TMI Blog2012 (4) TMI 222X X X X Extracts X X X X X X X X Extracts X X X X ..... .JUSTICE A.C.UPADHYAY, JJ. For Appellant: Mr. S. Sarma, SC, Income Tax For Respondent: Dr. AK Saraf, Sr. Adv. With Mr. A Goyal, Adv. Adarsh Kumar Goel, CJ. This appeal has been placed before this Bench in pursuance of order of the Division Bench dated 17.2.2010 to resolve conflict in two decisions of this Court in Commissioner of Income Tax vs. Daga Entrade P. Ltd. [2010] 327 ITR 467 (Gauhati) and Rajendra Singh vs. Superintendent of Taxes and others, 1979 STC 10. 2. Reference may briefly be made to the facts giving rise to the issue.The assessee was assessed for the assessment year 2002-03 by the Assessing Officer (AO) giving benefit of exemption under Section 54F of the Income Tax Act, 1961 for long term capital gains from sale of shares. The shares were purchased on 21.4.2000 for ₹ 19,536/- and sold on 2.5.2001 for ₹ 6,36,640/- i.e. on the increased price of more than 30 times in one year. The Commissioner of Income Tax (CIT) held the order to be erroneous and prejudicial to the interest of revenue and exercised suo motu revisional jurisdiction under Section 263 of the Act. It was, inter alia, observed that while accepting genuineness of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C 70; [2003] 1 GLR 448. The said power could be exercised if the order was erroneous on account of relevant material being ignored. It was observed that since the said Single Bench judgments were based on Division Bench judgment in Rajendra Singh vs. Superintendent of Taxes and ors. there was conflict in two Division Bench judgments requiring the matter to be placed before larger Bench to decide as to which of the two judgments was correct. Relevant part of the order is as under: In the course of hearing, a recent judgment of this Court dated 17.2.2009 in ITA No.1/2005 and other connected cases has been placed before us by Sri U. Bhuyan, learned departmental counsel. In para-29 and 30 of the said judgment, the Division Bench seems to have taken the view that exercise of suo motu revisional power under Section 263 of the Act need not be confined to the orders passed in error of jurisdiction, and interference can be made in a situation where relevant materials have been ignored at the time of making of assessment, resulting in an erroneous order. The Division Bench, while deciding ITA No.1/05 and other connected cases has also overruled two decisions rendered by two separate si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed: 7. There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. 9. Mr Abraham relied on the judgment of the Division Bench of the High Court of Madras in Venkatakrishna Rice Co. v. CIT( 1987)163 ITR 129 (Mad)interpreting prejudicial to the interests of the Revenue . The High Court held: In this context, (it must) be regarded as involving a conception of acts or orders which are subversive of the administration of revenue. There must be some grievous error in the order passed by the Income Tax Officer, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the Commissioner might think to be prejudicial to the interests of Revenue Administration. In our view this interpretation is too narrow to merit acceptance. The scheme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rroneous judgment means: One rendered according to course and practice of court, but contrary to law, upon mistaken view of law, or upon erroneous application of legal principles . From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an officer acting in accordance with law makes certain assessment and determines the turnover of a dealer, the same cannot be branded as erroneous by the Commissioner simply because according to him the order should have been written more elaborately. This section does not visualise a case of substitution of judgment of the Commissioner for that of the officer, who passed the order, unless the decision of the subordinate officer is held to be erroneous. Cases may be visualised where assessing officer while making an assessment examines the accounts, makes his enquiries, applies his mind to the facts and circumstances of the case and determines the turnover either by accepting the accounts or by making some estimates himself. The Commissioner on perusal of the records may be of the opinion that the estimate made by the officer concerned was on the lower side and left to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt to arbitrary exercise of power. It is well-settled that when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on records to satisfy it in that regard. If the action of the authority is challenged before the court it would be open to the courts to examine whether the relevant objective factors are available from the records called for and examined by such authority. Our aforesaid conclusion gets full support from a decision of Sabyasachi Mukharji, J. in Russell Properties Pvt. Ltd. v. A. Chowdhury, Addl. Commissioner of Incometax [1977] 109 ITR 229 (Cal). In our opinion any other view in the matter will amount to giving unbridled and arbitrary power to revising authority to initiate proceedings for revision in every case and start re-examination and fresh enquiries in matters which have already been concluded under the law. As already stated it is quasi-judicial power hedged with limitation and has to be exercised subject to the same and within its scope and ambit. So far as calling for the records and examining the same is concerned, undoubtedly it is an administrative act, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncement, not at the conclusion of the enquiry. In Anisminic Ltd. case (supra), Lord Reid said: But there are many cases where, although the tribunal had jurisdiction to enter on the enquiry it has done or failed to do something in the course of the enquiry which is of such a nature that its decision is a nullity. It may have given its decision in bad faith. It may have made a decision which it had no power to make. It may have failed in the course of the enquiry to comply with the requirements of natural justice. It may in perfect good faith have misconstrued the provisions giving it power to act so that it failed to deal with the question remitted to it and decided some question which was not remitted to it. It may have refused to take into account something which it was required to take into account. Or it may have based its decision on some matter which, under the provisions setting it up, it had no right to take into account. I do not intend this list to be exhaustive. In the same case, Lord Pearce said: Lack of jurisdiction may arise in various ways. There may be an absence of those formalities or things which are conditions precedent to the tribunal having any j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cree embodying the decision a nullity liable to collateral attack. The reason can only be that the error of law was considered as vital by the Court. And there is no yardstick to determine the magnitude of the error other than the opinion of the Court. 