TaxTMI 
TaxTMI 
TaxTMI 
2015 (3) TMI 1234
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....(3) of the Act on 19.2.85. On 27.8.81, search operations under section 132 of the Act was carried out at the residential premises of the son of the assessee. During search, cash, gold ornaments and other jewelery were seized. It was claimed that such assets belonged to various members of the family. Two statements of Savitaben Vallabhdas, wife of the assessee were also recorded in which, she claimed that some of the assets belonged to her. Upon scrutiny of the record of assessment, the Commissioner of Income Tax, Rajkot noted that the Income Tax Officer had not taken into consideration the explanation of Girishkumar Vallabhadas, son of the assessee and further that he had not considered the various statements of the persons which were recorded at the time of the search. He, therefore, took the order of assessment in revision. After hearing the assessee, the Commissioner set aside the order of assessment and directed the ITO to make fresh assessment. Such order of the Commissioner was taken in appeal by the assessee. One of the grounds raised by the assessee before the Tribunal was that the record pertaining to search and seizure operations at the premises of the son of the assessee....
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.... the Commissioner examines the record of search and seizure operations in respect of any person, say the respondent-assessees' son as in the instant case, and finds that such person had attributed some undisclosed income to the assessee, it is open to the Commissioner to call for the record in the assessee's case. The exercise of power by the Commissioner under Section 263(1) is obviously in respect of the assessee's case but for the purpose of exercising that power, the examination by the Commissioner is not required to be confined to the record of that assessee's case as such record could be any record relating to any proceeding under the Income-tax Act. There is nothing in the provisions of Section 263(1) to take such a narrow view of the powers of the Commissioner. Any doubt which could arise has been removed by the legislature by inserting through the Finance Act, 1988 an explanation and further amending it by Finance Act, 1989. The interpretation of the provisions of Section 263(1) read with explanation thereto by the Apex Court in light of the legislative intent leaves no room for doubt. 8. In our view, once there is a pronouncement of the highest Court of ....
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....as invalid. The question referred is therefore answered in the affirmative i.e. in favour of the assessee and against the revenue in both the references." 5. For some reason, the reference to the third member remained dormant for a long time. In the meantime, many developments in law took place giving a whole new dimension to this reference to the third member for his opinion. 6. Since this reference throws up a couple of interesting questions and since the assessees are not represented, I requested learned advocate Shri Bandish Soparkar to assist me as an amicus who, as is apparent from the materials collected by him, put in considerable time and effort in making research which I highly appreciate. 7. Learned advocates pointed out that after the disagreement between the Members of the Bench, similar issue came up for consideration before this court on two occasions. In the case of CWT v. Lalitchandra M. Patel [2002] 258 ITR 232/123 Taxman 682, a similar question arose in the background of the Wealth Tax Act, 1957. In that case, the Commissioner of Wealth Tax had taken assessment orders passed by the Wealth Tax Officer to be prejudicial to the interest of the Revenue, as the val....
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....sioner may come into possession of new material and he would be entitled to take the new material into account. If the material, which was not available to the Income-tax Officer when he made the assessment could thus be taken into consideration by the Commissioner after holding an enquiry, there is no reason why the material which had already come on record though subsequently to the making of the assessment cannot be taken into consideration by him. Hence, the Apex Court concluded that it was open to the Commissioner not only to consider the record of that proceeding but also the record relating to that proceeding available to him at the time of examination. 6. The Madras High Court followed the aforesaid decision in CWT v. S.V. Sivarathina Pandian (supra) which was concerned with a case similar to the case before us. Following the aforesaid decision, the Madras High Court held that the Commissioner of Wealth-tax was perfectly justified in setting aside the order of assessment and directing the Wealth-tax Officer to redo the assessment, taking into consideration the record relating to the proceedings available at the time of examination by the Commissioner and that the record wa....
