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2014 DIGILAW 21 (RAJ)

Commissioner of Income v. Kailash Chand Methi

2014-01-02

AJAY RASTOGI, J.K.RANKA

body2014
JUDGMENT 1. - This appeal under section 260A of the Income-tax Act, 1961 (for short, "the IT Act"), has been preferred by the appellant-Revenue against the order of the Income-tax Appellate Tribunal (for short, "the ITAT") dated July 28, 2011, passed in I. T. A. No. 2191/JP-2011 by which the Income-tax Appellate Tribunal has allowed the appeal filed by the respondent-assessee against the order of the Commissioner of Income-tax, Kota (for short, "the CIT"). The relevant assessment year is the assessment year 2006-07. 2. The brief facts, as emerging on the fact of record, are that the respondent-assessee submitted a return of income for the assessment year 2006-07 on October 30, 2006, declaring an income of Rs. 2,32,969. An assessment under section 143(3) of the Income-tax Act came to be made by the Assessing Officer (for short, "the AO") wherein the income was computed and assessed at Rs. 6,81,500, vide order dated September 30, 2008 after analysing various claims made by the respondent-assessee. It is apparent that an addition of about Rs. 4,50,000 was made by the Assessing Officer. 3. Aggrieved by the said order, the assessee filed an appeal before the Commissioner of Income-tax (Appeals), who, after analysing the grounds raised by the respondent-assessee, partly allowed the appeal of the respondent-assessee, vide order dated March 19, 2010. It appears that the said order became final and neither the respondent-assessee nor the appellant-Revenue preferred an appeal before the Income-tax Appellate Tribunal. 4. The Commissioner of Income-tax (Administration), Kota, having powers of revision, issued a show-cause notice under section 263 of the Income-tax Act on October 29, 2009, on the premise that the order passed by the Assessing Officer on September 30, 2008, was erroneous in so far as it is prejudicial to the interests of the appellant-Revenue. 5. The respondent-assessee appeared before the Commissioner of Income-tax (Administration) and filed detailed submissions. The Commissioner of Income-tax (Administration) was satisfied and dropped the proceedings under section 263, vide order dated May 4, 2010. 6. 5. The respondent-assessee appeared before the Commissioner of Income-tax (Administration) and filed detailed submissions. The Commissioner of Income-tax (Administration) was satisfied and dropped the proceedings under section 263, vide order dated May 4, 2010. 6. Subsequent to this order, after change of the Commissioner of Income-tax, the subsequent Commissioner of Income-tax (Administration) issued another show-cause notice under section 263 of the Income-tax Act read with section 154 of the Act dated January 17, 2011, for this very assessment year wherein he was of the view that the assessment order dated September 30, 2008, was erroneous and prejudicial to the interests of the respondent-Revenue and the previous Commissioner of Income-tax has not reviewed all aspects while passing the order under section 263 of the Act and, accordingly, the Commissioner of Income-tax, Kota, vide order dated February 1, 2011, set aside the order of the Assessing Officer dated September 30, 2008, and also observed that the Assessing Officer, who passed the order on September 30, 2008, had no jurisdiction to complete the assessment as the income of the subsequent assessment year 2007-08 was over rupees five lakhs and as per the circular of the Additional Commissioner of Income-tax, Range, Sawai Madhopur, the jurisdiction has to be seen on the basis of income as on April 1, 2001, and on 1st April of every subsequent year thereafter. Therefore, the Commissioner was of the opinion that since the return of income for the assessment year 2007-08 was over rupees five lakhs and, as such, the jurisdiction lied with the Deputy Commissioner of Income-tax/Assistant Commissioner of Income-tax and not the Assessing Officer. Thus, the Commissioner of Income-tax concluded that the order under section 143(3) itself was without authority and invalid, hence, the Assessing Officer, having proper jurisdiction, should re-assess the returned income again. 7. This order of the Commissioner under section 263 was assailed by the respondent-assessee before the Income-tax Appellate Tribunal, who, vide order dated July 28, 2011, quashed the order under section 263 and sustained the original order dated September 30, 2008. This is assailed before us by the appellant-Revenue by filing the instant appeal. 8. 7. This order of the Commissioner under section 263 was assailed by the respondent-assessee before the Income-tax Appellate Tribunal, who, vide order dated July 28, 2011, quashed the order under section 263 and sustained the original order dated September 30, 2008. This is assailed before us by the appellant-Revenue by filing the instant appeal. 8. Smt. Parinitoo Jain, learned counsel for the appellant-Revenue, submitted that the order of the Income-tax Appellate Tribunal is unjustified since as per the circular of the Additional Commissioner, the Income-tax Officer had no jurisdiction to assess the return under section 143(3) of the Act and since the assessment order was passed by the lower authority, i.e., the Income-tax Officer who had no jurisdiction, therefore, the Commissioner initiated proceedings under section 263 validly and was justified in quashing the said assessment. She contended that the Assessing Officer, assessing originally, overlooked various claims and in summary manner considered the issue and did not touch upon the vital issues which had far reaching consequences. Had the Assessing Officer, assessing originally, been vigilant, then he could have looked into the issues more appropriately. She contended that had the things been looked into by the higher authority in correct perspective, possibly so many lacunae, might not have been left by the Assessing Officer. She contended that the Income-tax Appellate Tribunal grossly erred in quashing the order of the Commissioner of Income-tax and submitted that substantial questions of law emerge out of the order of the Income-tax Appellate Tribunal and need consideration by this court. 