TMI Blog2000 (6) TMI 801X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under s. 163 of the Act. (3) The learned CIT ought to have appreciated that the assessment order passed by the AO by taking in view not only the provisions of the Act, but also following the various authorities cannot be said to be erroneous and prejudicial to the interest of the Revenue within the meaning of s. 263 of the Act unless some later judgment of the Supreme Court reversed that view. (4) Without prejudice to the above, the learned CIT ought to have appreciated that it is not enough that some prejudice is caused to the Revenue, but is further necessary that the order sought to be revised by the CIT is also erroneous. (5) The learned CIT ought to have appreciated that if the view taken by the AO could also be a possible view, it cannot be held to be erroneous merely because the CIT holds a different view. (6) The learned CIT ought to have appreciated that in normal course, revisionary jurisdiction cannot be allowed to be exercised either for substituting opinion or for making fishing or roving enquiry. (7) Without prejudice to the above, the learned CIT failed to appreciate that where assessment was completed under s. 143(3) r/w s. 144A i.e. afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Bom) 68: (1993) 205 ITR 339(Bom) would be fully applicable to the facts of the appellant's case. (12) Without prejudice to the above, the learned CIT ought to have followed the ratio laid down by the Hon'ble Madras High Court in the case of CIT vs. B. Nagi Reddy (1983) 35 CTR (Mad) 132: (1983) 144 ITR 62(Mad) and also of the Bombay High Court in the case of Thana Electricity Supply Ltd. vs. CIT (1993) 112 CTR (Bom) 356: (1994) 206 ITR 727(Bom), wherein the Courts held that if there are two decisions of the same High Court holding two different views, then in that case, later decision has to be followed. 2. Brief facts of the case as observed from the record before us are as under : (1) The assessee is a registered firm carrying on various business activities including making investment in shares, securities, dividend, lease rent from leasing out property and carrying on business as builders, developers and immovable property. (2) As a result of negotiations held between the assessee and M/s Eastern Ceramics Ltd. in regard to purchase of property owned by said M/s Eastern Ceramics Ltd., the assessee had handed over a sum of ₹ 5,00,000 being earnest mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luded agreement had been arrived at whereby said M/s Eastern Ceramics Ltd. had agreed to sell to the assessee and assessee had agreed to purchase from said M/s Eastern Ceramics Ltd. the relevant property and thus the assessee is entitled to claim specific performance thereof. (7) Without prejudice to the demand of the assessee-firm in suit so filed by it before Hon'ble High Court in respect of specific performance of the agreement in the alternative it was also claimed that in case specific performance is not granted in that event in addition to refund of earnest money of ₹ 5 lakhs along with interest at the rate of 21 per cent per annum from the date of cheque till payment or realisation, the assessee-firm claimed damages for breach of agreement to the tune of ₹ 600 lakhs as per exhibit G as estimated by assessee-firm together with interest at the rate of 21 per cent per annum. (8) It was asserted in the suit so filed by the appellant-firm in the High Court that as said M/s Eastern Ceramics Ltd. is attempting to sell and/or enter into an agreement for sale and/or to create third party rights in respect of relevant property to the detriment to the assessee-fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of the same a refund of ₹ 1,34,12,099 was resulted which was issued after obtaining the necessary prior permission of CIT, who accorded his consent for issue of refund vide his letter dt. 23rd May, 1996. As refund exceeded ₹ 50 lakhs, the same fall under necessary scrutiny. (13) During the course of assessment proceedings, the assessee-firm made petition under the provisions of s. 144A with Dy. CIT Range 21, Mumbai, requesting therein to issue necessary instructions on the point of whether the receipt of damage amounting to ₹ 4.95 crores is taxable or not. (14) The Dy. CIT issued the following direction under the provisions of s. 144A vide his order bearing No. DC. RG. 21/144A/1996-97 dt. 27th May, 1996 : The assessee was given an opportunity to present the case upon which Shri Rashmi J. Zaveri, CA attended on behalf of the assessee and submitted that the receipt by way of damages from M/s Eastern Ceramics Ltd. as per the directions of the Mumbai High Court following the backing out by the said party from an oral agreement to sell the factory premises at Goregaon to the assessee is not liable to tax either as business income or trading receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is noticed that the fact of the case in fact are identical to the case of CIT vs. Vijay Flexible Containers (1990) 81 CTR (Bom) 29: (1990) 186 ITR 693(Bom). Accordingly, while completing the assessment the AO as well as the then Dy. CIT failed to consider the decision in CIT vs. Vijay Flexible Containers (supra). 