COMMISSIONER OF INCOME TAX vs. SUMANKUMAR I PAREKH

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ITR/80/1989HC GujaratGJHC24012861198903 July 2002Bench: HONOURABLE MR. JUSTICE MOHIT S. SHAH,HONOURABLE MR. JUSTICE K.A.PUJ4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the Tribunal was not right in law in setting aside the order made by the CIT under Section 263 of the Income-tax Act, 1961. The Court followed the Supreme Court's decision in Commissioner of Income-tax vs. Shree Manjunathesware Packing Products and Camphor Works (1998) 231 ITR 53. This judgment clarified that the revisional power under Section 263 is of wide amplitude and allows the Commissioner to examine the "record of any proceeding" and make necessary inquiries. The Supreme Court held that the Commissioner can consider new material obtained through inquiry, even if it was not available to the Assessing Officer, and that material already on record, even if pertaining to related proceedings, can be taken into account. Therefore, the High Court disagreed with the Tribunal's narrow view that the "record" must exclusively pertain to the assessee's own case. The Court answered the reference in the negative, in favour of the revenue.

What were the facts?

The assessee, an individual, filed his return of income for assessment year 1983-84, which was accepted by the Income-tax Officer under Section 143(1). The Commissioner of Income-tax (CIT) initiated proceedings under Section 263, believing the assessment order was erroneous and prejudicial to revenue. This was based on the fact that the assessee's wife had declared gold ornaments valued at Rs. 91,988/- acquired at her marriage in 1974, while the assessee's father had not shown marriage expenses, and the wife had no other income source. The CIT concluded the ornaments were acquired from the assessee's undisclosed income and set aside the assessment, directing a fresh assessment. The Income Tax Appellate Tribunal (ITAT) set aside the CIT's order, holding that the CIT could not use records from other related persons for action under Section 263.

What were the issues?

1. Whether the Tribunal was right in law in setting aside the order made by the CIT under Section 263 of the Income-tax Act, 1961? The revenue contended that the CIT's action under Section 263 was justified. They relied on the Supreme Court decision in Commissioner of Income-tax vs. Shree Manjunathesware Packing Products and Camphor Works (1998) 231 ITR 53, which interpreted the term "record" in Section 263 broadly, allowing consideration of material not originally before the Assessing Officer, including material from related proceedings. The revenue argued that the ITAT's narrow interpretation, restricting the "record" to only the assessee's own case, was incorrect. The assessee did not appear to argue their case.

Which sections of the Income-tax Act were involved?

Section 263,Section 143(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 80 of 1989

For Approval and Signature:

Hon'ble MR.JUSTICE M.S.SHAH and Hon'ble MR.JUSTICE K.A.PUJ

============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements?

2.

To be referred to the Reporter or not? : YES

3.

Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? : NO -------------------------------------------------------------- COMMISSIONER OF INCOME TAX Versus SUMANKUMAR I PAREKH -------------------------------------------------------------- Appearance: 1. INCOME TAX REFERENCE No. 80 of 1989 MR TANVISH BHATT for Petitioner No. 1 NOTICE SERVED for Respondent No. 1

--------------------------------------------------------------

CORAM : MR.JUSTICE M.S.SHAH and MR.JUSTICE K.A.PUJ

Date of decision: 03/07/2002

ORAL JUDGEMENT (Per : MR.JUSTICE M.S.SHAH)

In this reference at the instance of the revenue, the following question is referred for our opinion in

respect of the assessment year 1983-84 :-

"Whether the Tribunal is right in law in setting aside the order made by the CIT u/s. 263 of the I.T. Act, 1961 ?"

2.

We have heard Mr Tanvish Bhatt, learned standing counsel for the revenue. Though served, none appears for the respondent-assessee.

3.

