Txa/67/2006 Of The Commissioner Of Income Tax, Panaji-Goa v. Alcon Resort Holding Limited, Panaji, Goa

Meena IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO. 67 OF 2006 The Commissioner of Income Tax,having office at Aayakar Bhavan, Patto Plaza, Panaji, Goa. v/s.Alcon Resort Holding Limited Velho Building,Panaji- Goa. …Appellant ...Respondent Ms. Suzan Linhares, Standing Counsel for the Appellant. Mr. D. Pangam, Advocate with Mr. P. Sawant, Advocate for theRespondent. CORAM :A. K. MENON &R. N. LADDHA, JJRESERVED ON :24th March, 2022 thPRONOUNCED ON :13 April, 2022. JUDGMENT : (Per R.N. LADDHA,J.) This appeal under Section 260A of the Income Tax Act, 1961(“the Act” for short) assails the order dated 20/10/2005 passed by theIncome Tax Appellate Tribunal, Mumbai Bench B, Mumbai. The impugned order relates to the assessment years 1991-92, 1992-93,1993-94, 1994-95, 1997-98 and 1998-99. 2. On 05/02/2007, this appeal was admitted on the followingsubstantial questions of law: (A)Whether on the facts and in the circumstances of thecase the ITAT was justified in law in holding that the noticeunder Section 21 of the E.T. Act, issued by the Commissionerof IT, in defective being not signed by him and the said defectis incurable? (B) Whether the ITAT ought to have held that the saidnotice dated 01/10/2002, was duly served on the assesseeand was heard before passing the said order and as such noprejudice is caused to the assessee? (C) That in the facts and in the circumstances of the case,ITAT ought to have held that the signing of the notice dated01/10/2002, issued under Section 21, of the E.T. Act, by theAssistant Commissioner of IT, in an administrative act and itdoes not vitiate the entire proceedings, unless it is shown thatthe grave prejudice has been caused to the assessee or thatthe order passed by the Commissioner is withoutjurisdiction? (D) That in the facts and in the circumstances of the case,the ITAT, ought to have held that non-signing of notice dated01/10/2002, by the Commissioner, does not affect thejurisdiction of the Commissioner under Section 21 of the E.T.Act, to initiate the proceedings and it does not violate theprovisions of Section 21 of the E.T. Act? 3. It would be noticed and admitted by the learned Counsel for theappellant that question (B) and question (C) herein above are the merefacet of / submission urged in support of question (A) and question (D),respectively. Therefore, both the questions (A) and (B) are subsumed inquestion (A). Similarly, question (C) and (D) are subsumed in question(D). In view of this, our consideration of question (A) and question (D)would include the submissions urged as question (C) and question (D) . 4. Briefly, the facts leading this appeal, are as under : a.Respondent is a company engaged in the hotel business.On 6/12/1990 the respondent company has set up a touristresort in the State of Goa. The respondent company, however,did not file returns required under Section 8 of the ExpenditureTax Act, 1987 (for short “E.T.Act”) contending that it wasexempt from filing returns under Section 5(1) of the E.T.Act.Notices, however, were issued by the Assessing Authority,requiring the assessee to file expenditure tax returns. Inresponse to that, respondent company / the assessee had filedNil liability returns for all these assessment years. On 6/12/1990 the respondent company has set up a touristresort in the State of Goa. The respondent company, however,did not file returns required under Section 8 of the ExpenditureTax Act, 1987 (for short “E.T.Act”) contending that it wasexempt from filing returns under Section 5(1) of the E.T.Act.Notices, however, were issued by the Assessing Authority,requiring the assessee to file expenditure tax returns. Inresponse to that, respondent company / the assessee had filedNil liability returns for all these assessment years. b.It is stated that the respondent company obtained a letterof exemption from the DG (IT) (Exemption), Calcutta vide orderof exemption from the DG (IT) (Exemption), Calcutta vide order dated 31/07/2001, wherein, DG(IT) (Exemption) exempted therespondent company under Section 80 IA (4)(iii) of the IncomeTax Act, from expenditure tax w.e.f. 06/12/1990. Based on thesaid exemption letter, the respondent company claimed that itshotel / resort was exempted from the provisions of theExpenditure Tax Act and as such it was not liable to file Returnunder Section 8 of the E.T. Act. c.Based on the said explanation and letter dated31/07/2001, the Assessing Officer by his Order dated28/03/2002 dropped the proceedings under Section 11 of theE.T. Act, initiated against the respondent company / assessee. Asthe said order dated 28/03/2002 passed by the Assessing Officerwas prejudicial to the interest of the Revenue, on behalf of theCommissioner of Income Tax, notice under Section 21 of the E.T.Act was issued to the respondent company. After givingopportunity of