High Court Of Madras
CIT vs. Smt. Tasneem Z Madraswala
Asst. Year 2004-05
K. Raviraja Pandian & M. M. Sundresh, JJ.
Tax Case Appeal No. 1310 of 2009
7th December, 2009
Counsel Appeared :
Patty B. Jaganathan, for the Appellant : J. Balachander, for the Respondent
JUDGMENT
M. M. Sundresh, J. :
The Revenue has come on appeal against the order passed by the Tribunal in ITA No. 2140/Mad/2007 for the asst. yr. 2004-05 by framing the following substantial questions of law :
“1. Whether on the facts and circumstances of the case, the Tribunal was right in holding that the CIT cannot give direction to the AO to complete the assessment afresh where it is prejudicial to the Revenue ?
Whether on the facts and circumstances of the case, the Tribunal was right in deciding that the CIT has only power to set aside the de novo assessment with absolute discretion to the AO ?
Whether on the facts and circumstances of the case, s. 263 of the IT Act confers power to the CIT to revise any proceedings of the AO where it is prejudicial to the Revenue or not ?”
2. The brief facts of the case are as follows : (i) The assessee filed her return of income on 15th Dec., 2004, admitting a total income of Rs. 7,77,440 for the asst. yr. 2004-05. The same was processed under s. 143(1) of the IT Act, 1961, on 20th June, 2005. Thereafter, the case was taken up for scrutiny and the regular assessment under s. 143(3) was completed on 20th Nov., 2006, determining the total income at Rs. 8,02,440. (ii) By exercising the power under s. 263 of the IT Act, 1961, the CIT, Chennai VI, has set aside the order passed by the AO and further directed the AO to pass a fresh assessment order by following the procedure contemplated under s. 50C(2)(b) of the IT Act. (iii) Challenging the abovesaid order, the assessee filed a further appeal before the Tribunal and the Tribunal by an order dt. 19th June, 2009, has allowed the appeal filed by the assessee in part by deleting the direction given by the CIT by invoking the procedure contemplated under s. 50C(2) (b) of the Act to value the capital asset in a particular manner. (iv) Challenging the same, the Revenue has filed the present appeal by formulating the abovestated substantial questions of law.
The learned counsel for the Revenue submitted that the assessment order is erroneous and prejudicial to the interest of the Revenue. The CIT has correctly invoked the power available to him under s. 263 of the IT Act, 1961. The learned counsel also submitted that the power is available to the CIT to issue such a direction for the purpose of conducting fresh assessment.
The suo motu power conferred under s. 263 of the IT Act, 1961 can be exercised by the CIT when the order of the AO is erroneous and prejudicial to the interests of the Revenue. While exercising the said power, the CIT will have to satisfy the twin conditions, namely, the order of the AO which is sought to be revised is erroneous and also prejudicial to the interests of the Revenue. The said power is of wide import. The phrase, “prejudicial to the interests of the Revenue” has to be read in conjunction with an erroneous order passed by the AO.
In the present case on hand, the CIT has correctly exercised the power, since based upon the records he found that the order passed by the AO is erroneous and prejudicial to the interests of the Revenue. In the judgment reported in Malabar Industrial Co. Ltd. vs. CIT (2000) 159 CTR (SC) 1 : (2000) 243 ITR 83 (SC) the Hon’ble apex Court was pleased to hold that the power under s. 263 is rather wide provided the CIT will have to satisfy himself with the order passed by the AO is both erroneous and prejudicial to the interests of the Revenue. Therefore, there is no difficulty in accepting the contention of the Revenue that exercising the power under s. 263 of the IT Act, 1961 is correct and proper. However the question to be considered in the present case is as to whether while exercising such a power, the CIT can direct the AO to complete the assessment in a particular manner in accordance with law with the directions.
The contention of the learned counsel for the Revenue cannot be accepted for the reason that while cancelling the order of assessment, there is no power vested with the CIT to direct the AO to complete the assessment in a particular manner. Therefore, the Tribunal has correctly set aside that portion of the order passed by the CIT, who directed the AO to complete the assessment by taking recourse to the provisions contained under s. 50C(2)(b) of the Act.
In this connection, it is useful to refer to the analogous provision contained in the Central Excises and Salt Act (1 of 1944). The Supreme Court, while considering the abovesaid provision held that the authority while exercising such power cannot direct the lower authority to complete the assessment in a particular manner. The observation of the apex Court in the case of Union of India vs. Tata Engineering & Locomotives Co. Ltd. AIR 1998 SC 287 is as follows (p. 288) :
“4. In our view, this writ petition should not have been entertained by the High Court at all. The Asstt. Collector is entitled to complete the assessment as he thinks fit in exercise of the judgment and according to his understanding of the law and facts. For this purpose, he can call for and examine whatever documents he considers relevant. If the Asstt. Collector fails to follow any judgment of the High Court or this Court, the assessee had adequate statutory remedies by way of an appeal and revision against the assessment order. The Court should not try to control the mode and manner in which an assessment should be made. If the Asstt. Collector is of the view that enquiries are necessary to be made as to the price at which trucks were sold at the Regional Sales Offices, the Court cannot stop him from making such enquiries.”
8. A reading of the abovesaid judgment would clearly show that while remanding the matter, the CIT ought not to have given a specific direction to complete the assessment in a particular manner. Further, the Tribunal has only set aside the abovesaid direction by which the AO was directed to complete the assessment by following s. 50C(2)(b) of the Act. We do not find any error in the order passed by the Tribunal. The questions of law raised by the Revenue are answered against the Revenue. Accordingly the tax case appeal is dismissed. No costs.
[Citation : 324 ITR 67]
