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TMI Blog2021 (3) TMI 1163X X X X Extracts X X X X X X X X Extracts X X X X ..... against the assessee by way of withdrawal of relief. At best, the ld. PCIT could have only directed the ld. AO to conduct enquiries even if he is of the opinion that enquiries were not carried out properly by the ld. AO. The entire action of the ld. PCIT goes to prove that the entire issue has been addressed with a pre-conceived notion in order to reach a pre-conceived destination by forgetting the legal tenets, factual verifications, verification of documents carried out by the ld. AO, improperly applying provisions of Explanation-2 to Section 263, not respecting the judicial hierarchy by ignoring the order of this Tribunal dated 14/01/2019 wherein the Tribunal had already quashed the assessment order dated 15/03/2016 but also granting relief to the assessee on merits on each of the five issues that were subject matter of revision proceedings, thereby proving his highhandedness. Hence, it could be safely concluded that proper and requisite enquiries were indeed carried out by the ld. AO while passing the order dated 02/05/2018 giving effect to the order of the ld. CIT(A) dated 28/06/2017 and hence, the ld. PCIT grossly erred in invoking revisionary jurisdiction u/s.263 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pendent order passed by the A.O. by directing the A.O. to recompute the income of the appellant at ₹ 2237,55,11,503/- instead of ₹ 6,84,08,000/- determined in consequence of ITATs order dt 30.01.2015. 3. Additional ground No 3 On the facts and circumstances of the case and in law, the order is barred by limitation as the Ld. PCIT has also erred in assuming jurisdiction and passing the impugned order u/s 263 of the Act without properly appreciating the provisions of section 263 of the Act." 3. We have heard the rival submissions and perused the materials available on record. We find that Shri Ashwin Mehta, brother of Late Shri Harshad Mehta, was present at the time of hearing and had made both oral and written submissions thereon on merits with regard to the additional grounds raised supra. For the sake of convenience, we deem it fit to reproduce the said written submissions given by Shri Ashwin Mehta as under:- ARGUMENTS IN BRIEF ON MERIT IN RESPECT OF ADDITIONAL GROUND NO. 1 TO 3 1. With respect to additional ground no.1, on merit I draw your attention to the provision of Section 263(1) Income Tax Act, 1961 as well as cause (c) of explanation 1 of Section 263 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edure court which are enjoyed by any Appellate Court. This was so held by the Bombay High Court in the case of New India Life Assurance Company Ltd. Vs CIT 31 ITR 844 (Mumbai). The status of Income Tax Appellate Tribunal has been discussed by the Supreme Court in the case of Ajay Gandhi vs B. Singh 265 ITR 451. In this regard the observation of the SC at page 182 of 235 ITR 175 (Supreme Court) in the case of ITAT Vs Dr. V. K. Agarwal (Ex Law Secretary, Ministry of law and Justice, GOI) are much relevant which are reproduced below: "Before examining the conduct of the first Respondent, we would like to deal with the technical objections which were raised before us on behalf of the first Respondent. The first Respondent had initially contended the Income Tax Appellate Tribunal was not a court and was also not court subordinate to the Supreme Court. Hence, the Supreme Court had no jurisdiction to issue a suo moto notice of contempt in respect of a matter pertaining to the Income Tax Appellate tribunal. However, subsequently, learned senior counsel for the first Respondent conceded that the Income Tax Appellate tribunal did perform judicial functions and was a court subordinate to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (1) to Section 263 (1) of the Income Tax Act, 1961 has specifically been inserted with the purpose that judicial hierarchy must be maintained and the junior officer should not bust aside the decision of superior or the Appellate authority on the subject matter which had been duly considered and decided by the Appellate authority. The height of the case which must be appreciated is that initially the revenue filed an appeal before the Tribunal against the order of CIT (Appeal) and knowingly that even after passing the order of the Tribunal dated 14.01.2019, PCIT under section 263 Income Tax Act, 1961 passed impugned order dated 22.01.2020 directing the assessing officer to withdraw the relief given by the CIT (Appeal) and as confirmed by this Hon'ble Tribunal. This fact that Tribunal has duly considered and confirmed the relief given by the CIT (Appeal) was placed before the PCIT during the course of 263 proceeding which is apparent from page 34 to 38 of the order of the PCIT. PCIT burst aside the argument of the assessee made merely on the basis that the revenue has not accepted the order of the Tribunal dated 14.01.2019 and the same is being contested before Honble High Court. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal against any order of any court in the country. The plenary jurisdiction of this court to grant leave and hear appeals against any order of a court and Tribunals confers power of judicial superintendence over all the courts and Tribunals in the territory of India including subordinate courts of Magistrate and District Judge. This court has, therefore, supervisory jurisdiction over all courts in India." Examining the powers of a court of record, it came to the conclusion that a court of record has inherent power to punish for contempt of all courts and Tribunals subordinate to it in order to protect these subordinate courts and Tribunals….. It was also submitted before us by learned senior counsel for the first respondent that although this court may have jurisdiction to punish for contempt, that jurisdiction should not be exercised in the present case. The appropriate authority to take action would be the High Court. We do not see much force in this submission. The Income tax Appellate Tribunal, although it may have Benches in different parts of the country, is a national Tribunal and its functioning affects the entire country and all its Benches. Appeals also lie ulti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has placed reliance on the decision of Hon'ble Supreme Court in the case of Kamalakshi Finance Corporation Ltd (Supra), the relevant observations made by Hon'ble Supreme Court in the said case, which is given in the book of Sampath Iyengar's "Law of Income tax" 10th edition (at page 212), for the purpose of obtaining clarity on the impugned issue are : "The learned Additional Solicitor General submits that the learned judges have erred in passing severe strictures (1990) 47 ELT 231 (Bom) against the two Assistant Collectors who had dealt with the matter. He submitted that these officers had given reasons for classifying the goods under heading 39.19 and not 85.46 and could do no more. He submitted that they acted bona fide in the interests of Revenue in not accepting a claim which, they felt, was not tenable. Sri Reddy is perhaps right in saying that the officers were not actuated by any mala fides in passing the impugned orders. They perhaps genuinely felt that the claim of the assessee was not tenable and that, if it was accepted, the Revenue would suffer. But what Sri Reddy overlooks is that we are not concerned here with the correctness or otherwise of their conclusi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4 SCC (Suppl.) 652), the Hon'ble Apex Court held that an order of Tribunal was binding on the Assessing officer and the first appellate authority and the failure to follow the same may constitute contempt of Tribunal's order. Similar views have been expressed in Sales tax matters in Rajendra Mills ltd Vs. Jt. CIT (1971) 28 STC 483 (mad), Senthil Raj Metals Vs. GTO (1990) 79 STC 38 (Mad). 2.5 Hon'ble Andhra Pradesh High Court, in the case of State of Andhra Pradesh Vs. Commercial Tax officer and another (169 ITR 564) had an occasion to discuss about the binding nature of the decision of High Court. It held that the Tribunals functioning within the jurisdiction of a particular High Court in respect of whom the High Court has the power of superintendence under article 227 are bound to follow the decisions of the High Court unless, on an appeal to the Supreme Court, the operation of the judgment is suspended. It further held that it is not permissible for the authorities and the Tribunals to ignore the decisions of the High Court or to refuse to follow the decisions of the High Court on the pretext that an appeal has been filed in the Supreme Court which is pending or that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is pending in the Supreme Court. (b) that a special leave petition is filed in the Supreme Court seeking leave to appeal against the judgment of this Court and the special leave petition is pending in the Supreme Court; (c) that the Department has not accepted the decision of this Court and is taking steps to file an appeal before the Supreme Court. We have noticed observations to the above effect in the orders passed by the Commercial Tax Authorities, including the Head of the Department, Commissioner of Commercial Taxes, Income-Tax Officers, including the Head of the Department, the Commissioner of Income-tax, Central Excise and Customs Authorities, including the Collector of Central Excise and Customs and a host of other authorities. The question for consideration is whether the authorities below can refuse to follow the judgments of this court on the above grounds". ………… "It is clear from the judicial pronouncements above referred to that the authorities and the tribunals functioning within the jurisdiction of this court in respect of whom this court has the power of superintendence under article 227 are bound to follow the decisions of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, I hold that the impugned order passed by the Income-tax Officer is wholly without jurisdiction and the same is liable to be set aside and I hereby do so". 