HIGH COURT OF JAMMU AND KASHMIR AT JAMMU. OWP No. 578/2008 CMP no. 869/2008 Date of Decision: 23.09.2008 Raj Kumar Vs. Union of India and Ors. Coram: Mr. JUSTICE J. P. SINGH, JUDGE. Appearing Counsel: For Petitioner : Mr. Subash Dutt, Advocate with Mr. Sachin Sharma, Advocate. For Respondents : Mr. D. S. Thakur, Advocate. i) Whether to be reported In Press/Journal/Media: Yes ii) Whether to be reported In Digest/Journal: Yes Commissioner of Income Tax J&K, Jammu, had issued Notice No. CIT/Tech/2008-09/1935 of June 5, 2008 to Raj Kumar alias Raju Chowdhary proprietor M/S Tawi Chemicals Industries, K. C. Market Jammu, hereinafter to be referred as, the petitioner, to show cause as to why Assistant Commissioner, Circle 2 Jammu’s order of 14.12.2007 passed under Section 143(3) of the Income Tax Act, 1961, for the assessment year 2005-06 be not cancelled and a fresh assessment ordered. 2 The Commissioner had issued this notice in exercise of his power under Section 263 of the Income Tax Act, 1961 (hereinafter to be referred as “the Act” ). The notice had been issued on the basis of the information and evidence which had come to light during the course of Survey Action under Section 133-A of the Act, carried at the factory premises of the petitioner on March 14, 2008. Perusal of the documents impounded, and the statements made by the employees of the company, during the Survey operation, revealed that the petitioner had made false claims of deduction under Section 80-IB (4) of the Act to the tune of Rs. 18,80,365/- in respect of the IInd furnace, in that, it was merely an extension of existing undertaking and no new undertaking, as projected, had infact come into being. The material collected during the course of Survey had revealed that the petitioner was not eligible to claim deductions under Section 80-1B of the Act in respect of IInd furnace at 100% because the said furnace was only an extension of the existing undertaking and no new industrial undertaking had been established. The notice further revealed that M/S Tawi Chemical Industries, ( Unit –II), of the petitioner was engaged in the business of manufacturing of M.S. Ingots, and a separate Manufacturing cum Trading account, and balance sheet had been filed on its behalf in which deduction of Rs. 3 3,42,46,999/- had been claimed under Section 80-1B of the Act on the profits of the Unit, which had been allowed after reducing the amount of discount received from its profits as the same had not been derived from industry’s activity. Petitioner’s counsel is stated to have denied receipt of any refund by the petitioner from Central Excise Department in respect of this unit during the relevant assessment year 2005-06. It was in these circumstances that deductions under Section 80-1B of the Act had been allowed without reducing any Central Excise Refund from the profits claimed as deductible under Section 80-1B of the Act. During the course of the Survey Action carried out at the factory premises, and information received from Central Excise Department, it had come to light that during the period relevant to the assessment year 2005-06 an amount of Rs. 169.93 lacs had, infact, been received by the petitioner on account of refund of the Central Excise Duty. The Commissioner had therefore come to the conclusion that the assessment framed under Section 143(3) of the Act by the Assistant Commissioner vide his order of December 14, 2007 was erroneous because it was prejudicial to the interest of the revenue. Petitioner has filed this writ petition, seeking quashing of Commissioner’s notice issued on June 05, 2008 on grounds reference whereto shall be made in the paragraphs to follow. 4 Disputing the statement appearing in the Commissioner’s notice and explaining as to how the petitioner was entitled to exemption and deductions under Section 80-1B of the Act, the petitioner has called in question Commissioner’s notice, on two grounds, viz: (1) Commissioner Income Tax, the revisional authority under Section 263 of the Act, would have no jurisdiction either to issue the show cause notice or exercise power under Section 263 of the Act, on the basis of the material collected during Survey Action under Section 133-A of the Act, and (2) Part of the assessment order issued by the Assistant Commissioner being subject matter of petitioner-assessee’s appeal, before Commissioner (Appeals), the Commissioner would have no authority to exercise jurisdiction under Section 263 of the Act. Elaborating his first submission, the petitioner says that the Commissioner could exercise revisional jurisdiction under Section 263 of the Act only on the basis of the records and material which was available with the Assessing Officer at the time of the passing of the assessment order, and not on the basis of any material/information which may come to its notice subsequently. Mr. Subash Dutt, learned counsel for the petitioner, submitted that the Commissioner had erred in assuming jurisdiction under Section 263 of the Act by taking into 5 consideration the material which had come to his notice on the basis of the Survey Action under Section 133-A of the Act. Initiation of action by the Commissioner under Section 263 of the Act, according to the learned counsel, was thus without jurisdiction, and in that view of the matter, the