TMI Blog2021 (3) TMI 1163X X X X Extracts X X X X X X X X Extracts X X X X ..... irected the ld. AO to conduct enquiries even if he is of the opinion that enquiries were not carried out properly by the ld. AO. The entire action of the ld. PCIT goes to prove that the entire issue has been addressed with a pre-conceived notion in order to reach a pre-conceived destination by forgetting the legal tenets, factual verifications, verification of documents carried out by the ld. AO, improperly applying provisions of Explanation-2 to Section 263, not respecting the judicial hierarchy by ignoring the order of this Tribunal dated 14/01/2019 wherein the Tribunal had already quashed the assessment order dated 15/03/2016 but also granting relief to the assessee on merits on each of the five issues that were subject matter of revision proceedings, thereby proving his highhandedness. Hence, it could be safely concluded that proper and requisite enquiries were indeed carried out by the ld. AO while passing the order dated 02/05/2018 giving effect to the order of the ld. CIT(A) dated 28/06/2017 and hence, the ld. PCIT grossly erred in invoking revisionary jurisdiction u/s.263 of the Act on the ground that the order of the ld. AO is erroneous and prejudicial to the interest o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dt 28.06.2017 as an independent order passed by the A.O. by directing the A.O. to recompute the income of the appellant at ₹ 2237,55,11,503/- instead of ₹ 6,84,08,000/- determined in consequence of ITATs order dt 30.01.2015. 3. Additional ground No 3 On the facts and circumstances of the case and in law, the order is barred by limitation as the Ld. PCIT has also erred in assuming jurisdiction and passing the impugned order u/s 263 of the Act without properly appreciating the provisions of section 263 of the Act. 3. We have heard the rival submissions and perused the materials available on record. We find that Shri Ashwin Mehta, brother of Late Shri Harshad Mehta, was present at the time of hearing and had made both oral and written submissions thereon on merits with regard to the additional grounds raised supra. For the sake of convenience, we deem it fit to reproduce the said written submissions given by Shri Ashwin Mehta as under:- ARGUMENTS IN BRIEF ON MERIT IN RESPECT OF ADDITIONAL GROUND NO. 1 TO 3 1. With respect to additional ground no.1, on merit I draw your attention to the provision of Section 263(1) Income Tax Act, 1961 as wel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal and enjoy the same power under the suit procedure court which are enjoyed by any Appellate Court. This was so held by the Bombay High Court in the case of New India Life Assurance Company Ltd. Vs CIT 31 ITR 844 (Mumbai). The status of Income Tax Appellate Tribunal has been discussed by the Supreme Court in the case of Ajay Gandhi vs B. Singh 265 ITR 451. In this regard the observation of the SC at page 182 of 235 ITR 175 (Supreme Court) in the case of ITAT Vs Dr. V. K. Agarwal (Ex Law Secretary, Ministry of law and Justice, GOI) are much relevant which are reproduced below: Before examining the conduct of the first Respondent, we would like to deal with the technical objections which were raised before us on behalf of the first Respondent. The first Respondent had initially contended the Income Tax Appellate Tribunal was not a court and was also not court subordinate to the Supreme Court. Hence, the Supreme Court had no jurisdiction to issue a suo moto notice of contempt in respect of a matter pertaining to the Income Tax Appellate tribunal. However, subsequently, learned senior counsel for the first Respondent conceded that the Income Tax Appellate tribunal did perform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of all these five issues. Clause (c) of explanation (1) to Section 263 (1) of the Income Tax Act, 1961 has specifically been inserted with the purpose that judicial hierarchy must be maintained and the junior officer should not bust aside the decision of superior or the Appellate authority on the subject matter which had been duly considered and decided by the Appellate authority. The height of the case which must be appreciated is that initially the revenue filed an appeal before the Tribunal against the order of CIT (Appeal) and knowingly that even after passing the order of the Tribunal dated 14.01.2019, PCIT under section 263 Income Tax Act, 1961 passed impugned order dated 22.01.2020 directing the assessing officer to withdraw the relief given by the CIT (Appeal) and as confirmed by this Hon ble Tribunal. This fact that Tribunal has duly considered and confirmed the relief given by the CIT (Appeal) was placed before the PCIT during the course of 263 proceeding which is apparent from page 34 to 38 of the order of the PCIT. PCIT burst aside the argument of the assessee made merely on the basis that the revenue has not accepted the order of the Tribunal dated 14.