Central Administrative Tribunal - Delhi
Shri Rakesh Kumar Jain vs Union Of India on 20 August, 2015
CENTRAL ADMINISTRATIVE TRIBUNAL PRINCIPAL BENCH O.A. No.2109/2014 Order Reserved on: 10.03.2015 Order Pronounced on: 20.08.2015 Honble Mr. Justice Syed Rafat Alam, Chairman Honble Mr. Sudhir Kumar, Member (A) Shri Rakesh Kumar Jain, Commissioner of Income Tax (Retd.) Code No.74013 S/o Late Shri Kailash Chand Jain, R/o Sector-C-6, Flat No. 6221 Vasant Kunj, New Delhi-110070 -Applicant (By Advocate: Shri Krishan Kumar) Versus 1. Union of India Through Secretary Dept. of Revenue North Block, New Delhi-110001 2. Chairman, CBDT Dept. of Revenue North Block New Delhi-110001. -Respondents (By Advocate: Shri R.N. Singh) O R D E R Per Sudhir Kumar, Member (A):
Even though the arguments in this case were completed on 10.03.2015, and the case was reserved for orders, permission had been granted to both the sides to submit their written submissions, copies of supportive case law, and original records, if any. The learned counsel for the applicant filed his written submissions and copies of supportive case-law on 13.03.2015, and the learned counsel for the respondents filed his written submissions and copies of the case law relied upon by him on 17.03.2015. However, the original files, in which the matter of instituting the departmental enquiry against the applicant had been dealt with, were produced by the respondents only on 26.03.2015.
2. The applicant of this OA is a retired Commissioner of Income Tax (CIT, in short), who is before us, aggrieved by the impugned order dated 13.03.2014 issued by the respondents under Rule 9 of the CCS (Pension) Rules, 1972 read with Rule 15 of CCS (CCA) Rules, 1965, produced by the applicant as Annexure P-I to the OA, through which penalty of withholding of 25% cut of the monthly pension otherwise admissible to him has been imposed upon him on permanent basis.
3. For a better appreciation of the sequence of events of this disciplinary enquiry (DE, in short) case, we may derive the benefit of the list of dates from and the contents of the order dated 16.03.2007 passed by the Income-tax Appellate Tribunal (ITAT, in short), Ahmedabad Bench. In Para-3 of its order, the ITAT had recorded the list of dates, which we may reproduce, with our short remarks in bold, as follows:-
Sl. No. (1) Relevant proceedings (2) Date (3)
1.
Asst. Year in this case was passed u/s 143(3) of the Act by the Assessing Officer 31/03/2000
2. The assessee filed a revision petition to the CIT in exercise of the rights available u/s 264 of the Act.
29/03/2001
3. The CIT- Applicant of this OA passed order u/s 264 of the Act.
22/03/2002
4. The Assessing Officer proceeded to give effect to the order of the CIT- Applicant of this OA passed u/s 264 of the Act by seeking certain details as per his letter 02/04/2002
5. Details were submitted by the assessee 11/04/2002
6. Draft order giving effect to the CITs order u/s 264 of the Act prepared by the Assessing Officer 24/04/2002
7. The Draft order so prepared submitted by the Assessing Officer to the CIT-Applicant of this OA 24/05/2002
8. CIT-Applicant of this OA informed the Assessing Officer that no further directions are required in the matter as per letter 31/05/2002 (copy placed at page No.48 of the assessees paper-book)
9. Final order passed by the Assessing Officer giving effect to the order u/s 264 of the Act.
31/05/2002
10. Proceedings u/s 263 of the Act for revising the Assessing Officers order giving effect to the CITs-Applicant of this OA order u/s 264 of the Act. Dated 31/05/2002 initiated as per first show-cause notice.
17/01/2003 Second show-cause notice was issued by CIT-Applicants successor in office during the course of proceedings u/s. 263 of the Act.
14/02/2003
11. Order u/s. 263 of the Act passed by CIT- Applicants successor in office 18/03/2003 THE APPLICANTS CASE
4. The facts of the case may be summarized as follows:-
i) The applicant joined the Indian Revenue Service (IRS, in short) in the year 1974, held various positions at different places in the country, and rose up to the rank of CIT, and retired as such while he was posted at Allahabad, in December, 2008.
ii) The applicant has claimed that he held an unblemished record throughout his career, and had never been even censured or admonished, and was in fact awarded many certificates of appreciation in respect of his outstanding performance and devotion to duty.
iii) He was issued a Memo of Charge through Annexure P-2 dated 01.05.2006, along with Statement of Articles of the two Charges, Charge-I & II, as its Annexure-I, and Statement of Imputation of Misconduct or Misbehaviour in support of those two Articles of Charge as Annexure-II of the same, a list of only two documents through Annexure-III of the same, through which the Articles of Charge framed against him were proposed to be sustained, and a NIL list of witnesses to support the Articles of Charges framed against him, through its Annexure-IV.
iv) After issuing the Charge Memo, the respondents delayed appointing the Enquiry Officer (EO, in short), and the applicant was compelled to file an OA No.896/2006 before Allahabad Bench of this Tribunal, which was disposed of on 30.03.2007. But, later, on a Miscellaneous Application filed in this regard, directions were issued by the Allahabad Bench of this Tribunal to the respondents through order dated 17.05.2007, directing them to conclude the DE proceedings against the applicant within three months from the date of that order.
v) However, the respondents filed a Writ Petition before the Honble Allahabad High Court, submitting therein that since the DE procedure was very complicated and time consuming, as such they will not be able to decide the DE case within the time frame prescribed by the Allahabad Bench of this Tribunal.
vi) In the meanwhile, the respondents had appointed an EO through orders dated 19.04.2007, and the applicant submitted his reply dated 22.11.2007 to the EO, in respect of the charges framed against him through Annexure P-4.
vii) The applicant has made an averment that in his final report of the D.E. dated 04.01.2008, submitted to the Disciplinary Authority, the EO had held both the Articles of Charge-I & II to have been only partially proved, and had basically exonerated him.
viii) The Disciplinary Authority thereafter consulted the Central Vigilance Commissioner (CVC, in short), and also the Union Public Service Commission (UPSC, in short), though the applicant is aggrieved that he was never supplied a copy of the CVC report, even though the impugned order clearly states that the Disciplinary Authority has taken into consideration the reports of both the CVC and the UPSC.
ix) The applicant has further assailed the impugned order to be technically defective, as it has claimed to rely on both Rule-9 of the CCS (Pension) Rules, 1972, as well as Rule-15 of the CCS (CCA) Rules, 1965, while a bare perusal of the said Rule-9 makes it clear that that Rule could have been invoked only in the cases of a grave misconduct, or when some pecuniary loss has been caused to the Government by an official who had since retired.
x) The applicant has further assailed the impugned order having simultaneously relied upon Rule-15 of the CCS (CCA) Rules, 1965, while, according to him, a bare perusal of the relevant Rules shows that they nowhere provide for a cut in pension to be one of the penalties which may be imposed under those Rules, 1965, and the said Rule-15 is related only to the procedural aspects of the DE. It was further submitted that Rule-11 of the said CCS (CCA) Rules, 1965, which talks of the leviable minor and major penalties, does not talk about any penalty in the nature of a cut in pension, and, therefore, the impugned order as passed by the Disciplinary Authority is extraneous to the provisions of law.
xi) The applicant is further aggrieved that the Disciplinary Authority has failed to take into account the provisions of Rule-9(2) (b) (ii) of CCS (Pension) Rules, 1972, which stipulates a time limit of four years from the date of incident for the purpose of initiation of DE proceedings under those Rules, while, in the instant case, the assessment related to the assessment year 1997-1998, and the applicant had passed the assailed order on 22.03.2002, under Section 264 of the Income Tax Act, 1961, handing over the matter to the Assessing Income Tax Officer (ITO, in short), for deciding the issues on his own, and thus he had no concern whatsoever with the order which was ultimately subsequently passed by the Assessing ITO.
xii) The applicant has submitted that as per law the assessment order has to be passed by the ITO on his own, by applying his own mind, independently, which could have had no concern whatsoever with the applicant, and, therefore, he cannot be held responsible for any order, which came to be passed by way of an assessment order passed by the ITO, whose statutory authority or discretionary powers could not have been interfered with by the applicant as the CIT, and, thus, no liability can be fastened upon him.
xiii) It was further submitted that not an iota of evidence has been brought against the applicant on record, as no witness has been examined by the respondents to support or substantiate any of the two charges levelled against him, and, therefore, the whole DE case is based on a case of no evidence, and the penalty order is, therefore, bad in law, and cannot be sustained.
xiv) An averment was made both in the OA, as well as during arguments by the learned counsel for the applicant, that the order of the ITAT dated 16.03.2007, through which the applicants successor in office CITs order u/s 263 of the Income Tax Act, which had revised the assessment order made by the assessing I.T.O. on 31.05.2002, had been set aside by the ITAT as not maintainable in law, for want of jurisdiction. The contention of the applicant was that by holding the applicants successor CITs order passed u/s 263 of the Income-tax Act on 18.03.2003 as not maintainable in law for want of jurisdiction, and it, therefore, being cancelled, this automatically meant the upholding by the ITAT of the original order of revision passed by the applicant as CIT u/s 264 of the Income Tax Act, thus making the entire DE proceedings against him as being without any basis.
xv) It was submitted by the applicant in Para 4.14 of the OA, and argued vehemently by his counsel, that any error of judgment while exercising quasi-judicial functions cannot be a misconduct, and cannot also be the basis of a charge sheet and subsequent disciplinary proceedings against the quasi-judicial authority. In saying so, the applicant has relied upon the case of P.C. Joshi vs. State of U.P. & Ors. 2001 (6) SCC 491. It was submitted that in a parallel case, in the case of Baljit Singh Sondhi, CIT Calcutta, in its order in OA No.06/2006 dated 27.02.2007 passed by the Calcutta Bench of this Tribunal, the Bench had observed that allegations of this nature when made are all based on individual perception of law by the Disciplinary Authority, and even the imputation of misconduct against the CIT in respect of such charges merely amounts to screening of the appellate/revisional orders passed by him as CIT, even though those orders had been subsequently upheld by the higher statutory authority, i.e. ITAT. Citing the case of Union of India & Ors. vs. K.K. Dhawan, 1993 (2) SCC 56, 1993 SCR(1) 296 (SC), the Calcutta Bench of this Tribunal had held that mere technical violation, or merely because the order passed is wrong or bad in law, no disciplinary action can be taken against a quasi-judicial authority which had passed such an erroneous order.
xvi) It was submitted by the applicant that in P.C. Joshi (supra), the Honble Apex Court has made two specific observations as follows, and the benefit of both these observations should enure to him in this case:-
i) there was possibility on a given set of facts to arrive at a different conclusion, it is not ground to indict a judicial officer for taking one view and that too for alleged misconduct for that reason alone;
ii) bonafide and erroneous exercise of judicial powers cannot be treated as misconduct at all.
(Emphasis supplied).
xvii) It was submitted that, thereafter, in Baljit Singh Sondhis case (supra), the Calcutta Bench of this Tribunal had opined as follows:-
a) if the applicant has taken a view which is different from the inquiry officer or the disciplinary authority in the given set of facts cannot be a ground to initiate disciplinary proceedings, far less wrong interpretation of law declared by the Honble Delhi High Court as error in law is not a misconduct;
b) In our view, there is not enough material which would reflect on the applicants reputation or integrity or good faith or devotion to duty or that he had been actuated by any corrupt motive;
c) At best, it can be said that the view taken by the applicant was not proper or correct.
(Emphasis supplied).
xviii) It was submitted, and later argued on behalf of the applicant that the list of documents through which the charge against the applicant was sought to be proved contains only the assessment records, and the proceedings file of the order of revision passed by the applicant as CIT u/s 264 of the Income Tax Act, and that there was no other document in the list of documents through which any charges of lack of integrity, or illegal gratification, or any corrupt motive, could be proved.
xix) It was submitted that since the respondents had failed to open the sealed cover, when sealed cover procedure was resorted to during the DPC proceedings, the applicant could not be promoted to higher positions, which would have benefitted him in his pensionary benefits, though many similarly placed persons, much junior to him, got higher positions, and retired from such higher positions. It was, therefore, prayed that suitable directions should be issued to the respondents for opening of the sealed cover, with all consequential benefits flowing to the applicant.
5. Therefore, the applicant had taken the following grounds to file the present OA:-
i) That the impugned order was arbitrary, illegal, against the merit, and the entire disciplinary proceedings were based on no evidence, as not even a single witness had been examined in the case to support and substantiate the charges levelled against him. It was further submitted that the disciplinary proceedings were time barred, as the same were initiated against the order passed by the applicant on 22.03.2002, and the charge Memo was served on the applicant for the first time on 10.05.2006, which was contrary to the specific provisions of Rule-9(2)(b) (ii) of the CCS (Pension) Rules, 1972, and, as was held by the Honble Delhi High Court in the case of MCD vs. Bhagwan Das 2012 (3) SLJ 139, no penalty can be imposed after retirement, and cut in pension cannot be imposed as a penalty, and no charge sheet can be issued for any event more than 4 years old.
ii) That Rule-11 of the CCS (CCA) Rules, 1965, does not provide for cut in pension as one of the penalties under the said Rules, and Rule-9 of the CCS (Pension) Rules, 1972, specifically stipulates that no cut in pension can be ordered, except in the case of grave misconduct, or a pecuniary loss to the Government, and since no charge of causing pecuniary loss to the Government had been framed against the applicant, the DE proceedings were hit by the said Rule-9, and the impugned order was, therefore, malafide, and extraneous to the provisions of law.
iii) That as a CIT, the applicant could not have usurped the statutory functions of the ITO, which basic principle of law has been overlooked by the Disciplinary Authority both while framing charges against the applicant, and also while passing the impugned order.
iv) That once the E.O. had, after conducting the D.E., found that none of the charges were proved against the applicant, the Disciplinary Authority was not competent to assume the functions, powers and duties of the E.O., and, by ignoring the factual aspect of the E.Os report, the Disciplinary Authority could not have, merely on its whims and fancies, assumed that the charges are proved, which peculiar assumption is wholly biased, and based on no evidence, and is against the law.
v) That the applicant had not been provided with a copy of the CVCs report, which has been relied upon by the Disciplinary Authority while passing the impugned order, and, therefore, for this reason also, the penalty order deserves to be set aside, as not legally sustainable. It was submitted that both E.O. as well as the Disciplinary Authority had failed to consider and record their findings on the various judgments and orders of this Tribunal, of the Honble High Courts, and of the Honble Supreme Court, which had been relied upon by the applicant in his reply to the Charge-Memo dated 22.11.2007 submitted to the E.O.
vi) That non-opening of the sealed cover envelope of the DPC proceedings in respect of his case had resulted in heavy loss and injury to the applicant, since he did not get the promotion to the post of CCIT, which his juniors got.
