COMMISS"IONER OF INCOME TAX. MUMBAI vs. AMITABH BACHCHAN

CIVIL APPEAL No. 5009/2016Supreme Court[2016] 3 S.C.R. 51611 May 2016Bench: 2 JudgesAuthor: RANJAN GOGOI, PRAFULLA C. PANT B17 pages
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What did the Supreme Court hold?

The Supreme Court held that for the exercise of jurisdiction under Section 263, an order must be both erroneous and prejudicial to the interest of the Revenue. The Court found that the assessee had multiple opportunities to produce documents but failed to do so, leading the Assessing Officer to complete the assessment hastily. The CIT, upon scrutiny, identified overlooked facts and documents, concluding the assessment order was erroneous and prejudicial. The Court also addressed the issue of the withdrawn expense claim, stating that its withdrawal, especially after initially claiming it and following a cash system of accounting, necessitated further inquiry. The Court held that the CIT was justified in exercising revisional powers. The Tribunal and High Court orders were set aside, and the CIT's revisional order was restored. The Court noted that the re-assessment order, made pursuant to the restored revisional order, had not been tested on merits and the assessee was free to do so.

What were the facts?

The Commissioner of Income Tax (CIT) initiated suo motu revision proceedings under Section 263 of the Income Tax Act, 1961, against the assessment order for Assessment Year 2001-2002 concerning Amitabh Bachchan. The CIT found the assessment order to be erroneous and prejudicial to the revenue, primarily due to the assessee's failure to produce books of account and relevant documents despite opportunities. The CIT also noted that the assessee had claimed additional expenses of 30% of gross professional receipts in a re-revised return, which was later withdrawn. The CIT believed this withdrawal warranted further inquiry. The Tribunal and the High Court had set aside the CIT's revisional order. The Revenue appealed to the Supreme Court.

What were the issues?

1. Whether the Commissioner of Income Tax (CIT) validly exercised his suo motu revisional powers under Section 263 of the Income Tax Act, 1961, when the assessment order was allegedly erroneous and prejudicial to the interest of the Revenue? Assessee's contentions: The assessee argued that the CIT's revisional power is not justified when two possible views exist, citing Malabar Industrial Co. Ltd. vs. CIT and CIT vs. Max India Ltd. They also contended that the CIT's order went beyond the show cause notice. Revenue's contentions: The Revenue argued that the assessment order was indeed erroneous and prejudicial to the revenue. They contended that the assessee failed to produce necessary documents, and the withdrawal of a significant expense claim required further investigation, which the Assessing Officer failed to conduct. The Revenue maintained that the principles of natural justice were followed, and the CIT's order was justified.

Which sections of the Income-tax Act were involved?

Section 263,Section 69-C

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A B c D E F G H [2016) 3 S.C.R. 516 COMMISS"IONER OF INCOME TAX. MUMBAI v. AMITABH BACHCHAN (Civil Appeal No. 5009 of2016) MAYll,2016 [RANJAN GOGOi AND PRAFULLA C. PANT, JJ.] Income Tax Act, 1961 - s. 263 - Revision C!f" order prejudicial to Revenue - Suo motu revisional powers of Commissioner of Income Tax uls. 263 - Exercise of - Held: For exeri.:ise a/juri iction u/s. 263, order passed by the Authority should be erroneous and prejudicial to the interest of the Revenue - Thereafter, the said power is available su~ject to observance of the principles of natural justice - Power of revision u/s. 263 is not co11tinge11t 011 the gh>ing of a notice to show cause - Requirement u/s.263 is an opportunity of hearing to the assessee and failure of the same renders the revisional order legally ji-agile - Full opportunity to controvert the same and to explain the circumstances surrounding such facts, must be afforded to assessee by C.I. T. prior to the finalization of the decision - On facts, C.I. Ton scrutinizing the record, noted that the assessee did not produce the books of account and other relevant documents despite various opportunities - Authorized repres

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