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the appellate power, the court has special residuary power to entertain appeal against any order of any court in the country. The plenary jurisdiction of this court to grant leave and hear appeals against any order of a court and Tribunals confers power of judicial superintendence over all the courts and Tribunals in the territory of India including subordinate courts of Magistrate and District Judge. This court has, therefore, supervisory jurisdiction over all courts in India. Examining the powers of a court of record, it came to the conclusion that a court of record has inherent power to punish for contempt of all courts and Tribunals subordinate to it in order to protect these subordinate courts and Tribunals .. It was also submitted before us by learned senior counsel for the first respondent that although this court may have jurisdiction to punish for contempt, that jurisdiction should not be exercised in the present case. The appropriate authority to take action would be the High Court. We do not see much force in this submission. The Income tax Appellate Tribunal, although it may have Benches in different parts of the country, is a national Tribunal and its functioning af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectified. 2.3 The Hon'ble M.P High Court in the case referred (Supra) has placed reliance on the decision of Hon'ble Supreme Court in the case of Kamalakshi Finance Corporation Ltd (Supra), the relevant observations made by Hon'ble Supreme Court in the said case, which is given in the book of Sampath Iyengar s Law of Income tax 10th edition (at page 212), for the purpose of obtaining clarity on the impugned issue are : The learned Additional Solicitor General submits that the learned judges have erred in passing severe strictures (1990) 47 ELT 231 (Bom) against the two Assistant Collectors who had dealt with the matter. He submitted that these officers had given reasons for classifying the goods under heading 39.19 and not 85.46 and could do no more. He submitted that they acted bona fide in the interests of Revenue in not accepting a claim which, they felt, was not tenable. Sri Reddy is perhaps right in saying that the officers were not actuated by any mala fides in passing the impugned orders. They perhaps genuinely felt that the claim of the assessee was not tenable and that, if it was accepted, the Revenue would suffer. But what Sri Reddy overlooks is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on them. 2.4 I also rely to the decision of Khalid Automobiles Vs. UoI (1995) (4 SCC (Suppl.) 652), the Hon'ble Apex Court held that an order of Tribunal was binding on the Assessing officer and the first appellate authority and the failure to follow the same may constitute contempt of Tribunal s order. Similar views have been expressed in Sales tax matters in Rajendra Mills ltd Vs. Jt. CIT (1971) 28 STC 483 (mad), Senthil Raj Metals Vs. GTO (1990) 79 STC 38 (Mad). 2.5 Hon'ble Andhra Pradesh High Court, in the case of State of Andhra Pradesh Vs. Commercial Tax officer and another (169 ITR 564) had an occasion to discuss about the binding nature of the decision of High Court. It held that the Tribunals functioning within the jurisdiction of a particular High Court in respect of whom the High Court has the power of superintendence under article 227 are bound to follow the decisions of the High Court unless, on an appeal to the Supreme Court, the operation of the judgment is suspended. It further held that it is not permissible for the authorities and the Tribunals to ignore the decisions of the High Court or to refuse to follow the decisions of the High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) that an appeal was actually filed in the Supreme Court against the judgment of this court and is pending in the Supreme Court. (b) that a special leave petition is filed in the Supreme Court seeking leave to appeal against the judgment of this Court and the special leave petition is pending in the Supreme Court; (c) that the Department has not accepted the decision of this Court and is taking steps to file an appeal before the Supreme Court. We have noticed observations to the above effect in the orders passed by the Commercial Tax Authorities, including the Head of the Department, Commissioner of Commercial Taxes, Income-Tax Officers, including the Head of the Department, the Commissioner of Income-tax, Central Excise and Customs Authorities, including the Collector of Central Excise and Customs and a host of other authorities. The question for consideration is whether the authorities below can refuse to follow the judgments of this court on the above grounds . It is clear from the judicial pronouncements above referred to that the authorities and the tribunals functioning within the jurisdiction of this court in respect of whom this court has the pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicial forum or a quasi-judicial forum or even in any administrative field. Therefore, I hold that the impugned order passed by the Income-tax Officer is wholly without jurisdiction and the same is liable to be set aside and I hereby do so . 2.9 The Hon'ble Bombay High Court in the case of Bank of Baroda Vs. H.C. Shrivatsava and Another (256 ITR 385) has also dealt with the impugned issue and the relevant observations are extracted below: At this juncture, we cannot resist observing that the judgment delivered by the Income-tax Tribunal was very much binding on the Assessing Officer. The Assessing Officer was bound to follow the judgments in its true letter and spirit. It was necessary for judicial unit and discipline that all the authorities below the Tribunal must accept as binding the judgments of the Tribunal. The Assessing Officer being an inferior officer vis- -vis the Tribunal, was bound by the judgment of the Tribunal and the Assessing Officer should not have tried to distinguish the same on untenable grounds. In this behalf, it will not be out of place to mention that in the hierarchical system of courts which exists in our country, it is necessary for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercising your judicial power to give the appeal effect to your honours order dated 14.01.2019 immediately within the specified time so that in future none of the revenue officer dare to disregard the order passed by the Appellate authority including the order of this temple of justice on which public at large have faith and high regard. Thus, this ground may kindly be allowed. 