The assessee is an individual. For assessment year 1983-84, the assessee filed his return of income on 26.9.1983 at total income of Rs.26,020/-. The Income-tax Officer accepted the return under Section 143(1) of the Act. On scrutiny of the record of the assessment as made by the Income-tax Officer on the assessee for the year under consideration, the Commissioner of Income-tax, Rajkot noticed that the assessee's wife Smt. Arunaben Sumankumar had filed her return of net wealth for the first time for assessment year 1983-84 on 29.9.1983 showing gold ornaments weighing 656 gms. valued at Rs.91,988/-. She had explained the acquisition of the gold ornaments as having been received by her in 1974 at the time of her marriage. The Commissioner of Income-tax further noted that Shri Ishwarlal C. Parikh, the father of the assessee had not shown any expenses on marriage of the assessee. Assessee's wife Smt. Arunaben, had no other source of income except interest income. The Commissioner of Income-tax, therefore, found that the ornaments were required to be treated as acquired by the assessee out of his income from undisclosed sources. He, therefore, held that the order of the Income-tax Officer was erroneous and prejudicial to the interest of revenue in as much as the same had been made without making proper enquiries regarding acquisition of gold ornaments by the assessee's wife. He, therefore, invoked his jurisdiction under Section 263 of the Act and after hearing the assessee set aside the assessment as made by the Income-tax Officer and directed him to read the same afresh according to the provisions of law.

4.

In second appeal, the Tribunal held that the Commissioner of Income-tax could not have taken action under Section 263 of the Act in the case of the assessee on the basis of the records in the cases of other persons, no matter how closely they were related to the assessee. Holding thus, the Tribunal set aside the order of the Commissioner. Hence, this reference at the instance of the revenue.

5.

At the hearing of this reference today, Mr

Tanvish Bhatt, learned standing counsel for the revenue has invited our attention to the decision of the Supreme Court in Commissioner of Income-tax vs. Shree Manjunathesware Packing Products and Camphor Works, (1998) 231 ITR 53 wherein the Apex Court has examined the legislative amendment to Section 263 including the amendment made with retrospective effect for amplifying the scope of the term "record". In the said decision, the Supreme Court did not accept the narrow interpretation of the word "record" which had appealed to the Calcutta High Court in the case of Ganga Properties vs. ITO, (1979) 118 ITR 447; and the Apex Court held as under :-

"The revisional power conferred on the Commissioner under section 263 is of wide amplitude. It enables the Commissioner to call for and examine the record of any proceeding under the Act. It empowers the Commissioner to make or cause to be made such enquiry as he deems necessary in order to find out if any order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. After examining the record and after making or causing to be made an enquiry if he considers the order to be erroneous then he can pass the order thereon as the circumstances of the case justify. Obviously, as a result of the enquiry he may come into possession of new material and he would be entitled to take that new material into account. If the material, which was not available to the Income-tax Officer when he made the assessment could thus be taken into consideration by the Commissioner after holding an enquiry, there is no reason why the material which had already come on record though subsequently to the making of the assessment cannot be taken into consideration by him. Moreover, in view of the clear words used in clause (b) of the Explanation to section 263(1), it has to be held that while calling for and examining the record of any proceeding under section 263(1) it is and it was open to the Commissioner not only to consider the record of that proceeding but also the record relating to that proceeding available to him at the time of examination."

6.

Following the aforesaid decision, we are of the view that thee is nothing in the provisions of the

Income-tax Act, 1961 particularly section 263 of the Act or in the aforesaid pronouncement of the Apex Court which would require us to accept the narrow view which appealed to the Tribunal that the record must be of the assessee concerned and that the Commissioner had no power, jurisdiction and authority to take action under Section 263 of the Act in case of the assessee on the basis of the records in the cases of other persons.

Our answer to the question is accordingly in the negative i.e. in favour of the revenue and against the assessee.

7.

The reference accordingly stands disposed of with no order as to costs.

(M.S. Shah, J.) (K.A. Puj, J.) sundar/-

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