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TMI Blog2019 (11) TMI 873X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of notice only, if, there is any violation of statutory provision. In view of the principle laid down in HARBANSLAL SAHNIA AND ANR. VERSUS INDIAN OIL CORPN. LTD. AND ORS. [ 2002 (12) TMI 564 - SUPREME COURT] the petitioner has not apprised this Court that he need not exhaust a remedy of submitting explanation/reply to the notice dated 08.02.2016. The power conferred on the High Court under Article 226 of the Constitution of India is to advance justice and not to thwart it. The very purpose of such Constitutional powers being conferred on the High Court is that no man should be subjected to injustice by violating law. This Court does not sit as an appellate authority over the decision of the authorities below. Further, while exercising extra-ordinary jurisdiction by the High Court under Article 226 of the Constitution of India, it should examine whether the impugned action is per se illegal or vitiated by errors apparent on the face of the record. In view of above narrated facts and circumstances read with the legal issues, petitioner has not made out a case so as to interfere with the impugned notice dated 08.02.2016. Resultantly: I. Writ Petition stands re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orities. Thereafter, several inquiries were made by the Assessing Officer (AO) as well as TPO. AO proceeded to pass a Draft Assessment Order under Section 144C for which the petitioner had certain objections and matter was forwarded to Dispute Resolution Panel (for short DRP ). 3. DRP consists of 3 Officers who are in the cadre of Commissioner, who have examined the Draft assessment order and objections of the petitioner under Sub-clause of Section 144 against Draft Assessment Order and DRP issued certain directions on 31.12.2003. Consequently, AO passed Final Assessment Order on 31.01.2014. 4. On 08.02.2016, Principal Commissioner of Income Tax, Bengaluru while invoking Section 263 of Act, 1961 issued a notice in respect of Assessment Order for the year 2009-10 pursuant to the return filed by the petitioner on 23.09.2009 declaring loss of ₹ 21,72,53,709/- read with the conclusion of the assessment under Section 143(3) read with Section 144C on 31.01.2014 while determining taxable income of the asssessee at ₹ 17,98,34,440/- which resulted in net tax liability at ₹ 3,71,45,516/-. The addition/disallowance made to arrive at the taxable income. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsequently, matter was referred to DRP and proceeded to pass order on 31.12.2003. In terms of the DRP decision dated 31.12.2003, the AO proceeded to pass Final Assessment Order on 31.01.2014. The DRP consists of three Commissioner s (Panel), in such circumstances, respondent being a Principal Commissioner cannot sit over the decision of the DRP consisting of three Commissioners. Therefore, respondent Principal Commissioner has no jurisdiction. On this score itself, the impugned notice issued by the respondent in invoking Section 263 of Act 1961 is liable to be set-aside. 7. Learned Senior Counsel further submitted that while invoking Section 263 of Act 1961 by the respondent in issuing notice to the petitioner, two ingredients like erroneous decision of the AO and it is prejudicial to the interest of revenue are not appraised. Perusal of notice, it is evident that the aforesaid ingredients are not forthcoming in the notice. Further, DRP decision has not been addressed. Therefore, even on the ground of non-compliance of the ingredients stated in Section 263 of Act 1961, impugned notice dated 08.02.2016 is liable to be set-aside. 8. Learned Senior Counsel for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mere passing of an order under Section 158BC, but an approval which takes note of the subject matter of assessment and there is application of mind before granting the approval. The Apex Court in the decision reported in AIR 2006 SC 2879 ASHOK KUMAR SAHU v. UNION OF INDIA held that the expression 'approve' means to have or express a favourable opinion of to accept as satisfactory as to the content of the assessment made under Section 158BC. The Karnataka High Court pointed out the difference between the approval and permission by referring P.Ramanatha Aiyar's Law Lexicon and held that when approval is given it means the approving authority has full knowledge about the contents of what is approved and confirmed authoritatively the order of the lower authority. 9. Further, he relied on Brief Note submitted during the course of arguments on Section 263 of Act 1961 (Para.6 to 9 and 13 to 16) which reads as under: 6. Section 144C was inserted in the Act by the Finance Act, 2009 and came into effect from 1st October, 2009. In the Notes on Clauses to the Finance Bill, 2009, the reason for insertion of Section 144C was as under: The subjects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed. Therefore, we are of the view that in the present facts this issue could be agitated before and rectified by the DRP. 9. It is submitted that the issue to taxability of shares being issued at a premium has already been well settled. The Revenue had raised a similar issue regarding discrepancy in valuation of the share premium received in the case of Vodafone India Services (P) Ltd vs UOI (2014) 368 ITR 1 (Bom) . A transfer pricing adjustment was made to the valuation of the shares, holding that valuation of shares adopted by the assessee is incorrect. The Hon ble Bombay High Court in no uncertain terms laid down the law stating as under:- 25. But we have examined the issue afresh. The word income for the purpose of the Act has a well understood meaning as defined in Section 2(24) of the Act. This even when the definition in Section 2(24) of the Act is an inclusive definition. It cannot be disputed that income will not in its normal meaning include capital receipts unless it is so specified, as in Section 2(24) (vi) of the Act. In such a case, Capital Gains chargeable to tax under Section 45 of the Act are, denied to be income. The amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the order. Therefore, by virtue of issuing a notice under Section 263, the Respondent is attempting to assume jurisdiction, when it has done and is trying to have a re-look at the final DRP order, when the jurisdiction to do so is barred under the Act. (Reliance in this regard is placed on the unreported judgment passed by the Division of Madras High Court in Appeal No.354/2006 para 20). 