TaxTMI 
TaxTMI 
2006 (12) TMI 101
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....as allowed under section 43B of the Act. After completion of this assessment, the Joint Commissioner of Income-tax, issued a notice, dated April 6, 1999, to the petitioner-company for rectification of mistake under section 154/155 of the Income-tax Act. The petitioner company, on being asked to submit a written reply to the said notice, submitted its reply on May 3, 1999, wherein the petitioner-company pointed out that the deduction, on account of bonus, was claimed by the petitioner company on the basis of section 43B, which allows deduction of bonus on the basis of payment of bonus made. The petitioner-company also produced documents and papers before the Joint Commissioner of Income-tax to show that the deduction, on account of bonus, was claimed in conformity with the provisions of section 43B of the Act. (ii) While the proceeding, so initiated by the Joint Commissioner, Income-tax, under section 154/155 of the Income-tax Act, was still pend ing, the Commissioner, Income-tax, issued a show-cause notice, dated January 24, 2000, to the petitioner-company under section 263 of the Income-tax Act asking it to show cause as to why the order of assessment, dated March 11, 1998, for ....
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....mistake under section 154/155 of the Income-tax Act by the Joint Commissioner of Income-tax was dropped on January 7, 2000, before the initiation of the proceeding under section 263 of the Act. 2. It is the notice dated January 24, 2000, aforementioned and the order dated March 28, 2000, passed by the Commissioner of Income-tax under section 263 of the Income-tax Act, which stand challenged in the present writ petition, by the petitioners under article 226 of the Constitution of India. 3. I have heard Dr. A. K Saraf, learned senior counsel, appearing on behalf of the petitioners, and Mr. U. Bhuyan, learned standing counsel, Income-tax Department. 4. Assailing the impugned order, Dr. Saraf submits that the Income-tax Commissioner\qs power of suo motu revision, under section 263, cannot be exercised unless the order sought to be revised, suffers from lack of jurisdiction. An order which is passed by any authority in exercise of its jurisdiction cannot be interfered with on ground of illegality or incorrectness in passing the order unless, contends Dr. Saraf, the incorrectness or illegality goes to the root of the exercise of power or suffers from jurisdictional error. An assessmen....
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.... v. K. M. Cheria Abdulla and Co. reported in 16 STC 875 (SC), Santalal Mehendi Ratta (HUF) v. Commissioner of Taxes reported in [2006] 143 STC 511 (Gauhati) ; [2002] 1 GLR 197, this High Court' s decision in W. P. (C) No.1416 of 2001 (Bongaigaon Refinery and Petrochemicals Ltd. v. Union of India [2006] 287 ITR 120). 6. It is further pointed out by Dr. Saraf that in the present case, suo motu revisional power has been exercised under section 263 on the basis of an audit objection. Exercise of jurisdiction by an authority under section 263 has to be based, contends Dr. Saraf, on the basis of its own findings and not on the basis of findings reached by any other authority, such as, an audit party. In the present case, according to Dr. Saraf, the exercise of revisional jurisdiction is based on the audit report and such exercise of powers is impermissible in law and cannot be sustained. In support of these submissions, Dr. Saraf relies on Sirpur Paper Mill Ltd. v. CWT reported in [1970] 77 ITR 6 (SC) and Jeewanlal (1929) Ltd. v. Addl. CIT reported in [1977] 108 ITR 407 (Cal). 7. Resisting the submissions made on behalf of the petitioners, Mr. Bhuyan has submitted that in the prese....
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....ch as the assessment order has been set aside only to the limited extent of examining the correctness of the order passed by the Assessing Officer allowing deduction under the head bonus. The impugned order, points out Mr. Bhuyan, leaves the petitioners completely free to satisfy the Assessing Officer that the deduction earlier permitted is permissible in law. That apart, points out Mr. Bhuyan, an order made under section 263 is an appealable order and the appeal lies under section 253(1)(c) of the Income-tax Act to the Appellate Tribunal. When there is an alternative remedy available to the petitioners, the petitioners cannot be permitted to sustain their challenge to the impugned order by taking resort to article 226 of the Constitution of India. In support of this submission, Mr. Bhuyan places reliance on C. A. Abraham v. ITO [1961] 41 ITR 425 (SC) ; AIR 1961 SC 609 ; Shivram Poddar v. ITO [1964] 51 ITR 823 (SC) ; AIR 1964 SC 1095, Thansingh Nathmal v. Superintendent of Taxes AIR 1964 SC 1419 ; 15 STC 468 (SC), Sales Tax Officer v. Shiv Ratan G. Mohatta 16 STC 599 (SC) ; AIR 1966 SC 142, Gita Devi Aggarwal v. CIT [1970] 76 ITR 496 (SC), Champalal Binani v. CIT [1970] 76 ITR 692 ....
