ORDER–Passed against IAC’s order.
Ratio:
Inspecting Assistant Commissioner’s order in pursuance to proceedings under section 147(a) could not be quashed in revision as per the facts of the case.
Held:
(i) In any case the Inspecting Assistant Commissioner (Assessment’s) order of 27-2-1984 cannot be termed as an order of reassessment and lifting the same could at best revive proceedings initiated under section 147(a) if these could be processed. But in the present case limitation for completion having expired that also could not be done under the garb of section 263.
(ii) The order in revision of 27-2-1984 if it is termed as an order in pursuance to proceedings under section 147(a) could not be revised in view of complete prohibition contained in clause (a) of sub-section(2) of section 263, as it existed before 1-10-1984 because the assessee got a vested right on 27-2-1984 of immunity of proceedings under section 263 of the Act.
(iii) If the intention and the tenor of the Commissioner(Appeal’s)’s order was to seek revision of the order of assessment of 27-12-1977, it certainly could not even be attempted in March, 1986.
Application:
Not to current assessment years.
Income Tax Act 1961 s.147(a)
Income Tax Act 1961 s.263
ORDER
S. Grover, Judicial Member
1. The contentions in this second appeal are that the order dated 24-3-1986 passed by the learned Commissioner of Income-tax, Delhi-II, New Delhi under Section 263 of the Income-tax Act, 1961 in respect of assessment year 1975-76 be struck down as illegal, erroneous and against the facts.
2. The return of income was filed by the appellant on 18th March, 1976 declaring income of Rs. 19,360 from salary and property. The ITO vide his order dated 17th December, 1977 completed the assessment at Rs. 22,670 under Section 143(3). A copy of the assessment order has been filed.
3. Subsequently it came to the notice of the department that appellant’s wife Smt. Piar Kaur was in possession of jewellery which she had declared in her wealth-tax returns filed in respect of assessment years 1975-76 and 1976-77 on 10th of March, 1976 and 19th of August, 1976. Though she claimed the jewellery to be her personal property and in her possession ever since her marriage before partition of India in 1947, the Department took the view that in the absence of definite source of income it could be the property of the appellant.
4. The assessment was accordingly sought to be re-opened under Section 147(a) by issuing a notice dated 20th March, 1980 under Section 148 of the Act. The learned IAC(Asst.) Range-VI, New Delhi, who had jurisdiction over the case after giving a number of hearings, dropped the proceedings on 27th of February, 1984 by recording as follows :-
I have seen the W.T. records of Smt. Piar Kaur for the assessment year 1975-76. The WTO in that year did not make any protective assessment for jewelleries. I am also satisfied with the explanation offered in this behalf. There is no evidence with the Department to suggest that these jewelleries were acquired by the assessee and his wife held them “benami”. Looking to the prevailing orders of the society, amount involved, I accept assessee’s version. Proceedings initiated Under section 147 of the Act are dropped.
5. Later on, GIT, Delhi-II, New Delhi opined that the dropping of proceedings by the IAC(Asst.) was erroneous and prejudicial to the interests of the Revenue and proceeded to take action under Section 263 of the Act and after giving a hearing on 24th March, 1986 for the first time, cancelled the IAC(Asst.) order of dropping of reassessment proceedings vide order passed on 24th March, 1986 itself. In the written objections filed the assesee contested the very proceedings under Section 263 on various counts. Vide objection No. 3 it was in terms stated that under Section 263 of the Act as it existed prior to its amendment by the Taxation Laws (Amendment) Act, 1984 w.e.f. 1-10-1984, no order made under Section 148/147 could be revised by the Commissioner under Section 263, in view of the prohibition contained under Sub-section (2) of Section 263, which stipulated that no order shall be made under Sub-section (1) to revise an order of re-assessment made under Section 147 of the Act. On merits the assessee resisted the proceedings under Section 263 of the Act and paragraphs 8 and 9 of the reply submitted on 24th March, 1986 before the Commissioner, I like to bring in focus as follows :-
8. When the matter came up before the IAC (Asst.) in the proceedings Under Section 148, I explained to the IAC(Asst.) that the jewellery was given to my wife by her in-laws and parents at the time of marriage. An affidavit from my wife’s brother Shri Ram Singh as well as from own brother Shri Santokh Singh were filed before the IAC(Asst.). Copies of the explanation filed before the IAC(Asst.) on 7-1-1984 and 11-2-1984 as also the copies’of the affidavit of Shri Ram Singh and Shri Santokh Singh are enclosed. After considering the explanation and affidavits furnished by me and going through the items declared by my late wife in her wealth-tax return, the learned IAC(Asst.) was satisfied that the jewellery did not belong to me and that keeping in view the status of the two families, customs in the societies to which we belong and the fact that my marriage took place in 1939, the jewellery in possession of my wife was reasonable. In view of this, the IAC(Asst.) dropped the proceedings Under section 147(a) as he formed an opinion that there was no escapement of income in my case.