2.9 The Hon'ble Bombay High Court in the case of Bank of Baroda Vs. H.C. Shrivatsava and Another (256 ITR 385) has also dealt with the impugned issue and the relevant observations are extracted below: "At this juncture, we cannot resist observing that the judgment delivered by the Income-tax Tribunal was very much binding on the Assessing Officer. The Assessing Officer was bound to follow the judgments in its true letter and spirit. It was necessary for judicial unit and discipline that all the authorities below the Tribunal must accept as binding the judgments of the Tribunal. The Assessing Officer being an inferior officer vis-à-vis the Tribunal, was bound by the judgment of the Tribunal and the Assessing Officer should not have tried to distinguish the same on untenable grounds. In this behalf, it will not be out of place to mention that "in the hierarchical system of courts" which exists in our country, "it is necessary for each lower tier" including the High Court, "to accept loyally the decisions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 immediately within the specified time so that in future none of the revenue officer dare to disregard the order passed by the Appellate authority including the order of this temple of justice on which public at large have faith and high regard. Thus, this ground may kindly be allowed. 3. With respect to ground no. 3, it is submitted that this ground is consequential to ground 1, therefore, if ground no. 1 is allowed, this ground is not pressed at present. 3.1. We find that Shri Ashwin Mehta also filed his written submission dated 14.1.2021 for consequential relief on additional grounds which was heavily relied upon by the ld AR. 3.2. Per Contra, the ld Special Counsel for the Revenue , vehemently objected to the admission of additional grounds per se and accordingly it was argued that all the aforesaid averments made by Shri Ashwin Mehta would be of no relevance. 3.3. We find that the issues raised in additional grounds are purely legal in nature and also go to the root of the matter not involving verification of any fresh facts and hence in view of the decision of the Hon‟ble Apex Court in the case of NTPC Limited reported in reported in 229 ITR 383, we are inclined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was termed as order giving effect to the ld. CIT(A)‟s order, the ld. AO did not disturb the total income already determined vide order dated 15/03/2016 in third round of proceedings as tabulated supra on the ground that the said income would get reduced after verification by him. 3.6. The ld. AO after due verification of all the issues and contentions raised by the assessee vide above mentioned grounds i.e. ground Nos. 6,8,10,13,17,28,29 & 31 raised before the ld. CIT(A) in the third round of proceedings as tabulated supra, passed an order dated 02/05/2018 actually giving effect to the order of the ld. CIT(A) dated 28/06/2017. In this giving effect order to the ld. CIT(A), the ld. AO determined the total income of the assessee at ₹ 1143,38,34,160/- after giving relief for the following items:- Particulars Amount (Rs.) Amount (Rs.) Income computed as per OGE dated 28.09.2017 2346,32,06,080 LESS (As per para 30.2 and 30.3 of CIT(A)'s order dated 28.06.2017) Addition on account of Profit on sale of shares in shortage - Credit in respect of 44 companies of letter dated 31.01.1995 (on proportionate basis) 71,09,68,698 LESS (As per para 30.2 and 30.3 of CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind that the aforesaid five items were also considered already by the ld CITA vide his order dated 28.6.2017 in page nos. 54 to 75 in para 24.22 for item (a) above, page nos. 43 to 48 in para 24.16 for item (b) above, page no. 76 para 24.24 for item (c ) above, page no. 81 para 25.7 for item (d) above and page no. 90 para 27.9 for item (e ) above. Similarly, this tribunal vide its order dated 14.1.2019 had also considered these items on merits in page nos. 33 to 78 in paras 9 to 9.49 for item (a) above, page nos. 33 to 78 in paras 9 to 9.49 for item (b) above, page no. 73 para 9.43 for item (c ) above, page nos. 78 to 84 paras 10 to 10.6 for item (d) above and page nos. 89 to 96 paras 12 to 12.9 for item (e ) above. Hence the assessment order dated 15.3.2016 and the first appellate order dated 28.6.2017 got merged with the tribunal order dated 14.1.2019 before passing the impugned order under appeal by PCIT U/s 263. Applying the theory of "Doctrine of Merger‟, the ld PCIT ought not to have invoked revision jurisdiction u/s 263 of the Act by seeking to revise the giving effect order to ld CIT(A) order. 3.8. We find that the revision proposal u/s 263 of the Act has been trige ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;, which means that proposal for initiation of revision proceedings must be initiated by the CIT, because, it is the CIT who has to call for and examine the records. But in the instant case the proposal came from the AO and on receipt of the proposal, the CIT initiated revision proceedings. Therefore, in our opinion, the proceeding gets flagged at the threshold. - We, therefore, hold that the proceedings were bad in law and thus subsequent proceedings are annulled. (ii)Rupayan Udyog Vs. CIT ITA No. 1073/Kol/2012 dated 28.11.2018 The power vested in the CIT is that of revisional jurisdiction to interfere with the order of AO, if it is erroneous in so far as prejudicial to the revenue and therefore, the power to exercise the revisional jurisdiction is vested only with Pr. CIT/Commissioner if he considers the order of the AO to