Commissioner Of Income Tax-14, Kolkata v. M/S. Assam Bengal Carriers

O-55 ITA/5/2018 IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION (INCOME TAX)ORIGINAL SIDE A.F.R. COMMISSIONER OF INCOME TAX-14, KOLKATAVERSUSM/S. ASSAM BENGAL CARRIERS BEFORE :THE HON’BLE JUSTICE SURYA PRAKASH KESARWANIANDTHE HON’BLE JUSTICE RAJARSHI BHARADWAJ Date : 30[th] April, 2024. Appearance:Mr. Amit Sharma, Advocate… for the appellant.Mr. Ananda Sen, Advocate… for the respondent. 1.Heard Sri Amit Sharma, learned standing counsel for the appellant andMr. Ananda Sen, learned counsel for the respondent/assessee.Mr. Ananda Sen, learned counsel for the respondent/assessee. 2.This appeal relates to the assessment year 2008-09. Facts:- 3.Briefly stated facts of the present case are that an assessment order dated23.08.2010 under Section 143(3) of the Income Tax Act, 1961 (hereinafterreferred to as ‘the Act, 1961’) for the assessment year 2008-09 was passedby the assessing officer (ACIT, Circle-56, Kolkata) in respect of theassessee determining total income at ‘Nil’. Subsequently, the Commissioner of Income Tax, Kolkata- 21, Kolkata noticed that theassessment order is erroneous and prejudicial to the interest of revenueon certain grounds. Accordingly, a notice dated 26.02.2013 was issued bythe Commissioner of Income Tax, Kolkata- 21, Kolkata under thesignature of Sri Brij Lal Meena, ACIT, Hqrs-21, Kolkata for theCommissioner of Income Tax, Kolkata. The aforesaid notice dated26.02.2013 is reproduced below: “Office of the Commissioner of Income Tax, Kolkata – XX – KolkataNo. CIT, Kol-XX1/263/M/S Assam Bengal Carriers/2012-13/4622Dated 26.02.2013 ToThe Principal Officer,M/S. ASSAM BENGAL CARRIERS40/8, Ballygunje Circular Road,Kolkata- 700 019. Sir, Sub: Show Cause Notice u/s.263 of the I.T. Act, 1961 inthe case of M/s. Assam Bengal Carriers PAN: against the order u/s.143(3) of theI.T.Act, 1961 for the A.Y. 2008-09- Matter reg. In this case, the order YU/s. 143(3) of the Act was passed byA.C.I.T. Circle-56, Kolkata for A.Y. 2008-09 on 23-08-2010, determiningthe total income at Rs.NIL. Thereafter, it is noticed that: i)Dividend income for Rs.5,018/- was claimed to be exempted by theassessee. Relatable expenditure earning such dividend income wascalculated to Rs.1,000/- and only Rs.4,018/- was claimed asexempted on account of Dividend income and the same was allowedby the A.O. However, as per provision of section U/s.14A of theI.T.Act, read with the Rule-D, expenditure should have been workedout of Rs.97,315/- (1/2% of average value of investment ofRs.1,94,62,975/-). Thus, it has resulted in underassessment ofincome of Rs.96,315/-.assessee. Relatable expenditure earning such dividend income wascalculated to Rs.1,000/- and only Rs.4,018/- was claimed asexempted on account of Dividend income and the same was allowedby the A.O. However, as per provision of section U/s.14A of theI.T.Act, read with the Rule-D, expenditure should have been workedout of Rs.97,315/- (1/2% of average value of investment ofRs.1,94,62,975/-). Thus, it has resulted in underassessment ofincome of Rs.96,315/-. ii)Further, loss on sale of motor car amounting to Rs.1,93,771/- waswrongly allowed to the assessee as it ceased to exist in the relevantblock of assets on the last day of the previous year.wrongly allowed to the assessee as it ceased to exist in the relevantblock of assets on the last day of the previous year. iii)FBT of Rs.11,546/- and income Tax of Rs.3,190/- were required to bedisallowed as these were pertaining to earlier years.disallowed as these were pertaining to earlier years. Consider that the order passed u/s.143(3) of the A.O. iserroneous in so far as it is prejudicial to the interests of the revenue. You are, therefore, hereby allowed an opportunity ofbeing heard and to show cause as to why the order passed by theA.O. u/s.143(3) for the A.Y. 2008-09 should not be enhanced/modified orfresh assessment be directed accordingly. The date of hearing fixedon 06/03/2013 at 2.30 P.M. iii)FBT of Rs.11,546/- and income Tax of Rs.3,190/- were required to bedisallowed as these were pertaining to earlier years.disallowed as these were pertaining to earlier years. Consider that the order passed u/s.143(3) of the A.O. iserroneous in so far as it is