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....such judgments of the Division Bench of this Court would bind me as a referee Judge or since the ultimate opinion that I may express in these references would be as a culmination of application of judicial mind by three Judges, I am not bound to follow such ratio ? 10. Learned counsel Shri PG Desai appearing for the Revenue submitted that the issue has now been concluded by virtue of the decisions of this Court in the case of Lalitchandra M. Patel (supra) and in the case of Arunaben Sumankumar (supra) and that, therefore, this reference to the third Member may be returned unanswered. Shri Soparkar placed decisions and materials before me to suggest that one plausible view would be that since the ultimate exercise would result into declaration of legal proposition by three Judges, the Division Bench judgments would not be binding. He, however, did agree that the third Member's opinion would be without deliberation between three Judges and in that context the present situation is unique. He, however, submitted that none of the aforesaid decisions conclude the issue arising in these references. He submitted that in both the cases the record relied upon by the Commissioner pertain....
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....onsistent decisions on points of law by different Division Benches that the rule has been evolved in order to promote consistency and certainty in the development of the law and its contemporary status that the statement of the law by a Division Bench is considered binding on a Division Bench of the same or lesser number of Judges. This principle has been followed in India by several generations of Judges. In the case of Rajasthan Public Service Commission v. H.R.Purohit AIR 2003 SC 3476, it was observed that the earlier decision of Division Bench is binding to a Bench of co-ordinate strength. If the Bench hearing the matter subsequently entertains any doubt about the correctness of the earlier decision, the only course open to it is to refer the matter to a larger Bench. 13. In the case of Purbanchal Cables & Conductors (P) Ltd v. Assam SEB [2012] 7 SCC 462, however, the Supreme Court drew a distinction between the ratio decidendi of the judgment which would form binding precedent from obiter dicta where an issue directly did not arise and no authoritative pronouncement was made on such an issue. 14. The legal proposition, therefore, that the decision of a Division Bench of this....
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....ecision would be made after all the members of the Bench simultaneously hear rival contentions presented by the advocates for the parties appearing before the Bench. The members of the Bench would have the benefit of deliberations inter-se all throughout the hearing of such proceedings and even after the hearing his over. It is a long standing convention of this Court that once any issue of considerable importance has been heard by a Bench, particularly a larger Bench, the Judges in the confines of the chamber debate, deliberate and exchange their views and opinions tentatively arrived at during the course of the arguments. Even thereafter, draft opinions may be exchanged. The members of the Bench may put their view points persuading the others to adopt the same. Some may yield to the view point of the other and in some cases, the Judges may ultimately find themselves simply unable to come to a unanimous conclusion. Whether such deliberations ultimately result into any unanimous decision expressed by any one member of the Bench or more even in case of unanimity or whether such deliberations result into any fractured verdict is of no consequence. The decision of the larger Bench wou....
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....ld form the basis of discussion, though, as pointed out above, the hearing of the arguments concluded as far back as 16th November, 1979. It was only on 7th May, 1980, just two days before the closing of the Court for summer vacation, that I was informed by the learned Chief Justice that he and the other three learned Judges, who had heard this case along with me, had decided, to pass an Order declaring the impugned constitutional amendments ultra vires and void on the ground that they violated the basic features of the Constitution and that the reasons for this Order would be given by them later. I found it difficult to persuade myself to adopt this procedure, because there had been no judicial conference or discussion amongst the Judges where there could be free and frank exchange of views nor was any draft judgment circulated and hence I did not have the benefit of knowing the reasons why the learned Chief Justice and the other three learned judges were inclined to strike down the constitutional amendments. If there had been a judicial conference or discussion or the draft judgment setting out the reasons for holding the impugned constitutional amendments ultra vires and void ha....
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....dealt only after the summer vacation. Thus there would have been no prejudice to the interests of justice if the order had been made on the reopening of the Court after the summer vacation supported by a reasoned judgment. These were the reasons which compelled me to make my Order dated 9th May, 1980 declining to pass the unreasoned order pronouncing on the validity of the impugned constitutional amendments and stating that I would "prefer to pass a final order in this case when I deliver my reasoned judgment". This order unfortunately led to considerable misunderstanding of my position and that is the reason why I have thought it necessary to explain briefly why I acted in the manner I did." 18. Learned counsel Mr.Bandish Soparkar drew my attention to an article "Transtemporal Separation of Powers in the Law of Precedent" by Randy Beck in which the author made the following interesting comments: "After oral argument, appellate judges typically begin an extended process of continued research and collective deliberation. The development of consensus among a group of judges on a multi-member appellate court may smooth out some of the biases and idiosyncrasies that can lead a singl....
