TMI Blog1997 (9) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... the firm ? (3) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is correct in law in directing that the material available at the time of passing the order under section 263 but which was not available at the time the Income-tax Officer passed the impugned order dated August 29, 1981, under section 185 should be ignored though the material disclosed that the Income-tax Officer had passed an order without making proper enquiries ? " The respondent/assessee is a firm (hereinafter referred to as "the firm"). For the assessment year 1980-81, the firm was granted registration under section 185 of the Act. In exercise of his revisional power under section 263 of the Act, the Commissioner set aside the order of registration on August 12, 1983. The firm carried the matter in appeal before the Income-tax Appellate Tribunal. The Tribunal took the view that the Commissioner was in error in cancelling the registration and thus allowed the appeal on October 31, 1985. That order has given rise to the aforementioned questions of law. Sri Prasad, learned standing counsel for the Revenue, contends that in view of the amendment of section 263 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt shall be excluded." Section 263 of the Act as it stands after the amendment reads as follows : " 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. Explanation.--For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,-- (a) an order passed on or before or after the 1st day of June, 1988, by the Assessing Officer shall include-- (i) an order of assessment made by the Assistant Commissioner or the Income-tax Officer on the basis of the directions issued by the Deputy Commissioner under section 144A ; (ii) an order made by the Deputy Commissioner in exercise of the powers or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The power under that section could be exercised if the Commissioner considers that any order passed by the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue ; then, after giving the assessee an opportunity of being heard and on making such enquiry as he may deem necessary, he may pass such orders as the circumstances of the case may justify. The word "record" was interpreted by the courts to mean record available with Income-tax Officer on the date of the passing of the order by the Income-tax Officer which was sought to be revised. The courts also took the view that material which came to light after the passing of the order of the Income-tax Officer does not form part of the record to justify exercise of revisional power under section 263. That was the view taken by the Calcutta High Court in Ganga Properties v. ITO [1979] 118 ITR 447. In that case a learned single judge of the Calcutta High Court took the view that under section 263 the Commissioner may call for the record of the proceeding which was before the Income-tax Officer and examine it in order to consider whether, on the basis of the materials which were before the Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir possession. On the basis of that record the Commissioner of Income-tax exercised jurisdiction under section 263 of the Act and set aside the assessment. On appeal, the order of the Commissioner was upheld by the Income-tax Appellate Tribunal. On a reference to the High Court of Madras, one of the questions that was referred related to exercise of power by the Commissioner under section 263(1), based on material which came to light after the order of assessment. The Division Bench of the Madras High Court has held that clause (b) of the Explanation was inserted in section 263(1), which provides that the word "record" shall include and shall be deemed always to have included all records in relation to any proceeding under the Act available at the time of examination of an order by the Commissioner to revise the same even if the order under revision was passed during the period prior to June 1, 1988, and, therefore, the Commissioner could make use of the materials gathered by him on the date when he assumed jurisdiction under section 263 of the Act. It held that there was no infirmity in the order of the Tribunal upholding the order of the Commissioner. Here we refer to an earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d law. We may note here that in Sundaram Pillai (S.) v. V. R. Pattabiraman, AIR 1985 SC 582 the Supreme Court pointed out the object of adding an Explanation to a statutory provision and observed : "It is now well-settled that an Explanation added to a statutory provision is not a substantive provision in any sense of the term but as the plain meaning of the word itself shows it is merely meant to explain or clarify certain ambiguities which may have crept in in the statutory provision," Having regard to the nature of clause (b) of the Explanation it has to be held that it is clarificatory in nature and retrospective in operation. The fact that it is inserted with effect from June 1, 1988, would not mean that the courts should confine its application and apply the meaning only from June 1, 1988. However, Sri Kodanda Ram has relied upon the observation of the Supreme Court in CST v. Bijli Cotton Mills [1964] 15 STC 656 to hold that the amended law cannot be made applicable. We are afraid we cannot accept the contention of learned counsel. In that case, the Supreme Court observed : "If the law which the Tribunal seeks to apply to the dispute is amended, so as to make the la ..... X X X X Extracts X X X X X X X X Extracts X X X X
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