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....the same set of facts, particularly when the Commissioner has not recorded any cogent reason to show that the order suffers from jurisdictional error. To support this submission, Dr. Saraf refers to Sirpur Paper Mill Ltd. v. CWT [1970] 77 ITR 6 (SC). 13. As regards the respondent' s contention that the present writ petition should not be entertained, Dr. Saraf submits that when a revisional order of a Commissioner is without jurisdiction or when the assessee challenges the very jurisdiction of exercise of revisional jurisdiction by a Commissioner under section 263, the fact that there is an alternative remedy in the form of statutory appeal, cannot be made a ground for not invoking the High Court' s jurisdiction under article 226. In this regard, Dr. Saraf places reliance on Shree Automobiles P. Ltd. v. Commissioner of Taxes reported in 132 STC 125 (Gauhati) ; Bhopal Sugar Industries Ltd. v. D. P. Dube, Sales Tax Officer 14 STC 410 (SC) ; AIR 1967 SC 549 and L. Hirday Narain v. ITO [1970] 78 ITR 26 (SC) ; AIR 1971 SC 33. 14. Let me now deal with the merits of the rival submissions made before me on behalf of the parties. Since it is section 263 of the Income-tax Act, 1961....
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....must be an erroneous one and (ii) because of being an erroneous order, the order must have become prejudicial to the interests of the Revenue. Unless both these ingredients are present in a given case, it is not legally permissible for a Commissioner to initiate suo motu proceeding under section 263 of the Act. 16. The expression "erroneous" has not been defined in the Act. However, Black' s Law Dictionary defines the word "erroneous" to mean "involving error ; deviating from the law" . "Erroneous assessment" refers to an assessment that deviates from the law and is, hence, invalid. The erroneous assessment pertains to a defect, which is jurisdictional in nature. It does not refer to the judgment of the Assessing Officer in fixing the amount or valuation of property. "Erroneous judgment" means one rendered according to course and practice of court ; but contrary to law, upon a mistaken view of law or upon an erroneous application of legal principles. 17. An order cannot be termed erroneous unless it can be shown to be an order, which is not in accordance with law. If the Income-tax Officer, acting in accordance with law, makes certain assessment, the same cannot be termed as ....
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.... at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interests of the Revenue. But that by itself will not be enough to vest the Commissioner with the power of suo motu revision because the first requirement, viz. that the order is erroneous, is absent." 19. Reference may also be made to the decision of this High Court in Santalal Mehendi Ratta (HUF) v. Commissioner of Taxes reported in [2006] 143 STC 511 (Gauhati) ; [2002] 1 GLR 197, wherein this High Court while examining section 36 of the Assam General Sales tax Act, 1993, which is pari materia, held as under (page 516) : "The revisional authority for various good reasons may be inclined to view an assessment order from a negative standpoint. The revisional authority may likewise disagree with the views of the primary authority in its interpretation of the law imposing the liability or the extent or quantum thereof. It may disagree with the primary authority with regard to the determination of the amount of tax to be pa....
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....s order, as is commonly understood, is not conceived by section 263. There has been unanimity in judicial opinion that the error committed by the primary authority must be an error of jurisdiction, for if the order is not kept confined to jurisdictional error, no distinction would be left between corrective powers or power of rectification conferred on an authority under the provisions of the Act and the revisional power exercisable by another authority. If the distinction between the power to reopen an assessment and the power to rectify is not distinguished from revisional jurisdiction, every incorrect order would become amenable to revisional jurisdiction and the fall out would be that revisional jurisdiction would then become exercisable even in a case where the provisions for initiating a rectification proceeding are attracted. Such an approach would lead to intermingling of powers by various authorities resulting in utter confusion and uncertainty. Such a situation, as correctly pointed out in Santalal Mehendi Ratta (HUF) 143 STC 511 (Gauhati), is not contemplated by any statute. Viewed thus, it is clear that every error cannot be an error of jurisdiction and every error of a....
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....; s order is erroneous, a Commissioner cannot interfere. Similarly, because an order of the Assessing Officer is prejudicial to the interests of the Revenue, it will not attract revisional jurisdiction under section 263. These two elements, namely, that the order is erroneous and it is prejudicial to the interests of the Revenue must co-exist. When an Assessing Officer has several choices and he adopts one of the choices, it cannot be interfered with unless it is shown that the choice of exercise by the Assessing Officer is without application of mind or wholly contrary to the law. The revisional power conferred on the Commissioner is not an appellate power, but a supervisory power. Thus, a Commissioner cannot sit as an appellate authority under section 263 on an order passed by an Assessing Officer. Section 263, it must be borne in mind, gives to the Commissioner a special power, which has almost no parallel in any other statute. It is an extraordinary revisional power. This power cannot be exercised as a jurisdictionally corrective power or as a review of the orders passed by subordinate authorities. This power under section 263 can be invoked only for the purpose of correcting s....
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....er of Income-tax to consider the said order as erroneous merely because in his view, a certain amount of bonus, allowed as deduction, should have been disallowed, particularly when the impugned order of the Commissioner does not show how the order of assessment can be said to be an order passed without jurisdiction or an order passed beyond jurisdiction or wholly contrary to jurisdiction. 25. While considering the present writ petition, it needs to be borne in mind that section 154 of the Act vests in an Assessing Officer, the power to initiate proceeding for rectification if there is some mistake in making the assessment and the mistake is apparent from the face of the record. Thus, when a mistake is apparent from the face of the record, it is section 154 which becomes applicable. Section 147 empowers an Assessing Officer to reopen a completed assessment if he has reason to believe that an income of the assessee has escaped assessment. Thus, the power of rectification which is exercisable under section 154, is distinct and separate from the power exercisable under section 147 of the Act. Similarly, the power of suo motu revision under section 263 has to be read as a power outside....
