9911796707
TMI Blog1985 (3) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... o fall -------------------------------------------------------------------------------------------------------------------------------------------------- 1. Freight charges 7,12,031 35B(1)(b)(iii) 2. Clearing charges 56,051 35B(1)(b)(iii) 3. Inspection charges 2,650 35B(1)(b)(iii) 4. Salaries 24,705 Sub-clauses (i) to (iv) of clause (b) of section 35B(1) 5. Bonus 10,425 Sub-clauses (i) to (iv) of clause (b) of section 35B(1) 6. Rent 4,000 Sub-clauses (i) to (iv) of clause (b) of section 35B(1) 7. Stationery 5,151 Sub-clauses (i) to (iv) of clause (b) of section 35B(1) 8. Commission to SAIL 33,915 Not specified 9. Postage telegrams 1,084 Not specified 10. Commission to 3,000 Not specified promotion council 11. Advertisement 1,326 Sub-clause (i) of clause (b) of section 35B(1). " ----------------------- Total 8,54,338 ----------------------- 2. For facility of reference, we may quote relevant extract from the order of the ITO dated 21-11-1978 showing the manner in which he dealt with the issue of weighted deduction, ultimately allowing a deduction amounting to Rs. 2,84,779 : " The assessee-firm derives income from export of bamboos, imli and timber ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt previous year the activities mentioned in sub-clauses (i), (ii), (v) and (vi) of clause (b) of section 35B(1). He finally passed the order setting aside the assessment already made and directing the ITO to make a fresh order of assessment after giving an opportunity to the assessee to furnish the details and evidence as stated earlier and determining afresh whether the assessee is entitled to the allowance of weighted deduction under section 35B in respect of any of the expenses booked under the various heads of accounts mentioned at serial Nos. 4 to 11 (both included) of the statement given in para 1 of his order and the amount of weighted deduction admissible, if any, in respect thereof, according to law, on examination of the details and the evidence furnished by the assessee and on obtaining such further information and/or making such further enquiries as may be considered by him to be necessary for this purpose and without allowing any weighted deduction under section 35B in respect of the expenditure on freight, clearing and inspection charges. 4. It will be worthwhile to analyse briefly the error found by and the approach of the Commissioner in giving the directions to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure at serial Nos. 8, 9 and 10 and in sub-para (v) with items at serial No. 11. In all these three sub-paras, the error prejudicial to the revenue pointed out by him was that the ITO accepted the claim of the assessee for the weighted deduction without examining and determining whether these expenses had been incorrect wholly and exclusively on any of the activities mentioned in various sub-clauses of clause (b) of section 35B(l). After hearing the authorised representatives of the assessee, he has dealt with this issue further in paras 9 to 12 of his order. In para 9, he has dealt with the contention put forward on behalf of the assessee that full details of the expenses at serial Nos. 4 to 11 had been furnished to the ITO in the course of assessment proceedings before him and that the ITO had accepted the assessee's claim for the weighted deduction having regard to the details furnished. The Commissioner held the claim of the assessee to be misconceived and not substantiated by the facts on records. He pointed out the following important facts : " The details of these various expenses, as were furnished by the assessee to the Income-tax Officer in the course of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the larger Bench of the Tribunal in J.H. Co.'s case was not part of the assessment records and that case was not known to many persons and that it was not the duty of the assessee to hint it and put it on record. In any event, it was contended that the ITO's order did not become erroneous because he did not follow the decision of the Tribunal in the aforementioned case. Shri Sharma took the further position that according to him, the Tribunal's decision was not case law. Another line of attack of Shri Sharma was that position about law must have attained a finality before it could be held by the Commissioner that the order of the ITO was erroneous. It was also submitted that correction on a question of law was beyond the purview of the Commissioner's jurisdiction under section 263. Shri Sharma also stated that an order may be prejudicial to the revenue but it may not be erroneous. He for his propositions relied on several decisions of the Tribunals including one of the Amritsar Bench of the Tribunal in the case of Jolly Engineers Contractors (P.) Ltd. v. ITO [1982] 2 ITD 92. 