9. We have heard learned counsel for the petitioner and considered the arguments advanced by her and on a perusal of the impugned order, we are not satisfied with the contentions raised by the counsel for the Revenue, particularly, in view of the fact that a return was submitted by the respondent-assessee before the concerned authority who had jurisdiction over the case on the date of filing of the return and it was not the duty of the respondent-assessee to find out about an internal circular that jurisdiction lied over the case with the Deputy Commissioner of Income-tax/ Assistant Commissioner of Income-tax. The respondent-assessee appeared a number of times before the Assessing Officer who issued show-cause notice under section 143(2) and even after a number of hearings, the Income-tax Officer, Ward No. 2, Sawai Madhopur made additions to the tune of about Rs. The respondent-assessee appeared a number of times before the Assessing Officer who issued show-cause notice under section 143(2) and even after a number of hearings, the Income-tax Officer, Ward No. 2, Sawai Madhopur made additions to the tune of about Rs. 4,50,000 and the matter even travelled before the Commissioner of Income-tax (Appeals) who allowed the appeal in part. 10. It is also an admitted fact that one Commissioner of Income-tax (Administration) had issued notice under section 263 dated October 29, 2009 and he also being satisfied dropped the proceedings under section 263 of the Income-tax Act and it would be fruitful to quote paragraph 6 for the present purpose which is reproduced ad infra : "Considering the submissions and facts of the case, it is noticed that the issue involved have been examined by the Assessing Officer on the basis of the submissions/details made by the assessee. The major issue regarding obtaining confirmations of advance given to farmers, the assessee has submitted that the same are brought for ward from previous years. The assessee has also received interest of Rs. 4,18,328 on various advances given. The Assessing Officer has made substantial addition/disallowances aggregating to Rs. 4,45,526 while framing the order under section 143(3) out of which some of the issues are subject matter of issuance of notice under the present proceedings. It would be incorrect to deviate from the view taken by the Assessing Officer and frame a different view now. Considering overall facts and circumstances of the assessee's case, the proceedings initiated under section 263 of the Income-tax Act, 1961, are dropped." 11. Even the said Commissioner while dropping the proceedings on May 4, 2010, did not observe as to whether jurisdictional error was there and therefore, in our view, the Commissioner, in the present order under section 263 was not justified in re-initiating the proceedings under section 263 mainly on this premise about jurisdiction. There was no fault of the respondent-assessee. The respondent-assessee appeared before the Assessing Officer who issued valid notice and the Assessing Officer had the authority to issue notice under section 143(2) as aforesaid and complied with the requirements raised by him. The respondent-assessee may not be aware of such requirements and for this the respondent-assessee cannot be subjected to fresh innings at the hands of another Assessing Officer. 12. The respondent-assessee may not be aware of such requirements and for this the respondent-assessee cannot be subjected to fresh innings at the hands of another Assessing Officer. 12. It would be fruitful to quote section 263(1) of the Income-tax Act, 1961 which provides as under : "263. Revision of orders prejudicial to revenue. - (1) The 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 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. - 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 Chief Commissioner or Director General or Commissioner authorised by the Board in this behalf under section 120 ; (b) 'record' shall include and shall be deemed always to have included all records relating to any proceeding under this Act avail able at the time of examination by the Commissioner ; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject-matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal." 13. Admittedly, the assessment order was challenged before the Commissioner of Income-tax (Appeals) who also allowed part relief and even up to the stage of the order of the subsequent Commissioner of Income-tax, Kota who dropped the proceedings under section 263 on May 4, 2010, the respondent-assessee was not made aware of the jurisdictional issue. 14. It may also be observed that the notice under section 143(2) was issued on January 11, 2007, by the Income-tax Officer and at that particular time, the income for the subsequent assessment year, i.e., the assessment year 2007-08 was not submitted rather the financial year had not ended by then and, in our view, the Income-tax Officer assumed valid jurisdiction. The return for the assessment year 2007-08 was submitted on August 31, 2007 and, in our view, merely because assessment order was passed after August 31, 2007, the order passed by the Income-tax Officer on September 30, 2008, cannot be said to be without jurisdiction rather, the assessment order, passed on September 30, 2008, can be said to be with jurisdiction and validly passed. 