be erroneous in so far as prejudicial to the interest of the revenue. The power cannot be usurped by the AO to trigger the revisional jurisdiction vested with the CIT as per the scheme of the Act which gives various powers to various authorities to exercise and they have to exercise powers in their respective given sphere which is clearly ear-marked and spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efer to a plea set-up by the assessee based on the decision of our co-ordinate Bench in the case of Ashok Kumar Shivpuri, ITA No. 631/Mum/2014 dated 07.11.2014. In this case, the Tribunal found that the Commissioner invoked Sec. 263 of the Act based on a proposal received from the Assessing Officer. The Tribunal found it inconsistent with the requirement of Sec. 263(1) of the Act and held that the initiation of proceedings u/s 263 of the Act was bad-in-law. The aforesaid proposition also supports the infirmity in the action of the Commissioner in as much as para 2 of the impugned order brings out that the initiation of proceedings u/s 263(1) of the Act is based on the proposal of the Assessing Officer dated 03.01.2013. (v)VinayPratap Thacker ITA No. 2939/Murn/2011 [27.02.2013) As per Section 263(1), the CIT must himself come to a conclusion, after applying his own mind, because, the words used in the section are"..... and if he considers ….",here, application of his own mind becomes important. It is important to examine the similarity of the expression used under section 147(1) and 263(1). Under section 147(1), the expression used is "has reason to believe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of this Tribunal dated 29.10.2014 in the present case, we noted that this Tribunal has not set aside assessment and has also not directed the AO to make a fresh assessment but as observed by the AO himself in his order giving effect to the order of the Tribunal dated 30.01.15 restored/set aside the issue to the file of AO and directed the AO to verify /examine each entry in the books of accounts and to decide the issue afresh after examining the books of accounts of the assessee. Consequently, we noted, that the AO, passed the order dated 30.01.2015 determining the income of the assessee at ₹ 6,84,08,000/- as declared by the assessee against the income of ₹ 2014,04,65,298/- determined vide assessment order passed u/s 144 dated 27.3.1995. The AO without resorting to the provisions of section 154 of the Act, passed another order giving effect to the order of the Tribunal dated 15.3.2016 purporting to be an order u/s 254 r.w.s 143(3) of the Act assessing the total income u/s 254 rws 143(3) of the Act which order is under challenge before us. Sh. Denial even though vehemently argued and tried to justify the action of the AO and the impugned order passed by the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation 1.-For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include - (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-Tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal vide its order dated 14.01.2019. Clause (c) of Explanation (1) to Section 263 (1) of the Act has specifically been inserted with the purpose that judicial hierarchy must be maintained and the junior officer should not brush aside the decision of superior or the Appellate authority on the subject matter which had been duly considered and decided by the Appellate authority. We are conscious of the fact that the order dated 2.5.2018 passed by the ld AO cannot be subject matter of appeal by the revenue as no appeal can be filed by the revenue. Even assessee has also not filed any appeal against the said order. But the facts of the above case clearly prove beyond any doubt that the issue in the said order was subject matter of appeal before the ld CITA as well as this tribunal in the appeals filed in the second round of proceedings filed by the revenue as well as by the assessee. The tribunal has considered and decided the subject matter of the issues before the ld AO vide its order dated 14.1.2019 prior to the order passed u/s 263 of the Act by the ld PCIT. Therefore, having regard to the provisions of section 263 of the Act, the order dated 2.5.2018 giving appeal effect to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lready been reproduced hereinabove. The order dated 02/05/2018 passed by the ld. AO was nothing but the order giving effect to the order of the ld. CIT(A) dated 28/06/2017, though termed as an independent order passed u/s.154 of the Act by the ld. AO. This fact we have already addressed elsewhere in our order, that is to say that the order dated 02/05/2018 is only effectively an order giving effect to the order of the ld. CIT(A) dated 28/06/2017. We find that the ld. PCIT has only sought to exercise revision jurisdiction u/s.263 of the Act for revising this order dated 02/05/2018 passed by the ld. AO. As could be evident from the table hereinabove representing the series of proceedings in three rounds, it is evident that against the assessment order framed by the ld. AO on 15/03/2016, in the third round of proceedings, the assessee had preferred an appeal before the ld. CIT(A) and which was further appealed by the Revenue as well as by the assessee before this Tribunal. We have already mentioned that this Tribunal vide its order dated 14/01/2019 had quashed the assessment order dated 15/03/2016. Hence, the entire proceedings in the third round stood quashed. While this is so, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2017 to CIT(A)'s order dated 28.06.2017 is being rectified u/s. 154 of the Act to give necessary appeal effects". 