8. On behalf of the revenue, Shri Berjinder Singh submitted that the order of the larger B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the amount of certitude required is less than the words 'reason to believe' in section 147 of the Act require. Proceeding on the basis of analogy it was pointed out that whereas an ITO could be said to have reason to believe in consequence of information in his possession when even a decision of an AAC in favour of the revenue becomes known and could reopen an assessment on the basis of the view of the AAC by fulfilling the more stringent considerations of section 147(b), it cannot be argued plausibly that the Commissioner cannot act under section 263 using less stringent language to take action under section 263 on the basis of a decision of the larger Bench of the Tribunal. In support, attention was invited to the Kerala High Court decision in CIT v. Kerala State Industrial Development Corpn. Ltd. [1981] 128 ITR 742. Finally, it was contended that the ratio of the decision of the Calcutta High Court in Ganga Properties' case will not apply when what is involved is interpretation of law by a competent authority. It was submitted that an interpretation of law given by a competent authority holds good always and it will not be applicable only from the date when the interpretation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal in the case of J.H. Co., it was clearly an error on his part of which the Commissioner has taken notice. Further, the pronouncement about the interpretation of law by a competent authority will indicate the state of law as it always was, irrespective of the date when the interpretation becomes available. Actually, it is obvious that the ITO has failed to notice the decision of the larger Bench of the Tribunal. 10.1 The next aspect is about the value of a decision of a larger Bench of the Tribunal qua the decisions of smaller Benches of the Tribunal expressing different views. There can be hardly any dispute that the Tribunal is a competent authority to pronounce on question of law arising under the Act, with which we are dealing now, and it functions in a judicial manner. Its decisions are to be followed by the lower authorities unless these are upset by a higher judicial authority. It follows the pattern of functioning of the High Courts inasmuch as the Benches normally of two members decide the appeal presented to it. According to a precedence followed by it, the President of the Tribunal can constitute a larger Bench to resolve the conflicting views of various Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of vendor-company while making an assessment on the assessees the vendee-company. It was a matter of due care on the part of the ITO and he had exercised his judicial capacity as best as he knew. In those circumstances, the Tribunal held that on the basis of the Tribunal's order in the case of vendor-company, the Commissioner could not hold the order of the ITO in the case of vendee-company to be erroneous, being prejudicial to the interests of the revenue. We may quote the following relevant passages from the order of the Tribunal in support of our view above : " 8. ...Now in the case of the vendor-company the ITO had looked into the agreement regarding the transfer of the buses and had rejected the plea of the assessee that any part of the consideration was either for the route permits or for the goodwill. He had, therefore, proceeded to work out the profit under section 41(2) in the case of the seller-company. Taking the same view in the case of the assessee-company, he allowed the depreciation on the sale consideration for these buses. Now the Commissioner is of the view that the ITO should have anticipated the possible appeal by the assessee and a possible view whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of section 263. 9. As regards the question of prejudice to the revenue, the order of the Commissioner shows that prejudice has been caused as a result of the order of the Tribunal and not as a result of the order of the ITO. If the order of the Tribunal had been otherwise, then the Commissioner could not come to the conclusion that the order of the ITO was prejudicial to the interests of revenue. In our opinion, this is entirely a wrong approach regarding the scope of section 263. The prejudice to revenue would disappear in case the decision of the Tribunal is upset by any judgment of the High Court or of the Supreme Court. The view that an order being prejudicial to the interests of revenue is dependent on the decision of the appellate authorities or the judgment of the High Court or the Supreme Court, is not a correct view and cannot upheld. We, therefore, agree with the learned counsel for the assessee that the assumption of jurisdiction by the Commissioner in the case was wrong and the order under section 263 cannot be upheld. " 10.3 Shri Sharma also invited attention to a decision of the Jaipur Bench of the Tribunal referred to in an article by Shri N.M. Ranka in Februa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TO could reopen an assessment by taking note of the interpretation of law given by the AAC. It is difficult to accept that the Legislature has intended a narrower jurisdiction for the Commissioner while framing section 263. Further, it is all the more difficult to accept the proposition that Commissioner will watch helplessly when errors of law are committed by his ITOs. There is nothing in section 263, which already confers a limited period of action of two years only on the Commissioner, to place a restriction of the kind suggested by the assessee's counsel. After all what the ITO seeks to do by reopening an assessment is also to safeguard the interests of the revenue and the same goal is to be attained by the Commissioner acting under section 263. Finally, we may mention that if Shri Sharma's views about the Commissioner having no jurisdiction when a question of law is involved is to be accepted, it will result in substantially shrinking the jurisdiction of the Commissioner, which will amount to rendering the provisions of section 263 otiose to a large extent. An interpretation bringing about such a result cannot be favoured. 