15. We are also of the view that there is no provision either under section 154 or under section 263(1) to inform the Commissioner of Income-tax to issue show-cause notice under section 263 by the lower authorities as the Commissioner only has the jurisdiction to issue show-cause notice under section 263 if he himself is satisfied after examining the records of the assessment order passed by the Assessing Officer which falls under his jurisdiction and the Commissioner of Income-tax also gets power of revision if the twin conditions are satisfied that the order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. 16. Revisional powers conferred on the Commissioner under section 263 of the Act is wide, it enables the Commissioner of Income-tax to call for and examine the record of the case or pass any order under the Act and also empowers him to make or cause to be made such an inquiry as he deems fit and necessary in order to find out, if the order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, however, he has to have certain material to come to the conclusion. Once, he comes to the above conclusion that there is material, the Commissioner of Income-tax is empowered to pass an order as per the circumstances of the case which may warrant as he is empowered to take recourse to any of the three courses indicated in section 263 only. Therefore, it is clear that the Commissioner of Income-tax does not have unfettered and unchequered discretion/power to revise the order. He can do so within the bounds of the law and has to satisfy the need of fairness in action and fair play with due respect to the principles of audi alteram partem as envisaged in the Constitution. The law is well settled that the Commissioner of Income-tax cannot invoke the powers to correct each and every mistake or error committed by the Assessing Officer. Every loss to the Revenue, cannot be treated as prejudicial to the interests of the Revenue and if the Assessing Officer has adopted one of the course permissible under the law or where two views are possible and the Assessing Officer has taken one view which the Commissioner of Income-tax does not agree, it cannot be treated as an order erroneous and prejudicial to the interests of the Revenue, the Assessing Officer exercises quasi-judicial power vested in him and if he exercises such powers in accordance with law and arrives at a just conclusion such conclusion cannot be termed to be erroneous only because the Commissioner of Income-tax does not feel satisfied with the conclusion. 17. We are also of the view that the Commissioner in the subsequent order passed under section 263 held that the assessment order was without jurisdiction and is not valid order and, in our view, the original order passed under section 143(3) and 263 cannot be rectified either under section 154 or under section 263 of the Act through the revisional power conferred on the Commissioner under section 263. 18. As discussed herein above, the Assessing Officer had the jurisdiction when the notice under section 143(2) was issued and once the Income-tax Officer had valid jurisdiction at the time of issuance of notice, then the Assessing Officer ought to have informed the assessee if there was some internal circular. 18. As discussed herein above, the Assessing Officer had the jurisdiction when the notice under section 143(2) was issued and once the Income-tax Officer had valid jurisdiction at the time of issuance of notice, then the Assessing Officer ought to have informed the assessee if there was some internal circular. The Commissioner later on was of the view that the Income-tax Officer had no jurisdiction and, in our view, it cannot be said to be proper as the assessee appeared on valid notice and after considering all the submissions or representations, the Income-tax Officer passed an order. It is not a case where the Income-tax Officer passed order in a cryptic or summary manner accepting the returned income and we notice that the assessment order is running into 12 pages and after elaborate discussion on most of the issues, the income was computed/assessed at Rs. 6,81,500. As pointed out here above, twin conditions have to be satisfied and the order cannot be termed to be erroneous only because the Commissioner of Income-tax does not feel satisfied with the conclusion. We have already referred to the fact that one Commissioner of Income-tax also issued notice under section 263 for the same assessment year between the same parties and he having been satisfied dropped the proceedings and it is only thereafter that another Commissioner of Income-tax came to the conclusion about jurisdiction while the earlier Commissioner of Income-tax was also aware of this factum but did not raise this issue. Before parting, we also wish to state that if the Commissioner of Income-tax was of the view that the Assessing Officer has passed an order without jurisdiction, then he ought to have initiated Departmental enquiry against such officer. No such information has come forward from the learned counsel for the appellant-Revenue or perused from the order of the Commissioner of Income-tax under section 263, thus the order of the Commissioner of Income-tax under section 263 can at best be said to be change of opinion and tantamounts to abuse of powers granted to the Commissioner of Income-tax. The practise adopted by the Commissioner of Income-tax is de hors and it amounts to unnecessary harassment to the assessee for no fault of his. 19. Accordingly, we do not find any infirmity or perversity in the order of the Income-tax Appellate Tribunal so as to call for any interference of this court. The practise adopted by the Commissioner of Income-tax is de hors and it amounts to unnecessary harassment to the assessee for no fault of his. 19. Accordingly, we do not find any infirmity or perversity in the order of the Income-tax Appellate Tribunal so as to call for any interference of this court. In our view, no substantial question of law arises out of the order passed by the Income-tax Appellate Tribunal. 20. Accordingly, the appeal, being devoid of merit, is hereby dismissed in limine. No order as to costs. *******