hearing to the respondent company, theCommissioner by his order dated 26/03/2004, set aside theorders passed by the Assessing Officer for all these assessmentyears and further directed the Assessing Officer to frame theassessment order afresh in accordance with law. d. Being aggrieved, the respondent company challengedthe order dated 26/03/2004 of the Commissioner before theIncome Tax Appellate Tribunal, Mumbai Bench(for short,“Tribunal”). The Tribunal heard the said appeal alongwith otherassessment years and passed a common order on 20/10/2005,holding the notice dated 01/10/2002, as defective, being notsigned by the Commissioner of Income Tax. e.Being aggrieved, the Revenue- appellant herein is inappeal before us. 5. Ms. S. Linhares, learned Standing Counsel for the Revenue/appellant states that there is no difference of facts in all the six taxappeals and the impugned order is a consolidated order pertaining to allSix appeals. As such, consolidated appeal is filed against the impugnedorder for all these Six appeals. Ms. Linhares states that the revisionorder passed by the Commissioner of Income Tax would not becomeinvalid only for the reason that the notices under Section 21 of the E.T.Act were issued by an Officer other than the Commissioner of theIncome Tax. It is submitted that on 26/03/2004 the revision orders havebeen passed by the Commissioner of Income Tax himself and therefore,the orders having been passed by the competent statutory authority cannot be said to be illegal only because notices under Section 21 of theE.T. Act were issued by an Officer other than the Commissioner. It hasbeen submitted that as the respondent company/assessee hadparticipated in the proceedings consequent to notice issued underSection 21 of the E.T. Act by the Officer other than the Commissioner ofIncome Tax, it amounted to waiver. The respondent company cannotnow challenge the jurisdiction of the Assistant Commissioner who issuedthe notices in question. 6. Mr. D. Pangam, learned Counsel for the respondent companystates that the notices have been issued by the Assistant Commissioner ofIncome Tax and not by the Commissioner of Income Tax. It is submittedthat the Commissioner of Income Tax cannot pass the order on the basisof the notice issued by his subordinate. According to him, there can beno question of waiver by mere participation in the proceedings beforethe Commissioner of Income Tax specially when there is inherent lack ofjurisdiction. Therefore, in his view, no fault can be found on this countwith the order of the Tribunal. 7. Mr. Pangam also relied upon the decision in the case of Sahni SilkMills (P) Ltd. & anr. vs. Employees' State Insurance Corporation1 in 1(1994) 5 SCC 346 6. Mr. D. Pangam, learned Counsel for the respondent companystates that the notices have been issued by the Assistant Commissioner ofIncome Tax and not by the Commissioner of Income Tax. It is submittedthat the Commissioner of Income Tax cannot pass the order on the basisof the notice issued by his subordinate. According to him, there can beno question of waiver by mere participation in the proceedings beforethe Commissioner of Income Tax specially when there is inherent lack ofjurisdiction. Therefore, in his view, no fault can be found on this countwith the order of the Tribunal. 7. Mr. Pangam also relied upon the decision in the case of Sahni SilkMills (P) Ltd. & anr. vs. Employees' State Insurance Corporation1 in 1(1994) 5 SCC 346 support of his contention that the power granted to the Commissionercould not have been exercised by the Assistant Commissioner absentany specific delegation of such power. Mr. Pangam also relied on theOrder of this Court in The Commissioner of Income Tax-I vs. LalitkumarBardia2 8. In order to appreciate the aforesaid submissions in its properperspective, it may be advantageous to reproduce Section 21 of the E.T.Act which reads as under: “Revision of orders by the Commissioner- (1) The Commissionermay, either of his own motion or on application by the assesseefor revision, call for the record of a proceeding under this Actwhich has been taken by the Income Tax Officer subordinate tohim and may make such enquiry of cause such enquiry to bemade and, subject to the provisions of this Act, may pass suchorder thereon as he thinks fit. (2) ---- (3) ---- (4) ---- (6)---- (7)---- .” 2Income Tax Appeal No. 127 of 2006 9. It is an undisputed position that the notice under Section 21 of theE.T. Act dated 01/10/2002 was issued and signed by the AssistantCommissioner of Income Tax (HQ) wherein it was stated that - “on examination of the record of assessment proceedings in yourcase under the Expenditure Tax Act for the Assessment Year1991-92, it is considered that the order passed by the AssessingOfficer on 28/03/2002 is erroneous insofar as it is prejudicial tothe interest of Revenue. You are requested to produce andfurnish evidence in connection with the following........”