2009 Supreme(SC) 958

Supreme Court of India
THE HONOURABLE MR. JUSTICE S.B. SINHA & THE HONOURABLE DR. JUSTICE MUKUNDAKAM SHARMA
Commissioner of Income Tax, Shimla & Another
Versus
M/S Greenworld Corporation, Parwanoo & Another
Civil Appeal No. 3312 of 2009 [Arising out of Special Leave Petition (Civil) No. 1789 of 2007] with Civil Appeal Nos. 3313-3316 of 2009 [Arising out of Special Leave Petition (Civil) Nos. 16922-16925 of 2007]
Decided on : 06-05-2009

IMPORTANT POINTS
Jurisdiction exercised by Revisional Authority pertains to his Appellate jurisdiction.
Jurisdiction u/s 263 can be exercised only when order of Assessing Officer is erroneous, and, it is prejudicial to interests of Revenue. These conditions are conjunctive and not disjunctive. Existence of another view is no ground for exercise of the jurisdiction u/s 263.
Jurisdiction to issue direction u/s 263 is limited.
Supervisory authority may discuss facts of the case, not merit of decision of the assessing officer.
To challenge appeal by Revenue on the ground of jurisdiction the assessee must show prejudice.

Headnote:(a) Administration of Justice – Jurisdiction – Appellate and Revisional jurisdiction – Jurisdiction exercised by Revisional Authority pertains to his Appellate jurisdiction. (Para 20)

       AIR 1970 SC 1 – Relied upon

       (b) Income Tax Act, 1961 – Section 263 – Revisional jurisdiction of Commissioner – Conditions precedent for suo motu exercise – When order of Assessing Officer is erroneous, and, it is prejudicial to interests of Revenue – These conditions are conjunctive and not disjunctive – Existence of another view is no ground for exercise of the jurisdiction u/s 263. (Para 23, 24, 29)

       243 ITR 83 (SC) : (2000) 2 SCC 718; (2007) 295 ITR 282 (SC) – Relied upon

       (c) Income Tax Act, 1961 – Section 150 – Reopening of proceedings under orders of appellate or revisional authority – Not without limitation – Jurisdiction can be invoked only if there is a proceeding before the authority, or, if the Assessment year in question is also a matter which would fall for consideration before the higher authority – Jurisdiction to issue direction is limited. (Para 30)

       52 ITR 335 (SC); 66 ITR 586 (SC); 120 ITR 14 (SC) – Relied upon

       (1963) 49 ITR 1 – Referred

       (d) Income Tax Act, 1861 – Section 263 – Supervisory jurisdiction – Supervisory authority may discuss facts of the case – Not merit of decision of the assessing officer – Assessing officer cannot be directed to render his decision at the instance of the supervisory authority. (Para 31)

       (2008) 3 SCC 582; (2004) 10 SCC 1 – Relied upon

       (e) Administrative law – Interference in hierarchical system – Statute providing for different hierarchies and forums for passing original or appellate order – Higher authority cannot interfere with the independence of lower authority. (Para 32)

       AIR 1952 SC 16; (2008) 7 SCC 117; AIR 1970 SC 1896; (2001) 6 SCC 260 – Relied upon

       (f) Income Tax Act, 1961 – Provisions akin to section 21, Code of Civil Procedure, 1908 – Order of CIT (Shimla) set aside by Tribunal – CIT (Shimla) competent to file appeal within limitation period from the date its order was set aside – To challenge jurisdiction of CIT (Shimla) to file appeal, assessee must show prejudice. (Para 34)

       66 ITR 367 (SC) – Relied upon

       (2006) 1 SCC 75 – Distinguished

       212 CTR 178 (Delhi) – Distinguished impliedly

       (g) Constitution of India – Article 136 and 142 – Doing complete justice – Appeal u/s 263 and notices issued u/s 148, IT Act, 1961 held not maintainable – Order passed by Assessing Officer held illegal and nullity having been issued at the instance of higher authority – Assessment needs to be made afresh – Case already transferred by Tribunal to CIT (Delhi) which stands impleaded before Supreme Court – CIT Delhi VII directed to reopen the assessment. (Para 37)

       (2006) 1 SCC 540 – Relied upon

       Facts of the case:

       M/s Green World Corporation is a partnership concern. The firm had set up two units for manufacturing exercise books, writing pads, etc. at Parwanoo in the State of Himachal Pradesh in the year 1995. They had also set up a third unit for manufacturing computer software.

       They started filing income tax returns from the Assessment Year 1996-97 showing huge profits. In the return for the Assessment Year 2000-01 they disclosed their total sales to the tune of Rs.1,51,69,515/-out of which a sum of Rs.74,69,314/-was shown as net profit. Thus, the profits bore a proportion of 49% to the gross sales. For the earlier assessment year, i.e. 1999-2000, the proportion of the net profit to the total sales was as high as 66% because out of the total sales of Rs.2,97,12,106/-net profits were declared to be to the tune of Rs.1,96,77,631/-. For the subsequent three assessment years i.e. 2001-2002, 20022003 and 2003-2004, the proportionate net profits to the gross sales were 81%, 95% and 95% respectively.

       It is furthermore stated that the total investment on plant and machinery for unit No. 1 was shown to be just Rs.1,25,000/-and a very small amount of money was shown to have been spent on plant and machinery for the second unit.

       On or about 7.2.2000, the Assessing Officer (`AO) conducted a survey at the premises of the assessee.

       Notices u/s 148 of the IT Act were issued to the Assessee for the Assessment Years 1996-97 to 1999-2000, 2001-2002 and 2002-2003.

       ITAT allowed the appeal filed by the assessee setting aside the order of the CIT (Shimla) on the jurisdictional issue alone.

       Assessee questioned the legality of the notice by filing a Writ petition.

       The Central Board of Direct Taxes, transferred the case from the jurisdiction of CIT (Shimla) to that of CIT (Delhi) with effect from 5.9.2005

       CIT (Shimla) preferred an appeal before the High Court under Section 260A of the Act on or about 17.10.2005.

       On or about 30.11.2005, the High Court while condoning the delay admitted the appeal without formulating the substantial questions of law as required under Section 260A.

       By reason of the impugned order dated 2.3.2006, the High Court while allowing the Appeal filed by CIT (Shimla) dismissed the writ petition filed by the assessee.

       

       Finding of the Court:

       While the assessment order is nullity and illegal, the order u/s 263 and notice u/s 148 is not maintainable.

       Result:

       Appeal disposed of.