Commissioner
of Income Tax, Bhopal Vs. Ralson Industries Ltd [2007] Insc 2 (4 January 2007)
S.B.
Sinha & Markandey Katju [Arising
out of SLP (CIVIL) NO. 17352 OF 2004] S.B. SINHA, J.
Leave
granted.
Interpretation
of the provisions of Section 154 vis-`-vis 263 of the Income Tax Act calls for
consideration in this Appeal which arises out of a Judgment and Order dated
15th December, 2003 passed by the High Court of Madhya Pradesh at Jabalpur in
ITR No.19/1999. The fact of the matter is not much in dispute. The Respondent
is an assessee under the Income Tax Act.
It
filed its return for the assessment year 1992-93 declaring its income at Rs.26,66,355/-.
The order of assessment was completed on or about 10.3.1995 under Section
143(3) of the Act opining that the assessable income as against the assessee
was Rs.35,40,414/-. The Commissioner of Income Tax invoked its jurisdiction
under Section 263 of the Act by setting aside the order of assessment excluding
certain amounts towards transport receipts to the extent of a sum of
Rs.2762982/- and interest amounting to Rs.141878/- from the assessee's total
income in the light of the provisions of Section 80HHC and Section 80-I of the
Act. The Assessing Officer was directed to make a fresh order of assessment.
Appeal
was preferred thereagainst by the assessee before the Income Tax Appellate
Tribunal. It was, inter alia, contended that after the order of assessment
under Section 143 (3) of the Act was passed, a Notice of Rectification of the
Order of Assessment under Section 154 thereof having been issued by the
Assessing Officer on 26.10.1995, wherein no modification/amendment was made in
regard to the purported exclusion of income under Sections 80HH and 80-I of the
Act on account of non- inclusion of transport receipts and interest on the
total income and, thus, the Commissioner of Income Tax has no authority to
initiate any proceedings under Section 263 thereof or otherwise.
The
said contention of the assessee was upheld by the Tribunal, inter alia, relying
on or on the basis of a decision of the Madhya Pradesh High Court in
Commissioner of Income-tax v. Vippy Solvex Products Pvt. Ltd. reported in
(1997) 228 ITR 587. The Tribunal was furthermore of the opinion that the Order
passed under Section 154 of the Act having been made upon due consideration of
the explanation of the assessee for the proposed rectification on the point of
excess deduction under Section 80HH and 80-I, the Commissioner lacked
jurisdiction to make may order under Section 263 thereof.
An
application in the aforementioned premise was filed before the High Court for a
direction upon the Tribunal for reference of the following questions to it for
its opinion: -
-
Whether on the
facts and in the circumstance of the case, the Hon'ble ITAT was justified in
law in holding that the CIT lacked jurisdiction to revise the order of
assessment u/s 263 of the I.T. Act?
-
Whether on the
facts and in the circumstances of the case, the Honorable ITAT was Justified in
holding that the issue of excess deduction u/s 80HH & 80 I contained in the
order u/s 143 (3) was merged with the order u/s 154 particularly when no
rectification u/s 154 was made in this regard.
-
Whether the view
taken by the Hon'ble ITAT that the AO did not consider the issue of excess
deductions u/s 80HH and 80 I for rectification in his order u/s 154 after due
application of his mind, could in law justify its conclusion that there was no
jurisdiction u/s 263 in respect of the said issue in terms of the assessment
order dated 10-03-95." Relying on a decision of the High Court in Chunnilal
Onkarmal Pvt. Ltd. v. Commissioner of Income Tax reported in 1997 ITR (224)
233, the High Court opined that no substantial question of law arises for
directing Tribunal to refer any question to the said Court.
Sub-sections
(1) and (6) of Section 154 and Sub-section (1) of Section 263 of the Act reads
as under: - "154. (1) With a view to rectifying any mistake apparent from
the record an income-tax authority referred to in section 116 may,-
-
amend any order
passed by it under the provisions of this Act;
-
amend any
intimation or deemed intimation under sub-section (1) of section 143.*** ***
*** (6) Where any such amendment has the effect of enhancing the assessment or
reducing a refund already made, the Assessing Officer shall serve on the assessee
a notice of demand in the prescribed form specifying the sum payable, and such
notice of demand shall be deemed to be issued under section 156 and the
provisions of this Act shall apply accordingly.
"263.
(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 canceling the assessment and
directing a fresh assessment" The scope and ambit of a proceeding for
rectification of an order under Section 154 and a proceeding for revision under
Section 263 are distinct and different. Order of rectification can be passed on
certain contingencies. It does not confer a power of review. If an order of
assessment is rectified by 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 there under 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.
When
an order is passed by a higher authority, the lower authority is bound thereby
keeping in view the principles of judicial discipline. This aspect of the
matter has been highlighted by this Court in Bhopal Sugar Industries v. Income
Tax Officer, Bhopal [AIR 1961 SC 182] in the following
terms:
"If
a subordinate tribunal refuses to carry out directions given to it by a
superior tribunal in the exercise of its appellate powers, the result will be
chaos in the administration of justice and we have indeed found it very
difficult to appreciate the process of reasoning by which the learned Judicial
Commissioner while roundly condemning the respondent for refusing to carry out
the directions of the superior tribunal, yet held that no manifest injustice
resulted from such refusal.