10.5 In view of the above discussion, we are inclin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he had only generally dealt with the issue. Relying on the Gujarat High Court decision in Addl. CIT v. Mukur Corpn. [1978] 111 ITR 312, the Delhi High Court decision in Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375 and the Karnataka High Court decision in Thalibai F. Jain v. ITO [1975] 101 ITR 1, it was the contention of the revenue that the ITO's failure to conduct enquiries has resulted in an error prejudicial to the interests of the revenue and the Commissioner has rightly acted under section 263. 12. We have carefully considered the submissions of both the sides. It is seen from the statement of facts on pages 1 to 3 referred to by the assessee's counsel that the ITO issued notice under section 143(2) of the Act for the first time on 26-10-1978 fixing the case for 30-10-1978. On 30-10-1978, the assessee appeared along with his chartered accountant and produced account books. On that date, the ITO asked for 'evidence regarding claim under section 35B'. The case was adjourned to 1-11-1978. On 1-11-1978, the assessee appeared again with the chartered accountant and filed a letter dated 1-11-1978 along with nine judgments of various Benches of the Tribunal. We have looked th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TO. The Commissioner rejected the assessee's plea that it was not given sufficient time to produce the necessary evidence before him but as he did not wish to deny the assessee ; the grant of weighted deduction under section 35B admissible in law, he accepted the assessee's request to give further opportunity. If the data and the evidence had been furnished to the ITO in response to his enquiries, such a request would not have been made by the representatives of the assessee. 12.2 It follows from the above discussion that the Commissioner has acted under section 263 by taking note of the prima facie position about the ITO failing to make the necessary and proper enquiries. In such circumstances, we do not find any flaw in his action to proceed under section 263 and the departmental representative has correctly relied on three authorities in this behalf. Here also we find that the Commissioner has acted properly. 13. In the result, the appeal of the assessee fails and is dismissed. Per Shri U.S. Dhusia, Judicial Member-- I have perused the finding of the learned Accountant Member, but I am not able to persuade myself that his finding that the Commissioner (Appeals) had passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax Appellate Tribunal lays down the correct position in law in respect of the aforesaid sub-clause (iii) of clause (b) of sub-section (1) of section 35B. " In ignoring the Special Bench decision, according to the Commissioner, the ITO placed himself in error and that error, being prejudicial to the revenue, made the assessment liable to be revised by the Commissioner, who relying upon the Special Bench decision, caused the weighted deduction to be withdrawn on these expenses. As far as the expenses listed in the second category is concerned, the Commissioner held that the ITO reached a finding without making any enquiry. He observed as under : " .... The assessee had not furnished any details in respect of any of these expenses so as to show that these expenses had been incurred on any of the activities mentioned in various sub-clauses of clause (b) of sub-section (1) of section 35B. There is also nothing in the assessment records to show that the ITO had required the assessee to furnish such details.... " 3. The Commissioner, accordingly, passed the impugned order, withdrawing the weighted deduction on freight, clearing and insurance charges and setting aside the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the decision of a High Court, the floodgates of the dissent are opened, which once opened, could not be shut again. The Tribunal, if allowed to act on the basis of this right, may not confine itself to pronounce on the correctness or otherwise of a decision of another High Court but may be tempted to make a pronouncement in respect of a decision of the Punjab and Haryana High Court, to which it is subordinate. The other day, it may pronounce upon the correctness or otherwise of the decision delivered by the highest Court, i.e., the Supreme Court. If once it is conceded that the Tribunal has a right to pronounce on the correctness of the superior authority, like the High Court or the Supreme Court, the same right can be claimed not only by other Benches, but by the authorities subordinate to the Tribunal, say the Commissioner or even the ITO. The ITO may openly pronounce upon the erroneous decision not only of the Tribunal, to which it is subordinate, but on those of the High Court of the State in which he has jurisdiction. He may also not spare the decision of the Supreme Court. It is not that a view cannot be taken by the Tribunal different from that expressed by a High Court. