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CIT v. Amitabh Bachchan [2016] 384 ITR 200 (SC)
For the assessment year 2001-02 the
assessment order was passed on March 30, 2004.
After the assessment as above was finalized, a show-cause notice dated
November 7, 2005 under section 263 of the Act was issed by the learned
Commissioner of Income Tax detailing as many as eleven (11) issues/grounds on
which the assessment order was proposed to be revised under section 263 of the
Act. The respondent-assessee filed his
reply to the said show-case notice on consideration of which by order dated
March 20, 2006 the learned Commissioner of Income Tax set aside the order of assessment dated March 30, 2004 and
directed a fresh assessment to be made.
Aggrieved, the respondent-assessee challenged the said order before the
learned Tribunal which was allowed by the order dated August 28, 2007.
Aggrieved
by the order dated August 28, 2007 of the learned Tribunal, the Revenue filed
an appeal under section 260A of the Act before the High Court of Bombay.
The aforesaid appeal, i.e. I.T.A. No.293 of 2008 was dismissed by the
High Court by the order dated August 7, 2008 holding that as the Commissioner
of Income Tax had gone beyond the scope of the show-cause notice dated
November7, 2005 and had dealt with the issues not covered/mentioned in the said
notice, the revisional order dated March 20, 2006 was in
violation of the principles of natural justice.
So far as the question as to whether the Assessing Officer had made
sufficient enquiries about the assessee’s claim of expenses made in the
re-revised return of income was concerned, which question was formulated as
question No.2 for the High Court’s consideration, the High Court took the view
that the said question raised pure questions of fact and, therefore, ought not
to be examined under section 260A of the Act.
The appeal of the Revenue was consequently dismissed. Aggrieved, appeal was filed before the Supreme
Court upon grant of leave under article 136 of the Constitution of India.
The
Supreme Court noted that the assessment in question was set aside by the Commissioner of Income Tax by the order dated
March 20, 2006 on the principal ground that requisite and due enquires were not
made by the Assessing Officer prior to finalization of the assessment by order
dated March 30, 2004. In this
connection, the Commissioner of Income Tax on consideration of
the facts of the case and the record of the proceedings came to the conclusion
that in the course of the assessment proceedings despite several opportunities
the assessee did not submit the requisite books of account and documents and
deliberately dragged the matter leading to one adjournment after the other.
Eventually, the Assessing Officer, to avoid the bar of limitation, had
no option but to “hurriedly” finalise the assessment proceedings which on due
and proper scrutiny disclosed that the necessary enquires were not made. On the said basis the Commissioner of Income
Tax came to the conclusion that the assessment order in question was erroneous
and prejudicial to the interests of the Revenue warranting exercise of power
under section 263 of the Act. Consequently,
the assessment for the year 2001-02 was set aside and a fresh assessment was
ordered. In the order dated March 20,
2006 the Commissioner of Income Tax
arrived at findings and conclusions in respect of issues which were not
specifically mentioned in the show-cause notice dated November 7, 2005. In fact, on as many as seven/eight (07/08)
issues mentioned in the said show-cause notice the Commissioner of Income Tax did not record any
finding whereas conclusions adverse to the assessee
were recorded on issues not specifically mentioned in the said notice before
proceeding to hold that the assessment needs to be set aside. However, three (03) of the issues, were common to the show-cause notice as well as the
revisional order of the learned Commissioner of Income Tax.
On
appeal, the Tribunal took the view that the Commissioner of Income Tax exercising powers
under section 263 of the Act could not have gone beyond the issues mentioned in
the show-cause notice dated November 7, 2005.
The Tribunal, therefore, thought it proper to take the view that in
respect of the issues not mentioned in the show-cause notice the findings as
recorded in the revisional order dated March 20, 2006 have to be understood to
be in breach of the principles of natural justice. The Tribunal also specifically considered the
three (03) common issues mentioned above and on such consideration arrived at
the conclusion that the reasons disclosed by the Commissioner of Income Tax in the order dated March
20, 2006 for holding the assessment to be liable for cancellation on that basis
were not tenable. Accordingly, the
Tribunal allowed the appeal of the assessee and reversed the order of the suo motu revision dated March 20,
2006.