6. In the result, the applicant had prayed for the following reliefs:-
a) that this Honble Court may kindly set aside the impugned order dated 13.03.2014;
b) that this Honble Court may kindly direct the Respondents to open the sealed cover DPC proceedings and in case the applicant is found fit, he may be given due promotions as have been given to his junior mentioned above with all consequential benefits along with arrears and interest thereon @ 18% per annum;
c) direct the Respondents to release the leave salary and gratuity benefit, arrears and interest @ 18% per annum;
d) that this Honble Court may kindly pass such other and further order or orders as this Honble Court may deem fit and proper in the facts and circumstances of the case.
7. The applicant had also prayed for an Interim Order of the respondents being restrained from imposition of 25% cut in pension, because he was suffering from serious ailment, and had undergone major surgery, and was in the need of money to meet these expenses. This prayer for interim order had, however, not been granted by this Tribunal.
8. Along with his OA, apart from the 10 page impugned penalty order signed by the Under Secretary, Ministry of Finance, Department of Revenue, and issued By order and in the name of the President of India, the applicant had also enclosed a copy of the Memorandum dated 01.05.2006, containing the Statement of Articles of Charges, and Statement of Imputation of misconduct etc. He had also enclosed as Annexure P-3, a copy of the order dated 17.05.2007 passed by the Allahabad Bench of this Tribunal in MA No.777/2007, in his earlier OA No.896/2006, filed before the Allahabad Bench of this Tribunal, through which, while allowing the MA, a time frame of three months had been fixed for the DE proceedings against the applicant to be concluded, and the necessary orders of the Disciplinary Authority being passed. His detailed reply to the Charge Memo dated 22.11.2007 as submitted to the E.O., running into 41 pages, was also produced by the applicant as Annexure P-4, and the communication dated 14.07.2008 regarding the service of Office Memorandum dated 05.06.2008, along with its enclosure, being a copy of the D.E. report dated 04.01.2008, and a copy of the CVCs advice dated 13.05.2008, through a letter dated 12.06.2008, and which documents were then re-served upon the applicant through letter dated 14.07.2008, were also filed by the applicant as Annexure P-5/Colly, with the views of the CVC being a part of that Annexure P-5 of the OA. At Annexure P-6 were the medical records of the applicant, and at Annexure P-7 his representation dated 18.11.2013, submitted to the Chairman, Central Board of Direct Taxes. A copy of the Revision order u/s 264 of the Income-tax Act, 1961, passed by the applicant as the then CIT, Central Circle-II, Ahmedabad, on 22.03.2002, from which the present disciplinary proceedings against him had emanated, had also been produced as Annexure P-8 of the OA. We shall examine the contents of these, and comment upon these Annexures later in the order.
9. During the course of the hearing of the O.A. on various dates, on 28.07.2014, the applicant had filed brief submissions, and had also submitted a list of six judgments, along with copies of those judgments, which, according to him, covered the law on the subject, and were in his favour, as follows:-
i) Union of India vs. Baljit Singh Sodhi, 2013 (2) SLJ (Delhi High Court) 261;
ii) Dr. Sudhakar Tiwari vs. Union of India & Others, 2012 (2) SLJ (CAT, Allahabad) 235;
iii) Union of India & Others vs. B.V. Gopinath & Others, 2014 (1) SLJ(SC) 1;
iv) Oriental Bank of Commerce & Ors. vs. S.S. Sheokand & Anr. 2014 (2) SLJ (SC) 96;
v) Rajinder Singh vs. DTC & Ors. 2012 (2) SLJ 162
vi) Union of India & Ors. vs. T.P. Venugopal, 2008 (3) SLJ 381.
10. Thereafter, on 19.08.2014, the applicant had filed another affidavit, enclosing therewith a copy of the information received by him under the RTI Act, as Annexure P-9, and a copy of the judgment dated 19.09.2012 passed by a coordinate Bench of the Tribunal in OA No.1784/2011 Jag Mohan Sahni vs. Union of India & Ors. at the Principal Bench itself, under the ratio of which also the applicant had sought shelter. In the RTI reply dated 04.08.2014, Annexure P-9, the applicant had been informed as follows:-
Query Reply
1. Whether this charge sheet was issued to me after approval granted by Finance Minister or not.
The Honble FM accorded the approval for intimation of Major penalty proceedings on 30/01/2006. Thereafter, the DGIT(Vig.), New Delhi approved the draft charge sheet on 25/04/2006.
2. If, yes copy of such approval may kindly be supplied to me.
Not applicable.
3. Whether advice of CVC was taken or not before issuing of the charge sheet.
The CVC has tendered its first stage advice on 25/11/2005 and the advice of the CVC was considered by DA at the time of giving approval for initiating Major penalty proceedings under Rule 14 of the CCS (CCA) Rules, 1965.
4. In case advice of CVC was sent to me, evidence or proof that CVC advice was sent to me may kindly be supplied.
The CVC advice was served upon you along with the charge memorandum dated 01/05/2006. You have duly acknowledged the receipt of CVC advice vide acknowledgement dated 10/5/2006. However, copy of the same is enclosed.
COUNTER REPLY OF THE RESPONDENTS
11. The respondents filed their counter reply written statement dated 10.11.2014 on 11.11.2014. The preliminary objections taken by the respondents were that OA is bad in law, and is not maintainable, as no statutory, Constitutional or legal right of the applicant has been infringed by the respondents, and no cause of action has accrued to the applicant to file and maintain the OA. Thereafter, the respondents had submitted that the Enquiry Officer had submitted his report on 04.01.2008, holding both the Articles of Charges I and II levelled against the applicant to have been partially proved, but the Disciplinary Authority had not accepted the E.O.s report, and had tentatively held that both the charges were fully proved. With this tentative view of the Disciplinary Authority, the matter was referred to CVC for second stage advice, and the CVC had, through OM dated 13.05.2008, advised for imposition of suitable major penalty. It was submitted that all these documents were served upon the applicant, and he was asked to submit his representation, if any, which he had done on 23.07.2008. After examining those submissions, the Disciplinary Authority took a tentative view to hold both the charges as proved, and gave approval to refer the matter to UPSC for its statutory advice. Through their letter dated 02.08.2013, UPSC concurred with the tentative view, and advised for imposition of penalty of withholding of 25% of the monthly pension otherwise admissible to the applicant, on a permanent basis. This advice of the U.P.S.C. was also forwarded to the applicant, in response to which he had submitted his reply dated 18.11.2013. Since the Disciplinary Authority did not find any merit in the explanations given in the representation of the applicant, it had accepted the advice of the UPSC, holding both the charges as proved, and had, accordingly, vide the impugned order dated 13.03.2014, imposed upon the applicant the penalty of withholding of 25% of the monthly pension otherwise admissible to him, on a permanent basis, which the respondents claimed to have been done after following the due procedure of law, and adhering to the principles of natural justice.
12. Thereafter, respondents had sought shelter behind the ratio in Honble Apex Courts judgment in Parma Nanda vs. State of Haryana & Others, 1989 (2) SCC 177, in which the Honble Apex Court has held that the Tribunal cannot interfere with the findings of the Enquiry Officer, or Competent Disciplinary Authority, where they are not arbitrary or utterly perverse, since the power to impose penalty on a delinquent officer has been conferred only on the competent Disciplinary Authority. They had further cited the ratio in Honble Apex Courts judgment in B.C. Chaturvedi vs. Union of India, 1995(5) SLR SC 778, AIR 1996 SC 484, to submit that judicial review is not an appeal from a decision, but a review only of the manner in which that decision is made, and submitted that only if the conclusion or finding of the Disciplinary Authority be such that no reasonable person would have ever reached such a finding, then only the Court/Tribunal may interfere with the conclusion, or the finding, and mould the relief, so as to make it appropriate to the facts of that case.
13. The respondents had further decried the allegation levelled by the applicant against the Enquiry Officer belatedly in the present OA, stating that he had not raised this issue in his representation dated 23.07.2008, or even in his representation dated 18.11.2013. It was submitted that the entire record, including the representation of the applicant dated 23.07.2008, had been sent to the UPSC for its statutory advice, and the UPSC had then tendered its advice (more than 5 years later!) vide its letter dated 02.08.2013.
14. Thereafter the respondents had denied the contentions of the applicant parawise, which need not be reproduced here. It was submitted by the respondents that when the applicant had earlier approached the Allahabad Bench of this Tribunal in his OA No. 896/2006, which was decided on 30.03.2007, the respondent department had thereafter merely filed an application for grant of more time for completing the disciplinary proceedings, and orders were passed later, on the respondents MA, on 17.05.2007.
15. It was contended that the correct procedure had been followed by the respondents at all stages. The CVCs 2nd stage advice dated 13.05.2008 had also been provided to the applicant through OM dated 05.06.2008, and that the penalty order has rightly been passed under Rule-9 of the CCS (Pension) Rules, 1972, read with Rule-15 of CCS (CCA) Rules, 1965. It was submitted that the bar in Sub Rule 2 (b)(ii) of Rule-9 of the CCS (Pension) Rules, 1972, applies only to disciplinary proceedings being initiated against the retired Government servants in respect of an event which took place more than four years before such institution of a departmental enquiry, but submitted that in case of serving officers, there is no such bar of four years for initiating disciplinary proceedings for the misconduct committed by the officer, and that the disciplinary proceedings against the applicant were initiated vide charge sheet dated 01.05.2006, when the applicant was very much in Government service, and that the proceedings of the DE were only continued after his retirement, for which there is no bar under Rule-9 of the CCS (Pension) Rules, 1972. The subsequent events, as have already been described above, were thereafter described in detail.
16. The respondents had submitted that in the case of Union of India & Ors. vs. K.K. Dhawan (supra), the Honble Supreme Court had laid down the following six possible circumstances to decide as to whether any breach of any of these six possible circumstances, which could then invite formal disciplinary proceedings being initiated against an authority, who was discharging quasi-judicial functions, which stipulation had been scrupulously adhered to by them:-
i) Where the Officer had acted in a manner as would reflect on his reputation for integrity or good faith or devotion to duty;
ii) if there is prima facie material to show recklessness or misconduct in the discharge of his duty;
iii) if he has acted in a manner which is unbecoming of a government servant;
iv) if he had acted negligently or that he omitted the prescribed conditions which are essential for the exercise of the statutory powers;
v) if he had acted in order to unduly favour a party;
vi) if he had been actuated by corrupt motive, however, small the bribe may be.
17. A contention was then accordingly raised by the respondents about the eligibility of the examination of the conduct even in respect of an officer who had exercised quasi- judicial functions. It was submitted that the case of the applicant falls very much within the ambit of the above six possible circumstances enumerated in the judgment of the Honble Apex Court in K.K. Dhawans case (supra). It was further submitted that no injustice has been done to the applicant, and that the Disciplinary Authority has taken a final view on the disciplinary proceedings only after following the due procedure of law.
18. It was further submitted that the applicant was duly assessed in the DPC held on 29.09.2006 for promotion of the Commissioners to the grade of Chief Commissioner of Income-tax (CCIT, in short). However, the recommendations of the DPC in respect of the applicant had been kept in sealed cover, as the applicant had not been granted vigilance clearance. The respondents had very stoutly denied all the grounds taken by the applicant in his OA, and had prayed that the OA is devoid of any merit, and deserves to be dismissed, as the applicant deserves no relief of any nature whatsoever.
APPLICANTS REJOINDER
19. The applicant filed his rejoinder dated 18.11.2014, more or less reiterating his contentions as already raised in the previous pleadings in the O.A. It was reiterated that since the respondents had never challenged the revisional order passed by the applicant u/s 264 of the Income Tax Act, 1961, before the ITAT, by way of appeal or reference, it fully goes to prove his case that he had passed a legally correct order, and, as such, that order could not have been made the basis for issuance of a charge sheet to him, more so when that order u/s 264 of the I.T. Act, 1961, was indirectly upheld by the ITAT in the subsequent proceedings, as already mentioned above.
20. The applicant further submitted that his revisional order u/s 264 of the I.T. Act, 1961, dated 22.03.2002, was in the nature of a quasi-judicial order, and as has been held by this very Tribunal as follows, in the case of Ajit Kumar Singh vs. Union of India & Ors. in OA No.1000/2009, decided on 11.03.2014, in Para-30 & 31, relying on various Supreme Court judgments, on similar reasoning & logic, he also could not have been penalized for having passed such a quasi-judicial order:-
30. While summing up our opinion, we are compelled to reiterate that a similar issue had been adjudicated before the Honble Supreme Court in the case of Zunjarrao Bhikaji Nagarkar Versus Union of India and Others [1999) 7 SCC 409] wherein the charges related to his posting as Collector of Central Excise Nagpur were served upon him in the form of a chargesheet. The applicant challenged the same before the Tribunal and High Court without success. The Honble Supreme Court clearly held that every error of law does not constitute misconduct. In order to sustain a chargesheet against an officer acting in quasi judicial capacity it has to be alleged and sustained as to how the act causes a wrongful loss to the State exchequer or a wrongful gain to some others. In the instant case, no such acts have been alleged on the part of the applicant. For the sake of greater clarity, we extract the relevant portion of the decision in Zunjarrao Bhikaji Nagarkar Versus Union of India and Others (supra) as under:-
43. If, every error of law were to constitute a charge of misconduct, it would impinge upon the independent functioning of quasi judicial officers like the appellant. Since in sum and substance misconduct is sought to be inferred by the appellant having committed an error of law, the charge-sheet on the face of it does not proceed on any legal premise rendering it liable to be quashed. In other words, to maintain any charge-sheet against a quasi judicial authority something more has to be alleged than a mere mistake of law, e.g., in the nature of some extraneous consideration influencing the quasi judicial order. Since nothing of the sort is alleged herein the impugned charge-sheet is rendered illegal. The charge-sheet, if sustained, will thus impinge upon the confidence and independent functioning of a quasi judicial authority. The entire system of administrative adjudication where under quasi judicial powers are conferred on administrative authorities, would fall into disrepute if officers performing such functions are inhibited in performing their functions without fear or favour because of the constant threat of disciplinary proceedings.
31. We further like to reiterate that this case has been decided on its own facts under directives of the Honble High Court referred to liberally earlier. As every case constitutes an authority in itself, we have no hesitation to hold that the Charges No.II to IV do not sustain in terms of the examination above in the facts of this case.
21. The applicant further relied on one of the aspects covered in the above cited order, that charges against an officer acting in his quasi-judicial capacity cannot be issued, unless there is an allegation of wrongful loss to the exchequer, or wrongful gain to the officer, and every error of law cannot be construed to be a misconduct, as it will impinge upon the independent functioning of the quasi-judicial officer.
22. The applicant further cited this Tribunals order in the case of S. Rajguru vs. Union of India, in OA No.2815/2012, dated 01.02.2013, wherein also the same views had been reiterated, and, relying upon the ratio in the judgment of the Honble Apex Court in Union of India Vs. Kunisetty Satyanarayana [2006-12-SCC-28], Paragraphs 13 to 16, even the Charge Memo issued to the applicant Shri S. Rajguru was quashed.