prejudicial to the interests of the revenue. You are, therefore, hereby allowed an opportunity ofbeing heard and to show cause as to why the order passed by theA.O. u/s.143(3) for the A.Y. 2008-09 should not be enhanced/modified orfresh assessment be directed accordingly. The date of hearing fixedon 06/03/2013 at 2.30 P.M. I am directed to request you to represent in your caseeither personally or through authorised representative on the abovementioned date & time. Your FaithfullySd/-(Brij Lal Meena) ACIT- Hqrs-21, Kolkata For- Commissioner of Income Tax” 4.Pursuant to the aforesaid notice, the respondent/assessee appearedbefore the Commissioner of Income Tax, Kolkata-21 and submittedhis explanation/reply on the points noted in the afore-quoted notice.The Commissioner of Income Tax considered the explanation/submissionof the respondent/assessee and passed an order dated 20.03.2013 underSection 263 of the Act, 1961 holding that the assessment order iserroneous and prejudicial to the interest or revenue. Accordingly, the CITset aside the assessment order and remitted the matter to the assessingofficer to pass an order in accordance with the provision of the Act, 1961after giving due opportunity to the assessee. 5.Aggrieved with the aforesaid order of the CIT(A), the respondent/assesseefiled an appeal being ITA no.707/K9ol/2013 (assessment year 2008-09) before the Income Tax Appellate Tribunal, Kolkata which has been allowedby the impugned order dated 15.01.2016 holding that “assumption ofjurisdiction under Section 263 of the Act, in the present case is not validsince the notice was not signed by the CIT rather it was signed by theACIT-Hqrs-21, Kolkata”. Accordingly, the ITAT had set aside the order ofthe CIT and allowed the appeal. 6.Aggrieved with the aforesaid order of the ITAT, the revenue has filed thepresent appeal.present appeal. Submissions:- 7.Learned counsel for the appellant submits that from the language ofSection 263 it is clear that the notice issued under Section 263 is not ajurisdictional notice for assumption of jurisdiction rather it is anintimation to the concerned assessee so as to afford an opportunity ofhearing. In the present set of facts, the notice was issued by or underdirection of the Commissioner of Income Tax-21, Kolkata although it wassigned by the ACIT, Hqrs-21, Kolkata with clear intimation to therespondent/assessee to appear before the Commissioner of Income Tax onthe date and time fixed. Therefore, the Tribunal has committed a manifesterror of law to set aside the order of the CIT passed under Section 263 ofthe Act, 1961. 8.Learned counsel for the respondent/assessee supports the impugnedorder of the ITAT and submits that to call for record and to afford an opportunity of hearing, it was mandatory for the CIT to sent a notice to theassessee under his own signature and since it has not been done,therefore, the notice itself was void ab initio, and consequently, the orderpassed by the CIT under Section 263 of the Act, 1961 is withoutjurisdiction and bad in law. The ITAT has not committed any error to setaside the aforesaid order of the CIT. Discussion and Findings : 9.This appeal was admitted by this Court by order dated 19.01.2018 on the following substantial question of law: (i) Whether the decision of the Income Tax Appellate Tribunal isperverse in quashing the proceeding under Section 263 of theIncome Tax Act, 1961, for non-signing of the show cause notice bythe Commissioner of Income Tax himself ?” 10.We have carefully considered the submissions of learned counsel for theparties and perused the paper book.parties and perused the paper book. Discussion and Findings : 9.This appeal was admitted by this Court by order dated 19.01.2018 on the following substantial question of law: (i) Whether the decision of the Income Tax Appellate Tribunal isperverse in quashing the proceeding under Section 263 of theIncome Tax Act, 1961, for non-signing of the show cause notice bythe Commissioner of Income Tax himself ?” 10.We have carefully considered the submissions of learned counsel for theparties and perused the paper book.parties and perused the paper book. 11.Before we proceed to examine the rival submissions of learned counsel forthe parties, it would be appropriate to reproduce the provision of Section263 of the Act, 1961, as then existed, as under : “Revision of orders prejudicial to revenue. 