Kapil Kumar Singh Adv (Student) (572 Points)
25 July 2009Dear All,
Please explain me in detail the application of Sec 150 (1 ) and SEC 150 (2 ) of Income Tax .
This Sec i.e. SEC 150 ( 2 ) is discussed ONLY in the book of Girish Ahuja Sir's .There is no reference to it either in V.K.Singhania 's Book or in the Vinod Gupta Sir's Notes.
CA CS Amit Borade
(Chief Accountant)
(2828 Points)
Replied 25 July 2009
Hi Kapil refer this case law .......
SUPREME COURT OF INDIA
Commissioner of Income-tax, Shimla
v.
Greenworld Corporation
S.B. SINHA AND DR. MUKUNDAKAM SHARMA, JJ.
CIVIL APPEAL NO. 3312 OF 2009
MAY 6, 2009
Section 150 of the Income-tax Act, 1961 - Income escaping assessment - In pursuance of an order on appeal, etc. - Whether although section 150 appears to be of a very wide amplitude, but it would not mean that recourse to reopening of proceedings in terms of sections 147 and 148 can be initiated at any point of time whatsoever; such a proceeding can be initiated only within period of limitation prescribed therefor as contained in section 149 - Held, yes - Whether for reopening of proceedings under section 150, records of proceedings must be before appropriate authority and it must examine records of proceedings; if there is no proceeding before it or if assessment year in question is also not a matter which would fall for consideration before higher authority, section 150 will have no application - Held, yes
Section 124, read with section 119, of the Income-tax Act, 1961 - Assessing Officer - Jurisdiction of - Whether when a statute provides for different hierarchies providing for forums in relation to passing of an order as also appellate or original order, by no stretch of imagination a higher authority can interfere with independence which is basic feature of any statutory scheme involving adjudicatory process - Held, yes - Whether though while making order of assessment Assessing Officer shall be bound by statutory circulars issued by CBDT, yet it cannot be said that assessing authority, exercising quasi-judicial function keeping in view scheme contained in Act, would lose its independence to pass an independent order of assessment and even merits of decision in assessment proceedings shall be discussed and shall be rendered at instance of higher authority - Held, yes - Whether, therefore, where Assessing Officer passed an order of assessment at instance of higher authority, it would be illegal - Held, yes
Section 263, read with section 148, of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue - Assessment year 2000-01 - Whether an order of assessment passed by ITO can be interfered with only because another view is possible - Held, no
FACTS
The assessee was engaged in manufacturing of exercise books, writing pads, etc. For the assessment year 2000-01, the Assessing Officer passed assessment order on 19-12-2002 accepting the assessee’s claim of deduction under section 80-IA/IB. In the said order, the Assessing Officer had recorded a note that on the call of the Commissioner (Shimla), the case had been thoroughly discussed with him and as he had directed that the reply submitted by the assessee being satisfactory and up to the mark, no more information was required to be called for and the case was to be assessed as such, the assessment was completed accepting the assessee’s claim. Later, the Commissioner, on whose dictates the order of assessment purported to have been passed, was transferred and his successor on or about 5-12-2003 issued a notice to the assessee under section 263 inter alia, on the premise that the order of assessment was prejudicial to the interests of the revenue. Thereafter, the Commissioner (Shimla), passed an order under section 263 holding that the assessee had not fulfilled many of the conditions for being entitled to deduction under section 80-IA/IB. He directed the Assessing Officer to examine the case records for all the preceding and the succeeding assessment years and to initiate necessary proceedings under section 148. Pursuant thereto, the Assessing Officer issued notices under section 148 to the assessee for the assessment years 1996-97 to 1999-2000, 2001-02, 2002-03. On appeal, the Tribunal set aside the order passed under section 263 holding that the claim of the assessee for deduction under section 80-IA was allowed by the Assessing Officer on proper application of mind to the detailed submissions made on behalf of the assessee as well as the other relevant material, including the findings of the survey and, therefore, there was no error in her order as alleged by the Commissioner. The Tribunal also held that the direction given by the Commissioner to the Assessing Officer to issue notices under section 148 and to examine the returns filed by the assessee for the subsequent years was beyond the jurisdiction conferred on him under section 263, since the same was confined only to the year for which the assessment order was sought to be revised. Subsequently, the Assessing Officer also issued notice under section 148 for the assessment year 2000-01. The assessee filed a writ petition questioning the legality of the said notice. In the meanwhile, the CBDT, on the assessee’s request, transferred its case from the jurisdiction of the Commissioner (Shimla) to that of the Commissioner (Delhi). Thereafter, the Commissioner (Shimla) filed an appeal under section 260A against the order of the Tribunal. The High Court, while allowing the appeal filed by the Commissioner (Shimla), dismissed the writ petition filed by the assessee opining that the order of the Assessing Officer, having been based on uncalled for interference in the judicial functions of the Commissioner, was bad, in law; that as the Assessing Officer had acted under the dictates and pressure of the Commissioner (Shimla), the order of the assessment was not maintainable; that the Commissioner could have issued directions for the proceedings for the other assessment years also apart from the assessment year 2000-01, subject of course to the law of limitation. Feeling aggrieved, the assessee filed two review petitions which were rejected by the High Court. In the instant appeal, the assessee contended that the notice under sections 263 having been issued in respect of the assessment year 2000-01 only, direction could not have been issued in respect of the past and future years of assessment, some of them being barred by limitation; that having regard to the order of the transfer passed by the CBDT transferring the case from the Commissioner (Shimla) to the Commissioner (Delhi), the Commissioner (Shimla) had no locus standi to maintain appeal before the High Court; and that mere error of law and/or different view from that of the Assessing Officer, by itself, could not have been a ground for exercising the jurisdiction under section 263.
