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2015 (3) TMI 1234

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..... traneous to the assessment proceedings. This provision, therefore, has an entirely different context where the term 'record' has been used and it does not include any explanation as was inserted in section 263(1) with a historical background noted by the Supreme Court in the case of Shree Manjunathesware Packing Products Camphor Works (1997 (12) TMI 4 - SUPREME Court ). Significantly, the explanation was added for all purposes to have been included from the beginning. The decisions relied upon in the context of the term 'record' used in section 154 of the Act, therefore, would render no further help on the controversy on the hand. - Decided against assessee - IT Reference Nos. 65 & 66 of 1988 - - - Dated:- 13-3-2015 - AKIL KURESHI, J. Pranav G. Desai, Advocate for the Appellant. Bandish Soparkar, Advocate for the Respondent. JUDGMENT 1. These references were originally heard by a Division Bench consisting of Justice M.S.Shah and Justice D.A.Mehta. The question pertained to the interpretation of section 263 of the Income Tax Act, 1961 ('the Act' for short) namely what would form the records which the Commissioner could place reliance upon for taking an .....

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..... Whether, in law and on facts, the Appellate Tribunal was right in coming to the conclusion that the basis of intervention by the commissioner should be part of the records in the assessment proceedings of the assessee and the statements in the search operations regarding the son of the assessee could not be considered as forming part of assessment of the assessee and thus the action was invalid ? 3. Justice M.S.Shah was of the view that the issue was covered by the decision of the Supreme Court in the case of CIT v. Shree Manjunatheware Packing Products Camphor Works [1988] 231 ITR 53 and noted as under: 'In our view, the aforesaid observations of the Apex Court clearly give the widest meaning to the word record . It is also pertinent to note that while Section 263(1) uses the word record , the explanation goes further and states that the record includes all records relating to any proceeding under this Act. The use of the plural records and relating to any proceeding under this Act do not permit any limitation being placed on the power of the Commissioner that the power under Section 263(1) can be exercised only on the basis of the statements which are recor .....

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..... g opinion. Relying on several decisions of the Supreme Court including in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83/109 Taxman 66 the learned Judge observed that the Commissioner can assume jurisdiction under section 263 of the Act provided the twin conditions of order of the Assessing Officer being erroneous and being prejudicial to the interest of the Revenue are satisfied. The learned Judge also referred to the provisions contained in the Act for rectifying the mistake in assessment and for reopening a completed assessment to demonstrate that the policy of law is that the finality of an order of assessment should not be lightly disturbed. The learned Judge was of the opinion that the issue at hand was not concluded by the decision of the Supreme Court in the case of Shree Manjunathesware Packing Products Camphor Works (supra). He was of the opinion that the term 'record' used in section 263 would not include the statement of the son of the assessee since there was nothing on the record to show these statements had come on record of the assessee. In his opinion, words any proceedings under the Act would not extend to a proceeding not relating t .....

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..... before the Wealth Tax Officer. The Revenue carried the matter before the High Court. The Division Bench allowed the appeal making following observations: Having heard the learned counsel for the revenue and having perused the aforesaid decisions, we find considerable substance in the submissions made by Mr Tanvish Bhatt, learned counsel for the revenue. In CIT v. Shree Manjunathesware Packing Products and Camphor Works (supra) the Supreme court interpreted a parimateria provision of Section 263 of the Income-tax Act and held that while calling for and examining the record of any proceeding under Section 263(1), it is and it was open to the Commissioner not only to consider the record of that proceeding but also the record relating to that proceeding available to him at the time of examination. The Supreme Court even held that the decision of this Court i.e. the Gujarat High Court in CWT v. Rajashree S. Parekh taking the contrary view and against which the department's SLPs were dismissed, did not lay down correct law and that the dismissal of the Special Leave Petitions summarily did not mean that the Supreme Court approved the view that was taken by the Gujarat High Court .....

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..... y the Commissioner. The Commissioner found that the assesee had filed a return of net wealth showing certain gold ornaments valued at ₹ 91,988/-. Such return was filed after the residential premises of brother-in-law of the assessee was subjected to search under section 132 of the Act. In the return, she had claimed that the ornaments belonged to her. The Commissioner found that the Income Tax Officer had not conducted any inquiry into the source of acquisition of such ornament and therefore, set aside the assessment directing the assessing officer to frame fresh assessment in accordance with law. Once again, the Tribunal held that the Commissioner could not have taken action under section 263 of the Act in the case of the assessee on the basis of record in case of other persons. The High Court placing reliance on the decision of Shree Manjunathesware Packing Products and Camphor Works (supra) allowed the Revenue's appeal observing as under: Following the aforesaid decision, we are of the view that there is nothing in the provisions of the Income-tax Act, 1961 particularly section 263 of the Act or in the aforesaid pronouncement of the Apex Court which would require u .....

