Karnataka High Court
The Commissioner Of Income Tax vs M/S Namdari Seeds on 24 October, 2011
Bench: Manjula Chellur, Aravind Kumar
I ' ~ \(:\':iu
_5_
APPELLATE C_'.OMM§SSIO'NE'R AND ASSISTANT ('_'.OMMISS10'NFLR OF
INCOME TAX, C}RCLE~2(l}, BANGALORE.
THESE APPEALS COMING ON FOR PR0NQ.L_INC:ee_'Mt«3NT or
JUDGMENT, HAVING BEEN RESERVED FOR ._..I:[email protected];N::;f_ "T1113
DAY MRS. MANJULA CHELLUR. J. r)I;'LI,w«;RED. THE
FOLLOWING: .
JUDGM§ggW;
rna Noa1282/200e,=i2ss/2006 and 1234/2006 ere
preferred by Revenue quest.i0_n_i'i'rg eQ_rreetr:.ess legality of
the order Bangaiore Bench-
B in ETA to assessment,
years t E
gave effect to the order passed
under by VCorr1.111'is'sio1'1er of I11C:O1'1'1e Tax and passed
0r(1eVr'sr--:«10.3.2006 which Came to be set aside by
taihgtnrfgfipeegyn1rnxNos2,3;nu14/Ae4u1nIxTuu4/oer
0*?' IV] and was affirmed by ITAT, Bar1ga}ore~B
'*.,Ben(:1"'r_ii1 ITA N0s.966, 967 and 968 (Ba11g)/2006 dated
V.':V'..Ai4,_§A';.2O07. Aggrieved by these orders of the ITAT, Revenue
_Mt_1§as preferred ETA N0s.'?5. 71 and 76 of 2008 questioning the
eorrec-t11ess and legality of the same. Hence, these appeals
are taken up together for coI1siderat.i0r1 and disposal.
it
, 7 _
3. Heard Sri lVI.V. Ses1'1ael1ala, learned counsel
appearing for Revenue and Sri Sl'1a.nl(ar, learned counsel
appearirig for respondent ~ assessee.
4. ETA No.l282/2006 was adniittetijbyv~t.h'1':§"C_outi*t._ to consider the following substantialoueistilons. of-vIa\v:'--f} d"
"1. Whether the 'l'l=i_bi;2--_nAal was" .righ_t.V, holding that the income... derived .tl1"e:"aosessee"
from mantlfacturing of sde.ed:~gancl"sal_e of the same would amount "3gFi_'Cll11_tl.1'TE_ll.'il'l-C.()1TI1€ which would be exempted L1/S.' Tax ACt:..?
tribunal was right in not into ""eAontéid'ei;atio1'1 of the fact that the CoI.;i1ci.":2o.t: have held the agricultural land iriwiew ofxth'e"'phrovi.sions of the section 79A of the l<I,a'1*natal:a Land Reforms Act, 1961.?"
._ 5;' 1283 and 1284. of 2006 came to be admitted
--V 011 to consider the substantial questions of law as l t3¢am_g¢d'i1i rm No. 1 282 /2006.
it i it ITA No.71/2008 Came to be ad1nit.ted 011 15. 1,2009 " to consider the following siibstantial qL1e.9tio1'1 of law:
_]Qe Tribunal and contends initiation of p1'o<:eedi1'1g"5Vi»~1{'1';7s.263 of the Act is without _jurisdietior1 since two vie_x3_\ts"w'e-rel' possible on the date of passing of the order an'ci~~'"o1"derof'xtli'e Assessing Officer which is in '»._de:tsi.l5 is,_1'1.ot1 é1rhAeA.ri';aeble to "
jurisdiction u/55.263 of 'VV:V}1vE?'I'}fl considered by the tirould further eonterid that in Seeds Pvt.Ltd., it was reopened 4l_l;',-"I u/-s.263 of the Act.