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner whether as strong as the expression 'reason to believe' indicates or otherwise has to be a consideration in conformity to the judicial rules and principles and not based on a subjective approach. A consideration of the Commissioner must not be subjective, but judicially sustainable. Looked at from these decisions, the finding of the Commissioner that the order of the ITO, based on the decisions of the Division Bench was incorrect, as the correct position was brought about in the decision of the Special Bench, has to be considered proceeding from the subjective consideration only and not in conformity to the judicial discipline governing the administration of justice. It is an irony of situation that both the day in and day out, correctness of the correct decision of the Special Bench in the case of J.H. Co. is being assailed in numerous references, filed by the revenue before us, is besides the point. A point has been made by the learned Accountant Member that the decision of a Special Bench, if not binding on the Division Bench, enjoys precedence over the decision of a Division Bench. I have already pointed that there is no basis in law for such a view, when dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Tribunal.... " As a matter of fact, whenever there is a decision of the higher appellate authority, the subordinate authorities are bound to follow the said decision if judicial discipline is to be maintained. 8. I must hold that conditions for exercise of the power under section 263, namely, that there must be material for the Commissioner to consider that the order passed by the ITO was erroneous insofar as it is prejudicial to the interests of the revenue, were not fulfilled in the instant case. If that is the position, then the notice must be held to be without authority. 9. In this view of the matter, the finding of the Commissioner that the order of the ITO was erroneous is not judicially sustainable or maintainable and is to be vacated. 10. I move to consideration of the other plea that the ITO in reaching the finding that the expenditure incurred on the items from serial Nos. 4 to 11 was entitled to weighted deduction, was not followed by any enquiry to show that the expenses had been incurred on any of the activities mentioned in the various sub-clauses of clause (b) of sub-section (1) of section 35B. I am not able to appreciate the purport of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal. 13. There was another hearing on 4-11-1978, when further details, asked for by the ITO, were filed and the case was discussed. 14. It was only after this hearing on 4-11-1978 that the assessment was finalised on 20-11-1978 after an interval of more than two weeks. Taking note of the course of hearing and the time taken after the last hearing, we cannot reach a finding that the assessment was finalised in a huff without making a proper appraisal of facts of the case or without properly appreciating the reply of the assessee, running into forty pages, containing nine Tribunal judgments. On these facts, we cannot hold that no enquiry was made by the ITO. As I have indicated that the ITO had not only satisfied himself about the reality or genuineness of the expenditure, but also the rationale of the expenditure, the purpose for which it was incurred. The ITO had, in his earlier part of the assessment, noted that the entire turnover consisted of the export. He had gone further. He had required evidence in support of the claim which had led the assessee to file a forty page reply and furnish nine judgments of the various Benches of the Tribunal, which supported the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 255(4) of the Act. 2. The facts leading to this reference may briefly be stated thus. The assessee, Export House, is a partnership firm carrying on business of exporting timber and other articles to Pakistan. The ITO, assessed the assessee for the assessment year 1978-79 computing loss of Rs. 84,706 after allowing weighted deduction under section 35B in the sum of Rs. 2,84,779 in respect of the following expenses : Serial Nature of Amount of expenditure No. expenditure Rs. 1. Freight charges 7,12,031 2. Clearing charges 56,051 3. Inspection charges 2,650 4. Salaries 24,705 5. Bonus 10,425 6. Rent 4,000 7. Stationery 5,151 8. Commission to SAIL 33,915 9. Postage telegrams 1,084 10. Commission to Promotion Council 3,000 11. Advertisement 1,326 ----------------------- Total 8,54,338 ----------------------- On examination of the assessment records, the Commissioner felt that allowance of weighted deduction in respect of the above items was prejudicial to the interests of the revenue and with a view to correct this error, he issued a notice to the assessee under section 263. The reasons that prevailed with the Commissioner in coming to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of other items, the ITO did not show that these expenses were incurred on advertisement or publicity outside India in respect of the export business of the assessee. In sum, the Commissioner came to the conclusion that the ITO had committed an error in accepting the claim of the assessee for the allowance of weighted deduction and the allowance was erroneous and caused prejudice to the interests of the revenue. 