The
Supreme Court, in an appeal filed by the Revenue, observed that under the Act
different shades of power have been conferred on different authorities to deal
with orders of assessment passed by the primary authority. While section 147 confers power on the
assessing authority itself to proceed against income escaping assessment, section
154 of the Act empowers such authority to correct a mistake apparent on the
face of the record. The power of appeal
and revision is contained in Chapter XX of the Act which includes section 263 that concern suo
motu power of revision on the Commissioner of Income Tax. The different shades of power conferred on
different authorities under the Act has to be exercised within the areas
specifically delineated by the Act and the exercise of power under one
provision cannot trench upon the powers available under another provision of
the Act.
The
Supreme Court reverting to the specific provisions of section 263 of the Act held
that what has to be seen is that a satisfaction that an order passed by the
authority under the Act is erroneous and prejudicial to the interests of the
Revenue is the basic pre-condition for exercise of jurisdiction under section
263 of the Act. Both are twin conditions
that have to be conjointly present. Once
such satisfaction is reached, jurisdiction to exercise the power would be
available subject to observance of the principles of natural justice which is
implicit in the requirement cast by the section to give the assessee an
opportunity of being heard. It is in the
context of the above position that this court has repeatedly held that unlike
the power of reopening an assessment under section 147 of the Act, the power of
revision under section 263 is not contingent on the giving of a notice to show
cause. In fact, section 263 has been
understood not to require any specific show-cause notice to be served on the
assessee. Rather, what is required under
the said provision is an opportunity of hearing to the assessee. The two requirements are different; the first
would comprehend a prior notice detailing the specific grounds on which
revision of the assessment order is tentatively being proposed. Such a notice is not required. What is contemplated by section 263, is an
opportunity of hearing to be afforded to the assessee. Failure to give such an opportunity would
render the revisional order legally fragile not on the ground of lack of
jurisdiction but on the ground of violation of principles of natural justice.
It
may be that in a given case and in most cases it is so done a notice proposing
the revisional exercise is given to the assessee indicating therein broadly or
even specifically the grounds on which the exercise is felt necessary. But there is nothing in the section (section 263) to raise the said notice to the
status of a mandatory show-cause notice affecting the initiation of the
exercise in the absence thereof or to require the Commissioner of Income Tax to
confine himself to the terms of the notice and foreclosing consideration of any
other issue or question of fact. This is
not the purport of section 263. There
can be no dispute that while the Commissioner of Income Tax is free to exercise
his jurisdiction on consideration of all relevant facts, a full opportunity to
controvert the same and to explain the circumstances surrounding such facts,
as may be considered relevant by the
assessee, must be afforded to him by the Commissioner of Income Tax prior to
the finalization of the decision.
The
Supreme Court held that in the present case, there was no dispute that in the
order dated March 20, 2006 passed by the Commissioner of Income Tax under section 263
of the Act findings have been recorded on issues that are not specifically
mentioned in the show-cause notice dated November 7, 2005 though there are
three (03) issues mentioned in the show-cause notice dated 7, 2005 which had
specifically been dealt with in order dated March 20, 2006. The Tribunal in its order dated August 28,
2007 put the aforesaid two features of the case into two different
compartments. In so far as the first
question, i.e., findings contained in the order of the Commissioner of Income
Tax dated March 20, 2006 beyond the issues mentioned in the show-cause notice was
concerned, the Tribunal held that the revision order was bad in law and also
violative of principles of natural justice and thus not maintainable.
According
to the Supreme Court, the above ground which had led the Tribunal to interfere
with the order of the Commissioner of Income Tax seemed to be contrary to the
settled position in law, as indicated above and the two decisions of the
Supreme Court in Gita Devi Aggarwal (76 ITR 496) and Electro House (82 ITR 824). The Tribunal in its order dated August 28, 2007
had not recorded any findings that in course of the suo motu revisional
proceedings, hearing of which was spread over many days and attended to by the
authorized representative of the assessee, opportunity of hearing was not
afforded to the assessee and that the assessee was denied an opportunity to
contest the facts on the basis of which the Commissioner of Income Tax had come to his
conclusions as recorded in the order dated March 20, 2006.