4. In response to this notice, the assessee filed written submissions dt. 9th Feb., 1999. After considering the written submissions of the assessee, the CIT passed a detailed order on 31st March, 1999. 5. Aggrieved by this order of CIT passed under the provisions of s. 263 the assessee is in appeal before us. The learned authorised representative assailing the impugned order of CIT under s. 263 on ground of legality contended that the order passed under the provisions of s. 263 will be bad on the following counts : (1) The matter in regard to taxability of relevant transaction was considered at length by taking into account all relevant facts as well as law specifically the observations of the jurisdictional Bombay High Court in the case of Vijay Flexible Containers (supra). (2) The order passed by AO was as per directions of Dy. CIT as well as the then CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;s compilation wherein the assessee made an application for issue of directions to Dy. CIT under the provisions of s. 144A wherein related case laws, circular, opinion etc. were also furnished before him and it was contended that the damages so received are not liable to tax either as a trading income, not as capital gain nor as a casual and non-recurring receipt and it was contended that it being capital receipt it is not liable to income-tax. He has further drawn our attention towards notice appearing at p 7 of assessee's compilation, which contained the notice issued under s. 263 by the CIT, to contend that CIT observed that the AO and the then Dy. CIT failed to consider the decision of Bombay High Court in the case of CIT vs. Vijay Flexible Containers (supra) is wrong inasmuch as the said decision was considered by the AO as well as the Dy. CIT. He has further contended that law laid down by Bombay High Court in the case of Vijay Flexible Containers is distinguishable. The assessee in the present case obtained damages for foregoing the right to sue and thus not taxable in view of the Dehgamwalla's case (supra). He relied upon the Bombay High Court decision in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directions in regard to framing of assessment, which is quasi-judicial act and cannot be interfered by the administrative authority. Under s. 144A the powers to issue directions are vested in Dy. CIT and no other authority is authorised to interfere in the process. He in this regard placed reliance on the judgment of Hon'ble Supreme Court in the case of Sirpur Paper Mills Ltd. (supra) to contend that assessment to be framed is a quasi-judicial act and unless law permits, it cannot be influenced by any direction issued by any superior authority. He has further drawn our attention towards the decision in Dehgamwalla's (supra) case, in which it is observed by the Hon'ble High Court that the right of specific performance was extinguished in 1961, and thereafter right to sue arises and in the instant case such right of specific performance was not extinguished. He has further drawn our attention towards the decision of Tribunal Delhi Bench in the case of Indian Aluminium Cable Ltd. vs. Dy. CIT (2000) 73 ITD 109(Del) wherein it is held that right acquired on allotment of an industrial plot falls within the expression of property of any kind used in s. 2(14) and is consequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, by an order refused to grant specific performance of the agreement and in the light of this fact their Lordships held that the extinguishment of right of specific performance by the order of the Court came to an end and right acquired in lieu thereof was only a mere right to sue and according to s. 6 of Transfer of Property Act which uses the expression property of any kind in the context of transferability makes an exception in the case of mere right to sue and such right does not constitute capital asset . In the present case as discussed above the claim of the assessee regarding specific performance had never been rejected by the Hon'ble High Court, rather, by issue of notice of motion it was held by Hon'ble High Court that plaintiffs (the assessee) have made out a prima facie case in respect of oral agreement of sale. The agreement has been entered into after negotiation between the parties. Discussing the circumstances and facts his Lordship in the notice of motion held that the plaintiffs have made out a good case for grant of the interim relief or injunction prayed for in terms of prayer cl. (b) of the notice of motion and thus, the notice of motion was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be seen from the above observations of their Lordship. The peculiarity of facts in Dehgamwalla's case (supra) was that by the order of Hon'ble High Court the right of specific performance was rejected, which fact is absent in Vijay Flexible Containers' case (supra) as well as in the present appeal. Our this view is also supported by the following observations of Hon'ble Bombay High Court in the case of Bafna Charitable Trust vs. CIT (1998) 146 CTR (Bom) 532: (1998) 230 ITR 864(Bom) at p 874. While discussing Vijay Flexible Containers case, the observations of their Lordships were as under : In CIT vs. Vijay Flexible Containers (1990) 81 CTR (Bom) 29: (1990) 186 ITR 693(Bom), it was reiterated by this Court that the right to obtain a conveyance of immovable property falls within the expression property of any kind used in s. 2(14) of the Act and is, consequently, a capital asset. It was held that the payment of earnest money in order to obtain such a right constitutes its cost of acquisition. Where such a right is given up, there is a transfer of a capital asset. These observations, would make further clear that there is no conflict between Vijay Flexibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 263 of the Act on the ground that the order passed by the AO is, erroneous and prejudicial to the interest of Revenue. 