COMMISSIONER OF INCOME TAX vs. SAVITABEN VALLABHDAS

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ITR/66/1988HC GujaratGJHC24013143198830 March 2015Author: HONOURABLE MR. JUSTICE M.R. SHAH,HONOURABLE MR. JUSTICE S.H.VORA5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court, in its majority view, answered the question of law in the negative, in favour of the revenue and against the assessee. The Court held that the basis of intervention by the Commissioner under Section 263(1) is not restricted to the assessment records of the assessee alone. The term 'record' is to be interpreted broadly, encompassing all records relating to any proceeding under the Income-tax Act. The Court relied on the Supreme Court's decision in CIT vs. Manjunathesware Packing Products, which interpreted the word 'record' widely and overruled the Calcutta High Court's decision in Ganga Properties' case, on which the ITAT had relied. The Court found that the ITAT had taken a narrow view of the Commissioner's powers. Therefore, the impugned judgment and order of the ITAT were quashed and set aside. The ITAT was directed to hear the appeals on merits on the remaining grounds. The Court noted that the pronouncement of the Supreme Court is binding under Article 141 of the Constitution.

What were the facts?

These two Income Tax References, filed by the revenue, were referred to the Gujarat High Court by the Income Tax Appellate Tribunal (ITAT) for its opinion. The references concerned the validity of intervention by the Commissioner of Income Tax under Section 263 of the Income Tax Act, 1961. The ITAT had set aside the Commissioner's order, holding that the basis for intervention, which included statements from search operations concerning the assessee's son, could not be considered part of the assessment records of the assessee. The High Court initially had a difference of opinion between two judges, leading to the matter being referred to a third judge. The third judge concurred with one of the original judges, leading to the current judgment.

What were the issues?

1. Whether, in law and on facts, the Appellate Tribunal was right in concluding that the basis of intervention by the Commissioner should be part of the records in the assessment proceedings of the assessee, and that statements from search operations regarding the son of the assessee could not be considered as forming part of the assessment of the assessee, thus rendering the Commissioner's action invalid? (Question of law and fact, concerning Section 263 of the Income Tax Act, 1961). Assessee's Contention: The ITAT had relied on the principle that the Commissioner's intervention under Section 263 must be based on records pertaining directly to the assessee's assessment proceedings. Statements from search operations of a third party, even if related, could not form the basis. Revenue's Contention: The revenue argued that the scope of 'record' under Section 263 is wide and includes any record relating to any proceeding under the Income-tax Act. They relied on Supreme Court decisions which interpret 'record' broadly, encompassing information from related search operations, even if concerning another person, if it has a bearing on the assessee's assessment. They cited CIT vs. Manjunathesware Packing Products and argued that the ITAT's reliance on Ganga Properties' case was overruled by the Supreme Court.

Which sections of the Income-tax Act were involved?

Section 263,Section 259

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
O/ITR/65/1988 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE NO. 65 of 1988 With INCOME TAX REFERENCE NO. 66 of 1988 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE S.H.VORA ====================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? ====================================== COMMISSIONER OF INCOME TAX....Applicant(s) Versus VALLABHDAS VITHALDAS....Respondent(s) ====================================== Appearance: MR PRANAV G DESAI, ADVOCATE for the Applicant(s) No. 1 NOTICE SERVED for the Respondent(s) No. 1 ====================================== CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE S.H.VORA Date : 30/03/2015

ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) [1.0] Both these References, at the instance of the revenue, are referred to this Court for the opinion of this Court by the learned Income Tax Appellate Tribunal, Ahmedabad Bench (hereinafter referred to as the “Tribunal”) to consider the following question of law; “Whether, in law and on facts, the Appellate Tribunal was right in coming to the conclusion that the basis of intervention by the Commissioner should be part of the records in the assessment proceedings of the assessee and the statements in the search operations regarding the son of the assessee could not be considered as forming part of assessment of the assessee and thus the action was invalid?” [1.1] It is required to be noted that both these References initially came to be heard by the Division Bench of this Court (Coram:-M.S. Shah & D.A. Mehta, JJ. [as they then were]) and Hon’ble Mr. Justice M.S. Shah (as he then was) was of the view that the issue was covered by the decision of the Hon’ble Supreme Court in the case of CIT Vs. Manjunathesware Packing Products reported in (1988) 231 ITR 53. Consequently, since the learned Tribunal had set aside the order of the Commissioner only on the aforesaid ground, in his opinion the matter should have been remanded to the learned Tribunal for consideration on merits. Hon’ble Mr. Justice D.A. Mehta (as he then was) was unable to confirm to the said opinion. He gave a differing opinion relying upon several decisions of the Hon’ble Supreme Court including the [1.2] In view of the difference of opinion between the two learned Judges of this Court, both these References were referred to the third learned Judge and by judgment and order dated 27/02/2015 & 13/03/2015 the learned Single Judge (Hon’ble Mr Justice Akil Kureshi) has concurred with the view of Hon’ble Mr. Justice M.S. Shah (as he then was) and has answered the Reference as under; “In our view, the aforesaid observations of the Apex Court clearly give the widest meaning to the word "record". It is also pertinent to note that while Section 263(1) uses the word "record", the explanation goes further and states that the record includes all records relating to any proceeding under this Act. The use of the plural "records" and "relating to any proceeding under this Act" do not permit any limitation being placed on the power of the Commissioner that the power under Section 263(1) can be exercised only on the basis of the statements which are recorded in the course of search and seizure operations in respect of the very assessee and not in respect of any other person. The Apex Court has in terms overruled the decision of the Calcutta High Court in Ganga Properties' case (118 ITR 447) on which the Tribunal had relied while passing the order giving rise to these references.

7.

As regards the reasoning which appealed to the Tribunal, the word "therein" is not necessarily capable of the interpretation which appealed to the Tribunal. When the Commissioner examines the record of search and seizure operations in respect of any person, say the respondent assessees' son as in the instant case, and finds that such person had attributed some undisclosed income to the assessee, it is open to the Commissioner to call for the record in the assessee's case. The exercise of power by the Commissioner under Section 263(1) is obviously in respect of the assessee's case but for the purpose of exercising that power, the examination by the Commissioner is not required to be confined to the record of that assessee's case as such record could be any record relating to any proceeding under the Income-tax Act. There is nothing in the provisions of Section 263(1) to take such a narrow view of the powers of the Commissioner. Any doubt which could arise has been removed by the legislature by inserting through the Finance Act, 1988 an explanation and further amending it by Finance Act, 1989. The interpretation of the provisions of Section 263(1) read with explanation thereto by the Apex Court in light of the legislative intent leaves no room for doubt.

8.

In our view, once there is a pronouncement of the highest Court of the land, the same is binding on all Courts, Tribunals and all authorities in view of Article 141 of the Constitution and it is not open to distinguish the same by referring to certain words of those provisions which were very much before the Supreme Court merely on the ground that some other arguments could have been urged which were not considered by the Supreme Court.” [1.3] Thus the question came to be answered in the negative i.e. in favour of the revenue and against the assessee and ordered that the learned Tribunal will hear the appeal of the assessee on merits on remaining grounds. That is how the matters are now placed before this Court after obtaining the order from Hon’ble the Acting Chief Justice for pronouncement of the judgment by the Division Bench in terms of Section 259 of the Act. [2.0] Now, in view of the majority view by Hon’ble Mr. Justice M.S. Shah (as he then was) and Hon’ble Mr. Justice Akil Kureshi, J., the question of law referred to this Court reproduced hereinabove is answered in favour of the revenue and against the assessee. Consequently, the impugned judgment and order passed by the learned Tribunal in ITA No.1403/Ahd/86 for the Assessment Year 1982-83 in the case case of the assessee-Smt Savitaben Vallabhdas wife of Shri Vallabhdas Vithaldas are hereby quashed and set aside. The learned tribunal will now hear the Appeals against the order of the Commissioner on merits on remaining grounds. [3.0] With this, both the References are disposed of accordingly. (M.R. SHAH, J.) (S.H. VORA, J.) Siji

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