The
Supreme Court observed that in the course of the revisional exercise relevant
facts, documents and books of account which were over looked in the assessment
proceedings were considered. On such
re-scrutiny it was revealed that the original assessment order on several heads
was erroneous and had the potential of causing loss of revenue to the
State. It is on the aforesaid basis that
the necessary satisfaction that the assessment order dated March 30, 2004 was
erroneous and prejudicial to the interests of the Revenue was recorded by the
Commissioner of Income Tax. At each
stage of the revisional proceedings, the authorized representative of the
assessee had appeared and had full opportunity to contest the basis on which
the revisional authority was proceeding/ had proceeded in the matter. The Supreme Court held that if the revisional
authority had come to its conclusions in the matter on the basis of the record
of the assessment proceedings which was open for scrutiny by the assessee and
available to his authorized representative at all times, it was difficult to
see as to how the requirement of giving of reasonable opportunity of being
heard as contemplated by section 263 of the Act had been breached in the
present case. The order of the Tribunal in so far as the first issue i.e. the
revisional order going beyond the show-cause notice was concerned, therefore, could not accepted.
The
Supreme Court therefore considered the second limb of the case as dealt with by
the Tribunal, namely, that tenability of the order of the Commissioner of
Income Tax on the three (03) issues mentioned in the show-cause notice and also
dealt with in the revisional order dated March 20, 2006. The aforesaid three (03) issues were:
(i) The
assessee maintaining 5 bank accounts and the Assessing Officer not examining
the 5th bank account, books of account and any other bank account
where receipts related to KBC were banked.
(ii) Regarding
claim of deposit of Rs.5206 lakh in Bank the a/c No. 11155 under the head
“Receipt on behalf of Mrs. Jaya Bachchan, and
(iii) Regarding
the claim of additional expenses in the re-revised return.
On the
above issues, the Tribunal had given detailed reasons for not
accepting the grounds cited in the revisional order for setting aside the
assessment under section 263 of the Act.
According to the Supreme Court, the reasons cited by the Tribunal in so far as the first two issues
were concerned may not justify a serious
relook and hence not be gone into. The Supreme
Court however was of the opinion the third question would, however, require
some detailed attention. The said
question was with regard to the claim of additional expenses made by the
assessee in its re-revised return which was subsequently withdrawn.
The Supreme Court held
that there could be no doubt that so
long as the view taken by the Assessing officer is a possible view, the same
ought not to be interfered with by the Commissioner of Income Tax under section
263 of the Act merelyon the ground that there is another possible view of the
matter. Permitting exercise of
revisional power in a situation where two views are possible would really
amount of conferring some kind of an appellate power in the revisional
authority. This is a course of action
that must be desisted from. However, according
to the Supreme Court the above was not the situation in the present case in
view of the reasons stated by the Commissioner of Income Tax on the basis of
which the said authority felt that the matter needed further investigation, a
view with which the Supreme Court wholly agreed. Making a claim which would prima facie
disclose that the expenses in respect of which deduction had been claimed had
been incurred and thereafter abandoning/withdrawing the same gave rise to the
necessity of further enquiry in the interests of the Revenue. The notice issued under section 69C of the
Act could not have been simply dropped on the ground that the claim had been
withdrawn. The Supreme Court, therefore,
was of the opinion that the Commissioner of Income Tax was perfectly
justified in coming to his conclusions in so far as the issue No. (iii) was
concerned and in passing the impugned order on that basis. The Tribunal as well as the High Court, therefore,
ought not to have interfered with the said conclusion.
The Supreme Court concluded that the present was a fit case for
exercise of the suo motu revisional powers of the Commissioner of Income Tax under section 263
of the Act.