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....ns are processed by several judges, the decision that is rendered even if not unanimous has the advantage of input from larger number of legally trained minds. In the present case, unlike a case of larger Bench where three or more judges would be simultaneously hearing a question of law, with the assistance of same set of arguments, I am as a referral judge left to choose between one of the two opinions of the differing judges which, in my opinion, is closer to the correct legal position. This completely robs the process of plurality in the decision making which is the foundation of law of precedent where a judgment of a Bench would bind the Bench of equal or lesser number of judges even if it is not a unanimous opinion. Under the circumstances, I feel bound by the decisions of the later Division Benches on the point which arises directly in the present reference. Independently also, I would have arrived at the same conclusion. I would state my brief reasons for the same. 19. Section 263 of the Income-tax Act, as is well-known, pertains to the power of the Commissioner to call for and examine the record of any proceedings and if he considers that any order in such proceedings pass....
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....he Finance Bill of 1988. We will refer to only that part which is relevant for us. It was observed by the Legislature that the provision as it stood then, had given rise to judicial controversy in respect of the following : "48. ...... (a) On the interpretation of the term 'record' : it has been held in some cases that the word 'record' in Section 263(1) could not mean the record as it stood at the time of examination by the Commissioner but it meant the record as it stood at the time when the order was passed by the Assessing Officer. Such an interpretation is against the legislative intent and defeats the very objective sought to be achieved by such provisions, since the purpose is to revise the order on the basis of the record as it available to the Commissioner at the time of examination. To eliminate litigation and to clarify the legislative intent in respect of the provisions in the three Direct Tax Act, it is proposed to clarify the legal position in this regard in the Explanation to the relevant sections. The proposed amendments are intended to make it clear that 'record' would include all records relating to any proceedings under the concerned....
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....arify that the provisions of the Explanation shall be deemed to have always been in existence. Amendments on the above lines have been proposed in Section 25 of the Wealth-tax Act and Section 24 of the Gift-tax Act also." After that amendment, the relevant part of the Explanation reads as under : "Explanation.- For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (b) "record" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner;" "Therefore, the materials which were not in existence at the time the assessment was made but afterwards came into existence cannot form part of the record of the proceeding of the ITO at the time he passes the order and, accordingly, it cannot be taken into consideration by the Commissioner for the purposes of invoking his jurisdiction under this section, for he is not an appellate authority under this section and exercise only revisional jurisdiction and hence he can only take into consideration the record as it stood before the ITO and the materials in such record for the purposes of ascert....
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....d that while calling for and examining the record of any proceeding under Section 263(1) it is and it was open to the Commissioner not only to consider the record of that proceeding but also the record relating to that proceeding available to him at the time of examination." 20. Additionally, as noted earlier, this Court in the case of Arunaben Sumankumar (supra) and in the case of Lalitchandra M. Patel (supra) has taken a similar view relying on the decision of the Supreme Court in the case of Shree Manjunathesware Packing Products & Camphor Works (supra). 21. In the case of CIT v. Export House [2002] 256 ITR 603/122 Taxman 879, Division Bench of the Punjab and Haryana High Court in the context of section 263 of the Income Tax Act observed as under: "Even question No.3 is also of academic interest only. However, the matter now stands concluded by the judgment of the apex court in CIT v. Shree Manjunathesware Packing Products and Camphor Works [1998] 231 ITR 53, in which it has been held that the expression "record" in section 263 means the record available at the time of examination by the Commissioner of Income-tax and is not confined merely to the material available to the I....
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....matter we are of the considered view that the Tribunal was not justified in holding that the valuation report could not have been taken into consideration by the Commissioner of Wealth-tax. We accordingly answer the questions in the negative, i.e. in favour of the Revenue and against the assessee." 23. Delhi High Court in the case of Globus Infocom Ltd. v. CIT [2014] 369 ITR 14/227 Taxman 48 (Mag.)/50 taxmann.com 100 observed as under: "An order is not erroneous, unless the Commissioner of Income-tax hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore Commissioner of Income-tax must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the Commissioner of Income-tax must come to the conclusion that the order is erroneous and is unsustainable in law. We may notice that the material which the Commissioner of Income-tax can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record as it stands at the time of examination by the C....