and both He would further subn1itVtl1a_t""s')1fi' of the order i.e. 31.3.2005,
two views harriely the order of the Tribuxial in the ease.._ofM "N:s..indl1ari Seeds PVt.Ltd.. [dated
11.v.8.5:;2O()'4}VV .a.s____sueh, Section 263 of the Act is not attracted 'am:1fl"(+Very loss of revenue as a consequence order of the }":ssessi_jng7'Officer ea.m1ot be treated as prejudicial to the ',1nt_erestsg_of the Revenue since if one possible course if v~.lf:+1clop*te(l by the Assessing Officer, which is permissible under ' law has resulted in loss of revenue canriot. be ground for exercise of revisions] jtirisdiction. He would submit that if two views are possible arid the Commissioiier does not agree with the View of the ASSf?S5I'I"1_§_;{ Office}: it Cannot be treated as ,,,, w___.mmmmmmmmmw22mWsé%W§&§fi3*
--I_lA an erroneous order prejudicial to the ititerestsic)fV._Revenue. He would elaborate his submissiori to C(JI_'1:féi"'ldvf;'fh;?l{._._fjr_3f'[,h€I' change of opinion by reappraisal of evi('!e1i-iuéfnor. S:_:bsti't'1ition of the opinioii of that of the Co::31m:i33.if1t)ri'ef tFi§§"*'viéT%.xf of t"h'c'f' Assessing Officer would fall' withiila fio1"vé_xoi'Cise of revisional jurisdiction. In he has relied upon the followiiog .
(1) 2951»;5Rg82tsC.")j;ViA V 'V
502.t,['G«a.:ij'j'~ L (5) 3'--i45'iiTré"2 . .16) 47 Drms , i ' = A ot%:'?iMA3.1to*rR 1 tn.'---.i[8) :::~R 108 {Born} (9)'ii3V23'ii'm 632 [Bani] ' iii-moi 324 ITR-411 (P8: H) "««.~AcTg:ordi11gly, he seeks for a_r1swer1'rig the stibsstantial questions 5, it " V . of law in favour of the and (:onseq'ue.nt.Iy c'1ismiss the appeals.
. . .__.._m__mmwmmwwmwmmmm M12-
10. It is noticed by us that while admitting appeals. the substantial questions of law as extractj'e'ti«.fi'1e_reit1"above has been formulated for being £1djtldiCE1~1«*E?d:f".VV H.owever.=..the substantial quesstion of law memorandums filed by t}.1e-'__. (J.:fV:7tIl€' Tribunal 11o1dir1g that 'Officer C3.I1HOt be termed as erroneot;1;_§fr:1_1f1c:tV: __to the interests of the Revenue 1'1.aving_ not deem it just and proper to questiorl of law also for beittg to the said substantial c1L1est.it>_11s._ V't'1--':+fi.'*.;t_:ivxro'Li3a'*--11a\.}e a bearirlg to consider other sL1bsta1'ttiat = As such. by Consent of learned ad\{o_§e.éttes a.p}5e~:.I.rj11g for parties, same is formulated as under:
the tribunal was correct in holding that -the order passed by the Cornrnissioner under of the Income Twc Act was not erroneous and "_.prejudictal to the interests of the R€I)€flt.1.€ and the 'A view taken by the Assessing O_[fic'er, being a possibility. exercise Oj:jtLFI'5diL?fI'(')Il UJCLS eorrect? } 1. In ortler to 2111.swer the. said stxbstantiai questi.on of law, it would be neeessaljv to f_'.XtrE}(j'.[ the relevant provision iraised' 1 "~t:h,e =:.;t:tppe'e;.i .- mdustri"i--~----€o.I.td.. vs. Commissioner of Income Tax _}_3_ namely Sc-@263 of the Income Tax Act. as in existence at the relevant point. of time:
"263. Revision: "of--- .orc§_ersi" fit-ejiidiiiciéet it to Revenue - (1) T11ef_Co;nrrivi.s'si.oner may Ca}! for and examine the reeoiflzof any proeee_ti~ing._ under this Aet.,an_d if he 'eor1sie:ie:'i::.Vf;hat:§ any in order passed therei'r1..by the Assevssingi Officer is erroneous in so"-f.ar as it"isgprejLi;diCi.a1 to the interests of V_ReV'er1ue, he may, after giving the -..as--sessee.an__op"portL1nity of being heard and 'after i~I;iaki_ng. for*{:.ai.1sing to be made s11ch,...i.nqi.iiry as he itieeiins necessary, pass sufjch thereon as the ei3.i'Cu;n'ista7ri<:es_ of thev'Ca'se"'justify, including gm;-t o-rtiler "-.;ge.r1hanc:ihg or modifying the :1SS€:3-SmE1if;, eaiiciieling the assessment ' -arj-.;gd (iii:eeti'ng*-a i'res'i'1"assessment."