14. Expression jurisdictional error has been used in Rajendra Singh in wider sense and not in narrow sense. 15. In Bongaigaon Refinery (supra), the order under Section 263 was quashed on the ground that the said order was passed only on audit objection and on the appreciation of materials on record on the ground that a different view could be taken. The operative part of the judgment is as follows:- 26. Incidentally, this Court in Bongaigaon Refinery and Petrochemicals Ltd. [2005] 274 ITR 379, had answered both the questions referred to it (quoted hereinabove) under Section 256(2) of the Act, in favour of the petitioner. It held against the decision of the learned Tribunal that the petitioner ought to have submitted its audited accounts in support of its claim for deduction under sections 80HH and 80-I of the Act in respect of its new industrial undertaking from its gross total income. In view of the above determination, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdance with law could not be branded as erroneous only because the Commissioner chose not to agree with him, it held. 14. The amplitude of the power of the revisional authority under Section 36 of the Assam General Sales Tax Act, 1993, was examined by this Court, in San-talal Mehendi Ratta, (HUF) [2002] 1 GLR 197 : [2006] 143 STC 511. Drawing sustenance, inter alia, from the ratio of the decisions in Rajendra Singh [1990] 79 STC 10 (Gauhati) and State of Kerala v. K.M. Cheria Abdulla and Co. [1965] 16 STC 875 (SC), it was held that an erroneous order cannot be equated with a wrong order as understood in common parlance and that an order of assessment passed within the limits of the jurisdiction of the assessing authority even if considered to be wrong by the revisional authority would not attract the invocation of suo motu revisional powers. It expressed itself further in the following terms (page 516 of 143 STC): The revisional authority for various good reasons may be inclined to view an assessment order from a negative standpoint. The revisional authority may likewise disagree with the views of the primary authority in its interpretation of the law imposing the liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve limitations. 17. In Shyam Sundar Agarwal (supra) referring to Division Bench judgment in Rajendra Singh, it was observed: 3. The expressions erroneous and prejudicial to the interest of revenue carry a specific and definite connotation which has been interpreted by a Division Bench judgment of this Court in the case of Shri Rajendra Singh ors. v. The Superintendent of Taxes and others, (1990) 1 GLR 449. This Court while interpreting the said expressions in the context of the parameteria provisions of the Tripura Sales Tax Act, 1976, has held that to invoke the suo motu power of revision both the conditions precedent, i.e., erroneous and prejudicial to the interest of revenue must co-exist. Taking into account the expression erroneous erroneous assessment and erroneous judgment as defined in the Black's Law Dictionary, this Court has held that both the expressions erroneous and prejudicial to the interest of revenue must reflect a defect which is jurisdictional in nature in the assessment/order which is sought to be revised. The power of suo motu revision, as held by this Court, would not be available to the Commissioner merely because the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Refinery and Petrochemicals Ltd. [2006] 287 ITR 120 (Gauhati) and in Shyam Sundar Agarwal [2003] 131 STC 70; [2003] 1 GLR 448. 20. For reaching the above conclusion, this Court referred to judgments of the Hon ble Supreme Court in Rampyari Devi Saraogi [1968] 67 ITR 84, Malabar Industrial Co. Ltd. [2000] 243 ITR 83, Smt. Tara Devi Aggarwal [1973] 88 ITR 323 and the Gujrat High Court in Mukur Corporation [1978] 111 ITR 312 (Guj) as follows: The Supreme Court in Rampyari Devi Saraogi [1968] 67 ITR 84, while examining the scope of revisional power under Section 33B of the Income Tax Act, 1922, which is identical as section 263(1) of the current Income Tax Act, held that it is not necessary for the Commissioner to embellish the short reasoning recorded, for deciding to exercise suo motu revisional power since no prejudice would be caused to the assessee, who will have full opportunity to establish before the Assessing Officer, that the assessments, ordered to be by the Commissioner of Income Tax was correctly made. In a later case, the Supreme Court in Malabar Industrial Co. Ltd. [2000]243 ITR 83 held that pre-requisite for exercise of suo motu revisional jurisdiction by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant material would certainly be erroneous assessment warranting exercise of revisional jurisdiction. Judgment has to be read as a whole and an observation during the course of reasoning in the judgment should not be divorced from the context in which it was used. The judgment is neither to be interpreted as an Act of Parliament nor as a holy book. If this principle is kept in mind, we do not find any conflict in the view taken in Rajendra Singh and Daga Entrade P. Ltd. Disagreement in Daga Entrade P. Ltd. is only to the interpretation which limits the ratio of the judgment by relying only one sentence in isolation divorced from the entire judgment. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous nonITA application of mind and omission to follow natural justice is in same category. 23. Accordingly, we hold that Daga Entrade P. Ltd. lays down correct law and the same is not in conflict with the earlier order of this Court in Rajendra Singh. Jurisdiction under Section 263 can be exercised whenever it is found that the order of assessment was erroneous and prejudicial to the interest of the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X
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