23. The applicant further relied upon the judgment dated 26.04.2014 of another Coordinate Bench of the Principal Bench of this Tribunal in OA No.343/2012 Rajesh Gupta vs. Union of India, and in particular Para-7 of that judgment, to submit that when there were no witnesses to support the case of the department, and to prove the relevant documents, it was a clear case of no evidence. It was further submitted in the rejoinder that the same Coordinate Bench had on 27.10.2014, in OA No.1304/2014 Shri Than Singh vs. Union of India also, quashed the charge-sheet on the ground of there being nil witnesses.
24. The applicant had further raised the legal issue that his Disciplinary Authority was the Honble Union Finance Minister, acting on behalf of the President of India, and as per the RTI reply received by him, already annexed by him, as discussed above, it was disclosed to him that no approval of the Honble Union Finance Minister had been obtained for the Charge Sheet, before issuing that Charge Sheet to him, which Charge Memo had, in fact, been issued with the approval of the DGIT (Vigilance), New Delhi, alone. It was, therefore, submitted that in view of the Honble Apex Courts judgment in the case of Union of India vs. B.V. Gopinath (supra), the DE proceedings initiated against him, without proper approval of the Charge Sheet by the Disciplinary Authority, were non-est in the eyes of law.
HEARING AND ARGUMENTS OF BOTH SIDES
25. Heard. The case was argued vehemently by the learned counsel of both the sides along the lines of their pleadings, as discussed in great detail above. Learned counsel for the applicant emphasized his point that for taking recourse to Rule-9 of the CCS (Pension) Rules, 1972, either grave misconduct, or pecuniary loss to the Government, is essential to be proved, while, in the instant case, no wrongful gain to the applicant, or pecuniary loss to the Government, has been proved, and when once the revisional order passed by the applicant as the CIT u/s 264 of the Income-tax Act, 1961, has been indirectly upheld by the ITAT, and the Respondents had even prior to that also not felt aggrieved, and had not appealed before ITAT against his revisional order u/s 264 of the Income-tax Act, the very basis of the charge against him has disappeared. The learned counsel for the applicant very laboriously took us through the various judgments cited by him, as we have already discussed above. He had also made an oral submission that no copy of the CVC opinion was ever served on the applicant as the Charged Officer, and secondly that the Rule-15 of the CCS (CCA) Rules, 1965, does not provide for cut in pension as a penalty, which Rule has been wrongly invoked by the respondents while imposing a cut in the applicants pension, and, therefore, the impugned order of levying penalty upon the applicant was without any legal basis/illegal.
26. In his reply arguments, learned counsel for the respondents submitted that it was settled law that no list of oral witnesses or production of oral witnesses is essentially required in a DE, so long as the list of documents relied upon to prove the charges has been supplied, and is available to the Charged Officer, and he does not dispute those documents. To support his contention, the learned counsel for the respondents cited the Honble Allahabad High Courts Division Bench judgment in the case of Rajbabu Agnihotri vs. Labour Commissioner, 2002 (3) AWC 2605.
27. He further submitted that Than Singhs case (supra) had not yet attained finality, as that particular Coordinate Bench had decided 5 or 6 cases in a similar manner, and Writ Petitions against four of them at least (to the best of his knowledge) are pending before the Honble High Court. He, therefore, submitted that the applicant cannot be allowed to claim that Than Singhs case (supra) lays down the law as on today.
28. He further submitted that even though the charge sheet was pending against the applicant, still his case was considered for being promoted as CCIT, in view of the law as laid down by the Honble Apex Court in the case of Union of India & Ors. vs. K.V. Janakiraman, AIR 1991 SC 2010.
29. He further took us through the contents of the Charge Memo, and submitted that the charges/allegations levelled against the applicant were grave in nature, did not relate to a minor negligence, were not a part and parcel of quasi-judicial functions of the applicant, were proved in the DE, and, therefore, there was nothing wrong in the impugned order as passed by the Disciplinary Authority.
30. He pointed out that it was not the order u/s 264 of the I.T. Act, 1961, passed by the Charged Officer/applicant, which was upheld by ITAT, but that the cited ITAT judgment related to the setting aside of the revisional order u/s 263 of the Income-tax Act, 1961, passed by the applicants successor-in-Office CIT, and that it could not be concluded from the order of the ITAT that the merit of the applicants earlier revisional order u/s 264, which had formed the basis of the issuance of the Charge Memo against him, had been upheld by the ITAT. He pointed out that in fact ITAT had not gone into the merits of either the order u/s 264 of the I.T. Act, 1961, which had been passed by the applicant as the CIT, or the Order u/s 263 of the I.T. Act, 1961, passed by his successor CIT, as is apparent from the last paragraph of the ITATs order.
31. The learned counsel for the respondents then very forcefully argued relying upon K.K. Dhawans case (supra) to submit that it hardly makes a difference whether the quasi-judicial order passed by the delinquent Charged Officer has been subsequently challenged or not, as long as the DE in respect of the irregularities in passing that order has been properly instituted, and principles of natural justice had been followed in those DE proceedings.
32. He further submitted that in the case of Union of India vs. Duli Chand, (2006) 5 SCC 680, the Honble Apex Court has held that the Apex Court judgment in the case of Zunjarrao Bhikaji Nagarkar v. Union of India ((1999) 7 SCC 409, relied upon by the applicant, does not lay down good law, but that the ratio of K.K. Dhawans case (supra) lays down the correct law, and he had, therefore, justified the institution of the DE against the applicant, and its proceedings/conduct thereafter. Learned counsel had submitted that since K.K. Dhawans case (supra) was decided by a Larger Bench, and in Para-8 of the judgment, the Honble Apex Court itself had explained as to how the judgment in the case of Zunjarrao Bhikaji Nagarkar (supra) was distinguishable, therefore, the law as laid down in K.K. Dhawan (supra), and later in Duli Chand (supra) must prevail over the ratio of the case in Zunjarrao Bhikaji Nagarkar (supra).
33. He further submitted that the benefit of the judgment in Ajit Kumar Singh (supra) could not be provided to the applicant, since in Para-31 of that order (as already reproduced by us in para 20/above), it has been clearly stated by this Tribunal that that case had been decided on its own facts, under the directives of the Honble Delhi High Court, and, therefore, the present applicant cannot be allowed to derive any benefit from the same. He further submitted that even the judgment of this Tribunal dated 01.02.2013 in Shri S. Rajguru (supra) has also not yet attained finality, as proceedings in that case are still going on before the Honble Apex Court.
34. He further submitted that when the applicant had earlier approached the Allahabad Bench of this Tribunal in OA No.896/2006, he had not assailed the institution of the DE proceedings, and that his only grievance and request then was for the DE proceedings to be concluded expeditiously. He pointed out that this aspect is clear from the order dated 17.05.2007 of Allahabad Bench of this Tribunal passed in MA No.777/2007, wherein the prayer was only for fixation of a time limit for conclusion of the DE proceedings.
35. Learned counsel for the respondents further submitted that after issuance of the charge Memo, the applicant has had at least three opportunities to deny the respondents competence to issue the charge sheet, and to institute the DE, but he had failed to state so, and, therefore, the judgment of Union of India vs. B.V. Gopinath (supra) would not come to his rescue.
WRITTEN SUBMISSIONS OF ARGUMENTS OF BOTH SIDES
36. Written submissions, with copies of the supportive case law etc., were then filed by the learned counsel for the applicant on 13.03.2015, and by the learned counsel for the respondents on 17.03.2015. Learned counsel for the respondents had also submitted a copy of the judgment of the Honble Apex Court in State Bank of India vs. Narendra Kumar Pandey (2013) 2 SCC 740, which had not been referred to by the learned counsel during his oral arguments on 10.03.2015. We have gone through that judgment also, in Para-12 of which the Honble Apex Court has held as follows:-
18. We are of the view that the High Court has committed an error in holding that the charge-sheet should have mentioned about the details of the documents and the names of the witnesses which the Bank proposed to examine and a list to that effect should have been appended to the charge sheet. We may point out that the charge-sheet need not contain the details of the documents or the names of the witnesses proposed to be examined to prove the charges or a list to that effect unless there is a specific provision to that effect. Charge-sheet, in other words, is not expected to be a record of evidence. Fair procedure does not mean giving of copies of the documents or list of witnesses along with the charge-sheet. Of course, statement of allegations has to accompany the charge-sheet, when required by the Service Rules.
(Emphasis supplied).
37. In Para-14 of Narendra Kumar Pandey (supra), the Honble Apex Court has further held as follows:-
21. The Inquiring Authority has examined each and every charge levelled against the charged officer and the documents produced by the presenting officer and came to the conclusion that most of the charges were proved. In a departmental inquiry, the disciplinary authority is expected to prove the charges on preponderance of probability and not on proof beyond reasonable doubt. Reference may be made to the judgments of this Court reported in Union of India v. Sardar Bahadur; (1972) 4 SCC 618 and R.S. Saini v. State of Punjab and Others; (1999) 8 SCC 90. The documents produced by the bank, which were not controverted by the charged officer, supports all the allegations and charges levelled against the charged officer. In a case, where the charged officer had failed to inspect the documents in respect of the allegations raised by the bank and not controverted it is always open to the Inquiring Authority to accept the same.
(Emphasis supplied).
38. Further, in Para-18 of that judgment, the Honble Apex Court had observed as follows:-
We notice in this case the Inquiring Authority had elaborately considered the charges levelled against the charged officer and also the materials produced by the bank because some evidence is necessary to establish the charges. In some cases, proof may only be documentary and in some cases oral. The requirement of proof depends on the facts and circumstances of each case. Appellant - Bank in this case has succeeded in establishing the charges levelled against the delinquent officer and was rightly dismissed from service which called for no interference by the High Court under Article 226 of the Constitution of India.
(Emphasis supplied).
39. In his reply arguments, learned counsel for the applicant had sought permission to file a copy of the OA No.896/2006 filed before the Allahabad Bench of this Tribunal, in which the order dated 30.03.2007 had been passed, and later MA No.777/2007 had been filed in that by the respondents, in which the order dated 17.05.2007, mentioned earlier, had been passed. Along with his written submissions, learned counsel for the applicant filed a copy of the original OA No. 896/2006 filed before Allahabad Bench, and a copy of the orders passed by the Bench on 30.03.2007, which we have perused and considered.
40. The learned counsel for the applicant had further contended that it was not a part of the charter of duties of the CIT as the Revisional Authority to direct the Assessing Officer to pass an order in a particular manner, particularly when, in the hierarchical scheme of things, at a later date, he might himself have been called upon to act as Revisional Authority in the self-same case. He had submitted that, therefore, it was indeed a gross exaggeration and absurd on the face of it, to even suggest that the applicant had deliberately and intentionally issued a letter on 31.05.2002, so as to facilitate a particular Assessing Officer in passing a perverse order on the day of the latters superannuation.
41. The learned counsel for the applicant had also submitted that there is absolutely no evidence worth the name in the Articles of Charge and Imputations of charge even to suggest that the applicant had failed to maintain absolute integrity, and, therefore, the entire Charge Memo issued was wholly misconceived and motivated by extraneous and irrelevant considerations. Admitting that the ratio of the law as laid down was that interference of Courts and Tribunals at the stage of issuance of Charge Memo should be rarely resorted to, and that too only in exceptional circumstances, he had emphasized that at the same time the law is equally well settled that if the charges are such that upon a bare and uncontroverted reading, they fail to disclose the commission of any misconduct, or the case happens to be one of no evidence of misconduct, then, even the Charge Memo, at the stage of its issuance itself, would be open to judicial review, and the learned counsel had claimed that this case falls squarely within the exception to the general rule, as above. In the third judgment of the Honble Apex Court annexed by the learned counsel for the applicant, in Civil Appeal No.9814/2014 State of Uttar Pradesh & Ors. vs. Arvind Kumar Srivastava & Ors., the circumstances in which this Tribunal had refused to condone the delay had been considered by the Honble Apex Court, and it was held that having regard to the facts and circumstances of the case, it was a fit case in which Tribunal should have condoned the delay in filing of the application, and that the appellant should have been given relief on the same terms as had earlier been granted by the Full Bench of the Tribunal. This judgment was also cited in the context of the Honble Apex Courts findings in the case of State of Karnataka & Ors. v. C. Lalitha (2006) 2 SCC 747, and in N.T. Devin Katti v. Karnataka Public Service Commission (1990) 3 SCC 157, from which judgments, the learned counsel for the applicant perhaps sought to derive advantage regarding consideration of the antedated promotion being granted to the applicant of the case before us if the prayer to allow the OA is accepted.
CONSIDERATION OF THE ISSUES AND POINTS OF LAW INVOLVED
42. We have given our anxious consideration to the facts of the case, and the issues and points of law involved. The first issue which arises for our consideration is as to whether the applicant was really performing as CIT any quasi-judicial functions. The view that the duty being performed by the applicant was quasi-judicial flows otherwise from the judgments and orders of this Tribunals Coordinate Benches also, which had been cited by the applicant and his counsel. But, the learned counsel for the respondents had submitted that many of these have been challenged, and the cases are pending before the Honble Apex Court, therefore, we have to look beyond this Tribunals judgments and orders. While our view would obviously be subject to the final decision of the Honble Apex Court in all those pending proceedings, if the facts are on all fours, let us venture to examine the history so far of the views taken by the superior Courts, especially the Honble Supreme Court, on this aspect.
43. There has been numerable case law on the aspect of the revisional powers of the CIT under Sections 263 and 264 of the Income-tax Act, 1961, and as to what he can do, or what he cannot do, and as to his capacity under these Sections of the I.T. Act being only administrative, or quasi-judicial. We may, therefore, first reproduce those Sections, and then briefly examine the case law on this subject.
263(1) The Commissioner may --> call for, and ? examine the records of any proceedings under this Act, and
If he considers that any order passed therein by the Assessing officer is erroneous.
in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard, and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment, and directing a fresh assessment.
Explanation (a)........................ }
(b)........................ }
(c)........................ } (2).......................................... } (Not reproduced here) } (3).......................................... } } Explanation............................ } } REVISION OF OTHER ORDERS
264. (1) In the case of any order other than an order to which section 263 applies passed by an authority subordinate to him, the Commissioner may, either on his own motion, or on an application by the assessee for revision, call for the record of any proceeding under this Act in which any such order has been passed and may make such inquiry or cause such inquiry to be made and, subject to the provisions of this Act, may pass such order thereon, not being an order prejudicial to the assessee, as he thinks fit.
(2) . } (3). } Provided } (Not reproduced here). (4) } (5).. } (6).. } Explanation- } (7) } Explanation 1. } Explanation 2. } (Emphasis supplied)
44. For many years, the view taken by the Honble Allahabad High Court in J.K. Jute Mills Co. Ltd. vs. ITO & Anr., 1978 CTR (All) 250 prevailed, which was that the revisional orders passed by the CIT u/s 264 of the Income-tax Act, 1961, were administrative orders, and were discretionary in nature, and that the doctrine of natural justice could not be invoked, and as such the revisional orders of the Commissioner were outside the purview of the extraordinary writ jurisdiction of the High Courts under Article 226 of the Constitution of India, and such orders of CIT were not amenable to judicial review, as the Commissioner did not perform any judicial or quasi-judicial function while passing such orders.
