to which no challenge is laid: An overview of the above features indicates that the agricultural produce was not proved; transportation of the same to UAA was also not proved; bills issued by UAA were not genuine; cash received from UAA shown at ₹ 1.00 crore did not appear in their books of account; the expenses claimed were not backed by any vouchers/bills; and all the expenses were claimed to have been incurred on one single day and that too in cash. We fail to comprehend as to how the assessment order accepting the genuineness of carrying out the agricultural operations and earning a huge income in such circumstances can be considered as an order made after proper inquiry as has been canvassed by the assessee .. 118. Thus, in the given facts and circumstances, we hold the Tribunal to have correctly af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order as the circumstances of the case justify, including (a) cancelling the assessment, (b) modifying the order of assessment, (c) directing fresh assessment, as such, the Commissioner was well within his right to pass an appropriate order of remission. 121. Scope of the Tribunal to examine correctness of the exercise of jurisdiction by the Commissioner is wide enough and not limited and restricted to the record as defined under clause (b) of sub-section (1) of Section 263 of the Act. In any case, even this definition is inclusive. It includes all records relating to any proceedings under the Act, be that of the Assessee or a third party, available at the time of examination by the Commissioner. The record need not pertain to the proceedings of the Assessee alone, be it for the relevant year or assessments pertaining to other years. It can also pertain to any other assessee. In fact, record of any proceedings under this Act available at the time of examination can be considered. Such record need not be placed by the parties. He has power to call for and examine the record of any proceedings under this Act . 122. As is evident, definition of word record , inclusive in nat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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