10. On the other hand, learned counsel for the Respondent Sri K V Aravind vehemently contended that contention of the petitioner that respondent has no jurisdiction to invoke Section 263 of Act 1961 in respect of Assessment Order which was pursuant to the DRP decision and further, its acceptance by the AO is without any legal substance. Even though, contention of the petitioner that DRP consists of three Commissioners and their decision has been taken note off by the AO while passing a Final Assessment Order, still there is no statutory provision barring the jurisdiction of the Respondent/Principal Commissioner to invoke Section 263 of Act 1961 to revise Assessment order of the Assessing Officer. On the other hand, Clause (c) to Explanation (1) of Section 263 of Act 1961 there is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel for the parties. 14. The questions for consideration in the present petition is: (1) Whether respondent could invoke Section 263 of Act 1961 in respect of an assessment order of the AO pursuant to DRP decision or not? (2) Impugned notice dated 08.02.2016 is in terms of the Section 263 of Act 1961 or not? 15. Petitioner who is an assessee had filed return of income on 23.09.2009 for the assessment year 2009-10. In view of the fact that International Money Transaction was involved in the petitioner s business, AO is required to initially proceed with the draft assessment order and communicate the same to the petitioner/assessee for either acceptance or filing of objection. Petitioner had filed objections. Consequently, objections were examined by the DRP consisted of three panel members who were in the cadre of Commissioner. On receipt of DRP s decision, AO proceeded to pass a Final Assessment Order. In this backdrop, question is, Whether the Respondent Principal Commissioner could invoke Section 263 of Act 1961 to examine the Assessment Order of the AO or not ? 16. Learned counsel for the petitioner submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction (or specified domestic transaction) referred to in sub-section (1). ((2A) Where any other international transaction (other than an international transaction referred under sub-section (1), comes to the notice of the Transfer Pricing Officer during the course of the proceedings before him, the provisions of this Chapter shall apply as if such other international transaction is an international transaction referred to him under sub-section (1)). (2B) Where in respect of an international transaction, the assessee has not furnished the report under section 92E, and such transaction comes to the notice of the Transfer Pricing Officer during the course of the proceeding before him, the provisions of this Chapter shall apply as if such transaction is an international transaction referred to him under subsection (1). (2C) Nothing contained in sub-section (2B) shall empower the Assessing Officer either to assess or reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154, for any assessment year, proceedings for which have been complete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mity with such order of the Transfer Pricing Officer. 7. The Transfer Pricing Officer may, for the purposes of determining the arm s length price under this section, exercise all or any of the powers specified in clauses (a) to (d) of sub-section (1) of section 131 or sub-section (6) of section 133 (or Section 133A). Explanation :- For the purposes of this section, Transfer Pricing Officer means a Joint Commissioner or Deputy Commissioner or Assistant Commissioner authorized by the Board to perform all or any of the functions of an Assessing Officer specified in sections 92C and 92D in respect of any person or class of persons. 144C. (1) xxxxx (2) xxxxx (b) file his objections, if any, to such variation with,- (i) the Dispute Resolution Pane; and (ii) the Assessing Officer. 263. (1) The (Principal Commissioner or) Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the (Assessing) Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder has not been passed in accordance by the jurisdiction High Court or Supreme Court in the case of the assessee or any other person. (2) No order shall be made under 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 action 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. 18. It is undisputed that Draft Assessment Order was notified by the AO in view of the fact that assessee s business involved International Money Transaction. Petitioner/assessee was e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... URJA VIKAS NIGAM LTD. Vs ESSAR POWER LTD. reported in (2008)4 SCC 755 and has held at paras. 35, 39 and 61 as under: 35: It is well settled that where a statute provides for a thing to be done in a particular manner, then it has to be done in that manner, and in no other manner [vide Chandra Kishore Jha v. Mahavir Prasad [(1999) 8 SCC 266 : AIR 1999 SC 3558] (SCC para 17 : AIR para 12), Dhanajaya Reddy v. State of Karnataka [(2001) 4 SCC 9 : 2001 SCC (Cri) 652 : AIR 2001 SC 1512] (SCC para 23 : AIR para 22), etc.]