JUDGMENT
T. Vaiphei, J.
These three appeals, involving a common question of law, were heard together and are being disposed of by this common judgment. The common substantial question of law so formulated is as follows:
Whether, on the facts and in the circumstances of the case, the learned Tribunal had erred in law in holding that the CIT, Shillong had the jurisdiction to pass the impugned order dt. 25th Sept., 1998 under Section 263 of the IT Act, 1961 and in dismissing the appellant’s Misc. Case No. 6/Gau/2003 in ITA No. 421/Gau/1998 ?
2. Both Mr. V.K. Jindal, the learned senior counsel for the appellant and Ms. P.D.B. Baruah, the learned Counsel for the Revenue have been extensively heard by us.
3. The material facts giving rise to these appeals are that the AO had treated the transport subsidies amounting to Rs. 17,45,426, Rs. 55,72,770 and Rs. 40,31,346 for the asst. yrs. 1994-95, 1995-96 and 1996-97 as non-taxable items. The AO had based his decision on the law as interpreted by this Court in CIT v. Assam Asbestos Ltd (1995) 215 ITR 847 (Gau) holding that transport subsidy is not a taxable item. The Special Leave Petition filed by the Department against the decision in Assam Asbestos Ltd. ‘s case (supra) was dismissed by the apex Court on 29th Nov., 1996. No statutory appeal was preferred by the Department thereafter. Subsequently, the apex Court in Sahney Steel & Press Works Ltd. v. CIT called upon to decide as to, among others whether a subsidy received by an assessee on the power consumed for production in the accounting year relevant to a particular assessment year was taxable as revenue receipt or not. The apex Court held that to determine this question, it was necessary to ascertain the purpose for the subsidy and if the subsidy was in the nature of operational subsidy, it would be taxable. Since subsidy in question was not given as in aid of setting up of the industry of the assessee held the apex Court, it was an operational subsidy and, therefore, exigible to tax.
4. Apparently taking cue from the aforesaid decision in Sahney Steel & Press Works Ltd.’s case (supra), the CIT, Shillong, invoked his powers under Section 263 of the IT Act for suo motu revision of the aforesaid assessment orders in accordance with the law laid down therein. According to the CIT, the subsidy in question, namely, transport subsidy, in this case was in the nature of operational subsidy and was, therefore, taxable and inasmuch as the AO had failed to include such subsidy in the total income of the assessee/appellant for the relevant assessment years, the assessments in question were considered erroneous and prejudicial to the interest of Revenue. It may be noted that the decision in Sahney Steel & Press Works Ltd.’s case (supra) was delivered on 19th Sept., 1997, i.e., a few months after the aforesaid assessment orders were passed. There is no dispute that no statutory appeals in respect of those assessment orders were pending. Aggrieved by the suo motu revision proceedings, the appellant preferred an appeal before the Tribunal being ITA No. 421/Gau/1998, which was dismissed by the common order dt. 25th Aug., 2000, according to the appellant, without hearing him and by ignoring his prayer for adjournment. Upon dismissal of the said appeals, the AO made the reassessment orders by his orders dt. 21st Jan., 2000. The appeal preferred by the appellant against the said reassessment orders being Appeal No. 75 of 2001 under Section 246 of the IT Act is now pending before the CIT(A), Shillong.
5. Mr. V.K. Jindal, the learned senior counsel for the appellant, submits that the question whether transport subsidy is a taxable item or not has been firmly decided against the Revenue in a series of decisions pronounced by the CIT, Tribunal of north-east region and the judgment of this Court and in favour of the assessee including the appellant, and as such, such question cannot now be reopened by the respondents in purported exercise of powers conferred by Section 263 of the Act. He further contends that the subject-matter in Sahney Steel & Press Works Ltd.’s case (supra) pertains to sales-tax and power subsidy and not transport subsidy and points out that the decision of this Court in Assam Asbestos Ltd.’s case (supra), dealing directly with transport subsidy and holding that the same is not a taxable item, has not been reversed/disturbed by the apex Court and is still holding the field. Assuming without admitting that Sahney Steel & Press Works Ltd.’s case (supra) is applicable to this case, such a judicial decision is merely an information and is not a “record” within the meaning of Section 263 of the Act. It is, therefore, submitted by the learned senior counsel that the impugned order is untenable in law and without jurisdiction and is liable to be quashed. On the other hand, Mrs. P.D.B. Baruah, the learned Counsel for the respondents supports the impugned order and submits that the word “record” appearing in Section 263 of the Act cannot be given a narrow interpretation and must be given liberal interpretation bearing in mind the interest of Revenue. So construed, according to the learned Counsel, the word “record” is not restricted to the record as it stood at the time of passing of the order in question by the AO but covers the record including subsequent decision of Courts as it stands at the time of examination by the CIT. She, thus, contends that the decision in Sahney Steel & Press Works Ltd.’s case (supra) constitutes a part of the record and the CIT did not commit any illegality or jurisdictional error in setting aside the assessment orders in question and in directing the AO to take a fresh decision in the light of the law laid down in Sahney Steel & Press Works Ltd. ‘s case (supra).