22. Various arguments have been raised by the learned authorised representative to show that the order was not erroneous on the ground that the matter was considered by the AO at length in the light of various legal pronouncements including the implication of Vijay Flexible Container's case (supra) and after considering all of them, it was found that in view of Dehgamwalla's case (supra) the receipt of sum of ₹ 5 crores was neither a trading receipt, capital gain nor a casual income and in arriving to this conclusion Dy. CIT also got the approval of the then CIT (the copy of proceeding carried out under s. 144A provided to us as well as to learned authorised representative by the learned Departmental Representative as per directions of the Bench). Arguments have also been raised in regard to validity of order under s. 263 on the ground that the then CIT had also considered the matter and formed the view that the concerned receipts were not taxable. Hence, the new CIT cannot sit over the judgment of the then CIT. 23. It is well settled law that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law. More emphasis was provided by learned authorised representative on the words 'unsustainable in law' to contend that the view taken by the AO in this case was sustainable in law. According to us, the view taken by AO was not sustainable in law. According to us, the view taken by AO was not sustainable in law in view of interpretation putforth by the decision of Hon'ble jurisdictional High Court in the case of Vijay Flexible Containers (supra). It is well settled law as observed by Hon'ble Supreme Court in the case of CIT vs. Amritlal Bhogilal Co. (1958) 34 ITR 130(SC) that whether or not the revisional power of the CIT can be exercised in a given case must be determined solely by reference to the terms of s. 33B itself, and the Courts are not justified in imposing additional limitations on the exercise of the said power on hypothetical considerations of policy or the extraordinary nature of the power. 26. Now coming to the contention of learned authorised representative that in view of the directions of the then CIT the new CIT cannot sit over the judgment of the then CIT. It is observed that what was subject-matter of revision under s. 263 is order of AO p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion that in view of the peculiarity of facts the powers under s. 263 have rightly been exercised, as order passed by AO under the provisions of s. 143(3) r/w s. 144A was erroneous insofar as it was prejudicial to the interest of the Revenue. We, therefore, uphold this action of CIT. 30. In the result, appeal of the assessee is therefore dismissed. PRADEEP PARIKH, A.M. : I have perused the order proposed by my learned brother. Whereas I agree with the conclusion reached by him, I would like to record separate reasons for the same. 2. On the legal aspect, we need to address ourselves on the following two issues : (i) Whether, under s. 144A, was the Dy. CIT justified in referring the matter to the CIT? (ii) Whether the subsequent CIT could exercise jurisdiction under s. 263 when once the predecessor CIT had given directions to the Dy. CIT? 3. The object of s. 144A appears to be to avoid multiplicity of proceedings and unnecessary appeals. Except for this provision, it is very clear that no orders, instructions or directions can be given so as to require any IT authority to make a particular assessment in a particular manner. Only under s. 144A, the Dy. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority as to how the revision application filed before him should be decided. He exercised no independent judgment. It was in this context the Supreme Court observed that the CIT misconceived the nature and extent of his jurisdiction. The Court has observed as follows : The CIT appears, in our judgment, to have wholly misapprehended the true character of the jurisdiction with which he is by the Act entrusted and has surrendered his judgment to the directions of the Board of Revenue . 6. In the case before us, the Dy. CIT surrendered his judgment to the directions of the CIT and in the process sought to set at naught the provisions of s. 263. We do not approve of this and accordingly hold that the subsequent CIT was competent to exercise jurisdiction under s. 263. 7. Now we come to the merits of the case. The facts have been elaborately set out by my learned brother in his order and hence the same need not be repeated. The basic dispute between the parties is about the applicability of two decisions of the Bombay High Court. The Department has relied on the decision in the case of Vijay Flexible Containers (supra) whereas the assessee has relied on the decision in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