3. With respect to ground no. 3, it is submitted that this ground is consequential to ground 1, therefore, if ground no. 1 is allowed, this ground is not pressed at present. 3.1. We find that Shri Ashwin Mehta also filed his written submission dated 14.1.2021 for consequential relief on additional grounds which was heavily relied upon by the ld AR. 3.2. Per Contra, the ld Special Counsel for the Revenue , vehemently objected to the admission of additional grounds per se and accordingly it was argued that all the aforesaid averments made by Shri Ashwin Mehta would be of no relevance. 3.3. We find that the issues raised in additional grounds are purely legal in nature and also go to the root of the matter not involving verification of any fresh facts and hence in view of the decision of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng effect to ld. CIT(A)‟s order dated 28/06/2017 . In this interim order, the ld. AO categorically admits that the issues mentioned in ground Nos. 6,8,10,13 17 requires verification by him in order to ascertain the correct amount of relief eligible to the assessee. Similarly, in respect of ground No.28, credit for TDS and advance tax would be given after due verification of the same. Similarly for ground Nos. 29 31, the revised interest shall be calculated as per directions of the ld. CIT(A) vide order dated 28/06/2017. In fact in this interim order dated 28/09/2017, though it was termed as order giving effect to the ld. CIT(A)‟s order, the ld. AO did not disturb the total income already determined vide order dated 15/03/2016 in third round of proceedings as tabulated supra on the ground that the said income would get reduced after verification by him. 3.6. The ld. AO after due verification of all the issues and contentions raised by the assessee vide above mentioned grounds i.e. ground Nos. 6,8,10,13,17,28,29 31 raised before the ld. CIT(A) in the third round of proceedings as tabulated supra, passed an order dated 02/05/2018 actually giving effect to the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (As per para 24.24 of CIT(A) s order dated 29.06.2017) Addition on account of money market unexplained stock Relief due to order of Supreme Court dated 01.11.2002 and 03.12.2008 224,37,25,245 LESS (As per para 27.9 of CIT(A) s order dated 28.06.2017) Addition on account of interest on money market 10,42,27,500 TOTAL TAXABLE INCOME 1143,38,34,164 Rounded off to 1143,38,34,160 3.7. Out of the aforesaid sums which were granted relief by the ld. AO in the giving effect order after due verification of the issues together with the relevant supporting evidences, the issues that are subject matter of revision proceedings u/s.263 of the Act (i.e. the impugned order) are as follows:- Particulars Amount(Rs.) a. Addition on account of money market oversold position due to decree transactions 438,43,55,195/- b. Addition on account of mone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the AO. The AO prayed for the revision of the assessment order as admitted in Paragraph 3 of the impugned order dated 22.01.2020. Under section 263(1) clearly says, The Commissioner may call for and examine the records of any proceedings under this Act, and if he considers ... , which means that proposal for initiation of revision proceedings must be initiated by the CIT, because, it is the CIT who has to call for and examine the records. In the case at present, the CIT did not initiate the proceedings himself but initiated the proceedings on the proposal received from the AO. Only on receipt of proposal from the AO, the Pr. CIT initiated revision proceedings. It is not the case where CIT called for the record and after examining the same, initiated the proceedings under section 263. This clearly proves that there is no application of mind on the part of CIT WHILE invoking jurisdiction u/s 263. As mentioned above, that the proposal for initiation of revision proceedings must be initiated by the CIT, which is not the case at present, therefore, the initiation of proceeding u/s 263 at the instance of the assessing officer are invalid. In this regard reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it prescribed by the statute. (iii)Shanti Exim Ltd Vs CIT [20171 88 taxmann.com 361 (Ahd. Tribunal) The Commissioner set aside assessment order in exercise of his power under section 263 on the ground that the Assessing Officer did not make any independent verification to establish the genuineness of the purchase transaction of the assessee-company with eight parties. Held that the action under section 263 initiated on the basis of recommendation by the concerned Assessing Officer/Joint Commissioner. The said Assessing Officer has categorically held that the order of his predecessor is erroneous and prejudicial to the interest of the revenue. Thereafter the case record was called for by the Commissioner. If the recommendation would not have received from the successor the Assessing Officer, then the Commissioner would even not have initiated the proceedings under section 263. Therefore, it could not be termed that the Commissioner himself has called for the records. In this case, the record has been called for only after the recommendation received from the successor Assessing Officer. In similar situation, the ITAT, Mumbai A Bench in the case of Ashok ku ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in so far as the CIT was concerned, he did not apply his own mind........ We are of the considered opinion that the CIT could not have invoked the jurisdiction under section 263 without his own independent application of mind. (vi)Span Overseas Ltd. Vs. CIT, Pune ITA No. 1223/PN/2013 (21.12.2015] The Commissioner of Income Tax has invoked the provisions of section 263 without applying his own independent judgment and merely at the behest of proposal forwarded by the Dy. Commissioner of Income Tax is against the spirit of Act. Thus, the impugned order is liable to be set aside. For revision of order of AO, the Pr. CIT had not made any inquiries on his own but had merely relied on the proposal made by the AO as is apparent from show cause notice as well as order u/s 263 to Pr. CIT that in the assessment order certain points were not verified although verification was duly made by assessing officer while allowing effect to the order of the CIT(A). Even the CIT did not point out what verification was left by Assessing officer. It is practically, revision asked by the AO himself and not by the Pr. CIT. He merely relied on the version of the AO who wanted to re-examine t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was a mistake in the order of the AO dated 30.01.2015, the only course of action available to the AO was to take an action u/s 154 of the Act but not to initiate the proceedings for passing a second order i.e. the impugned order. The AO having once passed an order giving effect to the order of ITAT, becomes functus officio. The AO does not have any jurisdiction to pass second order giving effect to the order of the Tribunal. We do not find any such provision under the Act and even Sh. Denial could not bring to our knowledge or attention any such provision. It is an undisputed fact that the AO has not taken any action u/s 154 of the Act in respect of the first order dated 30.01.2015 giving effect to the order of Tribunal dated 29.10.2014. Even no contrary decision was brought to our knowledge which has taken a view that the AO has the power to pass a second order giving effect to ITAT order. We are bound to follow the decision of the jurisdictional High Court as well of the co-ordinate Bench. We therefore quash and set aside the assessment order dated 15.03.2016 passed u/s 144 rws 253 of the Act as invalid. Thus the ground no. 1 2 taken by the assessee are allowed. 3.10. Apar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1988], the powers of the [Principal Commissioner or] Commissioner under this sub-section shall extend [and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal.] 3.12. No doubt this section refers to any order passed by the Assessing Officer. Any order passed by the Assessing Officer has to be an order which is independently passed by the Assessing Officer. In the impugned case, the impugned order dated 02.05.2018 against which ld. PCIT has invoked section 263 of the Income Tax Act, 1961 is an order in fact which was passed in consequence of giving the appeal affect of the order passed by ld.CIT(A) dated 28.06.2017 which is not included in the order eligible for revision in the aforesaid Explanation u/s 263 of the Act. Technically it cannot be called to be the order of the Assessing Officer. If ld. PCIT is permitted to invoke jurisdiction u/s 263 of the Income Tax Act, 1961 in respect of the order passed for giving effect to the order of the ld.CIT(A), then the provisions of clause (c) of Explanation 1 of Section 263 of the Act will become redundant. One cannot interpret the provision of section in this manner. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal before the Tribunal against the order of ld.CIT (Appeal) and knowingly that even after passing the order of the Tribunal dated 14.01.2019, ld. PCIT under section 263 of the Act passed impugned order dated 22.01.2020 directing the ld. AO to withdraw the relief given by the ld.CIT (Appeal) and as confirmed by this Tribunal. This fact that Tribunal has duly considered and confirmed the relief given by the ld.CIT (Appeal) was placed before the ld. PCIT during the course of 263 proceeding which is apparent from pages 34 to 38 of the order of the ld. PCIT. The ld. PCIT brushed aside the argument of the assessee made merely on the basis that the revenue has not accepted the order of the Tribunal dated 14.01.2019 and the same is being contested before Hon‟ble High Court. Needless to mention that the decision of the tribunal is binding on revenue including the ld. PCIT which passed an order under Section 263 of the Act until and unless operation of the order of this tribunal is stayed by the Hon'ble High Court. The operation of the order of the Tribunal has not been stayed by the Hon‟ble High Court. Hence, it could be safely concluded that the subject matter of is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d has been rightly placed by the ld. AR on the decision of Hon‟ble Karnataka High Court in the case of CIT vs. New Mangalore Port Trust reported in 382 ITR 434 wherein it was held that where on facts the assessment order was no longer in existence, any order passed by the Commissioner u/s.263 revising a non-existent order was to be declared void ab initio. Hence, even on this count, the entire revision order passed by the ld. PCIT u/s.263 of the Act deserves to be quashed and is hereby quashed. 