Commissioner of Income Tax vs Shankar Rajkhowa

D.N. Baruah, J.—In this reference u/s 256(1) of the income tax Act, 1961 (''the Act'') the Tribunal referred the following questions for opinion of this Court: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the Commissioner was not justified in only ordering the cancellation of assessment without giving directions to the Assessing Officer for making a fresh assessment, when the assessment completed on 4-10-1988 had not been found to have existed in law and when the valid order of assessment passed earlier on 31-12-1987 had already existed and had attained finality ?

Whether the Tribunal was justified in holding the view that the Commissioner had not made out a case as to how and in what manner the order of assessment made on 4-10-1988 was erroneous and prejudicial to the interests of the revenue, when the Commissioner had in fact decided on this point vide penultimate para of the order ?

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in quashing the order passed by the Commissioner u/s 263 of the income tax Act, 1961 ?

For the purpose of answering these questions the facts are :

The assessee is an individual and the questions referred to above relates to the assessment year 1983-84. The assessee on 16-1-1985 filed his return of income showing total income at Rs. 1,04,790 as his income from business. On 25-3-1986 the Assessing Officer completed assessment u/s 144 of the Act computing the total income at Rs. 2,40,970 by way of best judgment. Being aggrieved by the order passed by the Assessing Officer, the assessee preferred an appeal before the Commissioner, Shillong. The Commissioner by his order dated 13-6-1988 set aside the assessment order by invoking power u/s 264 of the Act and directed the Assessing Officer to pass fresh order in accordance with law. During the pendency of the above revision, the assessee on 26-3-1987 filed another return purportedly under the ''Amnesty Scheme'' showing a total income of Rs. 1,10,790 comprising business income of Rs. 1,04,790 plus Rs. 6,000 being the income from house property. On 3-7-1987 the assessee informed the Commissioner (Appeals) that he had already filed return under the ''Amnesty Scheme'' and he may be allowed to withdraw the appeal. On 17-7-1987 the Commissioner (Appeals) dismissed the appeal on withdrawal. On 6-11-1987 the assessee filed a petition u/s 264 before the Commissioner against the order of assessment dated 25-3-1986 passed by the Assessing Officer u/s 144.

In the meantime, the Assessing Officer before whom the second return was filed under the ''Amnesty Scheme'' declined to accept the same and initiated a proceeding u/s 147 of the Act to include the fresh income of Rs. 6,000 disclosed in the ''Amnesty Scheme''. On 31-12-1987 the Assessing Officer passed order of reassessment u/s 143(3) read with section 147 of the Act computing income at Rs. 2,46,790, i.e., Rs. 6,000 more than the amount computed in the order dated 25-3-1986. On 3-5-1988 the assessee preferred an appeal before the Commissioner (Appeals) against the reassessment order dated 31-12-1987, however, the Commissioner (Appeals) dismissed the appeal and confirmed the order dated 31-12-1987.

On 13-6-1987 the Commissioner before whom the assessee''s petition u/s 264 was filed, set aside the order of assessment dated 25-3-1986 by invoking power u/s 144 and directed for a fresh assessment in accordance with law. While the appeal against the order dated 3-5-1988 was pending before the Tribunal, the Assessing Officer on the basis of the direction of the Commissioner dated 13-6-1988 passed another order of assessment u/s 143(1) accepting the income of Rs. 1,10,790 which was filed under the Amnesty Scheme on 26-3-1987. On 29-5-1990 the Tribunal dismissed the appeal as infructuous on the ground that since the Commissioner on 13-6-1988 set aside the assessment order dated 25-3-1986 u/s 264, the original assessment was no longer in existence. On 1-11-1990 the Commissioner issued notice to the assessee calling upon him to file objection as to why action should not be taken u/s 263 of the Act for cancelling the order of assessment dated 4-10-1988. On 30-11-1990 the Commissioner passed order holding that the order of assessment dated 31-12-1987 was the only valid order of assessment and the order of assessment dated 4-10-1988 was erroneous and prejudicial to the interests of the revenue, and, therefore, the Commissioner cancelled the order dated 4-10-1988. Against this order, the assessee preferred an appeal before the Tribunal and the Tribunal by its order dated 19-1-1993 quashed the order dated 30-11-1990. Hence, the present reference.

We have heard Mr. U. Bhuyan, the learned junior counsel appearing for the revenue and Mr. R.K. Joshi, the learned counsel for the assessee.

Mr. Bhuyan submits that in the facts and circumstances of the case the direction was not necessary inasmuch as the reassessment order was already in force. On the other hand, Mr. Joshi submits that under the provisions of section 263 the Commissioner was not justified in cancel- ling the order dated 4-10-1988, inasmuch as, no direction was given for fresh assessment.

Regarding question No. 2, Mr. Bhuyan submits that the Commissioner has given the details how the order was erroneous and prejudicial to the interests of the revenue, to which Mr. Joshi raises objection.

On the rival contentions of the parties it is to be seen whether the order of the Tribunal was justified ?

Section 263 of the Act provides for revision of the order by the Commissioner. However, the Commissioner does not have unfettered discretion to revive the order and the condition necessary for invoking the power must exist. As per section 263 the Commissioner has the jurisdiction to revise the order only when he considers that any order passed by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of the revenue. This order of cancellation must contain of enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.

In the present case, the Commissioner cancelled the order of assessment, however, without giving any further direction for initiation for making a fresh assessment. Therefore, the Tribunal found that the order of the Commissioner was contrary to the provisions of section 263 and accordingly set aside the said order. After going through the records and on hearing the counsel for the parties, in our view, the Commissioner has rightly cancelled the order of assessment. Accordingly, we answer the question No. 1 in affirmative, i.e., in favour of the assessee and against the revenue. Regarding question No. 2 we have gone through the order passed by the Commissioner. In the concluding portion of the impugned order the Commissioner observed thus :

On a consideration of all the aspects the Court decisions detail and with due respect to my predecessor I come to hold the opinion that the order of revision passed on 13-6-1988 did not stand the test of law, it having set aside an assessment which is non est. It follows therefrom that the order of assessment of 4-10-1988 passed as it was in pursuance of directions contained in the said revision order is a nullity. The income tax Act does not anywhere provide for more than one assessment for a particular year of assessment at a given point of time. Even assuming for a moment but not admitting that the order did have for it a basis in law it was prejudicial to the interest of the revenue inasmuch as it had been completed without any enquiry being done. Such enquiries were definitely called for, the Assessing Officer earlier having taken notice of the investments made by the assessee.

We find that the Commissioner in his order gave details of reasons by which he came to the conclusion that the order of assessment passed on 4-10-1988 was erroneous and prejudicial to the interests of the revenue. In view of the above, in our view, the Tribunal was not justified in holding that the Commissioner had not made out a case as to how and in what manner the order dated 4-10-1988 was erroneous and prejudicial to the interests of revenue. In view of the above, we answer the question No. 2 in the negative, i.e., in favour of the revenue and against the assessee.

In view of the answer given by this Court against question No. l as affirmative, the question No. 3 is also answered in the affirmative, i.e., in favour of the assessee and against the revenue.

In the facts and circumstances of the case, there will be no order as to costs.