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..... ect of the ratio laid down by the Supreme Court which becomes law of the land by virtue of Article 141 of the Constitution, even other courts follow the principle of precedent where one Bench would be bound by the decision of a Bench of coordinate strength or larger Benches. In the case of Chandra Prakash v. State of U.P. , AIR 2002 SC 1652, the Supreme Court observed as under: The doctrine of binding precedent is of utmost importance in the administration of our judicial system. It promotes certainty and consistency in judicial decisions. Judicial consistency promotes confidence in the system, therefore, there is this need for consistency in the enunciation of legal principles in the decisions of this Court. It is in the above context, this Court in the case of Rabhubir Singh held that a pronouncement of law by a Division Bench of this Court is binding on a Division Bench of the same or similar number of Judges. It is in furtherance of this enunciation of law, this Court in the latter judgment of Parija (supra) held that- But if a Bench of two learned Judges concludes that an earlier judgment of three learned Judges is so very in correct that in no circumstances can it be .....

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..... e opinion of such judges or of the majority, if any, of such judges. (2) Where there is no such majority, the judges shall state the point of law upon which they differ, and the case shall then be heard upon that point only by one or more of the other judges of the High Court, and such point shall be decided according to the opinion of the majority of the judges who have heard the case including those who first heard it. In terms of sub-section (1) of section 259, reference to the High Court is to be heard by a Bench of not less than two Judges and would be decided in accordance with the opinion of such judges or majority of them. Sub-section (2) of section 259 provides that if there is no such majority, the judges should state the point of law upon which they differ and the case shall then be upon that point only by one or more of other judges of the High Court and such point shall be decided according to the opinion of the majority of the judges who have heard the case including those who first heard it. 16. From such statutory provisions, it is clear that any reference which is heard by two judges, in case of difference of opinion, the two learned Judges differing thus .....

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..... The hearing of the arguments commenced on 22nd October 1979 and it ended on 16th November 1979. I hoped that after the completion of the arguments on questions of such momentous significance, there would be a 'free and frank exchange of thoughts' in a judicial conference either before or after the draft judgment was circulated by my Lord the Chief Justice and I would either be able to share the views of my colleagues or if that was not possible, at least try to persuade them to agree with my point of view. But, I find myself in the same predicament in which the leanred Chief Justice found himself in Kesavanand Bharati v. State of Kerala [1973] Supp SCR 1 : (AIR 1973 SC 1461). The learned Chief Justice started his judgment in that case by observing. I wanted to avoid writing a separate judgment of my own but such a choice seems no longer open. We sat in full strength of 13 to hear the case and I hoped that after a free and frank exchange of thoughts, I would be able to share the views of some one or the other of my esteemed brothers, but we were over-taken by adventitious circumstances, namely, so much time was taken up by counsel to explain their respective points of v .....

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..... decision making, if one or more of the judges constituting the Bench proceed to say that they will express their individual opinion, ignoring their colleagues and without discussion the reasons with them and even without circulating their draft judgment so that the colleagues have no opportunity of participating in the collective decision making process. This would introduce a chaotic situation in the judicial process and it would be an unhealthy precedent which this Court as the highest Court in the land - as a model judicial institution which is expected to set the tone for the entire judiciary in the country - should not encourage. Moreover, I felt that it was not right to pronounce an Order striking down a constitutional amendment without giving a reasoned judgment. Ordinarily, a case can be disposed of only by a reasoned judgment the Order must follow upon the judgment. It is true that sometime where the case involves the liberty of the citizen or the execution of a death sentence or where the time taken in preparing a reasoned judgment might prejudicially affect the winning party, this Court, does, in the larger interests of justice pronounce an order and give reasons later, .....

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..... courts such as the United States Supreme Court rely on briefing and argument to enhance the quality of the decisions issued by judges. Inadequate briefing and argument contribute to inadequate judicial opinions. Good briefing and argument do not guarantee good decisions, but they increase the likelihood that judges will produce thoughtful rulings, truthful about the relevant facts, faithful to the applicable law, and useful in accomplishing the goals the legal system seeks to advance. In the same article reference is also made to the remarks by Cardozo, J. as under: The eccentricities of judges balance one another. One judge looks at problems from the point of view of history, another from that of philosophy, another from that of social utility, one is a formalist, another a latitudinarian, one is timorous of change, another dissatisfied with the present; out of the attrition of diverse minds there is beaten something which has a constancy and uniformity and average value greater than its component elements. The same article also refers to the comments by Evan H. Caminker who observed as under: The process of collective deliberation can improve autonomous decision m .....