45. This view was reversed by the Honble Delhi High Court partially in Dalmia Dairy Industries Ltd. v. Union of India, 174 CTR 296 (Del.), in which the Honble Delhi High Court noted that while the Commissioner was indeed a high dignitary, nonetheless he was required to exercise discretion judiciously, without being whimsical and fanciful, and, in that sense, it was held that the Commissioner exercised a quasi-judicial function u/s 264 of Income Tax Act, and in exercise of such a function, it was essential for him to give cogent reasons for passing an order. This ratio was then followed by other High Courts also in Sitalpore Colliery, 32 ITR 26(Cal.); Sugan Chand Saraogi v. CIT, 53 ITR 717 (Cal.) and in Dhumjishaw Pestonji, 46 ITR 1023 (Bom.).
46. For the first time the Honble Apex Court ruled on this aspect in Dwarka Nath v. ITO, 57 ITR 349 in which the Honble Apex Court also held and confirmed that the revisional jurisdiction conferred on the Commissioner u/s 264 of the Income Tax Act carried with it the necessary duty on him to act judicially, and he was required to pass a speaking order, and as such a writ under Article 226 before the High Court in judicial review, seeking to quash the order of the Commissioner, was maintainable, thus, settling this issue once and for all.
47. However, a word of caution was still expressed by the Honble Jammu & Kashmir High Court in the case of Krishanchand Girdharilal & Co. v. CIT, 171 ITR 498, when it was held that in its writ jurisdiction, the Honble High Court could not sit as a Court of appeal against the revisional findings of the Commissioner u/s 264 of Income Tax Act, unless any error apparent on the face of record, going to the root of the case, and showing patent illegality, was shown or demonstrated. Similar caution was advised by the Honble Karnatataka High Court also in Gemini Distilleries v. CIT, 196 ITR 462 (Karn.), when it was held that the Honble High Court, in its writ jurisdiction, would not sit again in judgment over the matters which have been found to have been carefully considered by the Revisional Commissioner in an order passed u/s 264 of Income Tax Act.
48. Honble Gujarat High Court also, in Karamchand Premchand Pr. Ltd. v. CIT 101 ITR 46, reiterated the view of the Honble Apex Court in Dwarka Nath (supra), by stating that it was possible to move the Honble High Court under Article 226 only in a case where the Revisional Commissioner had failed to apply the obvious and well recognized principles of law on the subject. Similar amenability to writ jurisdiction of the High Courts in respect of revisional orders of the Commissioner passed u/s 264 of the Income Tax Act was reiterated by the Honble Andhra Pradesh High Court also in the case of Gowni Ramchandriah & Co. v. ITO, Tax LR 364.
49. Then, in the case of Sajan Kumar Bhawsinka v. CIT, 236 ITR 38, the Honble Apex Court again held that while passing an order of revision, the Commissioner must give a considered decision, after a careful examination of the contentions raised by the assessee, and held that a Revision Petition u/s 264 of Income-tax Act, rejected only by passing a cryptic order, required to be decided afresh. Therefore, as held by the Honble Apex Court in Dwarka Nath (supra), the Commissioner is under a legal obligation to decide a revision application u/s 264 of the Income-tax Act judiciously, with utmost care in exercising his discretion, since this remedy of revision has been contemplated by the Legislature only to meet a situation faced by an aggrieved assessee, who is unable to approach the Appellate Authorities for relief, and has no other alternative remedy available to him under the Income Tax Act.
50. Honble Allahabad High Court in OCM Ltd. (London) vs. CIT 138 ITR 689 (All.), and Honble Punjab and Haryana High Court in Haryana State Small Industries and Export Corporation Ltd. Vs. CIT 142 ITR 293 (P&H) laid down the law that a public duty is imposed on the Commissioner of Income-tax as Revisional Authority:
- not only to entertain such application;
- but also to deal with the same in accordance with law;
- after giving the aggrieved party a reasonable opportunity of being heard;
- as the discretion vested in him is a judicial discretion and has to be exercised judiciously.
- It is a power to be exercised in the interest of justice to the assessee;
- It is also the duty of the revisional authority to revise an assessment which is found to be erroneous on the admitted facts of the case;
- If he detects an error committed by the subordinate officer, he has been given the right to correct it and pass such orders in relation thereto, as he thinks fit.
51. This aspect of the Revisional Commissioner being required to necessarily act judiciously was further reiterated by the Honble Apex Court in Sirpur Paper Mills Ltd. vs. CWT, 77 ITR 6 (SC), in which case Honble Apex Court again clearly held that the power of revision conferred on the CIT under Section 264 is not an administrative power, but is a quasi-judicial power, and Commissioner cannot permit his judgment to be influenced by matters, which are not disclosed to the assessee, by way of affording an opportunity under principles of natural justice, nor can he be dictated to by any other authority, including any circular of a higher authority (like his superior officers, or the Central Board of Direct Taxes), in deciding such a revision petition in a quasi-judicial manner.
52. On this aspect, it is seen that in Mohammadi Begum vs. CIT 158 ITR 622 (AP), it was held by Honble Andhra Pradesh High Court that the CIT has the power u/s 264 of Income Tax Act to even issue directions to the Assessing Officer. Also, in the case of C. Parikh & Co. vs. CIT : 1980 122 ITR 610 Guj, 138 ITR 689 (All), the Honble Gujarat High Court had held that the revisional powers conferred on the CIT by Section-264 of the Income Tax Act are very wide, and it is open to the CIT to entertain even a new ground, not urged earlier before the lower authorities, where the assessee detects mistakes on account of which he was over-assessed, while exercising his revisional powers under this section. This liberty afforded to the Commissioner u/s 264 was qualified by the Honble Allahabad High Court in the case of Rashtriya Vikas Ltd. vs. CIT 99 CTR 68(All) by stating that a new claim for deduction made by the assessee in the Revision Petition filed u/s 264 of the Income Tax Act has to be examined by the CIT on merits, as to whether there was material or particulars on the record to sustain the claims. In fact, in the case of Pt. Sheonath Prasad Sharma vs. CIT 66 ITR 647 (All), it was held that the CIT cannot reject a Petition for revision under Section 264 of the Income-tax Act merely on the ground that the assessee himself/itself had earlier returned some income, which he/it now claims in the Revision Petition as not his/its income. It was held that even in such a situation, the CIT is bound to apply his mind to the question as to whether the assessee is liable to be taxed in respect of that income or not. Further, in the case of Mohammadi Begum (supra), Honble Andhra Pradesh High Court had further said that even an order of the Assessing Officer, wherein the principles of natural justice had been ignored, and the assessee had not been given a proper opportunity to explain regarding his claims at the time of the assessment, can be corrected by the Commissioner in exercise of his revisional powers u/s 264 of the Income-tax Act.
53. In the case of CWT vs. Mrs. Kasturbai Walchand and others 177 ITR 188 (SC), it was held by the Honble Apex Court that these revisional powers of the CIT u/s 264 cannot be exercised by him during the pendency, or even after the disposal of the appeal filed by the assessee before the CIT (Appeals), or before the ITAT. The position remains the same even if the order of the CIT (Appeals) has been challenged by the Department before the ITAT, and not by the assessee. In CIT vs. Geetara, Kaliram 121 ITR 708 (All.FB), and in Gupta Builders (P) Ltd. vs. CIT 191 ATR 114 (Bom), it was clarified that the revision to the CIT u/s 264 of the Act lies even in respect of those items against which no appeal has been provided for in the Income-tax Act, like levy of penal interest etc. The sum and substance of all of these judicial pronouncement was contained in the Honble Apex Courts judgment in Sirpur Paper Mills Ltd. vs. CWT (supra), which is that the revisional jurisdiction conferred upon the CIT u/s 264 of the Income-tax Act is a quasi-judicial one, and in exercise of his revisional power, the Commissioner has to bring to bear, with an unbiased mind, consideration of the petition of the aggrieved party, and then decide the dispute according to the procedure, which procedure must be in consonance with the principles of natural justice, and he cannot permit his judgment to be influenced by matters not disclosed to the assessee, or dictated to him by another authority, as mentioned above also.
54. It was further clarified in the case of ACIT vs. M.V. Kenlucky, 60 ITD 492 (Pune-Trib) that the revisional powers of Commissioner u/s 264 of the Income-tax Act, 1961, are to provide redressal for the grievance of the assessee, and an order passed by the Commissioner u/s 264 of the Income Tax Act cannot be prejudicial to the assessee, though he may decline to interfere with the order of assessment already passed, which declining shall not be deemed to be an order prejudicial to the assessee, according to Explanation-1 to S.264. In the case of Aryaman Spinners Private Limited vs. CIT- Civil Appeal No.10636 of 2012 (Gujarat HC) dated 10.10.2012, the Honble Gujarat High Court had held that there was nothing in Section 264, which had placed any restriction on the Commissioners revisionary power to give relief to the assessee, and that the Commissioner was also empowered to entertain even a new ground, not urged earlier before the lower authorities, while exercising his revisionary powers. The Honble Gujarat High Court had further held in Aryaman Spinners Private Limited (supra) that the Commissioner would not be acting de hors the Income Tax Act, if he gives relief to the assessee in a case where it is proved to his satisfaction that there has been over-assessment, whether such over-assessment is due to a mistake detected by the assessee after completion of assessment, or otherwise. This judgment was a reiteration of the earlier judgments of the Honble Gujarat High Court in Ramdev Exports v. CIT (2002) 251 ITR 873, and in the case of S.R. Koshti v. CIT (2005) 276 ITR 165.
APPLICABILITY OF THE LAW AS LAID DOWN AS DISCUSSED ABOVE TO THE PRESENT CASE
55. Having discussed as to what is the law laid down in respect of the quasi-judicial revisional powers of the CIT u/s 263 and u/s 264 of the Income-tax Act, let us now return to the facts of the present case. The Articles of Charges against the applicant before us were very aptly summarized by the Allahabad Bench of this Tribunal, in its order dated 30.03.2007, referred to earlier.
56. From the narration of facts in his OA No.896/2006, as filed before the Allahabad Bench, it is very much clear that that OA was also directed against the very validity of the Charge Memo. The applicant had, therein also, prayed for the following reliefs, along with the prayer for Interim Relief to direct the respondents to consider his name for promotion to the post of CCIT, whenever the next DPC is held:-
a) That this Honble Tribunal be pleased to issue a suitable order or direction quashing and setting aside the impugned charge memo dated 1.5.2006 (Annexure No.A-1 to Compilation No.1) issued under the signature of Shri S.K. Mohanty, Under Secretary to the Government of India.
b) That this Honble Tribunal be pleased to pass such order and further orders as the applicant might be found entitled to in the facts of the case.
c) That this Honble Tribunal be pleased to award the costs of this application in favour of the applicant throughout.
57. We would benefit from reproducing portions of the order as passed by the Allahabad Bench of the Tribunal on 30.03.2007 in that OA No.896/2006, in which the content and nature of the charges against the applicant had been summarized as below, and the Bench had then gone on to hold, as follows:-
3. The first charge pertains to his failure in considering the Assessing Officers Objections to the assessees plea of overstatement of income, which effectively facilitated understatement of income for assessment year 1997-98 by an amount in excess of Rupees Two crores vis-`-vis the returned income. He also admitted additional grounds in the revision proceedings without any evidence and he failed to take any responsibility in his order of revision. The second charge pertains to his failure to detect the apparent contradictions between the A.Os remand reports and the draft order intended to give effect to the order of revision and failed to question the A.O. in respect of the contradictory position proposed to be accepted by the A.O. in the proposed draft order and callously issued a letter on 31.05.2002 in order to facilitate the A.O. to pass a perverse order on the date of superannuation of the A.O.
4 to 7 (not reproduced here) 8. The main point for our consideration is as to whether the applicant can be subjected to such disciplinary proceedings, in the context of judicial order passed by him in exercise of his quasi-judicial functions under Section 264 of the Income Tax Act. Sri Shyamal Narain, learned counsel for the applicant has vehemently argued that no Official can be subjected to such formal disciplinary proceedings for exercise of judicial functions or quasi-judicial functions as it is likely to shake the confidence of the public besides affecting independent and free exercise of such quasi-judicial functions. According to him, the subject matter of charge no.1 is order dated 22.03.02 passed by the applicant in exercise of his revisional powers under Section 264. Learned counsel says that the Order so passed by him may be erroneous or unsound from others point of view or from the point of view of superior like quasi-judicial authority, but that alone without anything more, to show any dishonest or malafide motive, can hardly form the subject matter of such disciplinary action. As regards the charge no.2, the submission of Sri Shyamal Narain is that the same is totally misconceived and legally ill advised to subject the applicant to said disciplinary action for something which he did in a lawful manner. He says that there is no provision in the Income Tax Act where under the Revising Authority has to approve or disapprove the draft order prepared by the Assessing Officer in compliance of the Revisional Order. So, the applicant was perfectly justified in saying that no further directions were needed in reply to the letter dated 24.05.2002 of the Income Tax Officer concerned. The learned counsel goes on to argue that had the applicant suggested some changes in the draft order so prepared by the Assessing Officer in compliance of the Revisional orders, he would have been charged with interfering with the quasi-judicial functions of the Assessing Officer. Learned counsel wonders as to how the applicant could be charged for something, which he did lawfully.
9. We do confess that the above submissions of Sri Shyamal Narain are attractive, but in view of settled legal position, to be discussed very shortly, we find it difficult to interfere in the matter at such premature stage when the inquiry is under way. We are not supposed to express our view as regards the merit or de-merit of the charges as that is the function assigned to the departmental authorities.
10. Relying on Union of India and others Vs. A.N. Saxena (1992) 3 S.C.C. page 124 and on Union of India Vs. K.K. Dhawan (1993) 2 SCC page 56, the Apex Court has ruled in Union of India Vs. Ashok Kacker 1995 Supplement (1) SCC page 180 that the Courts or Tribunals should not intervene at such a premature stage, as the official concerned has full opportunity to reply to the charge sheet and to raise all such points before the Inquiry Officer. We agree that whenever the disciplinary authority thinks to subject any public servant to such disciplinary proceedings, in the context of something done by him or something not done by him in discharge of his judicial or quasi-judicial functions, a great care has to be taken that he is not unnecessarily subjected to such proceedings. The reason is that fearless discharge of such judicial or quasi judicial function is essential to retain the faith of the people in the system. This view has been taken in A.N. Saxenas case (supra) by the Honble Supreme Court. But to say that officer taking decision in exercise of quasi-judicial function are immune from disciplinary proceedings will not be correct. The reason is that it is equally essential to take action for dishonest or culpable discharge of such judicial or quasi-judicial functions so as to retain the faith of people in the purity of the system. If there are reasons to form the view that officer was influenced by some extraneous consideration in discharging such quasi-judicial functions, action has to be taken to prevent him and others from acting in a similar manner. It would be appropriate to refer to three Judges judicial pronouncement of the Apex Court in the case of Union of India Vs. K.K. Dhawan (1993) 2 SCC page 56 where the Apex Court said that such officer could be subjected to formal disciplinary proceedings if:-
(i) the act or omission is such as to reflect on the reputation of the Government servant for his integrity or good faith or devotion to duty, or
(ii) there is prima facie material manifesting recklessness or misconduct in the discharge of the official duty, or
(iii) the officer had failed to act honestly or in good faith or had omitted to observe the prescribed conditions which are essential for the exercise of statutory power or if he has acted negligently or to do undue favour to a party or;
(iv) he has acted with corrupt motive.