3.15. In this order we find the ld.AO after due verification had granted relief for 10 items against which the ld. PCIT has exercised revision jurisdiction u/s.263 of the Act by holding that the order passed by the ld. AO is erroneous and prejudicial to the interest of the revenue only in respect of five items as tabulated supra. 3.16. We also find that the ld. PCIT in page 34 para 12 of his order states that no documents were ever submitted by the assessee before the ld. AO. We find that this statement of ld. PCIT to be factually incorrect as all the necessary details were already placed on record by the assessee before the lower authorities on more than one occasion. This fact is duly confirmed by the ld. CIT(A) while passing his order on 28/06/2017 in the third round of proceedings vide para 7 page 10 of his order. We find that the ld. CIT(A) categorically records that assessee had filed copies of paper book which was already filed before the ld. AO in para 7 of his order. In fact the assessee had brought to the notice of the ld. PCIT while giving reply to sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat certain reliefs have already been conditionally granted to the assessee. We find that ld. Senior Counsel representing the Income Tax department had sought time before the Special Court from time to time by stating that the ld. AO is in the process of verification of various documents in order to give effect to the order of the ld. CIT(A) dated 28/06/2017 and accordingly, the matter sought was finally adjourned to 07/06/2018. Further vide order dated 26/04/2018, the Special Court categorically records that the ld. Senior Counsel representing the Income Tax department on instructions had stated that the final order giving effect to order of the ld. CIT(A) will be passed within one week from today i.e. 26/04/2018 and that all necessary ground work prior to passing of the orders giving effect has been completed as of yesterday i.e. 25/04/2018. Finally the giving effect order to ld. CIT(A) order dated 28/06/2017 has been passed by the ld. AO on 02/05/2018 within the time granted by the Special Court. We have also gone through all these documents of Special Court which are enclosed in paper book-2 filed by the assessee vide pages 292 to 314 thereon. We have also gone through the affi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO. 3.18. We find that the ld. PCIT had placed reliance on Explanation-2 to Section 263 of the Act which has been inserted by the Finance Act 2015 w.e.f. 01/06/2015 by stating that where the order is passed by the ld. AO without making enquiries or verification which should have been made by him then the ld. PCIT could validly exercise revision jurisdiction thereon. We have already stated that requisite enquiries have been indeed already carried out by the ld. AO in the order dated 02/05/2018 which is the order giving effect to the order of the ld. CIT(A) dated 28/06/2017. With regard to reliance placed on Explanation-2 to Section 263 of the Act, we find that the Co-ordinate Bench of Jabalpur Tribunal in the case of Jashn Beneficiary Trust vs. Assistant Commissioner of Income Tax in I.T. Appeal No.100 (JAB) of 2016 dated 15/03/2017 had held as under:- "11. No doubt, clause (a) of Explanation 2 to section 263 deems the order to be erroneous and prejudicial to the interests of the Revenue in case the order is passed without making enquiries or verification which should have been made in the opinion of the Principal Commissioner or the Commissioner. In our opinion, for the applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustainable in the eyes of law in view of the fact that the impugned grievance of the ld. PCIT is that the ld. AO had not carried out proper enquiries on the aforesaid 5 issues as tabulated supra. While it is so, how and on what basis the ld. PCIT comes to a conclusion that those five issues deserve to be decided against the assessee by way of withdrawal of relief. At best, the ld. PCIT could have only directed the ld. AO to conduct enquiries even if he is of the opinion that enquiries were not carried out properly by the ld. AO. The entire action of the ld. PCIT goes to prove that the entire issue has been addressed with a pre-conceived notion in order to reach a pre-conceived destination by forgetting the legal tenets, factual verifications, verification of documents carried out by the ld. AO, improperly applying provisions of Explanation-2 to Section 263, not respecting the judicial hierarchy by ignoring the order of this Tribunal dated 14/01/2019 wherein the Tribunal had already quashed the assessment order dated 15/03/2016 but also granting relief to the assessee on merits on each of the five issues that were subject matter of revision proceedings, thereby proving his highhande ..... 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