TMI Blog2006 (3) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner to consider the explanations offered and on that basis to record his opinion/conclusion as to whether he still considered the assessment order in question to be erroneous and prejudicial to the interests of the Revenue and, if so, the reasons therefore. The Commissioner did not do that. Instead, in the order dated November 1, 1996, the Commissioner has recorded that the assessee has filed a written submission giving an exhaustive explanation in 7 pages and enclosing copies of various deeds, certificates, etc., which were required to be verified in detail. The Commissioner, in the above facts, set aside the assessment order and directed the Assessing Officer to make a fresh assessment after examining the submissions and contentions advanced by the assessee and after due scrutiny of the documents adduced. The course of action adopted was clearly impermissible in law in the absence of a finding that on consideration of the explanations submitted and for the reasons shown the assessment has to be reiterated to be erroneous and prejudicial to the interests of the Revenue. Unfortunately, the Commissioner did not do so which omission will have the effect of rendering the impu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner that the power under section 263 would be exercised to set aside the order of assessment and direct the Assessing Officer to reassess the investment in the house property on protective or substantive basis, as the case may be. 3. On receipt of the aforesaid notice dated August 14/19.8.1996, the petitioner-assessee showed cause by submitting a somewhat lengthy explanation dated September 20, 1996. In the explanations submitted by the petitioner-assessee it was contended that the house property in question was owned by the petitioner-assessee and the investments therein were made by her from her own sources. The petitioner, in the reply submitted, had shown the yearly investments made by her in the house property in question and it was further stated that along with the return filed by the petitioner for the assessment year in question, balance-sheets for the period March 31, 1988, to March 31, 1992, showing the position of the assessee's assets and liabilities were also filed before the Assessing Officer. The details of the funds available to the petitioner-assessee were also disclosed. In the reply submitted, the petitioner-assessee had also taken certain other grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to light in the form of the report of the CBI, at best, could have been a ground for the competent authority to invoke the power of reopening the concluded assessment of the petitioner under section 147/148 of the Income-tax Act. The said power, learned counsel contends, is a distinct and separate power conferred on another authority by the provisions of the Act. In the instant case the learned Commissioner by seeking to exercise his powers under section 263 of the Act has really trenched upon the powers vested in another authority by another provision of the Act. This, learned counsel contends, is not permissible on the ratio of the law laid down by this court in the case of Santalal Mehendi Ratta (HUF) v. Commissioner of Taxes reported in [2002] 1 GLR 197 and in the case of Shree Automobiles P. Ltd. v. Commissioner of Taxes reported in [2003] 3 GLT 40. Dr. Saraf, learned counsel for the petitioner, has further argued by relying on the additional affidavit filed by the petitioner that in any event the report of the CBI cannot, as on date, furnish any basis to justify the impugned order dated November 1, 1996, of the Commissioner of Income-tax inasmuch as in the criminal proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of causing prejudice to the interests of the Revenue. According to. Sri Bhuyan, the aforesaid satisfaction already reached the basis of the record of the assessment proceeding is only fortified by the subsequent report of the CBI but the satisfaction itself is not based an the said report of the CEI. On the aforesaid contentions the projections made by the writ petitioner in this regard have been sought to be demolished. Sri Bhuyan, learned counsel far the Revenue by specifically referring to the provisions of section 263 of the Act has submitted that under the said provision of the Act the Commissioner of Income-tax is empowered either to enhance or modify the assessment made or cancel the same and direct a fresh assessment. This is required to be done after giving the assessee an opportunity of hearing and after making such enquiry as may be deemed necessary. In so far as the power to enhance or modify the assessment is concerned, Sri Bhuyan has submitted that if the Commissioner of Income-tax is proceeding to act accordingly a firm opinion that the assessment order is erroneous and prejudicial to the interests of the Revenue would be called far. However, in a situation where t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Turning then to the jurisdiction which the revising authority may exercise under section 12(2), attention must first be directed to the phraseology used by the Legislature. The Deputy Commissioner is thereby invested with power to satisfy himself about the legality or propriety of any order passed or proceeding recorded by any officer subordinate to him, or the regularity of any proceeding of such officer, and to pass such orders with respect thereto as he thinks fit. For exercising this power, he may suo motu or on application call for and examine the record of any proceeding or order. There is no doubt that the revising authority may only call for the record of the order or the proceeding, and the record alone may be scrutinized for ascertaining the legality or propriety of an order or regularity of the proceeding. But there is nothing in the Act that for passing an order in exercise of his revisional jurisdiction, if the revising authority is satisfied that the subordinate officer has committed an illegality or impropriety in the order or irregularity in the proceeding he cannot make or direct any further enquiry. The words of sub-section (2) of section 12 that the Deputy Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4A authorizes the revising authority to enter generally upon enquiries which may properly be made by the assessing authorities and to reopen assessments. In Shree Automobiles P. Ltd. [2003] 132 STC 125; [2003] 3 GLT 40 this court understood the scope of the enquiry required to be made by the revisional authority before initiating a suo motu revision proceeding, in the following manner: 7. Coming to the second argument advanced on behalf of the writ petitioner, it must be noticed that the apex court in the case of State of Kerala v. K. M. Cheria Abdulla and Co. [1965] 16 STC 875, reliance on which has been placed on behalf of the petitioner, has clearly held that while it would not be correct to say that in exercise of the revisional power, the authority would not be competent to make an enquiry beyond the record of the proceedings sought to be revised, the power to make such an enquiry must necessarily be understood, in the context of the scheme of the Act. While exercising such powers and in conducting such enquiry, the authority must not encroach upon the other corrective powers, vested in other authorities, by the provisions of the Act.... 10. In the present case, a reading of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wrong order; it does not mean an order with which the Commissioner is unable to agree. An erroneous order would be an order which suffers from a patent lack of jurisdiction; the error must be with reference to jurisdiction. Prejudicial to the interests of the Revenue would mean an erroneous order which goes against the interests of revenue collection. Both the conditions must preexist to enable the Commissioner of Income-tax to exercise the power under section 263. Having said that, it will not be necessary to burden this order with any further description or narration. The foundation for the exercise of the power being the formation of an opinion or conclusion, there is no escape from the view that the Commissioner of Income-tax must record his conclusions in the matter before setting aside an order of assessment in exercise of the power under section 263. It will again be futile to embark upon any discussion as to the intensity or strength of the conclusion that must be reached by the Commissioner of Income-tax before setting aside an assessment under section 263 as the answer to the said question would really depend on the facts that may be confronting the Commissioner in any g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in question to be erroneous and prejudicial to the interests of the Revenue and, if so, the reasons therefore. The Commissioner did not do that. Instead, in the order dated November 1, 1996, the Commissioner has recorded that the assessee has filed a written submission giving an exhaustive explanation in 7 pages and enclosing copies of various deeds, certificates, etc., which were required to be verified in detail. The Commissioner, in the above facts, set aside the assessment order and directed the Assessing Officer to make a fresh assessment after examining the submissions and contentions advanced by the assessee and after due scrutiny of the documents adduced. The course of action adopted was clearly impermissible in law in the absence of a finding that on consideration of the explanations submitted and for the reasons shown the assessment has to be reiterated to be erroneous and prejudicial to the interests of the Revenue. Unfortunately, the Commissioner did not do so which omission will have the effect of rendering the impugned order dated November 1, 1996, legally fragile. 14. In the above circumstances and in the light of the discussions that have preceded, I am of the vi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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