TMI Blog2007 (11) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... nd help him in his J trade. They are assessed to income-tax separately in Madurai. The petitioner is an assessee from the assessment year 1993-94 and presently assessed by the Assistant Commissioner of Income-tax, Circle-IT, Madurai. I On November 18, 1998, when the petitioner was staying in a lodge in Trivandrum, the local police apprehended him and found in his possession jewellery, weighing 781.340 grams and cash of Rs. 40,800. On intimation by the police, the Director of Income-tax (Investigation), Cochin, gave a J requisition under section 132A of the Income-tax Act, 1961, to the police department and the abovesaid jewellery and cash were seized by the Income-tax Department. Pursuant to the notice under section 158BC of the Act, the petitioner filed a return of income in Form 2B on August 25, 1999, admitting a total income of Rs. 6,000 per month and requested that the tax payable be adjusted out of the seized cash. 4.The petitioner further submitted that being a small trader, he could not maintain any regular books of account. He further submitted that his sons are also petty traders and they do not maintain any accounts and they are filing their returns of income separately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 264 of the Income-tax Act, the consequential order of the Assessing Officer, enhancing the total income, prejudicial to the assessee, is patently without jurisdiction and therefore, the order needs correction in exercise of the powers under article 226 of the Constitution of India. 7.On the issue of scope and powers of the revisional authority under the Income-tax Act, learned counsel for the petitioner relied on a decision in CIT v. D. N. Dosani reported in [2006]280 ITR 275 (Guj). To support his contention that the error of jurisdiction can be corrected under article 226 of the Constitution of India, he cited decisions in Fenner (India) Ltd. v . Deputy CIT reported in [2000] 241 ITR 672 (Mad) and Whirlpool Corporation v. Registrar of Trade Marks, AIR 1999 SC 22. 8 On the other hand, Mr. S. Narayanasamy, learned counsel for the Revenue submitted that the scope of the revision under the Income-tax Act is wide open and it is not restricted and therefore, the Assessing Officer can redo the assessment afresh, taking into consideration the materials gathered during enquiry. He further submitted that as against the order of 1 the Assessing Officer, an alternat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y any person from whose possession or control such assets have been taken into custody by any officer or authority under any other law for the time being in force (clause (c) of section 132A)'. The applicant submits that none of this conditions (a) to (c) existed in the applicant's case. Since, the applicant did not possess any money, bullion, jewellery or other valuable article or thing which could represent any undisclosed income or property, it was impossible that the authorised officer would have 'reason to believe' to act for the purposes of authorising proceedings under section 132A of the Act. It is clear from the proceedings con ducted during the course of seizure that the authorised officer, while examining on oath under section 132(4) of the Act had not recorded any information to the effect the assets seized represented undisclosed income. The block assessment order also clearly indicates that the seized assets did not represent undisclosed income of the applicant. Hence, the proceedings initiated by issue of notice under section 158B(c) of the Act ought to have been dropped by the Assessing Officer as there was no case for the Department to make assessment. There can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. "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." "264. Revision of other orders. —(1) In the case of any order other than an order to which section 263 applies passed by an authority sub ordinate to him, the Commissioner may, either of his own motion or on an application by the assessee for revision, call for the record of any proceeding under this Act in which any such order has been passed and may make such inquiry or cause such inquiry to be made and, subject to the provisions of this Act, may pass such order thereon, not being an order prejudicial to the assessee, as he thinks fit. (2) The Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceeding under the Act, that is to say, the assessee may be in a position to point out that the assessment order is neither erroneous nor prejudicial to the interests of the Revenue, or even if it is erroneous, it is not prejudicial to the interests of the Revenue, or it may not be erroneous, even if it is prejudicial to the interests of the Revenue. Therefore, the moment the Revenue's contention is accepted that in the fresh assessment, the Assessing Officer is entitled to examine items which did not form part of section 263 proceedings, the statutory requirement of framing an order under section 263 of the Act after giving the assessee an opportunity of being heard, stands obliterated or is made redundant. This interpretation goes against clear unambiguous language in which the section is couched. 10. The provision also requires the Commissioner of Income-tax to - record that an order passed by the Assessing Officer is erroneous and prejudicial to the interests of the Revenue. The satisfaction of these two pre-requisite conditions is a must before assumption of the jurisdiction under section 263 of the Act. This legal position is well established and bears no repetition. Hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e items mentioned in the show-cause notice. For the Assessing Officer, to substitute his opinion, in place of the opinion of the Commissioner of Income-tax is not envisaged by the provision and therefore also, action of the Assessing Officer in expanding scope of consequential assessments cannot be upheld. 12. The scheme of the Act has provided different powers to different authorities and these are required to be exercised after satisfying the pre-requisite conditions and jurisdictional facts. The Assessing Officer can disturb/reopen a finalized assessment by invoking his powers either under section 154 or under section 147 of the Act, provided he can show that the necessary requirements are fulfilled. If, what Revenue contends today, is accepted, these and other such provisions which empower different authorities to exercise jurisdiction at different point of time in distinct settings would be rendered otiose and that can never be the legislative intent. It is almost akin to providing separate keys for separate locked doors and the person wanting to open a particular door is required to apply the correct key which matches the concerned lock. Therefore, in proceedings, to give e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer was erroneous in so far as it was prejudicial to the interests of the Revenue and directed the Income-tax Officer to make a fresh assessment in accordance with law so as to exclude the losses of the cashew department and of the hessian department (if any) after giving adequate opportunity to the assessee-company. It was a case where the Revenue established on the basis of the record that the assessment order was erroneous and prejudicial to the interests of the Revenue and directed the Income-tax Officer to make a fresh assessment in accordance with law and the order in the revision reflected that the set off of loss from the defunct cashew nut business against the profit of the business in the manufacture and sale of pesticides was erroneous. In the case on hand, it is not the case of the Revenue before the revisional authority that the original assessment order was erroneous and prejudicial to the interests to the Revenue nor is there any finding by the revisional authority to redo the entire exercise in that direction. There fore, the decision relied on by counsel for the Revenue is not applicable to the facts of the present writ petition. 18.Perusal of the revisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rors are capable of being corrected by this court in exercise of the court's powers under article 226 of the Constitution of India. The Supreme Court in the case of CIT v. Progressive Engineering [1993] 200 ITR 231 (sic), held that when all the relevant facts were before the court and the law is clear on the subject, it is the duty of the High Court to interfere. That was also a case where the proceedings were sought to be initiated against the asses- see under section 147 of the Act." 21.In Whirlpool Corporation v. Registrar of Trade Marks , AIR 1999 SC 22, the Supreme Court at paragraphs 20 and 21, held as follows (page 27) "20. Much water has since flown beneath the bridge, but there has been no corrosive effect on these decisions which, though old, continue to hold the field with the result that law as to the jurisdiction of the High Court in entertaining a writ petition under article 226 of the Constitution. In spite of the alternative statutory remedies, is not affected, specially in a case where the authority against whom the writ is filed is shown to have had no jurisdiction or had purported to usurp jurisdiction without any legal foundation. 21. That being so, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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