Jithwould of benefit to extract the judgment "of "thigh f;i~o1i'%Jie Supreme Court in the case of g1'1»ej§or:tegitjii:ttglotpo) 243 rm 33 (so); it 5. _"{'ot"3c_or1sictler the first contention, mqxx xxx Eicplaizationt xxxx".
" A bare reading of this provision makes it A ;"'«--._elear that the prerequisite to exercise of yjuristiiction by the CIT suo motu uncier it, is that the order of the ITO is erroneous insofar as it is prejudicial t_o the interests of the Revenue. The CIT has to be satisfied of twin r..-oriditions, namely' U.) the order of the A0 sought to be revised is erroneous: and [ii] it is ;)re_ji1di(r':'al to the interests of the Revenue. If one of them is abse..nt--if the jurisdiction.
fu Consequently. the only conclusion tliat can be arrived at is that the initiation of passed.
proceedings under section 263 without (41 The Hon'ble Delhi High Court in jar, CIT Vs. Vikas Polymers reported in 47..u'£'>T ' page No.35?) has held as follows:
It is also trite that the.ren_is .a fine ..thoug}71 subtle distinction between ,<'""iac'i: "vof inquiry" and "inadequate inqu.i1jr"_. Lit. is-.o'nly. in cases of "lack of inquiry" that the CIT is~-enipowe[r'ed=_to exercise his rev1'sional_.powers~-by fcalling for a"n;dexa1nir1ing the rectord-s_..of.iai1y p;1'ocee.dingstinder Act and passing orders.the;ifeoVi'1;. lUIn:._Gabri--all India Ltd. (supra), it was expressly¥.obs--e'rylec1:V':_. C C 'i'l'ie" l'_'ll.:§l'HlH Court in the case of CIT Vs. "SL1nbeajn auto Ltd repoited in 31 DTR l at page No. 1.1 has as follows:
..... ..T'i'i;--erefore, one has to from the record as:to"~whetherthcre was application of mind before allowing. the expenditure in question revenue .'.ll*e;{p,e1*;diai;Lire. Learned counsel for the assessee is "."1'igl/llf".iI1';: his submission that one has to keep in int-nclnthe distinction between "lack of inquiry" and j'inadequat,e inquiry". If there was any inquity, even inadequate that would not by itself give A occasion to the CIT t.o pass orders under Section 413263 of the Act.
Merely because he has different opinion in the matter. It is only in cases of "lack of inquiry" that such a course of action would. be open."
(6) The iiorrble Bombay High Court in the case of CIT Vs. Gabriel India Ltd.. reported in 208 l'l'R 108 at page No}. 14 has held as follows:
{1} The Coxnmissioner of Ineorne Tax can crV;i1'}»jf()r and examine the records of any proceedings L1nder..t.he_Ae'i;: if he is of the opinion that such Order or acts t.alter"1'.,has'-res1iite_dtin erroneous order, thereby it has e_ause'd 'iprejt1_d.i_(§e"hts the interests of the Revenue sand th--is"w--exe1*ei-setdis of adn1inist.rati011 corltrol and need not supplement with his i {2} Till eonsidereitgieri»,ai*i_d» of such records by the i1hdi;11iij§istr'a'tve--rw;iAquestion of assessees appearance the records and make such inquiries Lei1<id' that the order passed by the Assegssing Offieeriis erroneous and prejudicial to the interests y1:iQ\«'.ei.1;iLv1€, then he has to give an opportunity to the bgeiiig heard and after eonsideriiig the assessee's reply rniay pass such orders as the eircumstarices of the .,ease. xngiy justify by adhering to audi altrem partem . (4) The Commissioner can enhance or modify the assessment or cancel it and direct the fresh a.ssessment.
