TMI Blog1981 (3) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee displayed therein its share income from the joint venture. The Income-tax Officer accepted the return as he found it and made an assessment on the basis of the return, charging to tax the total income returned by the assessee which included therein the assessee's share income from the joint venture. Subsequently, the Commissioner of Income-tax initiated proceedings for suo motu revision under section 263 of the Income-tax Act, 1961, on the score that the Income-tax Officer's action in so far as he brought to charge the assessee's share income from the joint venture was prejudicial to the interest of the Revenue. According to the Commissioner of Income-tax, the Income-tax Officer should have considered assessing the joint venture income in the hands of the association of persons as a whole. By assessing the share income in the individual assessment of this assessee, the Income-tax Officer had put it out of his reach to get at the association of persons as a body and as a taxable entity. It was apparently the view of the Commissioner of Income-tax that the average rate of tax appertaining to the total income of the association of persons was higher than the average rate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind the view of courts is variously described. It is sometimes said that an association of persons and a member of such an association are two distinct entities. It is also said that under the scheme of the Income-tax Act, the Income-tax Officer has a choice of alternatives, either to assess the association of persons as a whole, on its total income or, in the alternative, to proceed to assess the respective share incomes of the individual members thereof. From this conception of the pattern of assessments of the two entities involving an option or an election, it was but a natural step for the courts to proceed to hold that when once an Income-tax Officer had taken a particular course of assessment, then not only, does he, as an assessing officer, commits himself to making an assessment in that mode but also commits the Income-tax Department as a whole to the course of action. In other words, if an Officer having charge of the assessment of an association of persons makes an assessment for any given assessment year on the total income of the association, there cannot be an assessment thereafter of the individual shares of the members separately. Contrarywise, where an Income-tax O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g double taxation of both of the association and of the members thereof, there is no provision which expressly permits the Income-tax Officer to tax one and the same income both in the assessment of the association of members and of the constituent members thereof. This rule against double taxation, according to Mr. S. Swaminathan, is at the bottom of the doctrine, that when once an Income-tax Officer makes an assessment of the share income of a member of an association, he shall not thereafter proceed to assess the association of persons, as a whole, as a unit of assessment. Mrs. Nalini Chidambaram, learned junior standing counsel for the Incometax Department, submitted that in order that the Income-tax Officer may be interdicted from proceeding to make an assessment on the association of persons following his assessment of the share income of a member thereof, there must be a conscious choice made by the Income-tax Officer of the alternatives before him. The suggestion in this argument was that if, in any given case, the Income-tax Officer is said to have made the assessment on a member without an intelligent exercise of his discretion or in a fit of absentmindedness, as it wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation as such. However, the point adverted to before us is that the choice is by the department as such and not by the individual. In other words, the point sought to be made out is that all the Income -tax Officers are functioning under the Income-tax Act to assess the income of any person liable to tax and that though, for convenience, they are invested with the jurisdiction over particular cases territorially or otherwise, still as all of them are discharging the same function, when one of them is exercising a choice, then he in a way forceloses the power available to the Department to assess the association." We do not therefore, accept the argument of the learned counsel for the Department that whenever an Income-tax Officer has taken the step to assess an individual member of the association in respect of Ids aliquot share, then the correctness of his choice of assessment is open to question on an inquiry as to whether he had consciously made that choice, having before him all the relevant data therefor, or did so accidentally or without an application of his mind. We may sum up this part of our discussion by observing that whether or not the modus operandi in the tax tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Income-tax that the order passed by the Incometax Officer was erroneous and prejudicial to the interests of the Revenue, was endorsed by the Tribunal in their order. The question is whether the view expressed by the Commissioner of Income-tax and the Tribunal are based on correct understanding of the enabling provisions of section 263 of the Incometax Act and of the nature of the order of assessment passed by the Income-tax Officer. Section 263 of the Income-tax Act is a provision in sub-chapter E of Chapter XX of the Income-tax Act. This Chapter deals with