3.14. We find that the ld. PCIT had in his revision order u/s.263 of the Act alleged that proper enquiries were not carried out by the ld. AO in the order dated 02/05/2018 while granting relief to the assessee. In this regard we find that in the first paragraph of the order dated 02/05/2018, the ld. AO categorically admits that he had concluded that the entire verification proceedings were carried out in accordance with various directions issued by the ld. CIT(A) on various issues thereon and accordingly had proceeded to give effect to the order of the ld. CIT(A) dated 28/06/2017. For the sake of convenience, the relevant operative portion of the order of the ld. AO dated 02/05/2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... V Money Market Oversold position Money Market Trading Loss 1-276 2. VI 1-383 3. XVI 1-78 4. Ill Money Market Unexplained Stock 1-162 5. IV 1-63 6. XI Interest on Money Market Securities 1 105 3.17. We find that in the proceedings before the Special Court (Trial of offences relating to transactions in securities) Act, 1992 at Bombay, the ld. Senior Counsel representing Income Tax department on instructions of the ld. AO i.e. Shri Manpreet Singh Duggal has stated that all orders giving effect to are pending before the ld. AO and accordingly, sought time from the Special Court. Further before the Special Court on 08/12/2017, the ld. Sr. Counsel representing the Income Tax department had categorically admitted in para 3 that certain grounds were allowed by the ld. CIT(A) thereby granting reliefs, verification has not been entirely carried out b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er book-2 filed before us. In the said affidavit, the ld. AO had categorically affirmed before the Special Court that the order giving effect to the ld. CIT(A) order dated 28/06/2017 could not be passed immediately after the receipt of order of the ld. CIT(A) in view of the fact that efforts were carried out to trace the original assessment folder which was traced finally at later point in time and due verification process as directed by the ld. CIT(A) was indeed carried out. The ld. AO also categorically affirmed before the Special Court in his affidavit by stating that letter to BSE (Bombay Stock Exchange) has been issued for verification purposes in respect of certain issues before granting relief to the assessee pursuant to order of the ld. CIT(A). We also find that the ld. AO in his affidavit in para 9 thereof had categorically admitted that necessary opportunity was given to the assessee and wherever verification from third party is required, the required notices were also issued. The order giving effect to the ld. CIT(A) order will be passed after receipt of replies from those third parties without any further delay. So, all these points categorically drives home the point t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at inquiries or verification the Principal Commissioner desires to have been carried out by the Assessing Officer. The Principal Commissioner in this case even though stated that the Assessing Officer failed to examine during the course of the assessment proceedings but did not point out what type of inquiry or verification should have been carried out in this regard by the Assessing Officer. How non-examination of this aspect has resulted in under assessment. The power entrusted on the Commissioner of Income-tax under this Explanation cannot be to be vague and he may mention the irrelevant enquiries to be made by the Assessing Officer even though the law does not require in respect of the issue involved such enquiry to be made by the Assessing Officer. The Explanation cannot override the provisions of the section. It can extend the scope but that has to be within the purview of the main provision. The order passed by the Assessing Officer, in our opinion, shall be deemed to be erroneous in so far as prejudicial to the interests of the Revenue if the Principal Commissioner would have specifically pointed out which of the inquiries or verification should have been carried out by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O while passing the order dated 02/05/2018 giving effect to the order of the ld. CIT(A) dated 28/06/2017 and hence, the ld. PCIT grossly erred in invoking revisionary jurisdiction u/s.263 of the Act on the ground that the order of the ld. AO is erroneous and prejudicial to the interest of the revenue because proper enquiries were not carried out by the ld. AO. 3.20. In view of the aforesaid detailed observations, we have no hesitation in quashing the revision order passed by the ld. PCIT u/s.263 of the Act for more than one reason as detailed supra. Accordingly, the additional grounds 1 to 2 and original grounds 2 to 5 raised by the assessee are allowed. 4. The Original Ground No. 1 raised by the assessee was stated to be not pressed by the ld AR at the time of hearing. The same is reckoned as a statement made from the Bar and accordingly dismissed as not pressed. Similarly in view of our aforesaid decision on additional grounds 1 and 2, the additional ground no. 3 raised by the assessee is dismissed as being academic in nature. 5. In the result, appeal of the assessee is partly allowed. Order pronounced on 26/03/2021 by way of proper mentioning in the notice board. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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