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..... ice the words shall include and shall be deemed always to have included for the original expression includes with effect from 1.6.88. The explanation itself was introduced with effect from 1.10.84. These legislative changes came up for consideration before the Supreme Court in the case of Shree Manjunathesware Packing Products Camphor Works (supra). It was contended that the Legislature by adding the explanation and widening the definition of the term 'record' has enabled the Commissioner to take into consideration all records relating to the proceedings. It was pointed out that earlier sub-section (1) of section 263 did not contained any explanation. Such explanation was added for removal of doubts. The Supreme Court in this context held and observed as under: 'Earlier Section 263(1) did not contain any explanation. It enables the Commissioner to call for and examine the record of any proceeding under the Act and 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, if he considers that any order passed by the Assessing Officer is e .....

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..... and, therefore, a further amendment was made by the Legislature while enacting Finance Act of 1989. The Memorandum explaining the provisions in the Finance Bill, 1989 makes that clear. Paragraph 28 of the said Memorandum reads as under : 28. Under the existing provisions of Section 263 of the Income-tax Act and corresponding provisions of the Wealth-tax Act and the Gift-tax Act, the Commissioner of Income-tax is empowered to call for and examine the record of any proceeding and if he considers that the orders passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of Revenue, he may pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the same or directing a fresh assessment. By the Finance Act, 1988, an Explanation was substituted with effect from 1st June, 1988, to the relevant sections of the Income-tax Act, Wealth-tax Act and Gift-tax Act to clarify that the term record would include all records relating to any proceeding available at the time of examination by the Commissioner. Further, it was also clarified that the Commissioner is competent to revi .....

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..... ecessary used in the second limb of this section. It, therefore, cannot be said, as contended by the learned counsel for the respondent, that the correct and settled legal position, with respect to the meaning of the word record till 1st June, 1988, was that it meant the record which was available to the Income-tax Officer at the time of passing of the assessment order. Further, we do not think that such a narrow interpretation of the word record was justified, in view of the object of the provision and the nature and scope of the power conferred upon the Commissioner. The revisional power conferred on the Commissioner under Section 263 is of wide amplitude. It enables the Commissioner to call for and examine the record of any proceeding under the Act. It empowers the Commissioner to make or cause to be made such enquiry as he deems necessary in order to find out if any order passed by the assessing officer is erroneous insofar as it is prejudicial to the interests of the revenue. After examining the record and after making or causing to be made an enquiry if he considers the order to be erroneous then he can pass the order thereon as the circumstances of the case justify .....

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..... it was open to the Commissioner not only to consider the record of that proceeding but also the record relating to that proceeding available to him at the time of examination. Respectfully following the aforesaid decision, we are of the considered opinion that the Tribunal was not justified in limiting the record which was available before the Income-tax Officer at the time of assessment. The Commissioner was well within his jurisdiction to take into consideration the report of the Valuation Officer which was available to him at the time of examination for the purpose of initiating the proceeding under section 263(1) of the Act. The same High Court in the case of CWT v. Smt. Phoolwati Agarwal [2005] 276 ITR 623/145 Taxman 436 (All.) observed as under: Learned counsel for the Revenue submitted that the record is not confined to what was available before the Wealth-tax Officer at the time of completion of assessment and it will include all such documents, materials which are on record at the time when the Commissioner of Wealth-tax examined and decided to initiate proceeding. He relied upon a decision of the apex court in the case of CIT v. Shree Manjunathesware Packing Pr .....

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..... ction 263 is found in section 264(1). It was observed that the explanation was added with words shall be deemed always to have included . However, the case on hand before the said High Court was arising under section 264 of the Act. Therefore, such distinction was drawn. It can be seen that consistently after the amendment in section 263(1) of the Act by insertion of the explanation and the decision of the Supreme Court in the case of Shree Manjunathesware Packing Products Camphor Works (supra), the courts have found the power of the Commissioner to take into account any record was wide enough and not confined to the record of the assessee which was before the assessing authority. 25. Learned counsel Shri Soparkar, however, drew my attention to various decisions of different High Courts taking a restricted view of the record in the context of section 154 of the Act. Such decisions are as under: (1) CIT v. Keshri Metals (P.) Ltd. [1999] 237 ITR 165/104 Taxman 360 (SC). (2) E.M. Vishwanathan Chettiar v. Agrl. ITO [1983] 142 ITR 244 (Kar.). (3) Smt. Swaran Yash v. CIT [1982] 138 ITR 734/8 Taxman 191 (Delhi). Section 154 of the Act as is well-known is in the nature of p .....

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