263. (1) The Commissioner may call and examine the record of anyproceeding under this Act, and if he considers that any orderpassed therein by the [Assessing] Officer is erroneous in so faras it is prejudicial to the interests of the revenue, he may, aftergiving the assessee an opportunity of being heard and after making or causing to be made such inequiry as he deemsnecessary, pass such order thereon as the circumstances of thecase justify, including an order enhancing or modifying theassessment, or cancelling the assessment and directing a freshassessment. [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 first day of June,1988] by the Assessing Officer shall include-1988] by the Assessing Officer shall include- (i)an order of assessment made by the AssistantCommissioner [or Deputy Commissioner] or theIncome-tax Officer on the basis of the directionsissued by the [Joint] Commissioner under Section144A;Commissioner [or Deputy Commissioner] or theIncome-tax Officer on the basis of the directionsissued by the [Joint] Commissioner under Section144A; (ii)an order made by the [Joint] Commissioner in exerciseof the powers or in the performance of the functions ofan Assessing Officer conferred on, or assigned to, himunder the orders or directions issued by the Board orby the Chief Commissioner or Director General orCommissioner authorised by the Board in this behalfunder section 120;of the powers or in the performance of the functions ofan Assessing Officer conferred on, or assigned to, himunder the orders or directions issued by the Board orby the Chief Commissioner or Director General orCommissioner authorised by the Board in this behalfunder section 120; (b)“record [shall include and shall be deemed always to haveincluded] all records relating to any proceeding under thisAct available at the time of examination by theCommissioner;included] all records relating to any proceeding under thisAct available at the time of examination by theCommissioner; (c)where any order referred to in the sub=-section and passedby the Assessing Officer had been the subject matter ofany appeal {filed on or before or after the first day of June,by the Assessing Officer had been the subject matter ofany appeal {filed on or before or after the first day of June, 1988}, the powers of the Commissioner under this sub-section shall extend [and shall be deemed always to haveextended to such matters as had not been considered anddecided in such appeal] [(2) No order shall be made under sub-section (1) after the expiry oftwo years from the end of the financial year in which the ordersought to be revised was passed.] (3) Notwithstanding anything contained in sub-section (2) an orderin revision under this section may be passed at any time in thecase of an order which has been passed in consequence of, oughtto give effect to, any finding or direction contained in an order of theAppellate Tribunal, [National Tax Tribunal,] the High Court or theSupreme Court. 1988}, the powers of the Commissioner under this sub-section shall extend [and shall be deemed always to haveextended to such matters as had not been considered anddecided in such appeal] [(2) No order shall be made under sub-section (1) after the expiry oftwo years from the end of the financial year in which the ordersought to be revised was passed.] (3) Notwithstanding anything contained in sub-section (2) an orderin revision under this section may be passed at any time in thecase of an order which has been passed in consequence of, oughtto give effect to, any finding or direction contained in an order of theAppellate Tribunal, [National Tax Tribunal,] the High Court or theSupreme Court. Explanation.- In computing the period of limitation for the purposesof sub-section (2), the time taken in giving an opportunity to theassessee to be reheard under the proviso to section 1 to 9 whichany proceeding under this section is stayed by order or injunctionof any court shall be excluded.” 