Guwahati H.C : Where deduction for same payment of bonus was allowed twice in two assessment years, revisional order passed by Commissioner directing Assessing Officer for recomputation, needed no interference

High Court Of Guwahati

CIT, Guwahati – II vs. B & A Plantation and Industries Ltd.

Assessment Years : 1994-95 And 1995-96

Section : 263, 43B

A.K. Goel, Cj. And C.R. Sarma, J.

Writ Appeal No. 309 Of 2008

February 13, 2012

JUDGMENT

A.K. Goel, CJ. – This appeal has been preferred by the Revenue against order of learned Single Judge quashing notice issued under Section 263 of the Income Tax Act, 1961 (the Act), followed by order dated 28.03.2000 on the ground that the error sought to be corrected by exercise of the suo motu revisional jurisdiction was not an error of jurisdiction and that the Commissioner had no jurisdiction to interfere with the order of assessment in the facts and circumstances of the present case.

2. The assessee was assessed to income tax in respect of the assessment year 1995-96 and in the course of the said assessment, assessee’s claim in respect of deductions on account of payment of bonus was allowed under Section 43B of the Act even though the said claim had been allowed in the assessment year 1994-95 also. Though proceedings for rectification under Section 154/155 of the Act were initiated for rectifying the said error, the said proceedings were dropped. This led to initiation of suo motu revisional jurisdiction by issuing notice dated 24.01.2000 seeking to revise order of assessment dated 11.03.1998 on the ground that the same was erroneous and prejudicial to the interest of Revenue inasmuch as the assessee had claimed the deduction twice. After due consideration of the reply of the assessee, the Commissioner passed order dated 28.03.2000 setting aside the order of assessment and directing the Assessing Officer to re-compute the assessment as per law after reasonable opportunity to the assessee. The error noticed by the Commissioner has been mentioned as follows :

“On perusal of the assessment records for the assessment year 1995-96 of the above named assessee it is found by me that the assessment order for the assessment year 1995-96 was passed u/s 143(3) on 11.3.98 determining business loss at Rs. 6,10,758/-. It is also found that under the bonus a/c Rs. 79,71,328/- (Rs. 37,00,000/- being provision for 94-95 and Rs. 42,71,328/- being short provision of 93-94) was debited to the P & L A/C and while computing total income for the assessment year 1995-96 only Rs. 37,00,000/- being bonus provision was added back and Rs. 67,87,419/- being bonus paid was deducted. Therefore, Rs. 42,71,328/- being short provision of 93-94 has been claimed as deduction in addition to the actual payment of bonus of Rs. 67,87,419/-. It is also revealed on perusal of the assessment records for the assessment year 1994-95 that while passing assessment order for the assessment year 1994-95 u/s 143(3) on 20.3.97 bonus of Rs. 42,74,392/- was allowed on actual payment basis as per the certificate of Auditor against provision of bonus of Rs. 25,00,000/- for 93-94. As the payment of bonus for the year 1993-94 amounting to Rs. 42,74,392/- was allowed in the assessment year 1994-95 on actual payment basis, the amount of Rs. 42,71,328/- being short provision bonus for 93-94 claimed as deduction was required to be disallowed and added back to the income for the assessment year 1995-96 but the Assessing Officer failed to do so. These actions of the Assessing Officer have rendered the assessment order passed u/s 143(3) for the assessment year 1995-96 erroneous in so far as it is prejudicial to the interest of the revenue.”

3. It is clear from the above that the payment of bonus had been allowed as a deduction for the assessment year 1994-95 and the same could not be again claimed for the year 1995-96. The assessee could not show that on facts the error noticed by the Commissioner was not there. However, instead of filing an appeal against the order of the Commissioner, the assessee approached this Court under Article 226 of the Constitution alleging that there was no justification for invoking jurisdiction under Section 263 of the Act as the said jurisdiction could be exercised only if there was a ‘jurisdictional’ error as held by a Division Bench of this Court in Rajendra Singh v. Superintendent of Taxes [1990] 79 STC 10 and other similar judgments. It was further submitted that the said power could not be exercised to interfere when power could be exercised for rectification under Section 154 or re-assessment under Section 147 of the Act. It was also submitted that the said power was not intended to be exercised to substitute the opinion of the Commissioner for the opinion of the Assessing Officer and in any case mere suggestion of the Audit party could not be the basis of exercise of the said power. Reliance was placed on State of Kerala v. KM Cheria Abdulla & Co. [1965] 16 STC 875, Santlal Mehndi Ratta (HUF) v. CIT [2002] 1 GLR 197, Bongaigaon Refinery & Petrochemicals Ltd. v. Union of India [2006] 287 ITR 120 (Gau.), Sirpur Paper Mills v. Commissioner of Wealth-tax [1970] 77 ITR 6 (SC) and Jeevan Lal Ltd v. Addl. CIT [1977] 108 ITR 407 (Cal.).

4. The writ petition was opposed and it was submitted that merely because rectification proceedings were dropped, did not affect jurisdiction of the Commissioner under Section 263 when such jurisdiction was exercised upon a finding that order of the Assessing Officer was erroneous and prejudicial to the interest of the Revenue. Mere fact that there was an Audit report also taking the same view did not affect the jurisdiction of the Commissioner. Objection was also taken that the order of the Commissioner was appellable under Section 253(1)(c) and therefore in view of the said alternative remedy, the writ petition ought not to be entertained.