HELD
The ITO, while passing an order of assessment, performs judicial function. An appeal lies against his order before the appellate authority. A revision application would also lie before the Commissioner. It is trite that the jurisdiction exercised by the revisional authority pertains to his appellate jurisdiction. [Para 20]
Section 263 provides for a revisional power. It has its own limitations. An order can be interfered with suo motu by the said authority not only when an order passed by the Assessing Officer is erroneous but also when it is prejudicial to the interests of the revenue. Both the conditions precedent for exercising the jurisdiction under section 263 are conjunctive and not disjunctive. [Para 23]
An order of assessment passed by an ITO, therefore, should not be interfered with only because another view is possible. [Para 24]
The scope of provisions of section 263 is no longer res integra. The power to exercise suo motu revision in terms of section 263(1) is in the nature of supervisory jurisdiction and same can be exercised only if the circumstances specified therein, viz., (1) the order is erroneous; (2) by virtue of the order being erroneous, prejudice has been caused to the interest of the revenue, exist.
In the instant case, it was beyond any doubt or dispute that only in terms of the directions issued by the Commissioner on 12-7-2004 under section 263, notices under section 148 had been issued. [Para 29]
Indisputably, the Commissioner (Shimla) had no jurisdiction to issue directions. Notices issued pursuant thereto would be bad in law.
The provision of section 150, although appears to be of a very wide amplitude, but would not mean that recourse to reopening of the proceedings in terms of sections 147 and 148 can be initiated at any point of time whatsoever. Such a proceeding can be initiated only within the period of limitation prescribed therefor as contained in section 149. Section 150(1) is an exception to the aforementioned provision. It brings within its ambit only such cases where reopening of the proceedings may be necessary to comply with an order of the higher authority. For the said purpose, the records of the proceedings must be before the appropriate authority. It must examine the records of the proceedings. If there is no proceeding before it or if the assessment year in question is also not a matter which would fall for consideration before higher authority, section 150 will have no application. It is, thus, evident that jurisdiction to issue directions is limited. [Para 30]
In the instant case, the noting of the Assessing Officer was specific. It was stated so in the proceedings sheet at the instance of the higher authorities itself. No doubt, in terms of the circular letter issued by the CBDT, the Commissioner or for that matter any other higher authority may have supervisory jurisdiction, but it is difficult to conceive that even the merit of the decision shall be discussed and the same shall be rendered at the instance of the higher authority, who is a supervisory authority. It is one thing to say that while making the order of assessment, the Assessing Officer shall be bound by the statutory circulars issued by the CBDT, but it is another thing to say that the assessing authority exercising quasi-judicial function keeping in view the scheme contained in the Act, would lose its independence to pass an independent order of assessment. [Para 31]
When a statute provides for different hierarchies providing for forums in relation to passing of an order as also appellate or original order, by no stretch of imagination a higher authority can interfere with the independence which is the basic feature of any statutory scheme involving adjudicatory process. [Para 32]
So far as the question as to whether the Commissioner (Shimla) could maintain an appeal before the High Court was concerned, an appeal is ordinarily maintainable at the instance of the Assessing Officer. In the instant case, not only an order of assessment was passed but also the Commissioner (Shimla) had already passed an order. Notices under section 148 had already been issued much prior thereto. [Para 33]