9. From the above facts, you will kindly appreciate that there is no question of escapement of any income. It is a matter of common knowledge and is customary in the families to which I belong that the ladies at the time of marriage and thereafter on certain occasions like birth of a son, birthdays etc. get jewellery. The jewellery at the rates of 1939 would be of very small value. At that time the gold was about Rs. 20 to 25 per tola. However, for the year in respect of which wealth-tax return was filed, i.e., assessment year 1975-76, the gold rate was as high as Rs. 500 (approx.) per tola and that is why the value of the jewellery declared in the return came to Rs. 98,682. The IAC(Asst.) has, after considering the facts and applying his mind to the case, dropped the proceedings on 27-2-1984.
6. For the appellant Shri Joginder Singh, Advocate appeared and argued and I was assisted by Shri R.S. Adlakha for the Revenue.
7. Whereas for the assessee Commissioner’s order was contested on several counts, the learned Departmental Representative submitted that in view of the amended provision w.e.f. 1-10-1984 the Commissioner had the necessary powers to vacate the order of 27th February, 1984, which according to him, could only be termed as an order of re-assessment.
8. There are several aspects which should be noticed in the present case the primary being of limitation. To understand the controversy it is necessary to bring in focus the relevant portion of Section 263 as it existed before its amendment w.e.f. 1-10-1984 :-
263. Revision of orders prejudicial to revenue.-(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry 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.
(2) No order shall be made under Sub-section (1)-
(a) to revise an order of re-assessment made under Section 147, or
(b) after the expiry of two years from date of the order sought to to be revised.
(3) Notwithstanding anything contained in Sub-section (2) an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, the High Court or the Supreme Court.
In the amendment though Sub-section (1) of Section 263 remains unchanged an Explanation is attached to it which provides that for the purpose of Sub-section (1), an order passed by the Income-tax Officer shall include-
(a) an order of assessment made on the basis of directions issued by the Inspecting Asstt. Commissioner under Section 144-A or Section 144-B ; and
(b) an order made by the Inspecting Asstt. Commissioner in exercise of the powers or in performance of the functions of an Income-tax Officer conferred on, or assigned to him, under clause (a) of Sub-section (1) of section 125 or under Sub-section (1) of section 125A.
Sub-section (2) has been amended and may also be brought in focus as below :-
(2) No order shall be made under Sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed.
Sub-section (3) also remains unchanged.
9. In view of the above provisions and the stated facts, the first question which arises is that which order is sought to be revised by the Commissioner in the first place. The Commissioner’s directions contained in para 3 of his order in such context assume importance and are, therefore, reproduced below :-
3. In these circumstances I consider that the order of the IAC (Asst.) dated 27-2-1984 dropping the proceedings under Section 147 was erroneous and is obviously prejudicial to revenue, hence the order is cancelled. The ITO i s directed to make fresh asst. for this year after making proper inquiries regarding the acquisition of gold ornaments.
10. From the above, it is clear that the learned Commissioner did not even record a positive finding that it was a straight case of under-assessment. All he said was that few facts were not taken notice of by the IAC (Asst.) before dropping the proceedings under Section 147(a) of the Act. But then that in itself could not give jurisdiction under Section 263 which hinges on two all important factors both of which must co-exist. That the order passed must not be only erroneous but also prejudicial to the interests of the Revenue. In the present case even a prima facie case is not made out that what the IAC (Asst.) accepted was not correct.
11. In any case the IAC (Asst.) order of 27th Feb., 1984 cannot be termed as an order of reassessment and lifting the same could at best revive proceedings initiated Under section 147(a) if these could be processed. But in the present case limitation for completion having expired, that also could not be done under the garb of Section 263.
12. Independent of the above and assuming that the IAC (Asst.) order of 27th February, 1984 could be termed as re-assessment and therefore, within the ambit of review proceedings under Section 263, the CIT could at best pass order himself even after the amendment by 31-3-1986, but direction of enquiries for making re-assessment was certainly beyond the scope of Section 263 considering the safeguards of limitations of the section.
13. Again, the order of 27th February, 1984 if it is termed as an order in pursuance to proceedings Under section 147(a) could not be revised in view of complete prohibition contained in clause (a) of subsection (2) of sec. 263, as it existed before 1-10-1984 because the assessee got a vested right on 27-2-1984 of immunity of proceedings under Section 263 of the Act.
14. If the intention and the tenor of the CIT’s order was to seek revision of the order of assessment of 17th December, 1977, it certainly could not even be attempted in March, 1986.
15.1 have dealt with the various facets above and the order brought in appeal is considered bad on various counts, independent of each other because of incurable legal infirmities.
16. In the case before me I am of the considered view that the learned IAC (Asst.) dropped the proceedings Under section 147(a) of the Act after accepting plausible explanation and his order, therefore, was not erroneous, much less prejudicial to the interests of the revenue.
17. In the result, the CIT’s order is cancelled and the appeal allowed on several counts independent of each other, as detailed above.