In that case the allegation of conferring undue favour was found to be sufficient to initiate disciplinary proceedings. That was a case of Income Tax Officer and the allegation against him was that he showed undue favour to an assessee while making the assessment, a quasi-judicial function.
11. So, this much stands well settled that a public servant, discharging judicial or quasi-judicial function can be subjected to formal disciplinary proceedings in any of the eventuality as enumerated by the Apex Court in K.K. Dhawans case. In charge no.1(a), it is said that by allowing the plea of over statement of income effectively facilitated the assessee to under state its income for assessment year 1997-98 by an amount in excess of Rupees Two crores vis-`-vis the returned income. But in fact is a charge that he unduly favoured the assessee. Whether the allegation is correct or incorrect, true or untrue will be looked into during the course of inquiry and this Tribunal will not be justified to go into merits or de-merits of that charge, that too at this stage. Likewise in charge no.2, it has been said that he callously issued a letter-dated 31.05.2002 with a view to facilitate the Assessing Officer for passing a perverse order on the day he was to superannuate. If this part of the charge is read in conjunction with paragraph no.7 of the statement of article of charge, it is difficult to say that initiation of departmental proceedings does not fall within the parameters laid down by the Apex Court in K.K. Dhawans case. We may reiterate on the cost of repetition that we are not on the truthfulness or otherwise of the charge as that has to be examined by the departmental authorities.
14.(sic 12) So far all the above reasons, we do not find it a fit case for our interference at this stage. The prayer for quashing the charge sheet dated 01.05.2006 cannot be allowed.
15. (sic 13) It appears that the applicant is a senior officer of the department and he says that he is also due for promotion and is to retire very shortly. We think early disposal of disciplinary proceedings in question will be just and proper. So, this O.A. is finally disposed of with a direction to the respondents to ensure that inquiry in question is concluded and necessary orders be passed as expeditiously as possible. The applicant will co-operate with the officer concerned in getting the matter decided at the earliest possible and if he does not do so, it may be possible for the respondents to conclude the matter expeditiously. No order as to costs.
(Emphasis supplied).
58. Contrary to the forceful oral arguments of the learned counsel for the respondents before us in this regard, it is seen from the contents of that earlier OA, as filed before the Allahabad Bench of this Tribunal, that the applicant had very much laid a challenge in that OA also to the very institution of the departmental enquiry against him, in respect of his claimed bonafide discharge of his quasi-judicial function u/s 264 of the Income-tax Act, and had further pointed-out that no action, at all, had been contemplated or initiated by the official respondents against those officers, who were actually responsible for the loss of revenue to the department, namely, the applicants successor CIT in office, who had on the one hand issued a notice to the assessee on 17.01.2003 for a revision of the assessment u/s 263 of the Income-tax Act, but before he passed his final order in the revisional proceedings u/s 263 of the Income-tax Act on 18.03.2003, on the other hand, he had proceeded to approve grant of refund to the said assessee of an amount of Rs.39,61,418/- on 25.02.2003, based upon the assessment order which he intended to revise, and had already issued the notice in this regard. He had also alleged that no action had either been contemplated or taken against the concerned officer, who was responsible for a time barred assessment order having been passed on 21.04.2005 purportedly giving effect to his successor Commissioners order dated 18.03.2003 passed under revision u/s 263 of the Income-tax Act, and, therefore, it is evident from the timing of issuance of the Charge Memo to the applicant that it was intended only to somehow scuttle his chances of promotion to the post of CCIT. While giving further details of the facts of the case, in Paragraphs-4 (xviii, xix & xx) of that earlier O.A. in particular, the applicant had pointed out that when the appeal of the assessee concerned was still pending disposal, and the matter regarding assessment of the assessees income had not yet attained finality, by no stretch of imagination the applicant could be subjected to any disciplinary proceedings arising from the facts of his having passed a quasi-judicial order of revision, when there was not even a passing suggestion in the Charge Memo to even hint that the applicant had done anything with the motive or objective to favour the assessee and gratify himself, at the expense of the revenue. It is very clear from the Allahabad Benchs order itself that the very basis for the institution of the DE against the applicant, and the basis of the Article of Charge-I(a), (b) & (c), in particular, was in respect of the alleged lacunae on his part while passing his revisional order u/s 264 of the Income Tax Act. We have already discussed in great detail above the relevant case law as to what was the extent and scope of the revisional powers and duties of the applicant as Commissioner acting u/s 264 of the Income Tax Act, which, as per the above cited case law, were quasi-judicial in nature, and the cited case law also discloses as to what extent the applicant could have traversed in passing his order, and as to what extent fault can be found in his order u/s 264 of the Income Tax Act in his traversing and covering the aspects concerned before him.
59. The order passed by the applicant as CIT on 22.03.2002 had been produced in his pleadings at Annexure P-8 (pages 162 to 188). Fault has been found with the same during the DE, firstly by the E.O., and later by the Disciplinary Authority, who were Administrative Authorities, though expected to act in a quasi-judicial manner in the DE proceedings before them. Let us therefore try to undertake an analysis of judicial review of the process through which that order dated 22.03.2002 came to be passed by the applicant as CIT, and as to how it has been later appreciated/criticized by the E.O. and the Disciplinary Authority. We have to tread carefully, as in judicial review we cannot re-appreciate the evidence as produced in a D.E. proceedings, but can only go into the manner in which the D.E. was conducted, and whether it was as per the law of the land, or not.
60. Article of Charge-I (b) against the applicant was that he had admitted an additional ground in the revision proceedings pending before him, without bringing on record any evidence raised by the assessee to show that the claim was bonafide, and that such an additional ground could not have been raised by the assessee earlier for good reasons, and that the admission and adjudication of such an additional ground would not entail any fresh investigation of facts. In view of the judgment in the cases of Aryaman Spinners Private Limited (supra), in C. Parikh & Co. C. Parikh & Co. (supra) and in Rashtriya Vikas Ltd. (supra), it is clear that the present applicant before us, as the Commissioner exercising his revisional jurisdiction u/s 264, was well within his rights to entertain even a new ground not urged earlier before the lower authorities. The gravamen of the judicial pronouncements, as discussed above, therefore, clearly goes against the very framing of the Article of Charge-I (b), as had been framed against the applicant. A charge could have been framed only on one of six possible circumstances as enumerated in K.K. Dhawan (supra), which have been reproduced by us in para 16/above.
61. It is further seen from Para 4.1, 4.2 & 4.3 of the applicants revisional order dated 22.03.2002 that in his Revision Petition filed u/s 264 of the Income Tax Act, the assessee had claimed hypothetical credit of interest in the Profit and Loss account, which was also wrongly assessed as income, and hypothetical credit of development income in the Profit & Loss account was wrongly assessed as Income, and deduction for additions/disallowances made in the assessment order passed, in which the Additional ground was in respect of the hypothetical credit of development income in Profit & Loss account in Shilalekh, with the amount being Rs. 1,87,43,990/-. The submissions of the assessee on his contentions were recorded by the applicant in his revisional order in Paragraphs 5.1 (a to f). Para-6 of the revisional order discloses that the submissions made by the assessee from time to time were forwarded to the Assessing Officer for verification and for his comments. A report of the Assessing Officer was called for on this issue through letter dated 31.10.2001, and the Assessing Officer even submitted his report dated 20.03.2002, bringing to light the facts, as recorded by the applicant before us in his revisional order, in Paragraph 6.1, 6.2, 6.3, 6.4 and 6.5. Since the report of the Assessing Officer had been forwarded by the Additional Commissioner, with his own comments also, those comments were also recorded by the applicant in his revisional order in Paragraph-7, in which the Additional Commissioner had recommended that each transactions of loans and advances given, and chargeability of relevant interest income may be decided individually, based on the facts and circumstances involved therein. Paragraph-8 of the revisional order shows that after going through the submissions made by the assessee, and the report of the Assessing Officer, and the forwarding comments of the Additional Commissioner, the applicant as the Revisional Commissioner had not accepted the assessees contentions, and had rather decided to accept the recommendations of his subordinates, and had directed the Assessing Officer to recompute the interest income on the basis of his own investigations and findings, as narrated by him in the remand report, which had been confirmed by the Additional Commissioner. As was recorded by the Honble Andhra Pradesh High Court in Mohammadi Begum (supra), u/s 264 of the Income Tax Act, as the Revisional Commissioner, the applicant before us had the power to issue such directions to the Assessing Officer to complete the assessment. So, no fault can be found with the directions as issued by the applicant in his quasi-judicial revisional order dated 22.03.2002 on this count, and no charge could ever have been framed against the applicant for having issued such directions, except in the case when one of six possible circumstances as enumerated in K.K. Dhawan (supra), as have been reproduced by us in para 16/above, stood satisfied.
62. In respect of Taxability of Hypothetical Credit of Development Income, the applicant as the Revisional Commissioner had examined the submissions of the assessee in Paragraph 9.1, 9.2, 9.3 and in Paragraph-10, and had then recorded the comments of the Additional Commissioner that the Assessing Officer has found no anomaly in the assessees claim in this regard. Then, in accordance with the law as laid down and discussed above, the taxability of such development income was considered by the applicant revisional CIT in his order in Paragraph-11, and, in view of the report submitted by the Assessing Officer, as confirmed by the Additional Commissioner, he had come to the conclusion that the claim of the assessee appears to be genuine, and he had then directed the Assessing Officer to allow the claim of the assessee on the basis of his own investigation and report, as he could have done in terms of the law as declared in Mohammadi Begum (supra). So no fault can be found with the directions as issued by the applicant in his quasi-judicial revisional order dated 22.03.2002 on this count also, except in the case when one of six possible circumstances as enumerated in K.K. Dhawan (supra), as have been reproduced by us in para 16/above, stood satisfied.
63. Paragraph-12 of the quasi-judicial order passed by the applicant u/s 264 of the I.T. Act related to the Taxability of Hypothetical Credit of Development Income, and in particular in respect of Shilalekh- on account of Rs.1,87,43,990/-. The Additional grounds raised by the assessee for claiming his deductions were discussed in the applicants revisional order in Paragraph-12.2, 12.3, 12.4, 12.5 & Para-13. In Paragraph-14 & 15, it had been noted by the applicant as the Revisional Commissioner that the assessee had maintained that even though it was a separate project, and sanction of loans from three banks and two financial institutions had been recorded, the applicant had in Paragraph-15 come to the conclusion that in the absence of any separate bank account of the project, it was not possible to ascertain as to when the funds had been borrowed and as to where they had been utilized, and the applicant Revisional Commissioner had noted that the assessee had not filed any proof of utilizing the funds, or borrowing the funds, for the Shilalekh project. Even the claim of interest paid was in respect of one of the banks, which had sanctioned loan, and 7 other private financial institutions and individuals, whose names had been mentioned in the Revisional Order passed by the applicant. The conclusion drawn by the applicant Revisional Commissioner in Paragraph-16 was that it appears from the balance sheet that the assessee has diverted its funds into the investments other than the regular business of construction, and, therefore, the burden of interest has been increased. So, fault can be found with the applicants Revisional Order dated 22.03.2002 on that count also only if it could be charged against him and then proved that he had shown undue favour to the assessee, and any one of the six possible circumstances as enumerated in K.K. Dhawan (supra), which have been reproduced by us in para 16/above, stood satisfied.
64. In Paragraph-17, 18 & 19 of his order, the applicant Revisional Commissioner had examined other aspects in detail, and in Paragraph-20, the forwarding comments of the Additional Commissioner were recorded as follows:-
As far as the remuneration and organization fees shown as receivable from Shilalekh project of Rs. 1,87,43,990/- is concerned, the A.O. reported that the assessee has not maintained separate books of accounts for the Shilalekh project as mentioned in the agreement itself. In view of the same, the correct working of project wise cost and interest and also the quantification of actual surplus of project cannot be ascertained. Accordingly, the assessees contention is non verifiable on this account.
(Emphasis supplied).
65. The final order of the applicant as the Revisional Commissioner was contained in Paragraph-21, and it stated as follows:-
I have gone through the detailed report submitted by the Assessing Officer and the comments of the Addl. Commissioner also. The Assessing Officer is directed to recompute the income as per his report and to his satisfaction.
(Emphasis supplied).
66. Therefore, it appears to us that in his own order as the Revisional Commissioner u/s 264 of Income Tax Act, the applicant had not accepted all the contentions of the assessee, and then granted him any reliefs, going out of the way, but had rather accepted all the contentions of the Assessing Officer, and the comments thereupon of the Additional Commissioner, and had then left it to the Assessing Officer to recompute the income of the assessee, as per his own report, and to his own satisfaction, through Paragraph-21 of his Revisional Order dated 22.03.2002, which direction he was fully competent to issue to the Assessing Officer in terms of the gravamen of the case law on Section 264 of the Income-tax Act, and, in particular, in terms of the judgment in the case of Mohammadi Begum (supra). Therefore, unless any one of the six possible circumstances, as enumerated in K.K. Dhawan (supra) were found to have been satisfied, charges had been levelled on the basis of that, and then proved in the D.E., the D.E. proceedings not conforming to the above requirement were very much questionable ab initio.
67. Other portions of the Revisional order passed by the applicant as the empowered Commissioner were contained in Paragraph-22.1, in which the claim of the assessee for deduction of public issue expenses was declined, and the Assessing Officer was told to disallow the same, which order was also against the assessees claim and request as contained in the revision petition. In Paragraph-23.2, the disallowance made by the Assessing Officer of Rs.3 lakh was confirmed by the applicant, which order also was against the assessees petition. In Paragraph-24.3 of the order of revision also, accepting the report of the Assessing Officer, the deduction made by the Assessing Officer had been confirmed by the applicant as the Revisional Commissioner, again not accepting the contention of the assessee as raised in his revision petition. In Paragraph-25.3 of his revisional order again it had been held by the applicant u/s 264 of the Income Tax Act that the expenditure incurred by the assessee is not for the purpose of business, and, therefore, the addition made by the Assessing Officer in the original Assessment order was confirmed, again not accepting the contention of the assessee in his revision petition. Since in Paragraphs-22.1, 23.2, 24.3 & 25.3 of his order, the applicant, in his the then capacity as the Revisional Commissioner, had upheld all the contentions of the Assessing Officer, and had not accepted the assessees contentions in the revision petition, and, therefore, unless at least one of the six possible circumstances enumerated in K.K. Dhawan (supra) were shown to have existed, perhaps no charges could have been framed against him for his having passed an order in favour of the assessee, and against the interest of revenue, in a mala fide manner. In Paragraph-21 of his order also, as we have already discussed and reproduced above, the revisional order of the applicant as the empowered Commissioner was only for directions to the Assessing Officer to recompute the assessees income as per his own report, and to his satisfaction, and the law, as settled u/s 264 of the Income Tax Act, as already discussed by us in detail above, permitted him to do so. It, therefore, appears that even the Article of Charge-I (c) as framed against the applicant also does not stick, unless at least one of the six possible circumstances as enumerated in K.K. Dhawan (supra), could be demonstrated to have existed, and then Charge Memo on the basis of that infraction on the applicants part had been issued, and the charge proved in the D.E. proceedings thereafter.