appeals and revision. Section 246 provides a right of appeal to an assessee, against orders passed by the Income-tax Officer, to the Appellate Assistant Commissioner. Section 252 provides a further appeal to the Tribunal against the orders passed by the Appellate Assistant Commissioner in appeal. In the sub-chapter of Chapter XX relating to revision by the Commissioner apart from section 263, there is yet another provision under section 264 which confers revisional power on the Commissioner of Income-tax. This latter revisional power under section 264 enables the Commissioner, either suo motu or on application by as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uggest in what way there is any prejudice to the interests of the Revenue. Even if prejudice to the Revenue is to be reckoned in terms of the actual loss to the exchequer, no figures have been given in the order of the Commissioner of Income-tax to suggest that the average rate of income-tax on the total income of the association of persons would be far higher than the average rate of income-tax applied to the share income from the joint venture in this assessment year in so far as the present assessee is concerned and in so far as the other members of the association are concerned. Indeed, in one portion of the order, the Commissioner had dealt with the argument advanced on behalf of the assessee to the effect that even if the joint venture is to be assessed as such, the tax effect may not necessarily be more. While noticing this contention of the assessee, the Commissioner had observed that this question as to whether the tax effect would be more or less may be raised when the assessment of the association of persons is taken up. This is an indication that the Commissioner had not, as on that date, any clear idea as to what the difference in tax effect would have been if, instead ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s used to distinguish it from any person enthroned. The interests of the Revenue is not to be equated to rupees and paise, merely. There is a biblical saying that we do not live by bread alone. Varying this saying, it may be said that the Revenue does not live by tax alone. In this sense, therefore, the interests of the Revenue are not tied up merely with realising as much Revenue as possible, willy nilly, merely looking to the productivity aspect of taxation. The jurisdiction of the Commissioner under section 263 is undoubtedly a supervisory jurisdiction. It is intended for interference in special cases to counteract orders which are erroneous as well as prejudicial to the interests of the Revenue. In this context, therefore, the expression "prejudicial to the interests of the Revenue" must be regarded as involving a conception of acts or orders which are subversive of the administration of revenue. There must be some grievous error in the order passed by the Incometax Officer, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the Commissioner might think to be prejudicial to the interests of Revenue administration. There might be cases wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the income disclosed, the Income-tax Officer hurried with the assessment and completed it. The Commissioner of Income-tax took action under section 33B of the Indian Income-tax Act, 1922, and set aside the assessment for the reason that the income, which was offered for assessment by the assessee in that case, really had to be considered as part of the income of some other taxpayer in higher income bracket Before the Supreme Court, it was urged that on the Commissioner's view that no income was assessable in the hands of the person who filed the return, the Commissioner could not regard the order of assessment as prejudicial to the interests of the Revenue. The Supreme Court rejected this contention and upheld the Commissioner's interference under section 33B. One way of understanding the reasoning of the Supreme Court in this case is to say that the Commissioner is not confined to have regard to the particular assessment order before him for the purpose of drawing an inference that that order is prejudicial to the interests of the Revenue, but he can have regard to the repercussions of that order generally in other assessments as well. Another way of understanding the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of the Supreme Court's ruling was that an appeal was but rehearing and the powers of the appellate authority are so equal with those of the assessing authority, in the first instance. In coining to this conclusion, the Supreme Court were only adopting the general law relating to the powers of the appellate authorities under the Civil Procedure Code, and other enactments dealing with the powers of appellate courts. The Commissioner of Income-tax acting under section 263 is not, however, an appellate authority, by any means. As we had earlier observed, the power conferred on him by this section is in the nature of a supervisory power. We have referred to another revisional power under section 264 which might be regarded as a regular revision. Section 263, however, is a special power, which, so far as we know, has no parallel in any other statute or legal system. It is an extraordinary revisional power. It is also sui generis, in its nature, and in the occasion for its exercise, it is to be employed not as a jurisdictional corrective or as a review of a subordinate's order in exercise of supervisory power. It is, on the contrary, to be invoked and employed only for the purp ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
