2015 (3) TMI 1234 - HC - Income Tax

Interpretation of Tax Act term 'record' under Section 263 upheld, Commissioner's jurisdiction broadened.

The case involved the interpretation of Section 263 of the Income Tax Act, 1961, focusing on the term 'record' and the Commissioner's jurisdiction to ... Revision u/s 263 - interpretation of the term 'record' appearing in section 263 - Held that:- Section 154 of the Act as is well-known is in the nature of power of rectification of mistake. Sub-section (1) thereof clothes the Income-tax authority with a view to rectifying any mistake apparent from the record the power to amend any order passed under the Act, amend any intimation or deemed intimation under section 143(1) or amend any intimation under sub-section (1) of section 200A. The term 'record', therefore has to be seen in the context of the nature of the statutory provision and the power it aims to cloth the Assessing Officer. As noted, the power is for rectification of any mistake apparent from the record. Such powers are not in the nature of review or revision and can be exercised only for correction of a mistake which is apparent from the record. In this context, therefore, the term 'record' has to be understood as record of the case before the Assessing Officer. Obviously, reference to the mistake apparent from the record cannot have relation to some other record extraneous to the assessment proceedings. This provision, therefore, has an entirely different context where the term 'record' has been used and it does not include any explanation as was inserted in section 263(1) with a historical background noted by the Supreme Court in the case of Shree Manjunathesware Packing Products Camphor Works (1997 (12) TMI 4 - SUPREME Court ). Significantly, the explanation was added for all purposes to have been included from the beginning. The decisions relied upon in the context of the term 'record' used in section 154 of the Act, therefore, would render no further help on the controversy on the hand. - Decided against assessee Issues Involved:1. Interpretation of Section 263 of the Income Tax Act, 1961.2. Scope of the term 'record' under Section 263.3. Jurisdiction of the Commissioner to revise assessment orders based on records from related proceedings.4. Binding nature of precedents and decisions of higher courts.Detailed Analysis:1. Interpretation of Section 263 of the Income Tax Act, 1961:The primary issue revolves around the interpretation of Section 263, which empowers the Commissioner to revise any order passed by the Assessing Officer if it is erroneous and prejudicial to the interests of the Revenue. The judgment explores whether the Commissioner can rely on records from related proceedings, such as those involving the assessee's son, to revise the assessment order of the assessee.2. Scope of the Term 'Record' under Section 263:The term 'record' is crucial in determining the scope of the Commissioner's powers under Section 263. Justice M.S. Shah argued that the term 'record' should be given a broad interpretation, including all records related to any proceeding under the Act, not just the records of the specific assessee. This view is supported by the Supreme Court's decision in CIT v. Shree Manjunathesware Packing Products & Camphor Works, which held that the term 'record' includes all records available at the time of examination by the Commissioner.Justice D.A. Mehta, however, held a narrower view, arguing that the term 'record' should be limited to the records directly related to the assessee's assessment proceedings. He emphasized that the statements made during the search of the assessee's son's premises should not be considered part of the assessee's assessment records.3. Jurisdiction of the Commissioner to Revise Assessment Orders Based on Records from Related Proceedings:Justice M.S. Shah's interpretation allows the Commissioner to examine records from related proceedings, such as those involving the assessee's son, if they reveal undisclosed income attributed to the assessee. This broad interpretation aims to prevent the Commissioner's power under Section 263 from being unduly restricted.Justice D.A. Mehta's interpretation restricts the Commissioner's jurisdiction, arguing that the Commissioner should only rely on records directly related to the assessee's assessment proceedings. This view aims to maintain the finality of assessment orders and prevent them from being lightly disturbed.4. Binding Nature of Precedents and Decisions of Higher Courts:The judgment discusses the binding nature of precedents, particularly the decisions of the Supreme Court and Division Benches of the High Court. The Supreme Court's decision in CIT v. Shree Manjunathesware Packing Products & Camphor Works is binding under Article 141 of the Constitution. The judgment also refers to subsequent decisions by Division Benches of the Gujarat High Court, which followed the Supreme Court's broad interpretation of the term 'record.'The judgment emphasizes that the doctrine of binding precedent promotes certainty and consistency in judicial decisions. It is noted that a Division Bench's decision is binding on a Bench of equal strength, and any deviation requires referral to a larger Bench.Conclusion:The third Judge concurred with Justice M.S. Shah's broader interpretation, holding that the term 'record' under Section 263 includes all records related to any proceeding under the Act available at the time of examination by the Commissioner. This interpretation aligns with the Supreme Court's decision and subsequent Division Bench decisions. Consequently, the question was answered in favor of the Revenue, allowing the Commissioner to consider records from related proceedings when revising assessment orders under Section 263. The Tribunal was directed to hear the appeal on merits based on the remaining grounds.