TMI Blog2006 (9) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... J.-The order dated February 5, 2001, passed by the Commissioner of Income-tax, Guwahati (hereafter referred to as "the CIT"), directing the jurisdictional Assessing Officer to work out the deductions under sections 80HH and 80-I of the Income-tax Act, 1961 (hereafter referred to as "the Act"), creditable to the petitioner has been impugned arguably being afflicted by the vice of transgression of the statutorily prescribed limits of the said authority. I have heard Dr. A. K. Saraf, senior advocate for the petitioner, and Mr. U. Bhuiyan, learned standing counsel for the Revenue for the respondents. The unrebutted pleaded facts forming the background of the impugned decision and the challenge thereto have to be minuted in brief. The petitioner, a public limited company and a public sector undertaking incorporated under the Companies Act, 1956, has its registered office at Dhaligaon, Bongaigaoh. It is an assessee under the Act. Its three units-refinery, petrochemicals and polyster staple fibre were set up and commissioned in the financial years 1979-80, 1985-86 and 1988-89, respectively, and produce articles distinctly different and individually identifiable. According to the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itwise details as in the audited profit and loss account the bifurcation of the overall profit should have been made on the basis of the turnover. In its reply, the petitioner not only stated the reasons for not claiming deduction in the earlier years but also with reference to sections 80HH(5) and 80-I of the Act, asserted that it being a limited company, no audited profit and loss account was required to be submitted, It underlined that the bifurcation of its profits on the basis of actual workings amongst its different industrial units as per its books of account, was more appropriate than the turnover basis. The petitioner thereafter was served with the notice under section 263 of the Income-tax Act, 1961, issued by the Commissioner of Income-tax, NE Region, Shillong, mentioning that the Assessing Officer had allowed excess deduction to it under the aforementioned provision thereby rendering the assessment erroneous and as such prejudicial to the interests of the Revenue. The authority concerned recorded that the audited profit and loss account did not reveal any bifurcation amongst the three industrial units by totally overlooking the fact that the petitioner in the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HH(5) and 80-I(7) of the Income-tax Act, 1961, the Appellate Tribunal is justified in upholding that the assessee's company ought to have submitted audited account in support of the claim for deduction under sections 80HH and 80-I in respect of its new industrial undertaking from its gross total income?" While the matter rested at that, the petitioner in response to a notice dated June 1, 2000, from the learned Commissioner of Income-tax submitted before him audited unitwise balance-sheet and profit and loss account for the year ending March 31, 1992. The petitioner also by letter dated September 22, 2000, furnished all necessary details about the basis of the bifurcation of the industrial units. It also submitted on October 9, 2000, a copy of the audited pool account sought for by the learned Commissioner of Income-tax for verifying the transfer of price of the refinery products. By the impugned order dated December 5,2005, the learned Commissioner of Income-tax set aside the order of the Assessing Officer for the assessment year 1992-93 and directed him to ferret out the deductions under sections 80HH and 80-I by calculating the profit of the petitioner's units in proportion to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y determining the profit of its industrial units on the basis of the turnover thereof, reiteration of the same in the impugned order besides being per se illegal, betrays bias and a predetermined mind of the said authority and on that count as well the same is liable to be set aside. This is further evident, according to learned senior counsel from the fact that the exercise to overturn the assessment already completed was on account of an audit objection so much so that the impugned order is attuned thereto reflecting absence of independent application of mind to the, facts and law. Learned senior counsel contended that in view of the decision of this court in Bongaigaon Refinery and Petrochemicals Ltd. v. CIT [2005] 274 ITR 379 answering both the questions referred to it under section 256(2) of the Act as above, in favour of the petitioner, the impugned order is inoperative, null and void. The following decisions were pressed into service in support of the above contentions. Rajendra Singh v. Superintendent of Taxes [1990] 79 STC 10 (Gauhati); [1990] (1) GLR 449; Santalal Mehendi Ratta (HUF) v. Commissioner of Taxes [2002] (1) GLR 197, State of Kerala v. K. M. Cheria Abdulla an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the maintainability of the writ petition in the face of availability of an alternative remedy under the Act may be attended to at the threshold to clear the deck, for dealing with the other questions. True it is that an appeal lay before the learned Tribunal against the order impugned in the instant proceeding. As a matter of fact, the petitioner had availed of that course of remedy on the earlier occasion. However, as the instant petition was entertained to be heard on the merits, at this instant point of time, I do not feel persuaded to reject the same on the ground of non-exhaustion of alternative remedy. The plea raised on behalf of the Revenue in this regard therefore fails. While the legal principle enunciated in Shivram Poddar [1964] 51 ITR 823 (SC), C. A. Abraham [1961] 41 ITR 425 (SC) and as well as Sales Tax Officer [1965] 16 STC 599 (SC), bearing on the restraint in the exercise of powers under article 226 to entertain issues adjudicatable before the fora provided for redress by the corresponding legislations is inalienably basal, no absolute bar in exercise of the writ jurisdiction is suggested thereby. For the reasons cited hereinabove, this court is not inclined