68. On going through the Report of the E.O., the Chief Commissioner of Income Tax-III, Ahmedabad, Shri R.C. Sethi, dated 04.01.2008, produced at pages 95 to 145 of the OA, it is seen that in Para-15.1.1 of his report the E.O. had held that Article of Charge-1(a) is not proved. In Para-15.2, in respect of Article of Charge-1(b), towards the end of the paragraph, the E.O. had recorded as follows:-
On perusal of the order u/s 264, it is observed that the CO has in fact not given any reason for entertaining the Additional claim of the assessee. In these facts and circumstances, the Additional ground so taken by the assessee did not conform to the provisions of sub-sections (3) & (5) of section 264 and as such, the Article of Charge-1(b) is proved.
(emphasis supplied)
69. This, to our mind, is against the above discussed settled law regarding the provisions of the Section 264 of the Income-tax Act itself. Since the law u/s 264 of the Income Tax Act, as discussed in great detail above, allows the Revisional Commissioner to entertain Additional claims, and even a new ground not urged before the lower authorities, while exercising his revisional powers, as held in C. Parikh & Co. (supra) and in Rashtriya Vikas Ltd. (supra), and in Aryaman Spinners Private Limited (supra), the applicant as the competent Revisional Commissioner acting u/s 264 was fully within his powers to entertain any additional claims, and the conclusion, therefore, arrived at by the E.O. appears to be perverse, without a proper appreciation of the law of the land on this subject, and without any proper application of mind.
70. In Paragraph 15.3 of his enquiry report, even though the E.O. took note of the directions contained in Para-21 of the Revisional order passed by the applicant u/s 264 on 22.03.2002, he held the charge 1(C) as partly proved on the following grounds:-
It is significant to note that the AO/Addl.CIT had stated that the contention of the assessee was not verifiable. Thus, the direction of the CIT to recompute the income as per report of the AO and to his satisfaction, cannot be said to be based on reason or that a considered decision was rendered by him.
To sum up, the charge in Article of Charge-1(c) is partly proved with reference to taxability of interest income from six parties and taxability of income from Shilalekh Project and not proved in respect of development charges from Shiromani Bungalow Project.
(emphasis supplied)
71. When the law u/s 264, as discussed in great detail above, permits the Revisional CIT to issue directions to the Assessing Officer, as held in Mohammadi Begum (supra) by the Andhra Pradesh High Court, and other case law already cited above, the conclusion arrived at by the E.O. does not appear to be in accordance with the settled law on the subject, and is, therefore, unsustainable.
72. Moreover, the nature of a Revisional order passed under Section 264 of the Income-tax Act is such that either of the aggrieved parties, the revenue, or the assessee, can either go in appeal before the ITAT (for a quasi-judicial review), or approach the jurisdictional High Court for a judicial review of that order. The E.O. cannot, therefore, be allowed to put himself in the shoes of a Revisional CIT, acting under his powers u/s 264 of the Income-tax Act, and to try to re-appreciate in his own wisdom the facts, as had been brought for consideration before the Revisional C.I.T, and nor can the Disciplinary Authority undertake such a re-appreciation of the facts. The only fora for a re-appreciation of the facts, as decided by a CIT in revisional orders u/s 263 or 264 of the I.T. Act, 1961, are ITAT, and the jurisdictional High Court, which can undertake a quasi-judicial and judicial review, respectively, and change the contours of the relief denied or provided to an assessee by the Revisional CIT in his order.
73. In Paragraph 15.4 of his enquiry report, in respect of Article of Charge-II, the E.O. had correctly noted that the charge did not relate to the powers of the applicant as CIT u/s 264 of the Income-tax Act, but related to the supervisory jurisdiction of the Commissioner, to whom, after his having passed his revisional order, a draft assessment order had been somehow un-necessarily submitted by the Assessing Officer, seeking his approval for the same. The E.O. has further correctly appreciated that nowhere in the Income-tax Act, it has been warranted that the Revisional Commissioner would, after his having passed a revisional order u/s 264 (or u/s 263) of the Act, later give approval to such a draft assessment order, and the E.O. has rightly appreciated that any such approval of a draft assessment order prepared by the Assessing ITO, or directions from the CIT to the Assessing Officer in respect of assessment, would have amounted to interference in the exercise of the quasi-judicial powers vested with the Assessing Officer, and the E.O. has further correctly appreciated and admitted that the CIT is not legally or statutorily required to give any such approval to the draft assessment order un-necessarily submitted to him by the Assessing Officer. However, still, the E.O. has held the applicant guilty of his not having noticed the contradictions between the draft assessment order as sent to him by the Assessing ITO, and the earlier remand report of the same Assessing Officer, which contradictions were so glaring that the same could not have escaped his notice, and the E.O. has, therefore, gone on to hold that at least in his supervisory capacity, the applicant delinquent officer should have found out the ways and means to verify the correctness of the Assessing Officers findings in the draft assessment order vis-`-vis the same Assessing Officers remand reports submitted earlier on these specific issues, (without mentioning the Sections of the Income-tax Act in which such ways and means could have been found), and then, after considering the totality of the facts with respect of the Article of Charge-II, the E.O. has come to the conclusion that there had been a lapse on the part of the applicant as a Charged Officer in his supervisory capacity, even though no irregularity is fastened on him, from any legal or statutory point of view, as per provisions of Income-tax Act, but still the E.O. had then gone on to hold that, in the result, the charge as contained in Article of Charge-II, is partially proved.
74. When on the one hand the E.O. himself had admitted that any approval/directions from the CIT to the Assessing I.T.O. would have amounted to an interference with the exercise of quasi-judicial powers vested with the Assessing I.T.O., and when the E.O. himself had further accepted that no irregularity is fastened on the applicant from any legal or statutory point of view, as per any of the provisions of the Income Tax Act, his conclusion to still treat the Article of Charge-II as partially proved appears to be totally against all the canons of law.
75. Thereafter, even though the Enquiry Officer had held the Article of Charge-I(a) as not proved, and had only held the Article of Charge-I(b) as proved, and Article of Charge-I(c) as partly proved, and Article of Charge-II as partially proved, in his summing up Para-17, the Enquiry Officer had held both the Article of Charge-I and II as partially proved, which goes against his own findings in respect of Article of Charge-I(a), which he had held to be not proved. Therefore, it is apparent that there were serious defects in the report of the E.O. as had been presented. We shall discuss the aspect of the legality of the E.Os report in respect of the Articles of Charges 1(a), 1(b) and 1(c) separately also later.
DISCUSSION OF FILES
76. The respondents produced the three relevant Departmental files concerning the case, which have been perused. From the first file No.CVO-I/44/03, which was further re-numbered 2-3 times, it is seen that nearly 8 months after the Assessing Officer Shri P.M. Makwana, Deputy Commissioner of Income-tax (DCIT), (since deceased), had, on his last working day, on the date of his superannuation, passed an assessment order, and while the applicant before us (Civil List Code 92568) was still in service, a complaint was sent by one Shri P.L. Roongta, DGIT (Investigation), Ahmedabad, in which it was alleged that the present applicant, and the retired DCIT Shri P.M. Makwana (since deceased) had shown undue favours to the concerned assessee firm in respect of the assessment of Assessment Year 1997-98, and that the Company had given a flat each to both these officers in one of its housing projects as illegal gratification.
77. The DGIT (Investigation) Shri P.L. Roongta had further alleged that the present applicant had displayed lack of integrity, and he had, therefore, suggested that the concerned Assessment case should be examined, and suitable action should be taken. It was opined on the file that the genuineness of the complaint of DGIT was not in doubt, because of which, through notings dated 21.01.2003 to 23.01.2003, the file No.DGIT(V)/WZ/Con/0006/2003 was started. But nobody suggested for going in appeal to the ITAT, or for a judicial review of the applicants Revisional Order before the Honble Gujarat High Court.
78. Further, after having carely gone through all the documents brought on record, and after perusing all the notings in all the three files submitted before us, it is seen by us that nowhere have the respondents tried to make out a charge against the present applicant in respect of his having received illegal gratification in the form of a flat, or bring any evidence to support the complaint lodged by Shri P.L. Roongta, DGIT (Investigation), Ahmedabad, that the assessee Company had given a flat each to these two officers in one of its housing projects as illegal gratification, and neither was that ever made a charge against either the applicant or the said DCIT Shri P.M. Makwana (since deceased), which would have been totally covered under K.K. Dhawan (supra). There is a mention of separate disciplinary proceedings under Rule-9 of the CCS (Pension) Rules, 1972, having been initiated against the said retired Assessing Officer Shri P.M. Makwana, (since deceased), but we have not had the benefit of the records pertaining to that disciplinary enquiry, to verify as to whether any charge having been framed against him, or any evidence ever having been brought on record in regard to the alleged illegal gratification of a flat having been accepted by him, alongwith the applicant before us in these proceedings.
79. At least in the case of the present applicant, this mention on the first page of the Note-sheet is the one and only mention of illegal gratification having been received by him from the assessee Company, and though it would have been a perfectly valid ground to Charge Sheet him on that ground under K.K. Dhawan (supra), this did not even form a part of the charges as framed against the applicant, as we have discussed above, borrowing also from the Allahabad Bench judgment and order on his first O.A. filed there.
80. There is no concept of an administrative review of a quasi-judicial order. A quasi-judicial order can be reviewed only through a judicial review, or at least in another quasi-judicial review.
81. When within 8-9 months of the revision order u/s 264 having been passed by the applicant as the then CIT Circle-III Ahmedabad, the department had come to the conclusion that it had been passed after the applicant having received illegal gratification from the assessee Company, this would have been all the more reason for them to have immediately:
(a) taken action to challenge that revision order passed by the applicant u/s 264 of the Income-tax Act before the ITAT in quasi-judicial proceedings, or directly before the Honble Gujarat High Court at Ahmedabad, in a judicial review of those review proceedings, and
(b) start disciplinary proceedings against the applicant on the charge of his having received illegal gratification for passing his quasi-judicial order, as per the law as laid down in K.K. Dhawan (supra).
82. But that was never done. Instead, the respondents took it upon themselves only to undertake an administrative review of the applicants quasi-judicial order, against all canons of law.
83. Moreover, the entire edifice of the case against the applicant has been built upon the allegedly wrong Assessment order passed by the retired DCIT Shri P.M. Makwana (since deceased) on the last date of his service on 31.05.2002, and the irregularity and illegality contained in that, which the respondents have ascribed to have been made possible by the applicants actions and inactions.
84. It has also further come on record earlier itself that the successor in office of the applicant had, under his revision powers u/s 263 of the Income-tax Act, reviewed that Assessment order passed by Late Shri P.M. Makwana, considering it as having been wrong, and the matter had then been carried before the ITAT by the assessee, and the ITAT had, in its quasi-judicial review of the order passed u/s 263 by the applicants successor CIT, refused to interfere with that order, as already mentioned above.
85. The inaction of the respondents in never challenging quasi judicially before the ITAT and/or filing a Writ Petition for a judicial review by the Honble Gujarat High Court of the revision order passed u/s 264 by the applicant, only goes to show that the department was perhaps not aggrieved with the said order passed by the applicant, for many years after it had been passed.
86. In so far as framing of the charges against the applicant is concerned, it is seen from the files that a summary of the charges proposed to be framed against him had been put up on 05.12.2005 by Shri P.K. Misra, DGIT (Vigilance) and Chief Vigilance Officer, seeking approval of the then Honble Finance Minister for initiation of major penalty proceedings against the applicant, and for appointment of an Enquiry Officer and Presenting Officer as and when rendered necessary, and approval for the same had been accorded by the Honble Finance Minister, acting on behalf of the President of India, on 30.01.2006 (page-28 of the note file).
87. Thereafter, the final charge sheet as issued to the applicant did not travel in its draft form up to the Honble Finance Minister for application of his mind, and for being approved by him, as the applicants disciplinary authority, and was only approved by the DGIT (Vigilance) and Chief Vigilance Officer Shri P.K. Misra himself on 25.04.2006. This procedure, as adopted by the respondents, was thus against the law as was laid down by the Honble Calcutta High Court in the case of Paresh Chandra Dutta vs. Collector of Calcutta & Ors 1979 (1) SLR 44 (CAL), by the judgment dated 14.12.2011 by Jodhpur Bench of this Tribunal in OA No.89/2009 Prem Prakash vs. Union of India & Another, and which has been now made the law of the land through Honble Apex Courts judgment dated 05.09.2013 in Union of India and Ors. vs. B.V. Gopinath (supra), along with the connected case of Union of India vs. K.K. Kapila, finally laying down the law that if a charge-sheet/charge memo has not approved by the disciplinary authority himself, after application of his own mind, it is non est in the eyes of law.
88. Learned counsel for the respondents had, at the very beginning of his arguments, relied upon the judgment in Rajbabu Agnihotri (supra), wherein all the evidence against the delinquent officer during the disciplinary enquiry was only in the nature of documents, and since the genuineness of documents had not been challenged, it was held that it was not obligatory for the employer to bring any oral evidence to prove the documents, and, in that sense, no illegality was committed by the E.O. in referring to and relying upon the documents, which were relied upon at the time of issuing the charge-sheet, and were not denied by the delinquent. In respectful agreement with the above ratio, we are unable to accept the submissions of the applicant, and the arguments of his learned counsel, that the DE conducted against him was bad in the eyes of law only because no witnesses had been produced by the respondents for oral evidence. It is apparent from the report of the E.O. also that even the applicant before us had also not prayed for summoning any defence witnesses, and, therefore, it is clear that there has been no miscarriage of principles of natural justice to that extent in the conduct of the proceedings of the DE by the E.O., and this issue gets settled by the above case law.
89. One of the objections raised by the applicant has been that his appointing authority being the President of India, his Disciplinary Authority, under the Presidents delegated powers, can only be the Honble Union Minister for Finance, and that the charge Memo to be issued for instituting the disciplinary enquiry, as well as the final order of the Disciplinary Authority accepting or rejecting the report of the Enquiry Officer have both to be personally approved by the Honble Union Minister for Finance, in his exercise of the Presidents delegated powers under Article-77 of the Constitution of India. The earliest most authoritative and appropriate judgment on this aspect had been pronounced by Honble Calcutta High Court in Paresh Chandra Dutta vs. Collector of Calcutta & Ors (supra) in which it was held that granting approval to the charge-sheet to be issued for instituting a disciplinary enquiry was a statutory function, and nobody other than the appointing or the disciplinary authority, substantively holding that post or position, can perform that statutory function, and even an officer (or a Minister) acting as stop-gap arrangement in place of the disciplinary or the appointing authority was not competent to perform that statutory function. To the best of our understanding and knowledge, that judgment continued to be settled law on this subject for the next 35 years till 2013.