3. To the notice issued by the Commissioner to the assessee to show cause as to why the allowance given by the ITO should not be withdrawn, it was submitted on behalf of the assessee that the claim allowed by the ITO on the basis of several decisions given by the Tribunal, which were produced before the ITO at the time of assessment, and it could not in the circumstances be said that the ITO committed mistake or error when he followed the decisions of the Tribunal. The decisions of the Tribunal where the claim of the assessee was accepted were again cited before the Commissioner, which he listed in his order. It was specifically pointed out to the Commissioner that even though there was a Special Bench decision of the Tribunal in the case of J.H. Co , it did not mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (b) of sub-section (1) of section 35B and qualified for the allowance of the weighted deduction. He observed that there was no support for that view in the decisions of the Tribunal cited before him. On this view he came to the conclusion that there was no direct or exclusive relationship of the expenses under any of these heads of accounts with the activities mentioned in sub-clauses (i), (ii), (v) and (vi) of clause (b) of section 35B(1) so as to warrant a view that these expenses were incurred wholly and exclusively on these activities in their entirety even if it were to be accepted that the assessee carried on the activities mentioned in the abovesaid sub-clauses. He, thus, held that the allowance of weighted deduction of the sum of Rs. 2,84,779 by the ITO was clearly prejudicial to the interests of the revenue and was erroneous. However, while he categorically held that the allowance of weighted deduction in respect of serial Nos. 1 to 3 should not be made, in respect of other items he directed the ITO to re-verify the claim and then allow in the light of such fresh examination. This is in main the sum and substance of the order passed by the Commissioner under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Commissioner that filing of information before the ITO was not sufficient and adequate to prove or justify the assessee's claim and, therefore, an error was committed by the ITO. On the other hand, the learned Judicial Member was of a different opinion. He was of the opinion that when the ITO has followed a decision of the Tribunal and applied the interpretation of law as given by it, he does not commit an error causing prejudice to the interests of the revenue. After discussing the law bearing on the subject of precedence, he held that it was not open to the ITO or the Commissioner for that matter to say that he would not follow an order of the Tribunal but it is always open to him to say that he would desire to take a different view provided there was sufficient reason for doing so. The learned Judicial Member further pointed out that before the Commissioner could act under section 263, he must first of all find out that there was an error committed by the ITO. That is a condition precedent for the assumption of jurisdiction under section 263. In this case the Commissioner did not point out any error committed by the ITO except stating that by following the decision of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exports to the local turnover, which meant that if there was no local turnover and the entire output was exported, the entire expenditure of that nature could be said to be on promotion of export and, therefore, entitled to weighted deduction under section 35B. Thus, in his view, the Commissioner had not made a proper appraisal of the facts and came to erroneous conclusions. He also found that the ITO followed nine Tribunal decisions in allowing the assessee's claim and on those facts it could not be said that no enquiry was made by the ITO. He also noticed that in support of the claim the assessee filed before the ITO a reply containing 40 pages and furnished nine judgments of the various Benches of the Tribunal, which belied the view taken by the Commissioner that no enquiry was made by the ITO. He, therefore, preferred to cancel the order passed by the Commissioner. Thus, the difference of opinion couched in the beginning of this order has been referred to the President, who has nominated me as the Third Member. 5. My task is to find out first what is the error committed by the ITO which caused prejudice to the interests of the revenue so that it could be said that the Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llows the view expressed by a Special Bench only to have uniformity of views and not on the view that the Special Bench had the power or endowed with the authority of overruling a Division Bench view. The constitution of the Special Bench in the Act is never meant to give the power to overrule the Division Bench decision. That can be done only when a Special Bench has been vested with the appellate jurisdiction or revisionary jurisdiction, both of which it does not possess under the law as it is constituted unlike the procedure obtaining in the High Courts. In a High Court the latter's patent appeal is specifically provided against the view expressed by a Single Judge or a Division Bench to a larger Bench. The view of the larger Bench will then be the view of the High Court which will have the effect of overruling the view expressed by a Single Judge or a Division Bench. Such law not being available or enacted or contemplated under the Act for the purpose of constituting the Special Benches, the Special Bench view cannot have the effect of upsetting or overriding or reversing the view of the Division Bench. The reference application lies to the High Court against the order of a Div ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the correct law so as to say that the ITO committed an error in not following it. Then he addressed himself to the question as to what should be the meaning of the word 'consider' used in section 263 ; whether that should be objective consideration, subjective