to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority in the absence of any express conferment of power by the legislation concerned has no authority to review the evidence on record. Shah J., in his separate rendering, while recognising the power of the Deputy Commissioner of Commercial Taxes to make or direct further enquiry under rule 14A of the Madras General Sales Tax Rules, 1939, as found necessary, held that the prerogative has to be essentially subject to the scheme of the Act so much so that the revising authority is not equipped with the dominion to relaunch enquiries at large so as to trench upon the powers which have been exclusively reserved by the Act or the rules for other authorities or to ignore limitations inherent in the exercise of those powers. In no uncertain terms his Lordship held that neither section 12 nor rule 14A authorised the revising authority to enter generally upon enquiries, which may appropriately be made by the assessing authorities, and to reopen assessments. 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 Santalal Mehendi Ratta, (HUF) [2002] 1 GLR 197 ; [2006] 143 STC 511. Drawing sustenance, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other mades as contemplated by the statute. The above judicial pronouncements therefore adumbrate the essence and extent of the revisional jurisdiction of an authority akin to the Commissioner of Income-tax under the Act. Not only is the exercise of the sua matu power conceptualised therein hedged by the two conditians of error in the order sought to be revised and the consequential prejudice to the Revenue, but no interference is permissible unless the same is afflicted by a jurisdictianal error or a patent illegality rendering the same ex facie invalid and non-existent in law. The process to derive the satisfaction that the order is erraneous and is thus prejudicial to the interests of the Revenue, the sine qua non for invocation of the power, thus logically has to be informed with the above limitations. Entertainment of a view different from the one adopted by the Assessing Officer, if plausible would not clothe the Commissioner with the power to interfere therewith under the said provision of the Act. Differently put, an error within the jurisdiction of the Assessing Officer on an evaluation of the materials available would not be exposed to interference in exercise of suo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of an audit objection to the effect that the petitioner had claimed excess deduction and that in the absence of unitwise details in the audited profit and loss account, the bifurcation of the overall profit ought to have been made on the basis of the turnover of the industrial units. In its reply to the said objection, the petitioner had by its communication dated December 14, 1996, clarified that its profit and loss account along with the balance-sheet had been duly audited under the Companies Act, 1956, and in terms of sections 80HH(5) and 80-I(7) unitwise profit and loss statement was not required to be audited it being a company. It also referred to the profit and loss statement submitted in the assessment proceedings bifurcating the net profits for the three industrial units separately on the basis of the actual working as available in the books of account maintained by it. It, therefore, contended that the profits of different units as set out in the revised return were duly substantiated by the said profit and loss statements. The Commissioner of Income-tax on a reappraisal of the materials available along with the audit objection was, however, of the view that no basis in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax for verification of the transfer price of the refinery products. Sections 80HH(5) and 80-I(7) bear out the petitioner's contention that it being a company, submission of audited accounts for ascertaining the profits and gains to grant the benefit of deduction thereunder is not obligatorily essential. The petitioner's unambiguous and consistent assertion of having submitted unitwise profit and loss statement on the basis of actual working of the units in the assessment as well as audited unitwise balancesheet and profit and loss account thereof for the relevant year and the audited pool account in response to the queries made by the Commissioner of Income-tax has remained unrebutted by the Revenue. Sub-section(6) of section 80HH and sub-section(8) of section 80-I enact a procedure for the computation of the profits and gains of the assessee specified therein forthe purpose of determining the deduction to which they are entitled thereunder. The provisos appearing under the sub-sections permit the Assessing Officer to compute such profits and gains on a reasonable basis as he would deem fit in case in his opinion the computation of the profits and gains in terms of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order.': While the initiation of the revisional proceedings acting on the audit objection per se was not impermissible, the course charted by the Commissioner of Income-tax to analyse and review the materials on record, by usurping the role of the Assessing Officer is in disregard of the established restrictions on the exercise of his revisional powers. In the contextual facts, the decision of the Allahabad High Court in CIT v. Bhagat Shyam and Co. [1991] 188 ITR 608, does not advance the cause of the Revenue. Apart from the fact that the operative direction in the impugned order, is exactly similar to the one set aside by the learned Tribunal by its order dated June 18, 1998, in I. T. A. Gau of 97, the Commissioner of Income-tax in the opinion of this court, having regard to the process undertaken by him had clearly breached the limits of his jurisdiction under section 263 of the Act. The approach adopted by him flies in the face of the preponderant judicial opinion noticed hereinabove and the views expressed in the instant narrative. Incidentally, this court in Bongaigaon Refinery and Petrochemicals Ltd. [2005] 274 ITR 379, had answered both the questions referred to it (qu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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