. Section 86(1)(f) provides a special manner of making references to an arbitrator in disputes between a licensee and a generating company. Hence by implication all other methods are barred. 39. It may be mentioned that the Mimansa rules of interpretation were our traditional principles of interpretation laid down by Jaimini, whose sutras were explained by Shabar, Kumarila Bhatta, Prabhakar, etc. These Mimansa principles were regularly used by our great jurists like Vijnaneshwara (author of Mitakshara), Jimutvahana (author of Dayabhaga), Nanda Pandit, etc. whenever they found any conflict between the various smritis or any ambiguity, incongruity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain contingencies. It does not confer a power of review. If an order of assessment is rectified by the assessing officer in terms of Section 154 of the Act, the same itself may be a subject-matter of a proceeding under Section 263 of the Act. The power of revision under Section 263 is exercised by a higher authority. It is a special provision. The revisional jurisdiction is vested in the Commissioner. An order thereunder can be passed if it is found that the order of assessment is prejudicial to the Revenue. In such a proceeding, he may not only pass an appropriate order in exercise of the said jurisdiction but in order to enable him to do it, he may make such inquiry as he deems necessary in this behalf. In para 12 of the said judgment it was also held that when different jurisdictions are conferred upon different authorities, to be exercised on different conditions, both may not be held to be overlapping with each other. While examining the scope and limitations of jurisdiction under Section 154 of the Income Tax Act, it was held that such a power of rectification could only be exercised when there is an error apparent on the face of the record and that it does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o say, in respect of the particular assessee and in relation to the particular assessment year. To be a necessary finding, it must be directly involved in the disposal of the case. It is possible in certain cases that in order to render a finding in respect of, (A) a finding in respect of B may be called for. For instance, where the facts show that the income can belong either to A or B and to no one else, a finding that it belongs to B or does not belong to B would be determinative of the issue whether it can be taxed as A's income. A finding respecting B is intimately involved as a step in the process of reaching the ultimate finding respecting A. If, however, the finding as to A's liability can be directly arrived at without necessitating a finding in respect of B, then a finding made in respect of B is an incidental finding only. It is not a finding necessary for the disposal of the case pertaining to A. The same principles seem to apply when the question is whether the income under enquiry is taxable in the assessment year under consideration or any other assessment year. As regards the expression direction in Section 153(3)(ii) of the Act, it is now well settled tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in para nos 4, 9 and 10 held as under:- 4. There is a subtle distinction between delegation of legislative powers and delegation of non-legislative/administrative powers. As far as delegation of power to legislate is concerned, the law is well settled: the said power cannot be sub-delegated. The legislature cannot delegate essential legislative functions which consist in the determination or choosing of the legislative policy and formally enacting that policy into a binding rule of conduct. Subordinate legislation which is generally in the realm of rules and regulations dealing with the procedure on implementation of plenary legislation is generally a task entrusted to a specified authority. Since the legislature need not spend its time for working out the details on implementation of the law, it has thought it fit to entrust the said task to an agency. That agency cannot entrust such task to its subordinates; it would be a breach of the confidence reposed on the delegate. 9. The Constitution confers power and imposes duty on the legislature to make laws and the said functions cannot be delegated by the legislature to the executive. The legislature is constitut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guage employed in Section 263 of Act 1961. 26. In view of Section 263 of Act 1961 read with the aforesaid principles laid down by the Apex Court in various decisions, the cited decision on behalf of the petitioner would not aid or support the contention of the petitioner that Principal Commissioner/respondent has no jurisdiction to invoke Section 263 of Act 1961, is not appreciable. Consequently, the contention of the petitioner that Principal Commissioner has no jurisdiction to invoke Section 263 of Act 1961 is hereby rejected. 27. The other contention is that impugned notice dated 08.02.2016 do not contain the ingredients and notice is liable to be set-aside. Petitioner has a remedy before the Principal Commissioner if there is any shortcoming in respect of ingredients stated in Section 263 of Act 1961. Writ Court cannot examine the validity of notice on merit. Petitioner has a remedy before the very same authority by submitting explanation to the notice. Writ Court can interfere in respect of notice only, if, there is any violation of statutory provision. Supreme Court in the case of HARBANSLALSAHNIA AND ANOTHER Vs INDIAN OIL CORPORATION LIMITED AND OTHERS re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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