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....ld justify recourse to the provisions. To permit the revisional authority to exercise powers under section 263 of the Act in the instant case, on the ground that excess deduction on account of bonus has been allowed, would amount to permitting the revisional authority to intrude into the powers of the authorities under sections 147 and 154 of the Act. 27. What may be pointed out is that section 154 of the Act confers power on the Assessing Officer to initiate proceeding for rectification if it is found that there is some mistake apparent from the face of the records. Independent of, and distinct from, this power is the power which section 147 confers on the Assessing Officer making it possible for him to reopen a completed assessment if he has reason to believe that any income of the assessee has escaped assessment. The basis on which the notice under section 263 has been issued and the impugned order has been passed does not come within the purview of section 263, for the Act has conferred jurisdiction on the Assessing Officer specifically to deal with a situation, such as the present one and when the Assessing Officer had already resorted to section 154 to reverify whether there....
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..... Exercise of revisional jurisdiction in such a case was interfered with by the court on the ground that a turnover, which escaped assessment due to concealment, can be reopened by taking resort to the power to reopen the assessment and when such a power of reopening the assessment existed, it is not permissible to exercise revisional jurisdiction, for revisional jurisdiction cannot be exercised as an alternative to, or as a substitute of, the power to reopen assessment. The relevant observations made by this High Court, in Santalal Mehendi Ratta (HUF) 143 STC 511 (Gauhati), read as under (page 517) : "In the instant case, it is not the stand of the Deputy Commissioner that the primary authority did not have the jurisdiction to make the assessment or had exceeded its jurisdiction. The short and simple case of the Deputy Commissioner is that the turnover of the petitioner has escaped assessment due to concealments made by the assessee. The aforesaid facts, in my considered view, does not render the order infirm on account of any jurisdictional error. If tax has escaped assessment due to concealment, the proper recourse is to reopen the assessment under section 18 of the Act. This i....
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....tatus to surrogate the other authorities and supplant their roles under the Act. The Commissioner is not a substitute for the other statutorily prescribed fora with codified functions dischargeable in terms of the prescribed procedure in the situations comprehended thereby. The Commissioner, therefore has to be rigorously held to the limits of his suo motu revisional jurisdiction lest any transgression of statutorily ordained prerogatives of other authorities under the Act result from an unbridled exercise of such power. The Act envisages a compart mentalisation in the functioning of the authorities prescribed who have to dwell within the legally stipulated parameters so much so that it would be impermissible to overreach the legislatively mandated frontiers. Any other approach would be antithetical to the scheme and alignment of the Act." 30. From what have been discussed above, it becomes abundantly clear that a revisional authority cannot entrench upon the powers which are expressly reserved by the Act in favour of the other authorities. The Act nowhere authorises the revisional authority to intrude into inquiries properly made by the assessing authority and to reopen an alread....
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....der section 263, for the purpose of making a roving enquiry by directing an authority, as has been done in the present case, to again verify an issue which was verified by the Assessing Officer and thereby settled and concluded by him. Such an approach is not permitted within the parameters of the powers conferred on a revisional authority under section 263, for, allowing exercise of such powers would amount to permitting the revisional authority to reopen an assessment, which has been made in exercise of jurisdiction vested in the assessing authority, but while making the assessment, a mistake has been committed by the assessing authority unless it is alleged that the deductions allowed were wholly impermissible in law. Furthermore, though a revisional proceeding has been initiated against the order of assessment made on March 11, 1998, no revisional proceeding was initiated against the order dated January 7, 2000, whereby the assessing authority had dropped the rectification proceeding initiated under section 154. Thus, while the order passed on January 7, 2000, remains unchallenged and unaltered, the order dated March 11, 1998 gets reopened. When a rectification proceeding is in....
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....ping of the rectification proceeding did not mean that there was no mistake or error in making the assessment order has no force, for, when the rectification proceeding is dropped after receiving reply from an assessee, the logical conclusion would be, unless shown otherwise that there was no error in making the assessment which called for rectification in exercise of powers under section 154. This apart, the exercise of power of revision is not permissible on the same set of facts on which a rectification proceeding was dropped unless it can be shown that the rectification proceeding initiated was without jurisdiction or that the dropping of the rectification proceeding amounted to refusal of exercise to jurisdiction. It has neither been contended by the respondents nor does it appear that the rectification proceeding was without jurisdiction. In such circumstances, when the rectification proceeding was dropped, revisional jurisdiction could not have been exercised without showing that dropping of the rectification proceeding was improper or dropping of the rectification proceeding itself was without jurisdiction. 36. Though it is not necessary for the Commissioner to record a sp....