90. Also, in the judgment in Prem Prakash vs. Union of India dated 14.12.2011, in OA No.89/2009 of the Jodhpur Bench of this Tribunal, authored by one of us, it was held that passing of an order by any authority other than the delinquent Officers Disciplinary Authority etc., holding charge in their substantive capacity, was not legally correct, though that order was pronounced without noticing the law as laid down in 1979 by Paresh Chandra Dutta (supra). Since that order of the Jodhpur Bench has been stayed by the Honble Rajasthan High Court at Jodhpur, we are not reproducing portions of that order here, even though it has since become the law of the land one and a half years later, through the Honble Apex Court reiterating that very principle as its ratio in B.V. Gopinath (supra), in which the Honble Apex Court has held as follows:-
39. Article 311(1) of the Constitution of India ensures that no person who is a member of a civil service of the Union or an all India service can be dismissed or removed by an authority subordinate to that by which he was appointed. The overwhelming importance and value of Article 311(1) for the civil administration as well as the public servant has been considered stated and re- stated, by this Court in numerous judgments, since the Constitution came into effect on 19th January, 1950. Article 311(2) ensures that no civil servant is dismissed or reduced in rank except after an inquiry held in accordance with the rules of natural justice. To effectuate the guarantee contained in Article 311(1) and to ensure compliance with the mandatory requirements of Article 311(2), the Government of India has promulgated CCS (CCA) Rules, 1965.
40. Disciplinary proceedings against the respondent herein were initiated in terms of Rule 14 of the aforesaid Rules. Rule 14(3) clearly lays down that where it is proposed to hold an inquiry against a government servant under Rule 14 or Rule 15, the disciplinary authority shall draw up or cause to be drawn up the charge sheet. Rule 14(4) again mandates that the disciplinary authority shall deliver or cause to be delivered to the government servant, a copy of the articles of charge, the statement of the imputations of misconduct or misbehaviour and the supporting documents including a list of witnesses by which each article of charge is proposed to be proved. We are unable to interpret this provision as suggested by the Additional Solicitor General, that once the disciplinary authority approves the initiation of the disciplinary proceedings, the charge sheet can be drawn up by an authority other than the disciplinary authority. This would destroy the underlying protection guaranteed under Article 311(1) of the Constitution of India. Such procedure would also do violence to the protective provisions contained under Article 311(2) which ensures that no public servant is dismissed, removed or suspended without following a fair procedure in which he/she has been given a reasonable opportunity to meet the allegations contained in the charge sheet. Such a charge sheet can only be issued upon approval by the appointing authority i.e. Finance Minister.
41. In fact, issuance of the office order No.205 dated 19th July, 2005 makes it evident that the respondents were aware of the legal position. The office order clearly sets out the levels of the decision making authorities depending on the gravity of the consequences that would have to be faced by a delinquent public servant in case the decision is taken to proceed against the public servant. Clause (1) deals with closure of complaints which are anonymous/pseudonymous; if the decision is taken to close the complaint it can be taken by the CVO. But in case of verifiable facts, the complaints have to be referred to the next level of hierarchy CVB (Central Vigilance Bureau). For placing an officer under suspension, the decision has to be taken by the Finance Minister himself. Even review of suspension at quarterly/half yearly interval rests with the Finance Minister. This is so, as suspension during contemplation/pendency of enquiry, though may not be penal in nature per se, still has very serious adverse consequences on the professional as well as the personal life of the officer suspended. The office order recognizing the gravity of the consequences ensures that the decision in relation to suspension/review of suspension shall be taken by the highest authority in the department i.e. the Finance Minister. In matters related to reference to CVC for first stage advice, the competent authority is the Secretary (Revenue). Similarly, for reconsideration of CVCs first stage advice, again the competent authority is the Secretary (Revenue), but in case of disagreement with CVCs first stage advice on approval for referring the case to Department of Personal and Training, the competent authority is the Finance Minister.
42. Clause (8) of the Circular makes it abundantly clear that it relates to approval for issuing charge memo/sanction of prosecution. A plain reading of the aforesaid clause shows that it relates to a decision to be taken by the disciplinary authority as to whether the departmental proceedings are to be initiated or prosecution is to be sanctioned or both are to commence simultaneously. The competent authority for approval of the charge memo is clearly the Finance Minister. There is no second authority specified in the order. We do not agree with Ms. Indira Jaising, learned Additional Solicitor General that the use of the word approval of is not an expression distinct from approval for initiating major penalty proceedings. Under Clause (9), the department firstly puts up the file before the Finance Minister seeking approval for issuing charge memo/sanction of prosecution. The department is seeking an order as to whether the officer is to be proceeded against departmentally or criminal proceedings are to be initiated or both proceedings are to be commenced simultaneously. When the decision is taken by the Finance Minister that the departmental proceedings are to be held (initiation), only then the question of approval of charge memo arises. The department would thereafter complete the necessary formalities and then place the file before the Finance Minster, for approval of charge memo. This provision is in harmony with the mandate contained under Articles 311(1) and (2) that no civil servant shall be dismissed or removed by an authority subordinating to that by which he was appointed. The second limb of the same direction is that punishment on a public servant of dismissal, removal or reduction in rank can only be imposed when the charges have been proved against him in a departmental enquiry held in accordance with the rules of natural justice. Rule 14 of the CCS (CCA) Rules provides for holding a departmental enquiry in accordance with the provisions contained in Article 311(2) of the Constitution of India. Clause (8) also makes it clear that when the Finance Minister is approached for approval of charge memo, approval for taking ancillary action such as appointing an inquiry officer/presiding officer should also be taken. Clause (9) in fact reinforces the provisions in clause (8) to the effect that it is the Finance Minster, who is required to approve the charge memo. Clause (9) relates to a stage after the issuance of charge sheet and when the charge sheeted officer has submitted the statement of defence. It provides that in case the charge sheeted officer simply denies the charges, CVO will appoint an inquiry officer/presiding officer. In case of denial accompanied by representation, the Chairman is to consider the written statement of defence. In case the Chairman comes to a tentative conclusion that written statement of defence has pointed out certain issues which may require modification/amendment of charges then the file has to be put up to the Finance Minster. So the intention is clearly manifest that all decisions with regard to the approval of charge memo, dropping of the charge memo, modification/amendment of charges have to be taken by the Finance Minister.
43 to 46xxxxxxxxxxxxxxxx (Not reproduced here)
47. Further, it appears that during the pendency of these proceedings, the appellants have, after 2009, amended the procedure which provides that the charge memo shall be issued only after the approval is granted by the Finance Minister.
48 to 50 xxxxxxxxxxxxxxx (Not reproduced here).
91. Therefore, in this case also, it was necessary that when once the sum and substance of the charge proposed to be framed against the applicant had been put up for perusal and approval of the Honble Finance Minister, under Rule 16(2) of the CCS (CCA) Rules, his approval to the draft charge memo/charge under Rule 16(3) of the said Rules was also necessary, and the respondents could not have issued the charge sheet to the applicant without the final approval of the same by the Honble Finance Minister himself personally. Hence, it is held that the charge sheet issued to the applicant itself was non-est in the eyes of law.
92. The second file No.DGIT(V)/DP/211/06-Vol.II submitted by the respondents contains only documents and no Note Sheets, and, therefore, does not disclose the process of application of mind on the basis of which various decisions had been arrived at in the applicants case, and we need not discuss the contents of the second file.
93. The third file No DGIT(V)/DP/211/06 submitted by the respondents was started on 08.05.2006, in which the whole process of appointment of the Enquiry Officer, and the Presenting Officer etc., and thereafter the conduct of the D.E. has been dealt with, and is very important. We need not discuss the initial difficulties faced by the respondents in finding an officer of sufficient seniority to be appointed as the E.O. against the applicant, which ultimately could be started by them just before the applicants retirement, as has been noted in the above reproduced order of Allahabad Bench of this Tribunal. Once the respondents delayed the conclusion of the departmental proceedings, the applicant before us had also filed a Contempt Petition CCP No.130/2007 in the meanwhile, which came to be disposed of finally, and soon thereafter the enquiry was finally completed.
94. When the Allahabad Bench of the Tribunal had directed that the disciplinary proceedings should be completed well before 15.05.2008, a Self-Contained Note (SCN, in short) was put up on 12.03.2008 by the Additional Director of Income-tax (Vigilance) Technical to CIT (Vigilance) OSD-I and OSD-I to DGIT (Vigilance), for being submitted to Honble Finance Minister for seeking his approval for not accepting the Enquiry Officers report, as per the discussion in that SCN, and for holding that both the Articles of Charges have been fully proved, and for the matter to be then referred to the CVC for its second stage advice, suggesting that it was a fit case for imposition of a suitable major penalty on the Charged Officer. The DGIT (Vigilance) recorded on 27.03.2008 that in his opinion the Article of Charge-I has to be taken as fully proved, (without his making any distinction in between the Charge 1(a), 1(b) and 1(c), as per the E.O.s report) as against partly proved, as per the report of the Enquiry Officer, and that the Charge No. II should also be held as proved, which had also been held as partly proved by the E.O., and, therefore, he opined that both the Charges were to be taken as fully proved. Accordingly, once again, another modified and more detailed SCN was put up for Honble Finance Ministers approval by Shri A.K. Handa, Director General of Income-tax (Vigilance) on 31.03.2008.
95. The then Honble Finance Minister applied his mind, and very carefully went through this modified and elongated SCN, with great care and attention, and very appropriately marked his query in respect of X against the following portion in Para-2 (12) of the SCN, and then raised a query on 15.04.2008, which portion of the S.C.N. we are highlighting:-
2.12The AO also brought to the notice of Shri Jain that the CIT could only adjudicate on that part of the income which formed part of the additions to the returned income enforced by the AO in his earlier order u/s 143(3) and nothing else other than the enforced additions were open in the revision proceedings.
96. In so far as that part of the charge, out of the Charges 1(a), 1(b) and 1(c) as divided by the E.O., and which had been held by the Enquiry Officer to be proved or partly proved are concerned, those findings of the E.O. were found to be acceptable in that SCN, on the following grounds:-
(a & b) .(Not reproduced here) (c) The IO has also mentioned in his report that the POs contention of the CO exceeding his revisionary power under section 264 for granting relief to the assessee is not a part of the articles of charge and the imputations thereto.
The above finding of the IO is not correct as in the statement of imputations it has been clearly mentioned that the AO had also brought to the notice of Shri Jain that the CIT could only adjudicate on that part of income which form part of the addition to the returned income enforced by the AO in his earlier order u/s 143(3) and nothing else other than the additions were open in the revision proceedings. Further a bare reading of the section in the Act clearly spells out the scope of section 264 as it talks about revision to be made under this section, only to any order passed under the Act. It may also be added that the facts of the case of Gujarat Gas Company Ltd. Vs. JCIT (245 ITR 84) cited by the assessee in connection with this issue are distinguishable from the facts of the case of the assessee himself. In the case cited by him the main issue under consideration was whether the CBDT can direct any Income Tax Authority to make assessment in a particular manner and whether existence of alternative remedy is barred to issue of writ where alternative remedy futile. In view of the above facts the IOs finding of the charges as not proved is not acceptatble.
Article II Allegation That Shri R.K. Jain, functioning as CIT, Central II, Ahmedabad during F.Y. 2002-03, in the case of M/s Labh Construction & Industries Ltd. For AY 97-98 acted with gross negligence, in so far as he failed to detect the apparent contradictions between the AOs remand reports and the draft order intended to give effect to the order of revision; failed to question the AO in respect of the contradictory position the AO was proposing to adopt in draft order vis-`-vis the earlier remand reports; and callously issued a letter on 31/5/2002 in order to facilitate the AO for passing a perverse order on the day of superannuation of the AO.
Comments With regard to the second article of charge dealing with the failure on the part of the CO to detect the apparent contradiction between the AOs remand report and the draft order intending to give effect to the order of revision and his failure to question the AO in respect of contradictory position in the draft order vis-`-vis the earlier remand reports, the IO has held that there is a lapse on the part of the CO in his supervisory capacity, even though no irregularity is fastened on him from legal or statutory point of view as per provisions of the IT Act. Hence he held this charge as partly proved.
In so far as the IO has held the charge to be proved in terms of the lapse on the part of the CO in his supervisory capacity, the same is acceptable. However, it may also be added that the admission of the application u/s 264 without verifying whether any appeal is pending when the revision application was filed on 29.03.2001 is in itself an act of gross negligence. Therefore to proceed to call for a report from the AO before deciding on this issue indicates undue interest in this case and hence absence of absolute integrity and devotion to duty.
Even in terms of the legal powers conferred on the CIT, the provisions of section 264 are meant to give relief where there is miscarriage of justice. In this case there has been no miscarriage of justice because all the issues brought up in the petition relate to items of income disclosed by the assessee in his return after due audit by the statutory auditors. Hence it should have been clear to the CO that the provisions of section 264 and the CO in his capacity as Commissioner of Income Tax, requiring to deal with petition u/s 264, should have taken more care and exercised caution while dealing with this issue, including supervising his subordinates vis-`-vis their reports on such petitions filed. Hence the IOs finding that no irregularity is fastened on him from legal or statutory point of view as per provisions of IT Act is not acceptable. (Emphasis supplied)
97. But, Since the Honble Finance Minister had in his noting dated 15.04.2008 directed to produce the case law in support of the proposition contained in the portion marked as X in Para-12 of that SCN, highlighted and reproduced by us in para 95/above, and to discuss the scope and application of Section 264 of the Income-tax Act, on Honble Finance Ministers directions, another shorter SCN only on the points of law involved was then put up by Shri A.K. Handa, Director General of Income-tax (Vigilance), on 24.04.2008. Interestingly, in this SCN, the scope and powers of the CIT u/s 264 were then correctly and properly examined at last, and it was recorded as follows:-
2. Scope and application of Section 264 Section 264 empowers the Commissioner to call for record of any proceedings under the Act, either on his own motion or on an application by the assessee for the revision of an order.
The condition essential for revision u/s 264 is that there should be an order.
The Commissioner is however to exercise his powers objectively and not arbitrarily or subjectively. The Power is coupled with a duty to be exercised in the interest of doing real justice between the parties.
He cannot ignore relevant and material contentions.
The power of revision u/s 264 is not an administrative power.
The CIT must act according to rules of reasons and justice and he must pass a reasoned order giving adequate reasons in support of the order.
There is nothing in Section 264 which places any restriction on the CIT to give relief to the assessee in a case where the assessee detects mistakes on account of which he was over assessed, after the assessment was completed.
It is also open to the Commissioner to entertain a new ground not argued before the lower authorities.
Some of the situations in which an assessee can approach the Commissioner for revising an order are as under:- [Illustrative] i. where a return is rejected as belated without application of mind;
ii. where certain items of income on which tax is deducted at source are inadvertently omitted to be included resulting in loss of relief to asessee;
iii. where the assessee has omitted to claim certain deductions though all the relevant data are on record.
iv. where the assessee has not remedy by way of appeal against the order in question;
v. where the assessee challenges the correctness of the assessing officer on a point which was not contested before the Assessing Officer, vi. where the assessee challenges the order of the Assessing Officer, on the basis of earlier or later decisions of the Tribunal, High Court or Supreme Court, or otherwise and vii. where an order passed u/s 220(6) had not followed Board Circular No.530, dated 01.03.1989.