availability of opportunity to the petitioner to show cause against the notice, and the alternative remedy of appeal before the Income Tax Tribunal against the final order that may be passed by the Commissioner, would not operate as bar to the maintainability of the writ petition. Learned counsel relies on 238-ITR 143 to support his submissions. Opposing the admission of writ petition to hearing, Mr. D. S. Thakur, learned counsel for the revenue, submitted that in view of the language employed in Section 263 of the Act, the intention of the Parliament in conferring plenary jurisdiction on the revisional authority is writ large and such plenary jurisdiction would not debar the revisional authority to examine the records of any proceedings under the Act to find out as to whether or not the Assessing Officer’s order was erroneous as it was prejudicial to the interest of revenue. Learned counsel relies on Section 263(1) (b) of the Act to support his submissions. Meeting the second submission of the petitioner’s counsel, learned counsel submitted that pendency of assessee’s appeal against part of the order of the Assessing 6 Officer, before the Commissioner (Appeals), would not oust the jurisdiction of the Commissioner under Section 263 of the Act to examine the records for considering the exercise or otherwise of the power to revise the Assessing Officer’s order. Learned counsel relies on 231-ITR 53 to support his submissions. Learned counsel further submitted that in view of the availability of an opportunity to the petitioner to show cause against the action proposed by the revisional authority, and the availability of alternative efficacious remedy against the final order of the Commissioner by way of an appeal to the Income Tax Tribunal, the petitioner cannot invoke the extra ordinary civil writ jurisdiction of the Court. I have heard learned counsel for the parties. Before appreciating the submissions of learned counsel for the parties, reference needs to be made to Section 263 of the Act, which, for facility of reference, is reproduced hereunder:- Revision of orders prejudicial to revenue. 263. (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 [Assessing] Officer is erroneous in so far 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 7 assessment, or canceling the assessment and directing a fresh assessment. [Explanation- For the removal of doubts, it is hereby declared that, for the Assessing Officer shall include- (a) an order passed [on or before or after the 1st day of June, 1988] by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner [ or Deputy Commissioner] or the Income-tax Officer on the basis of the directions issued by the [Joint] Commissioner under section 144A; (ii) an order made by the [Joint] Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner 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 Commissioner; (c) Where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal [filed on or before or after the 1st day of June, 1988], the powers of the Commissioner under this sub-section shall extent [and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal.] (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.] (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, [National Tax Tribunal,] the High Court or the Supreme Court. Explanation- In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to Section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded. Perusal of Section 263 (1) (b), which defines the expression “record” as it so appears in Section 263(1) of the Act, leaves no manner of doubt that the expression “record” 8 appearing in Section 263 (1) of the Act would include all records relating to any proceedings under the Act which may be available to the Commissioner at the time of examination of the records. Reading of Section 263, as a whole, would not, thus, in my opinion, permit restrictive construction of the expression “record” to mean only that material which was available with the Assessing Authority at the time of passing of the assessment order, and not any other records/material which may come to the revisional authority’s notice on the basis of any proceedings under the Act, including those under Section 133-A. In view of the plain and unambiguous language of Section 263 of the Act, I do not see any merit in petitioner’s counsel’s submission that while exercising jurisdiction under Section 263 of the Act, the revisional authority cannot place reliance on the material collected after passing of the assessment order and during the Survey Action under Section 133-A of the Act. I am supported in taking this view by a judgment of Hon’ble Supreme Court of India reported as 231 ITR 53, where the Commissioner had been held to be jurisdictionally competent to invoke its revisional jurisdiction under Section 263 of the Act, on the basis of the material which, though not in existence at the time of passing of the assessment order, 9 had later come to its notice at the time of the examination of records by it. It would be advantageous to refer to what had been said by their lordships of Hon’ble Supreme Court of India in this regard, in the aforementioned judgment. View expressed by their lordships reads thus:- “In South India Steel Rolling Mills. V. CIT [1997] 224 ITR 654 (SC); [1997] 