12.The clear mandate of sub-section (1) of Section 263 of the Act, 1961 is that the Commissioner may call for and examine the record of anyproceeding under this Act, if he considers that any order passedtherein by the assessing officer is erroneous so far as it is prejudicialto the interest of revenue, he may after giving the assessee anopportunity of being heard and after making or causing to be madesuch enquiry as he deems necessary pass such order thereon as thecircumstances of the case justify, including an order enhancing or modifying the assessment, or cancel the assessment and directing a freshassessment. The mandatory requirement for passing an order underSection 263(1) of the Act, 1961 is that the order of the assessing officer iserroneous and it is prejudicial to the interests of the revenue. The thirdrequirement is that such an order may be passed by the Commissioner ofIncome Tax after giving the assessee an opportunity of being heard andafter making or causing to be made such enquiry as he deems necessary. 13.The scope of Section 263 of the Act, 1961 has also been explained byHon'ble Supreme Court in Commissioner of Income Tax, Shimla v. TheGreenworld Corporation (2009) 7 SCC 69 [paragraphs 28 and 41], asunder:- “28.Before, however, adverting to the jurisdictional issue raisedby the assessee herein, we may consider the jurisdiction of theCommissioner of Income Tax to issue notice in terms of Section 263 ofthe Act. It provides for a revisional power. It has its ownlimitations. An order can be interfered with suo motu by the saidauthority not only when an order passed by the assessing officer iserroneous but also when it is prejudicial to the interests of theRevenue. Both the conditions precedent for exercising the jurisdictionunder Section 263 of the Act are conjunctive and not disjunctive. Anorder of assessment passed by an Income Tax, Officer, therefore,should not be interfered with only because another view is possible. 41.The scope of provisions of Section 263 of the Act is no longerres integra. The power of exercise suo motu revision in terms of Section 263(1) is in the nature of supervisory jurisdiction andsame can be exercised only if the circumstances specifiedtherein viz. (1) the order is erroneous; (2) by virtue of the order beingerroneous prejudice has been caused to the interest of the Revenue,exist.” 41.The scope of provisions of Section 263 of the Act is no longerres integra. The power of exercise suo motu revision in terms of Section 263(1) is in the nature of supervisory jurisdiction andsame can be exercised only if the circumstances specifiedtherein viz. (1) the order is erroneous; (2) by virtue of the order beingerroneous prejudice has been caused to the interest of the Revenue,exist.” 14.In Commissioner of Income Tax, Mumbai v. Amitabh Bachchan (2016) 11SCC 748 [paragraphs 10, 11 and 12], Hon'ble Supreme Court consideredthe provisions of Section 263 of the Act, 1961 and held that the power ofrevision under Section 263 is not contingent on the giving of a noticeto show-cause. In fact, Section 263 has been understood not torequire any specific show-cause notice to be served on the assessee.Rather, what is required under the said provision is an opportunity ofhearing to the assessee. There is nothing in Section 263 to infer thenotice under Section 263 to the status of a mandatory show-causenotice affecting the initiation of the exercise of jurisdiction or torequire the CIT to confine himself to the terms of the notice andforeclosing the consideration of any other issue or question of fact.While CIT is free to exercise his jurisdiction of consideration of all relevantfacts, full opportunity to controvert the same and to explain thecircumstances surrounding such facts, as may be considered relevant bythe assessee, must be afforded to him by the CIT prior to the finalisationof the decision. The notice/intimation given under Section 263 is not ajurisdictional notice or notice to assume jurisdiction. 