consideration or restrictive consideration. He submitted that it should be objective consideration and looking it from the point of view of objectivity, he should have seen that the ITO also followed a decision of the Division Bench in allowing the assessee's claim and that did not cause any prejudice to the interests of the revenue at the point when he made the assessment. Referring to serial Nos. 4 to 11 he submitted that the Commissioner was not correct at all in observing that the ITO had not examined those claims in depth and that in any case the assessee had not produced before him the necessary details. All that could be done by an assessee was done by the assessee in this case ; all the information was furnished and there was nothing more to be done in this regard. It is only the inference to be drawn by the ITO on the basis of those information and even here the ITO drew correct inferences following the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iolation on the part of the ITO to have allowed weighted deduction on those items when the law was against it. He should have known the correct position in law and should have disallowed the claim. He should not have followed the orders of the Division Bench when it was not accepted by a Special Bench constituted specially for this purpose. In this context he went to the extent of saying that in fact and in law there cannot be any difference between considerations necessary to reopen an assessment under section 147 and considerations necessary to revise an assessment under section 263. Both are one and the same. Here in section 263 the word used is 'consider' while the words used in section 147 are 'reason to believe'. What is available for reopening an assessment under section 147(b) on the basis of the existence of a reason to believe that income has escaped assessment or under-assessed, the same considerations should also prevail and should be available to invoke the jurisdiction of the Commissioner under section 263 because of the use of the word 'consider' in section 263. Both sections 147 and 263 are aimed at preventing under-assessments and securing to the State what is due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he submitted that it is for the assessee to satisfy the ITO by adducing necessary evidence in support of the claim. If the ITO had not made appropriate enquiry or if the enquiry made by the ITO is found to be inadequate and if further enquiries are found necessary to support the assessee's claim, the order passed by the ITO can be said to be erroneous and the Commissioner acquires the necessary jurisdiction to revise the order under section 263. In spite of the several opportunities given, the assessee could not substantiate its claim as to what was the nature of services rendered in incurring the expenditure mentioned at serial Nos. 4 to 11. The Commissioner did not totally shut out the assessee with regard to these claims. All that he said was that the ITO should re-examine these claims and the assessee should file further evidence. A direction given to the ITO to gather further evidence and then to allow the claim is a most justified order that could be passed on the facts of this case and this order did not really cause prejudice to the interests of the assessee even though the order as originally passed, if allowed to stand, had caused prejudice to the interests of the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l on appeal shall be final, that is to say, the finality to the order passed by the Tribunal is taken away only if a reference application is filed under section 256. Thus, the orders of the Tribunal cannot be said to be final till the view of the Tribunal is accepted by the High Court. If the view of the Tribunal is accepted by the High Court, then the view expressed will not be the view of the Tribunal but the judgment of the High Court, which has got a different binding force under our Constitution as well as the Act notwithstanding an appeal against that judgment is filed before the Supreme Court. The same cannot be said of the Tribunal's view although the view expressed by the Tribunal is of persuasive value. It is also true that the Andhra Pradesh High Court in one case has taken the view that a view expressed by the Tribunal is binding on all the authorities over whom it exercises jurisdiction till the view is reversed by the High Court of that State. The Madras High Court has gone a step further and laid down a rule that if an authority inferior to Tribunal does not follow or apply the view of the Tribunal, that authority would be committing contempt of the Tribunal. These ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject or amendment of a provision of law or non-consideration of important place of evidence, etc., etc. If sufficient grounds are shown to show that the Special Bench had not considered an important and vital aspect, it is open to a Division Bench to express those points of difference. The convention that we have developed is that instead of a Division Bench straightaway differing from the view of the Special Bench, it will write to the President through the Vice President concerned to constitute still larger Bench to consider those aspects and the President would normally suggest constitution of still larger Bench. Instances of constituting a larger Bench to consider the view of the Special Bench do also exist. The whole object is to strive to secure uniformity in views, which is