6. Upon hearing the learned Counsel appearing for the parties and after perusing the materials on record, the sole question which falls for consideration in these appeals is whether the CIT can invoke the power under Section 263 of the Act for suo motu revision of the said assessment orders following the change of law enunciated by the apex Court in Sahney Steel & Press Works Ltd. ‘s case (supra) ? At this stage, it will be appropriate to refer to Section 263 of the IT Act. 1961, which reads thus:
Revision of orders prejudicial to Revenue.–(1) The CIT may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the AO is erroneous insofar as it is prejudicial to the interest of the Revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.
Explanation. : For the removal of doubts, it is hereby declared that, for the purposes of this Sub-section–
(a) an order passed (on or before or after the 1st day of June, 1988), by the AO shall include–
(i) an order of assessment made by the Asstt. CIT or Dy. CIT or the ITO on the basis of the directions issued by the Jt. CIT under Section 144A;
(ii) an order made by the Jt. CIT in exercise of the powers or in the performance of the functions of an AO conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief CIT or Director General or CIT authorized by the Board in this behalf under Section 120;
(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 CIT;
(c) where any order referred to in this sub-section and passed by the AO had been the subject-matter of any appeal (filed on or before or after the 1st day of June, 1988) the powers of the CIT under this sub-section shall extend (and shall be deemed always to have extended) to such matters as had not been considered and decided in such appeal.
7. At the very outset, it may be instructive to refer to the decision of the Division Bench of this Court in Victor Cane Industries v. Commr. of Taxes (2002) 2 GLR 69 (Gau): (2001) 2 GLT 583 (Gau). Though this Court was dealing with a case under the Assam Sales-tax Act, the provisions of law under consideration therein were in pari materia with the provisions of Section 263 of the Act. The relevant portions of the judgment are at paras 7 and 12, which read thus:
7. The point urged by the learned Counsel for the appellant is that under Section 31 of the Assam Sales-tax Act the power of revision by the CIT can only be invoked if the CIT is of the opinion that the order of the assessing authority is erroneous and prejudicial to the interest of the Revenue. In the present case, the order of assessment was in conformity with law on the day when the Asstt. Commr. of Taxes passed the order on 31st July, 1992. The order of the Commr. was rather against the dicta of the apex Court in Pine Chemicals case judgment was rendered on 16th Jan., 1992, what is to be seen is as to what is the law prevalent on the date when the assessment order is passed. Even if subsequently the law is changed or reversed, the assessment already completed cannot be allowed to be reopened. Reference was made to a Division Bench judgment of the Punjab & Haryana High Court in State of Punjab v. Free Wheels (India) Ltd. 1977 STC 332 (P&H).
12. On the basis of what has been observed above, we are of the view that on the day the assessment order was passed and even on the day when the Asstt. Commr. of Taxes passed the order on 31st July, 1992 the law then existing was as per 1992 (2) SCC 683 (supra) as also the earlier law of this Court and the various other High Courts. The orders of assessment could not be said to be erroneous and prejudicial to the interest of the Revenue. We are in respectful agreement with the view expressed by the Punjab & Haryana High Court (supra) that simply because the law has been changed or earlier law laid down has been reversed, that would entitle the revisional authority to reopen the earlier assessments. The learned Single Judge has not gone into this aspect of the matter.