It
must be remembered that the order of the Tribunal dated April 22, 1954, was not under challenge before the
Judicial Commissioner. That order had become final and binding on the parties,
and the respondent could not question it in any way. As a matter of fact the
Commissioner of Income-tax had made an application for a reference, which
application was subsequently withdrawn. The Judicial Commissioner was not
sitting in appeal over the Tribunal and we do not think that, in the
circumstances of this case, it was open to him to say that the order of the
Tribunal was wrong and, therefore there was no injustice in disregarding that
order. As we have said earlier such a view is destructive of one of the basic
principles of the administration of justice." This principle has been laid
down also in Dharam Chand Jain v. The State of Bihar [AIR 1976 SC 1433] stating :
"The
State Government, being a subordinate authority in the matter of grant of
mining lease, was obligated under the law to carry out the orders of the
Central Government as indicated above. But the State Government declined to do so
on the ground that it had laid down a policy that the mining leases in respect
of the area should be given only to those who were prepared to set up a cement
factory. It was clearly not open to the State Government to decline to carry
out the orders of the Central Government on this ground, particularly because
the Central Government was a tribunal superior to the State Government..."
In Morgan Securities and Credit Pvt. Ltd. v. Modi Rubber Ltd. [2006 (14) SCALE
267], this Court opined:
"While
exercising its power under sub-section (3) of Section 22, the Board cannot
ignore an order passed by a superior court. It may be bound by the doctrine of
judicial discipline." 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. Jurisdiction under Section 154 of the
Act is only to be exercised by him when there is an error apparent on the face
of the record. It does not confer any power of review. An order of assessment
may or may not be rectified. If an order of rectification is passed by the
Assessing Authority, the rectified order shall be given effect to. However,
only because an order of assessment has undergone rectification at the hands of
the Assessing Officer, in our opinion, the same would not mean that revisional
authority shall be denuded of exercising its revisional jurisdiction.
Such
an interpretation, in our opinion, would run counter to the scheme of the Act.
The
Tribunal relied on Vippy Solvex Products Pvt. Ltd. (supra).
Therein
the question was determined in the light of the decision of this court in S.R.Venkataraman
v. Union of India [AIR 1979 SC 49]. Ratio of the said decision was not at all
applicable. The High court, thus, committed a manifest error in relying on the
said decision. In S.R. Venkataraman (supra) this court was concerned with an
administrative order passed by a statutory authority. It is trite that when an
authority having discretionary power exercises the same for unauthorized
purpose or on consideration of irrelevant facts, the same must be held to be
bad in law, but the said principle of judicial review could not have been
applied. Such a principle cannot be applied in a case of this nature where an
authority exercises judicial or quasi-judicial function. It is a statutory
power. Power of review and/or rectification is not akin to an administrative
power. An administrative function and judicial function operate in two
different places.
Whereas
a judicial function must be exercised by the authority invested therewith in
terms of the provisions of the statute and on the basis of the materials on
record; an administrative order may although inter alia have to be passed by a
statutory authority but the same must be confirmed within the four corners of
the statute. There may, however, have an element of discretion. Order by a
judicial functionary is subject to appeal or revision.
An
administrative order may or may not be.
An
order of assessment is subject to exercise of an order of a revisional
jurisdiction under Section 263 of the Act. Doctrine of Merger in such a case
will have no application.
The
decision of the Madhya Pradesh High Court in Chunnilal Onkarmal (supra) is also
not apposite. Initiation of a proceeding under Section 263 of the Act cannot be
held to have become bad in law only because an order of rectification was
passed. No such hard and fast rule can, in our opinion, be laid down. Each case
is required to be considered on its own facts. In a given situation, the High
Court may be held to be entitled to set aside both orders and remit the matter
for consideration of the matter afresh. But in our opinion, it would not be
correct to contend that only because a proceeding for rectification was
initiated subsequently, the revisional jurisdiction could not have been invoked
under any circumstances whatsoever. If such a proceeding was initiated, in our
opinion, the contesting parties could bring the same to the notice of the
Commissioner so as to enable him to take into consideration the subsequent
events also. It goes without saying that if and when the Commissioner of Income
Tax takes up for consideration a subsequent event, the assessee would be
entitled to make its submission also in regard thereto.
For
the reasons aforementioned, the impugned judgment cannot be sustained. It is
set aside accordingly. Our attention has been drawn to the fact that Assessing
Officer had allegedly taken into consideration the application of Sections 80
HHC and 80-I of the Act. In our opinion, therefore, interest of justice would
be met if the Commissioner of Income Tax is directed to have a fresh look at
the matter in the light of the order of rectification passed by the assessing
authority.
This
appeal is allowed with the aforementioned direction. In view of the facts and
circumstances of this case, there shall be no order as to costs.
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