[5] The Comrmssioner who issues notice u/s.263 of the Income Tax Act can act on the basis of records and suggestions put. up to him. by his stiborclina.tv.es;.V:'anc} others either suomoto or at the stzggestioii / of (6) The Con1n1issioner':v§h.o oi%ithe Income Tax Act has Assessing Officer as on the date was made on the basis of 1'eturn's_:'fi1_ecl then.
14. .__[v')'oxVv:."rv-r;be,A1-.,oi:interfere1'1ce under this section'"is' an order which is not favoursbleto or to bring more money to the Revenue. °"~}"11'e.p_rejudViee must actual prejudice to the asuch 'r'e'visio11a1 power is an extraordinary power __.r'eo,_uireC1._Vi;o"'oe"em'p1oyed not a jurisdictional corrective or as revVieW*--.o'f a subordinates order in exercise of supervisory V'~».power..___"3it is invoked and ernployed only for the purpose of right distortioris and prejudices caused to the .o __'R3€V€I1L1C. Thus. the two ingredierlts essemial for invoking of k./'_"}' this power are: "erroneous" and "prejudicial" order which must go hand in hand. In other words, both. c.onditior1s must (:0-exist.
V31- errorieous. A perusal of the order of the Assessing Officer would not depict' that he has chosen one from outof the two courses available or permissible. Thus on facts;jti'ie"--«assessee himself having treated the income as "busin;essviifieolnte'? had suddenly changed to the heading: "'"agrioi'_ilttira1I. 'jneo1j11e"'.. ai2..d7 hence. there were no two views'«ava_i1'able"to=th.e"
Officer even if so. it is not inllthe those two views and asto how' iirlitendsllto"-adopt one out of these two views. In of of the considered view. the "the learned counsel appearing inapplicable and the to be answered in the by the Tribunal requires to be set aside and the order passed by the Commissioner for
-lnc}on1e--.TaX to bVef"i*est,ored. X 1§e:~z*1%A 71/2008, 75 81 76/2008 The above appeals came to be admitted for l 'eonsicleriiig the substantial question of law formulatecl which i " extracted above.
..33_ was Clairned as business income. In View of our firrding given in ETA Nos.75/2007', 76/2007. 284/2007.; 388/2008, 389/2008. 739/2008, 740/Qtotjosijfe??4s';<aeo8. 19/2008 and 474/2008 by orderef rexz¢n.e% §i;;f¢earey norm'ma income earned by the assessee is"*1'1o:t_agrieu1_t.i;.ra!_iixicofiie and ' i for the reasons set out tiiereiirté and fo11oxvii'1g{tt'1e-"sarneywe answer the s'ubstant.'1--a1 que-s*ti.or:.s"~of taW'~in..--faVot1r of the Revenue and against the ass'e_s.se'e. i
21. At:c_2.t_u.-@11ag1y§.:'Aweahsttfer_:1--_he suvhstantiai questions of law with to ,e'x.e'r::ise of Revisional Jurisdimion by Commissioner'under S~e_etir3'i1 263 of Income Tax Act, I961 in the n--e.gativef that is in favour of the Revenue and against the "ri'22LIi1sofar as the substantial q1.1est.ioi'1 of law formu.1at.ed herein above with regarti to "agricultural Cfii1eiome". we have already answered the same in ETA 1\i§os.4/2009 and ETA N'o."/44/2009 and other crorinected matters by order of even date, holding that income earned by the is not agrieu.1t11ral iI1C'OlI'1€' and for the reasons set. out therein. the above sifostantial questxions of law are _ IA] answered a.CCc-rclingly as held lay us in ITA No.4/2009 and ETA NOJ744/2009.
Pl'*'