8. From the paras extracted above, it becomes plain that the AO is obligated to make his assessment in accordance with the law applicable at the point of time as interpreted by the High Court or the apex Court. As noted earlier, a Division Bench of this Court in Assam Asbestos Ltd. ‘s case (supra) had already decided that transport subsidy is not a taxable item. The SLP No. 24101 of 1996 preferred by the Department against the aforesaid judgment was dismissed by the apex Court on 29th Nov., 1996. It was on the basis of the said decision that the AO made assessment orders for the years 1994-95, 1995-96 and 1996-97 on 9th June, 1997 and 31st March, 1997 treating transport subsidy as not taxable. The CIT, therefore, clearly erred in holding that the assessment orders were erroneous. The question whether the subsequent change of law can be a ground for exercising the power of suo motu revision under Section 263 came up for consideration in CIT v. G.M. Mittal Stainless Steel (P) Ltd. (2003) 179 CTR (SC) 553 : (2003) 263 TIP, 255 (SC) holding that such power is not available, the apex Court observes:
5. Although nobody appears on behalf of the respondent despite service of notice of appeal, we are of the view that the High Court was entirely correct in deciding the question framed in favour of the assessee and against the Revenue. Section 263 of the IT Act requires that the CIT can call for to examine the record of any proceeding under the IT Act only on the basis of his being satisfied (1) that the AO was erroneous in passing the assessment orders, and (2) that the decision of the AO was prejudicial to the interest of the Revenue. Needless to say the satisfaction must be one which is objectively justifiable and cannot be the mere ipse dixit of the CIT.
6. In this particular case, the CIT has not recorded any reason whatsoever for coming to the conclusion that the AO was erroneous in deciding that the power subsidy was capital receipt. Given the fact that the decision of the jurisdictional High Court was operative at the material time, the AO could not be said to have erred in law. The fact that this Court had subsequently reversed the decision of the High Court would not justify the CIT in treating the AO’s decision as erroneous. The power of the CIT under Section 263 of the IT Act must be exercised on the basis of the material that was available to him when he exercised the power. At that time, there was no dispute that the issue whether the power subsidy should be treated as capital receipt had been concluded against the Revenue. The satisfaction of the CIT, therefore, was based on no material, either legal or factual which would have given him the jurisdiction to take action under Section 263 of the IT Act.
9. In the light of the foregoing discussion, the correct legal position is that the power of the CIT under Section 263 of the IT Act must be exercised on the basis of the material that was available to him when he exercised the power; that if the assessment order of the AO is made on basis of the operating decision of jurisdictional High Court, it cannot be held that such an assessment order is erroneous and that the fact that the apex Court had subsequently reversed the decision of the High Court cannot be a ground for invoking the suo motu revisional power of the CIT under Section 263 of the IT Act. As noted earlier, the decision of this Court in Assam Asbestos Ltd.’s case (supra) was holding the field when the assessment orders in question were made by the AO and the SLP filed by the Department thereagainst was dismissed by the apex Court. As far as the Revenue authorities in north-east region were concerned, the issue as to whether transport subsidy was a taxable item or not could not be said to be alive. In the view that we have taken, we hold that the Tribunal had erred in holding that the CIT, Shillong, had the jurisdiction to pass the impugned order dt. 25th Sept., 1998 under Section 263 of the IT Act, 1961 and in dismissing the Misc. Case Nos. 5, 6 and 7/Gau/2003 filed by the appellant in connection with ITA Nos. 421, 422 and 423/Gau/1998.
10. It may be noticed at this stage that the Division Bench of this Court in IT Appeal No. 16 of 2001 had observed while modifying the order passed by the Tribunal, that the AO, while re-examining the matter for the asst. yrs. 1994-95 and 1996-97, should also re-examine the issue for the asst. yr. 1991-92 with reference to the ratio available in the judgment of the Hon’ble Supreme Court in Sahney Steel & Press Works Ltd. ‘s case (supra), documents available on record and in accordance with the provisions of law (Emphasis, italicised in print, supplied). We make it clear that the direction for re-examination contained therein cannot be construed to be a direction for reassessment by the AO against, or contrary to, the provisions of law.
11. The result of the foregoing discussion is that the three appeals be and are hereby allowed. The common question of law so formulated in the beginning is answered in the affirmative and against the Revenue. Consequently, the impugned orders of the Tribunal are quashed. Inevitably, the assessment orders dt. 21st Nov., 2000 passed by the Addl. CIT, Special Range, Shillong, cannot also survive and are, accordingly, set aside. However, the parties are directed to bear their own costs.