Citation: Civil Appeal No. 5009 of 2016 [Arising out of S.L.P (C) No. 11621 of 2009]
Court: Supreme Court of India.
Case Type: Civil Appeal.
Case No.: 5009 of 2016.
Decided on: 11/05/2016.
Appellant: Commissioner of Income Tax, Mumbai.
Respondent: Amitabh Bachchan.
Bench: Justice Ranjan Gogoi and Justice Prafulla C. Pant.
- Income Tax Act, 1961.
- Gita Devi Aggarwal vs Commissioner of tax, West Bengal and others.
- C.I.T. West Bengal, II, Calcutta vs M/S Electro House.
- Malabar Industrial Co. Ltd. Vs CIT
- Commissioner of Income vs Max India Ltd.
- The appellant (Revenue) sought to challenge the order passed by the High Court of Bombay on 7th August 2008 which dismissed the appeal filed by it(appellant) under 260A of the income Tax Act and affirmed the order passed by the Income Tax Tribunal, Mumbai (Tribunal) on 28th August 2007.
- The Income Tax Tribunal, Mumbai, on 28th August 2007, filed an order which reversed the order filed by Commissioner of Income Tax (C.I.T.) dated 20th March 2006.
- The said order by the C.I.T. was passed under section 263 of the Income Tax Act, 1961 (The Act).
- The assessment year in question was 2001-2002 and the assessment order was filed on 30th March 2004.
- After the above assessment was finalized, the C.I.T. issued a show cause notice dated 7th November 2005, mentioning 11 grounds on which the original assessment order was under review under section 263 of The Act.
- The show cause notice proposed to set aside the assessment filed on the 30th of March, 2004 and mentioned of a fresh assessment to be made.
- The respondent (assessee) replied to the show cause notice on 20th March 2006.
- The responded moved to the Tribunal which, on 28th August 2007, dismissed the show cause notice filed by the appellant.
- Aggrieved by the order of the Tribunal, the appellant moved to the High Court challenging the order of the Tribunal.
- The High Court quashed the appeal on the grounds that the appellant had gone beyond the scope of the show cause notice, dated 7th November 2005, and had dealt with issues not covered/mentioned the revisional order dated 20th March 2006 was against the principles of natural justice.
- Thus, having been aggrieved, the appellant filed an appeal of grant of leave under article 136 of the Constitution of India.
- Whether the order filed by the appellant dated 20th march 2006 was in violation of the principles of natural justice.
- During the course of revisional proceedings, did the assessee have proper opportunity to contest the facts and issues mentioned in the order filed by the appellant on 20th March, 2006.
- Whether the C.I.T. overstepped his jurisdiction while issuing the said order.
Contention by Appellant:
- The assessment in question was set aside by the C.I.T. on the grounds that the necessary requisites and due enquiries were not made by the Assessment Officer (AO).
- The C.I.T. also observed that during the course of the assessment, the respondent on purpose delayed the submission of necessary books of accounts and documents and this dragged the entire process of assessment.
- As a result, the AO was forced to finalize the assessment in a hurry so as to avoid the bar or limitation.
- On this basis, as necessary enquiries were not made, the C.I.T. came to the conclusion the assessment was erroneous and prejudicial to the interests of the state.
Contention by Respondent:
- In the order dated 20th March 2006, the appellant arrived at 11 issues while the show cause notice dated 7th November 2005 mentioned only 03 of those 11 issues.
It may be appropriate to reproduce hereunder the provisions of Section 263 of the Act to appreciate the arguments advanced and to understand the contours of the suo motu revisional power vested in the learned C.I.T. by the aforesaid provision of the Act. “263 – Revision of orders prejudicial to revenue.–(1) The Principal Commissioner or 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.
- The pre requisite to the exercise of jurisdiction under section 263 of The Act is that an order passed by an authority under The Act is prejudicial and erroneous to the interest of the Revenue.
- Once this condition is satisfied, jurisdiction to exercise the power would be available subject to observance of the principles of natural justice which is implicit in the requirement cast by the Section to give the assessee an opportunity of being heard. It is in the context of the above position that this Court has repeatedly held that unlike the power of reopening an assessment under Section 147 of the Act, the power of revision under Section 263 is not contingent on giving of a notice to show cause.
- Upon reading the order of the AO dated 30th March 2004 as well as the order of the C.I.T. dated 20th March 2006, The Court observed that the C.I.T. come to the conclusion that the assessment order passed by the AO was indeed erroneous and prejudicial to the interests of the revenue.
- The representative of the assessee was present on each revisional proceeding and had full opportunity to contest the basis on which the revisional authority was proceeding.
- The Court sided with the appellant in the 3rd issue mentioned in the show cause notice dated 7th November 2005, the issue related to disclosure of income, on the grounds that it was yet another instance where the AO had failed in properly filing the original assessment report.
Rationale: Section 263 of the Act was not in violation of the principles of natural justice as the section did not mention about a notice being issued to the assessee. The only condition was that the assessee be given a proper opportunity the issues upon which the reassessment has been ordered.
- The case was deemed as a fit case for the exercise of suo moto revisional powers of the C.I.T.
- The C.I.T. was justified in coming to the conclusions related to issue no. (iii) mentioned in the show cause notice.
- The order of the C.I.T, was restored by the Supreme Court.
- The orders passed by the High Court and the Tribunal were deemed to be untenable.
- The appeal of the Revenue was allowed.
- A fresh assessment of the year 2001-2002 was ordered.
The different levels of powers invested upon the different authorities by The Act must be exercised within the areas specifically demarcated by the Act. The exercise of power under one shade cannot trounce upon the powers available under other shades of the act.
Prepared by Mihir Poojari