15.Thus, the powers conferred upon the Commissioner of Income Tax underSection 263 of the Act, 1961 is in the nature of supervisory jurisdictionand the same can be exercised in the circumstances specified in Sub-section (1) of Section 263 namely (1) the order is erroneous; and (2) theorder is prejudicial to the interests of the Revenue. Another ridercontained in Sub-section (1) of Section 263 of the Act, 1961 is that beforepassing the order, the Commissioner of Income Tax shall give anopportunity of hearing to the assessee and make or cause to be madesuch enquiry as it deems necessary. Notice under Section 263 of the Act,1961 is issued by the Commissioner of Income Tax so as to comply withthe mandate of “giving the assessee an opportunity of being heard”. Thus,notice issued by the Commissioner of Income Tax under Section 263 ofthe Act, 1961 is in exercise of his supervisory power. Thus, a notice underSection 263 of the Act, 1961 is not a jurisdictional notice to assumejurisdiction, rather it is an intimation to the assessee so as to give him anopportunity of being heard pursuant to the statutory mandate of Sub-section (1) of Section 263 of the Act, 1961.Section 263 of the Act, 1961 is in the nature of supervisory jurisdictionand the same can be exercised in the circumstances specified in Sub-section (1) of Section 263 namely (1) the order is erroneous; and (2) theorder is prejudicial to the interests of the Revenue. Another ridercontained in Sub-section (1) of Section 263 of the Act, 1961 is that beforepassing the order, the Commissioner of Income Tax shall give anopportunity of hearing to the assessee and make or cause to be madesuch enquiry as it deems necessary. Notice under Section 263 of the Act,1961 is issued by the Commissioner of Income Tax so as to comply withthe mandate of “giving the assessee an opportunity of being heard”. Thus,notice issued by the Commissioner of Income Tax under Section 263 ofthe Act, 1961 is in exercise of his supervisory power. Thus, a notice underSection 263 of the Act, 1961 is not a jurisdictional notice to assumejurisdiction, rather it is an intimation to the assessee so as to give him anopportunity of being heard pursuant to the statutory mandate of Sub-section (1) of Section 263 of the Act, 1961. 16.In the present set of facts, we find that the notice under Section 263 of theAct, 1961 so as to afford opportunity of hearing to the respondentassessee was issued by the Commissioner of Income Tax – 21, Kolkata.However, it was signed by the ACIT, Hqrs – 21, Kolkata for theCommissioner of Income Tax, with a clear stipulation in the notice that heAct, 1961 so as to afford opportunity of hearing to the respondentassessee was issued by the Commissioner of Income Tax – 21, Kolkata.However, it was signed by the ACIT, Hqrs – 21, Kolkata for theCommissioner of Income Tax, with a clear stipulation in the notice that he has been directed by the Commissioner to request the assessee torepresent in his case either personally or through authorisedrepresentative on the date and time mentioned. Undisputedly, pursuantto the aforesaid notice dated 26.02.2013, the respondent assesseeappeared before the Commissioner of Income Tax – 21, Kolkata andsubmitted its explanation/reply which was considered by theCommissioner of Income Tax and thereafter he passed the order dated20.03.2013 under Section 263 of the Act, 1961. Thus, the statutorymandate of giving the assessee an opportunity of being heard has beenfully satisfied by the Commissioner of Income Tax. The Commissioner ofIncome Tax has recorded a finding in his order that the assessment orderpassed by the assessing officer is erroneous and it is prejudicial to theinterests of the revenue. Thus, both the requirements of Sub-section (1) ofSection 263 of the Act have been satisfied in the order passed by theCommissioner of Income Tax. The Tribunal has committed manifest errorof law to set aside the order of the Commissioner of Income Tax on theground of wrong assumption of jurisdiction due to signing of the notice bythe ACIT. 17.For all the reasons aforestated, the impugned order dated 15.01.2016 inITA No.706/Kol/2013 (assessment year 2008-09) passed by the IncomeTax Appellate Tribunal “D” Bench, Kolkata setting aside the order of theCIT dated 20.03.2013 under Section 263, cannot be sustained and isITA No.706/Kol/2013 (assessment year 2008-09) passed by the IncomeTax Appellate Tribunal “D” Bench, Kolkata setting aside the order of theCIT dated 20.03.2013 under Section 263, cannot be sustained and is hereby set aside. The substantial question of law is answered inaffirmative i.e. in favour of the revenue and against the assessee. (SURYA PRAKASH KESARWANI, J.) (RAJARSHI BHARADWAJ, J.) As/S. Kumar.