9 SCC 728, the Commissioner in exercise of his power under section 263 had withdrawn the development rebate granted for the years 1962-63, 1963-64, 1967-68 and 1968-69, on the ground that since the partnership stood dissolved on March 3, 1968, on the death of one of the two partners, before the expiry of eight years, the assessee-firm was not entitled to the benefit of the development rebate under section 33(1) (a) of the Act. The said order passed by the Commissioner was challenged before the Tribunal but the assessee’s appeal had failed. At its instance the following question was referred to the Madras High Court: “Whether, on the facts and circumstances of the case the revision of assessment under section 263 by the Commissioner for withdrawing the development rebate granted for the assessment years 1962-63, 1963-64, 1967-68 and 1968-69 is proper and justified?” The High Court also decided against the assessee. In the appeal filed by the assessee, the order of the Commissioner was challenged, inter alia, on the ground that the power under section 263 could have been invoked on the basis of the record as it stood when the order was passed by the Income-tax Officer and that it was not open to the Commissioner to take into account the dissolution of the assessee-firm, which took place after the passing of the assessment order, because that circumstance was not disclosed by the record which was before the Income-tax Officer. Rejecting this contention, this court held (page 662): “As regards his taking into consideration an event which had occurred subsequent to the passing of the order by the Income-tax Officer, it may be stated that in Explanation (b) in section 263 there is an express provision wherein it is prescribed that ‘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 10 Commissioner’. The death of one of the two partners resulting in the dissolution of the assessee- firm on account of such death took place prior to the passing of the order by the Commissioner and it could, therefore, be taken into consideration by him for the purpose of exercising his powers under section 263 of the Act.” In that case also the amendment was held applicable to an order passed before June 1, 1988. We, therefore, hold that it was open to the Commissioner to take into consideration all the records available at the time of examination by him and thus to consider the valuation report submitted by the Department valuation cell subsequent to the passing of the assessment order and, so the order passed by him was legal. The High Court was wrong in taking a contrary view. We, therefore, allow this appeal, set aside the judgment and order passed by the High Court and answer the question referred to the High Court in the negative, i.e., in favour of the Revenue and against the assessee. In view of the facts and circumstances of the case, there shall be no order as to costs.” First submission of learned counsel for the petitioner, that the Commissioner’s notice impugned in the writ petition suffers from lack of jurisdiction because he had relied on material which had come to his notice pursuant to Survey Action under Section 133-A of the Act, after the passing of the assessment order by the Assistant Commissioner, therefore, fails and is, accordingly, rejected. Plea of jurisdiction raised by the petitioner having failed, the judgment J.C.T.Limited and anr vs. Commissioner of Income Tax and ors, reported as (238-ITR 143) cited by learned counsel for the petitioner, would not therefore come to petitioner’s rescue in maintaining the writ petition and questioning the Commissioner’s notice in view of the availability, of opportunity to him to answer the show cause notice before the Commissioner, and, the alternative 11 remedy of appeal to the Income Tax Tribunal, in case the revisional authority ruled against him pursuant to his notice under Section 263 of the Act. The Parliament, in its wisdom, has not provided any restriction on the exercise of power under Section 263 of the Act and, in that view of the matter, pendency of petitioner- assessee’s appeal against a part of the assessment order would not, thus, in my opinion, be an impediment in Commissioner’s exercising his wide jurisdiction under Section 263 of the Act to consider exercise or otherwise of his revisional jurisdiction, which may be exercised in case he had found that the order passed by the Assessing officer was erroneous insofar as it was prejudicial to the interest of the revenue. The second submission of petitioner’s counsel too lacks substance and therefore fails. For all what has been said above, it is not considered appropriate to stall the proceedings pending before the Commissioner when the petitioner has been afforded opportunity to show cause as to why the order proposed by the Commissioner be not made against him. Yet another reason which dissuades this Court to exercise its extra ordinary writ jurisdiction is the availability of an alternative efficacious remedy of appeal to the Income 12 Tax Tribunal to the petitioner in case the revisional authority’s order goes against him. No case for admission of the writ petition to hearing has been made out by the petitioner. His writ petition is, accordingly, dismissed in limine. (J. P. Singh) Judge JAMMU: 23.09.2008 Anil Raina, PS