the prime concern of the Tribunal to develop faith of the litigants in its administration of justice. That does not mean either in fact or in law or in the contemplation of the Special Bench that the Special Bench will overrule a Division Bench view. As I said in the beginning since the Special Bench does not sit as an appellate authority over a Division Bench, it does not have the power of overruling a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal is diluted, still the views expressed by the Tribunal on questions of law are entitled to greater respect and are to be followed. If the ITO, therefore, follows the view expressed by the Tribunal on a question of law, which under the law it is empowered to express, he would not be committing an error of law at all, even if the view is found to be incorrect subsequently in the light of the judgments given by the High Court or other Benches of the Tribunal or if the law is to be otherwise. Assume a case where the Tribunal expressed an opinion on the question of law and it became final, within the meaning of section 254(4), then that view the ITO has to adopt notwithstanding the fact that there was a contrary decision of another Bench of the Tribunal elsewhere in the country against which a reference application has been filed making the order of the Tribunal not final. In such a situation can it be said that the ITO commits an error when he followed the view of the Bench which has become final ? The answer must be in the negative. As rightly pointed out by the learned departmental representative, the Courts have held almost unanimously that a view expressed by the AAC on a que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect of suspending the operation of the order under appeal and despite the fact that the pendency of an appeal may put the order in jeopardy, yet until the appeal is finally disposed of, the said order subsists and is effective in law. This is the cardinal priniciple to be borne in mind while deciding the issues involved in this case and in cases of this nature. It does not, therefore, seem correct to say on the authority of the Calcutta High Court decision, which has rendered its decision on the authority of the Supreme Court decision referred to above, that the ITO has committed an error in following an order of the Tribunal. Then there is another aspect to be considered. What is the meaning of the word 'record' used in section 263. Is the expression 'record' confined to the record as it stood when the ITO passed the order or does it include the subsequent material that could form part of the record ? When a similar situation came up for consideration before the Calcutta High Court, the Calcutta High Court held that the word 'record' meant the record available to the ITO when he passed the order and it does not include anything that comes into his possession subsequently [see Gan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is revisional powers under section 263. Once I arrive at this conclusion, I need not go into the merits at all. In this view of the matter, I find it rather extremely difficult to agree with the arguments advanced by the learned departmental representative, Shri Kapila, though they are very attractive and seemed acceptable at the first blush. There can be no two opinions on the point that the object of sections 147 and 263 is the same, namely, preventing the loss of revenue but there are limitations provided for in the Act for the assumption of jurisdiction. Since the assumption of jurisdiction under these sections put the finality of the orders in jeopardy, various limitations, restrictions and safeguards were built into these sections. Unless they are satisfied strictly by the authority concerned, be it the ITO under section 147 or the Commissioner under section 263. They cannot assume jurisdiction. Whatever may be the view of the Special Bench in relation to the view of a Division Bench, so long as the ITO followed a Division Bench view, he cannot be found fault with for not following the view of the Special Bench. A contrary view expressed by a Special Bench would certainly con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made. I am deliberately avoiding all the references given in the paper book to the various letters filed by the assessee in response to the various enquiries made by the ITO only with a view to reduce the burden of this order, which is already burdened. The Commissioner is, therefore, in my opinion, not quite correct in saying that the assessee had not produced enough evidence to justify its claim and that the ITO was in error when he accepted those claims. He cannot, therefore, assume jurisdiction to unsettle the finality of that view in the hope that something would come out if further enquiry was ordered. The assessee is an exporter and it is on record that the entire output is exported and there were no local sales. There are several orders of the Tribunal to show that expenditure to be allowed could be proportionate, which means proportionate to the export turnover as to the local turnover, which means that if there is export turnover as to nil local turnover, the entire expenses have to be allowed for weighted deduction. This is what the ITO has done and nothing was shown by the Commissioner to show that the expenditure so allowed by the ITO contained items which did not meri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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