5. Learned Single Judge held that the writ petition could be entertained as order of the Commissioner was without jurisdiction. If the Assessing Officer allowed the deduction on account of bonus, the Commissioner could not substitute his opinion for that of the Assessing Officer. The Commissioner could also not exercise revisional jurisdiction when the matter was covered by the scope of rectification jurisdiction. The relevant findings recorded by the learned Single Judge are :

“24. In the present case, it is after examination of the books of account under Section 43B of the Act that the assessing authority has allowed the deduction on account of bonus in exercise of its powers under Section 143(3). The assessing officer, having acted within his jurisdiction, in allowing the claim of bonus as deduction, it was not open to the Commissioner of Income Tax to consider the said order as erroneous merely because, in his view, 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 he order passed without jurisdiction or an order passed beyond jurisdiction or wholly contrary to jurisdiction.”

“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, authorizes the revisional authority to intrude into the inquiries properly made by the assessing authority and to reopen an already completed assessment.”

“32. From the facts as discussed above, it is clear that in the case at hand, the Commissioner has initiated the suo moto revisional proceeding, under Section 263, entirely based on the objection raised by the internal audit authority. There is nothing either in the impugned notice, dated 24.01.2000, or in the impugned order, dated 28.03.2000, to show that the Commissioner has applied his independent mind and has come to the conclusion that the assessment made needs to be revised. Moreover, the suo moto revisional jurisdiction cannot be invoked, under Section 263, for the purpose of making 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 11.03.1998, no revisional proceeding was initiated against the order, dated 07.01.2000, whereby the assessing authority had dropped the rectification proceeding initiated under Section 154. Thus, while the order passed, on 07.01.2000, remains unchallenged and unaltered, the order, dated 11.03.1998, gets reopened. When a rectification proceeding is initiated under Section 154 and a final order dropping the rectification proceeding is passed, the effect is that the assessment order has merged into the order made in the rectification proceeding. In the case at hand, the assessment order, dated 11.03.1998, had merged into the order, dated 07.01.2000. In such circumstances, without interfering with the order, dated 07.01.2000, the order, dated 11.03.1998, could not have been reached by the revisional authority and set aside. Viewed thus, it is clear that the impugned notice, dated 24.01.2000, and the order, dated 28.03.2000, passed by the Commissioner, under Section 263, are absolutely without jurisdiction and not tenable in law.”

“34. From what have been pointed out above, it is clear that the Commissioner of Income Tax initiated the revisional proceeding influenced by the objection raised by the internal audit party and has not applied his independent mind, while passing the impugned order. Hence, the impugned order is liable to be set aside and quashed.”

“38. What crystallizes from the above discussion is that in the present case, when there was no lack of jurisdiction on the part of the assessing authority, in passing the order of assessment and the assessing authority had not exceeded its jurisdiction in passing the order of assessment, the order cannot be termed erroneous, within the meaning of Section 263, to enable the Commissioner of Income Tax to invoke powers under Section 263 of the Act.”

6. We have heard Mr. Sanjoy Sarma, learned Standing Counsel for the Revenue. None appears for the assessee though the service is complete as noticed in order dated 25.11.2010.

7. Learned counsel for the Revenue challenged the view taken by learned Single Judge by submitting that there was clear and patent error in the order of the Assessing Officer in not taking into account the fact that the assessee had already availed of the same deduction in the earlier assessment year which was not disputed by the assessee. In these circumstances, the order of the Assessing Officer could certainly be held to be erroneous. The expression ‘erroneous’ did not include mere error of jurisdiction but also covered a case of wrong assumption of facts or incorrect application of law or absence of application of mind. He submits that law laid down in Rajendra Singh (supra) has been explained in a recent Full Bench judgment of this Court dated 08.02.2012 in ITA 2 of 2008 (CIT v . Jawahar Bhattacharjee [2012] 341 ITR 434 (Gau). He also submitted that mere fact that the error could be rectified or resort could be taken to re-assessment would be no bar to exercise of revisional jurisdiction if the case falls within the purview of the said jurisdiction. Mere fact that the Audit party had also raised some objection did not affect the jurisdiction of the revisional authority. It was not a case where the revisional authority had substituted its opinion for that of the Assessing Officer but a case where the Assessing Officer failed to notice the factual aspect and made assessment on wrong assumption of facts and without application of mind.

8. We have given due consideration to the submission made on behalf of the Revenue. We are of the view that the learned Single Judge was not justified in interfering with the order of the Commissioner passed under Section 263 of the Act. Even if we ignore the objection of alternative remedy of appeal, available to the assessee under Section 253(1)(c) of the Act, the fact remains that an error was noticed by the Commissioner in the order of the Assessing Officer that the assessee had made claim for the same deduction twice and after noticing the said error, the same was corrected. In these circumstances, it could not be held that such an order was beyond the revisional jurisdiction of the Commissioner. Similar objection of the Audit party did not in any manner affect the revisional jurisdiction, nor the fact that the error could be rectified by the Assessing Officer or the Assessing Officer could have taken resort to re-assessment could be a bar to exercise of revisional jurisdiction. It was also not a case of substitution of opinion of revisional authority for the opinion of the assessing officer. Thus, learned Single Judge was not justified in interfering with the revisional order of the Commissioner under Section 263 of the Act.

9. In view of above, we allow this appeal, set aside the impugned order passed by the learned Single Judge and dismiss the writ petition filed by the respondent assessee.

[Citation : 346 ITR 43]

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