. 10. Thus, it is apparent that the record was examined by the AssistantCommissioner and not by the Commissioner of Income Tax. Section 21of the E.T. Act mandates the examination of records by theCommissioner of Income Tax and for issuance of notice under Section21 of the E.T. Act Commissioner of Income Tax himself is required toapply his mind. The Commissioner of Income Tax cannot pass an orderin revision order on the basis of a notice issued by his subordinateofficer. The Assistant Commissioner of Income Tax in his notice dated01/10/2002 nowhere stated that the said notice was issued on theinstructions or direction of the Commissioner of Income Tax. 11. Insofar as principle of waiver is concerned, it is settled position oflaw that the same cannot be invoked so as to confer jurisdiction. In thiscase, the Assistant Commissioner Income Tax had issued notice under Section 21 of the E.T. Act who admittedly had no jurisdiction. In termsof Section 21 of the E.T. Act, the Commissioner of Income Tax is thecompetent authority vested with that power. Therefore, the notice underSection 21 of the E.T. Act has necessarily to be issued by theCommissioner of Income Tax and not by the Assistant Commissioner.As a consequence, the notice being without jurisdiction, all theproceedings subsequent thereto are without authority of law. 11. Insofar as principle of waiver is concerned, it is settled position oflaw that the same cannot be invoked so as to confer jurisdiction. In thiscase, the Assistant Commissioner Income Tax had issued notice under Section 21 of the E.T. Act who admittedly had no jurisdiction. In termsof Section 21 of the E.T. Act, the Commissioner of Income Tax is thecompetent authority vested with that power. Therefore, the notice underSection 21 of the E.T. Act has necessarily to be issued by theCommissioner of Income Tax and not by the Assistant Commissioner.As a consequence, the notice being without jurisdiction, all theproceedings subsequent thereto are without authority of law. 12. In Sahni Silk Mills (P) Ltd. (supra), the Supreme Court wasconsidering the legality of resolution empowering the Director Generalto authorize any other Officer to exercise his powers. The Court foundthat in the absence of enabling provision, such delegation would not bepermissible and that the legislature can permit any statutory authority todelegate its power to any other authority after such a policy is indicatedin the statute itself and when parliament has specifically appointed anauthority to discharge a function, it cannot be readily presumed that ithad intended that its delegate should be free to empower another personto act in his place. The Court cited with approval the case of BariumChemicals Ltd. vs. Company Law Board3, and quoted the followingparagraph : 3AIR 1967 SC 295 “Bearing in mind that the maxim delegatus non protestdelegare sets out what is merely a rule of construction, sub-delegation can be sustained if permitted by express provision orby necessary implication.” 13.In the instant case, nothing has been shown to us whereby theAssistant Commissioner was empowered to act in place of theCommissioner under Section 21 of the ET Act. 14.Lalitkumar Bardia (supra) considered Section 2(7A) of the IncomeTax Act and the meaning of the expression “Assessing Officer” and foundthat the DCIT, Nagpur, did not have jurisdiction over the Respondent-Assessee by virtue of Section 120 of the Act and it is the AssessingOfficer alone who was to serve notice calling upon the assessee tofurnish a return in terms of Section 158 BC. The notice issued by theDICT was bad since on the date the notice was issued, he was not theAssessing Officer. The Division Bench held that as a consequence thenotice issued by the DCIT and all proceedings subsequent thereto werewithout authority of law. 15. Lalitkumar Bardia (supra), also made reference to A.C.I.T. vs. HotelBlue Moon4, that the notice under Section 158 BC was mandatory andthe very foundation of jurisdiction and had necessarily to be issued bythe Assessing Officer and not by any Officer of the Income Tax4(2010) 321 I.T.R. 362 (SC) Department. As we can see from the aforesaid decisions, an Officersuperior in rank to the Assessing Officer was found to have nojurisdiction to issue the notice in question. Applying these principles atthe case at hand, we have no hesitation in concluding that the AssistantCommissioner could not have issued the notice in the instant case. 16. In the above view, the substantial question of law as framed hereinabove at (A) is answered in the affirmative and the substantial questionof law at (D) is answered in negative i.e. in favour of therespondent/assessee and against the Revenue. 17. The appeal is disposed of in the above terms. There shall be noorder as to costs. R.N. LADDHA,J. MEENA VISHAL BHOIRDigitally signed by MEENA VISHAL BHOIR Date: 2022.04.13 17:58:03 +05'30' A. K. MENON, J.