In the instant case, the Commissioner (Shimla) had passed an order. His order was set aside by the Tribunal. He, therefore, in ordinary course could have preferred an appeal only by the time when administrative decision could be taken by him to prefer an appeal. The right to prefer an appeal arose on the date on which the Tribunal passed an order. It might have taken sometime to prefer an appeal. Ordinarily, he was the authority who could have preferred an appeal. By preferring an appeal, new proceedings were initiated. In any event, nothing had been shown as to how the assessee was prejudiced. In a case of this nature, the provisions akin to section 21 of the Code of Civil Procedure may be held to be applicable for the purpose of questioning the jurisdiction of the High Court to entertain an appeal on the ground of lack of territorial jurisdiction. In a peculiar case of this nature, prejudice must be shown. [Para 34]
In the instant case, whereas the order under section 263 and, consequently, the notices under section 148 have been held to be not maintainable, the Assessing Officer had passed an order at the instance of the higher authority which was illegal. For the aforementioned purpose, there was no need to go into the question of bona fide or otherwise of the authorities under the Act. They might have proceeded bona fide, but the order of assessment passed by the Assessing Officer on the dictates of the higher authorities being wholly without jurisdiction was a nullity. Therefore, with a view to do complete justice between the parties, the assessment proceedings should be gone through again by the appropriate assessing authority. [Para 35]
It was true that despite order passed by the High Court the Commissioner (Delhi) had not been impleaded. Presumably, because of the said defect in the order passed by the High Court, the revenue could not implead the Commissioner (Delhi) as a party in the appeal. The Commissioner (Delhi), however, had been impleaded as a party in the Special Leave Petition (SLP) filed by the assessee. The Commissioner (Delhi) had, in an irregular manner, filed a rejoinder. Counter affidavit was filed by the assessee in the appeal preferred by the revenue and the same was on record. The said authority, therefore, was otherwise before the Court. [Para 36]
It is now well-settled that the Supreme Court in exercise of its extra-ordinary jurisdiction under article 136 of the Constitution of India may, in the event an appropriate case is made out, either refuse to exercise its discretionary jurisdiction or quash both the orders if it is found that setting aside of one illegal order would give rise to another illegality.
Therefore, in exercise of jurisdiction under article 142 of the Constitution, it was to be directed that the assessment be reopened by the Commissioner (Delhi). [Para 37]
CASE REVIEW
CIT v. Sahara India Financial Corpn. Ltd. [2007] 294 ITR 363/162 Taxman 357 (Delhi) [Para 33] distinguished.
CASES REFERRED TO
Shankar Ramchandra Abhyankar v. Krishnaji Dattatraya Bapat AIR 1970 SC 1 [Para 20], Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83/109 Taxman 66 (SC) [Para 29], CIT v. Max India Ltd. [2007] 295 ITR 282 (SC) [Para 29], ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC) [Para 30], S.C. Prashar v. Vasantsen Dwarkadas [1963] 49 ITR 1 (SC) [Para 30], N.KT. Sivalingam Chettiar v. CIT [1967] 66 ITR 586 (SC) [Para 30], Rajinder Nath v. CIT [1979] 120 ITR 14/2 Taxman 204 (SC) [Para 30], State of Kerala v. Kurian Abraham (P.) Ltd. [2008] 3 SCC 582 [Para 31], Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706/132 Taxman 373 (SC) [Para 31], Commissioner of Police v. Gordhandas Bhanji AIR 1952 SC 16 [Para 32], Pancham Chand v. State of Himachal Pradesh [2008] 7 SCC 117 [Para 32], Purtabpur Co. Ltd. v. Cane Commissioner of Bihar AIR 1970 SC 1896 [Para 32], Tarlochan Dev Sharma v. State of Punjab [2001] 6 SCC 260 [Para 32], CIT v. Sahara India Financial Corpn. Ltd. [2007] 294 ITR 363/162 Taxman 357 (Delhi) [Para 33], CIT v. Anil Kumar Roy Chowdhury [1967] 66 ITR 367 (SC) [Para 33], Uday Shankar Triyar v. Ram Kalewar Prasad Singh [2006] 1 SCC 75 [Para 33], Kiran Singh v. Chaman Paswan AIR 1954 SC 340 [Para 34], Mantoo Sarkar v. Oriental Insurance Co. Ltd. 2008 (16) SCALE 197 (SC) [Para 34] and Transmission Corpn. of A.P. Ltd. v. Lanco Kondapalli Power (P.) Ltd. [2006] 1 SCC 540 [Para 37].
I. Venkatanarayana for the Appellant. Harish N. Salve and Sunil Gupta for the Respondent.
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