Thus whenever a power is conferred on an authority to revise an order, the authority is entitled to examine the correctness, legality and propriety of the order and to pass such suitable orders as the authority may think fit in the circumstances of the particular case before it.
In this case there has been no miscarriage of justice because all the issues brought up in the petition related to items of income disclosed by the assessee in his return after due audit by the statutory auditors. Hence it should have been clear to the CO that the assessee was attempting to reopen settled issues by misinterpreting and misusing the provisions of section 264. The CO in his capacity as CIT (Central), should have exercised more care and caution while dealing with petition u/s 264, including supervising his subordinates vis-`-vis their reports on such petitions filed.
3. As regards the issue as to whether assessees application can be entertained u/s 264 and revision order can be passed where the assessment order is a subject matter of an appeal to CIT (Appeal) or to the Tribunal, it is submitted that there are a plethora of judgments both for and against the issue. However, the following departmental circular sets at rest the controversy on the point: (Reference page 8272 to 8274, Chaturvedi and Pithisaria Vol.V,F/X).
Section 264(4)(c) of the Income Tax Act, 1961, provides that the Commissioner shall not revise any order under that section where the order has been made the subject of an appeal to the Commissioner (Appeals) or to the Appellate Tribunal. A doubt has been raised whether in the following situations the order can be said to have been made subject of an appeal.
(i) where the appeal was withdrawn by the assessee and it was dismissed as such;
(ii) where the appeal was dismissed on the ground that the appeal was incompetent;
(iii) where the appeal was dismissed on the ground of limitation.
Further, the Department Circular No.367, dated 26th July, 1983 on Section 264 (4) (c) of the Income Tax Act, 1961 has clarified that the Board are of the view that the order cannot be said to have been made subject of an appeal if the appeal has been disposed of by the Commissioner (Appeals) or the Appellate Tribunal without passing an order u/s 252(1) or 254(1) on merits.
In the present case the petition u/s 264 was filed by the assessee before the CIT on 28.03.2001. The first appeal against the assessment order u/s 143(3) dated 31.03.2000 was filed on 25.04.2000. It was not admitted by the CIT (Appeal) in terms of Section 249(4), in view of the fact that the assessee had not paid admitted taxes on its returned income and it was dismissed on 31.10.2000. The assessee appealed to the ITAT against the action of the CIT (Appeal) on 01.01.2001. The application to withdraw appeal from ITAT was submitted on 11.12.2001 and assessees appeal on this basis was dismissed on 8.01.2002. The order u/s 264 was finally passed on 21.03.2002. It is for consideration, since the appeal was not decided on merit and no appeal was pending on the date of the order u/s 264, the CO seems to be not precluded from entertaining and passing the order u/s 264.
In view of above and discussion on pages 33-53/N, FMs approval is solicited for
a) not accepting the IOs report to the extent discussed above and holding both the Article of charge as fully proved and
(b) referring the matter to the CVC for their second stage advice suggesting that it is a fit case for imposition of a suitable major penalty on the CO.
(Emphasis supplied)
98. Honble Finance Minister could then somehow overlook the conclusion of the Department itself in that SCN on points of law that .since the appeal was not decided on merit, and no appeal was pending on the date of the order u/s 264, the C.O. seems to be not precluded from entertaining and passing the order u/s 264, & then he approved the proposal on 28.04.2008, and the matter was then referred for the second stage advice to the CVC on 30.04.2008. Nobody thought it fit to frame a proper Note of Disagreement of the Disciplinary Authority at that stage itself, and obtain Honble Finance Ministers approval for such a note of disagreement, as per law.
99. The advice of the CVC dated 13.05.2008 was received within two weeks, and the file was put up again on 14.05.2008, but this time it travelled only upto the DGIT (Vigilance). Another SCN was then ordered to be prepared, which also travelled only upto the DGIT (Vigilance) on 24.11.2008. Thereafter, another SCN dated 24.11.2008 was put up, which also reached only upto the level of Minister of State for Revenue on 04.12.2008, who was not the Disciplinary Authority of the applicant. After that, since the then Honble Prime Minister was then holding the charge as Finance Minister also at that point of time, the file was sent to the Honble Prime Minister. But, instead of the Honble P.M. & F.M. applying his own mind to the case, as is necessarily required of a Disciplinary Authority under the law, and himself signing that file, on behalf of the then Honble P.M./F.M., only his PS wrote on 18.12.2008 that the Prime Minister/Finance Minister had approved the proposal. This sort of practice must be the usual practice of the P.M.s Office in the case of the files of administrative nature, but this just cannot and did not satisfy the legal requirement of the Disciplinary Authority himself applying his own mind, in a quasi judicial capacity, and approving a proper Note of Disagreement. In fact no such Note of Disagreement of the Disciplinary Authority, intended for service upon the applicant, was ever prepared at all, which could be put up for approval by the Honble P.M. and F.M. The applicant thereafter retired on 31.12.2008, on reaching the date of his superannuation.
100. Therefore, it is clear that the proposal to disagree from the findings of the Enquiry Officer, and to hold both the charges as proved, and also to accept the second stage advice of the CVC for levy of suitable major penalty on the applicant, and to refer the matter to the UPSC for its statutory advice, had only the administrative approval from the office of the then Honble Prime Minister and Finance Minister, but it did not have his own approval in a quasi-judicial capacity, by applying his own mind, and he himself signing on the file. Also, as mentioned above, since no note of disagreement was ever prepared on behalf of the Disciplinary Authority, intended to be served upon the applicant, and got approved from the then Honble P.M./F.M., as the quasi-judicial Disciplinary Authority after applying his own mind to the facts of the case, and then served upon the applicant, the whole process of the D.E. got vitiated in this manner also. Therefore, when even this procedural aspect of the necessity of a proper Note of Disagreement of the Disciplinary Authority being prepared, approved by the Disciplinary Authority himself, and served through a notice upon the delinquent Charged Officer was not fulfilled, and given a go bye, this totally and completely vitiated the process of the D.E. proceedings against the applicant, and the applicant retired on 31.12.2008. Still, nobody in the respondent Department comprehended the implication of his retirement.
101. It is seen from pages 88 to 101 of the Note-Sheet file that, in the meanwhile, on the reference made by the Department on 26.08.2010, after the applicant had retired on superannuation on 31.12.2008, the UPSC had first pointed out certain deficiencies on 12.10.2010, and when the file was then again re-submitted and re-sent to UPSC on 11.01.2013, it was the UPSC which had for the first time, much more than four years after the applicants retirement, pointed out through their letter dated 11.03.2013 that though the delinquent Government official had already retired from service on superannuation on 31.12.2008, but neither in the reference made to the UPSC, nor in the notes on the Departments file, it had been mentioned anywhere that the President has considered the case under Rule-9 of the CCS (Pension) Rules, 1972. Therefore, thereafter, through Para-10 & 11 of the Noting of the DGIT (Vig.) & CVO dated 20.03.2013, an approval of the Honble F.M. had been sought and obtained on 23.03.2013 for making a reference once again to the UPSC for its statutory advice, recommending that it is a fit case for imposition of major penalty by way of pension cut in terms of Rule-9 of the CCS (Pension) Rules, 1972, as there was grave misconduct on the part of the Charged Officer. And, instead of first seeking to take action as per the U.P.S.C.s advice to first obtain a sanction for continuance of the vigilance enquiry itself, as required under Rule-9 of the CCS (Pension) Rules, 1972, straightaway the respondent Department jumped the gun, and the approval of the Honble F.M., acting on behalf of the President under the CCS (Pension) Rules, 1972 had been sought for the proposal for holding the applicant guilty, and imposition of a major penalty upon him, as follows:-
10. In view of the above observations of the UPSC formal approval of Honble FM for again making a reference to the UPSC for its statutory advice recommending that it is a fit case for imposition of major penalty by way of pension cut in terms of Rule 9 of the CCS (Pension) Rules, 1972 as there was grave misconduct on the part of the CO, is required.
11. In view of the facts discussed above the approval of the Honble FM is solicited for the following:
A. Tentatively holding both the articles of charge as proved; and B. Accepting the second stage advice of the CVC dated 13.05.2008 that this case merits levy of a suitable major penalty on the CO; and C. Making a reference to UPSC for its statutory advice recommending that it is a fit case for imposition of major penalty by way of a suitable cut in pension in terms of Rule 9 of CCS (Pension) Rules, 1972 on the Charged Officer (who has already retired) as he is tentatively found guilty of grave misconduct and negligence.
102. It is seen from Paragraphs-11.5 (a&b), 11.6 (a&b),11.7 (a&b),11.8(a&b), 11.9(a&b), & 11.10(a&b) of the SCN dated 07.02.2014, that the Departmental authorities once again undertook an exercise of an administrative review of the applicants quasi-judicial orders u/s 264 of the Income-tax Act, which noting may be reproduced here as follows:-
11.5 (a) COs submission:
There was no substances in the allegation that I had failed to detect the apparent contradiction between AOs remand report and the draft order, intending to give effect to the revision. The CO (that is myself) had directed the AO to give effect as per remand report. I was not supposed to give further directions to the AO. It is also relevant to note here that the order passed u/s 264 and the consequent order passed by AO survived and were valid as confirmed by ITAT. Only Addl. CIT could direct the AO as per section 144A.
The role of the CIT as a supervisory authority cannot be measured or documented. It cannot also be quantified or presented in a tabular form to counter any vague and unsubstantiated allegation. The supervisory functions exist but not overtly displayed for future analysis except in form of prescribed inspections and writing of reports on the officers performance. It is unfortunate that only with a view to punish the CO without any material support this charge has been foisted on me. The charges should therefore have been dismissed as irrelevant and unsubstantiated. Yet the UPSC has gone along with DA without examining the legal position of the case.
11.5 (b) Our comments:
There was an apparent lapse on the part of the CO in his supervisory capacity which has been pointed by the IO also. The CO in his capacity as Commissioner of Income Tax while dealing with the assessee petition u/s 264 should have seen that the assessee was attempting to reopen settled issue; should have taken more care and exercised caution while dealing with this issue including supervising his subordinate viz-a-viz their reports in the matter.
11.6 (a) COs submission:
To sum up, Charge sheet was issued on the basis of order u/s 264 wherein no relief to assessee was given. What was given was a simple direction to the AO to pass suitable order on the basis of examination and investigation done by him. This cannot be described as Laconic (para 4.7 of the advice). Most importantly; the order of AO passed on the basis of directions given u/s 264 has been confirmed by ITAT. To nullify the effect of order u/s 264, an order u/s 263 was passed on 18.3.2003. This order was cancelled by ITAT on 16.3.2007. On the basis of reviewed order, penalty u/s 271(1)(c) was also levied and the same also has been cancelled by ITAT on 16.3.2007. Thus, the validity of the order has now been upheld by ITAT and has become final.
11.6 (b) Our comments:
As a Senior Supervisory authority in the Department with vast experience at his command it should have been clear to the CO that the assessee was attempting to reopen settled issues under he garb of provisions of section 264. The CO in his capacity at CIT (Central), should have exercised more care and caution while dealing with petition u/s 264. The AO in his first report pointed that u/s 264 the CIT could only adjudicate on that part of the income which formed part of the additions to the returned income enforced by the AO in his earlier order u/s 143(3) and nothing else other than the enforced additions were open in the revision proceeding. Further the CO as CIT while passing order u/s 264 failed to include his own decision on the AOs point of view with regard to non acceptance of assessees plea of so-called accounting error resulting into over statement of income in the return, while passing his own order of revision. The subsequent event therefore will not help the case of the CO.
11.7 (a) COs submission:
Some of the other issues that needs to be noted are:-
(a) The figure of Rs.2 crores was mentioned just to highlight the gravity of charges. However, refund was given to assessee even after the charges were levelled against the CO. If the figures of demand raised in the order giving effect to order u/s 264 and in the order passed after order u/s 263 were considered, the total tax effect was Rs. 8,91,193 and not Rs. 2 crores.
(b) Regarding the comment that the CO should have given direction and should have found fault in the draft order, it is stated that there is no provision in the Act for giving such directions by the CIT. The Addl. CIT is authorized to give direction u/s 144A to AO. Had he given any such direction, it could have been alleged that the CO interfered in the quasi-judicial functions of the AO.
(c) The allegation of PO that direction was issued to AO before his retirement was baseless as order u/s 264 was passed on 22.3.2002 and not 31.4.2002. It was the AO who slept over two months for which he has been charge sheeted.
11.7 (b) Our comments:
These are matters of record and therefore no separate comment are offered. However the CO as supervisory should have exercised more care and caution while dealing with petition u/s 264, including supervising his subordinates vis-`-vis their reports on such petitions filed.
11.8 (a) COs submission:
No relief was given by CO in order u/s 264 and no directions were issued to give relief. No action was taken to stop issue of refund would indicate that there was no mistake. Similar orders were passed by CIT(A)-III Ahmedabad on 24.10.2002 for A.Y.s 1996-97, 1998-99 and 1999-2000 which were confirmed by ITAT. The successor CIT found no mistake in the order passed by CO but only found some mistake in giving effect to order u/s 264. The AO who gave effect to the order u/s 263 also mentioned that there was no mistake. It is submitted by CO that as the claim of assessee could not be verified by the AO in the remand report, the relief granted by the AO in the order dated 31.5.2002 was therefore beyond the authority granted in order u/s 264 by the CIT. The AO has already been charge sheeted on this ground. The CO could not be held responsible for any relief given by him in the final order (emphasis supplied). In any case, order of AO had been upheld by ITAT. Thus, the order u/s 264 has survived and is valid as on date.
11.8 (b) Our comments:
The action in the case of other officers or subsequent event are not relevant to the case which has to be decided based upon the facts as were before the CO. However it is a fact that a charge sheet dated 28.06.2005 under rule 9 of the CCS (Pension) Rules r/w rules 14 & 15 of the CCS (CCA) Rules was issued to Sh. P.M. Makwana, DCIT(Retd). This was dealt in F. No. DGIT(V)/DP/167/05 and the proceedings were abated vide order dated 25.08.2010 on the demise of the officer.
11.9 (a) COs submission:
Order u/s 264 was passed by me in the year 2002 & this harsh penalty has been decided in 2013 i.e. after a lapse of 11 years. Since the decision for this punishment has taken so long, I have already been punished on so many counts such as a. I was not promoted since the decision was not taken on time.
b. I was not given higher scale of pay due to delay in decision.
c. My gratuity has not been given & I have lost interest of 5 years as I retired in the year 2008.
Since I have already suffered a lot therefore there is no justification on levying such a harsh penalty. I, therefore, request you to reconsider the same.
11.9 (b) Our comments:
The penalty proceeding in this case have been conducted as per CCS (CCA) Rules and also keeping in mind that principle of natural justice is not violated. In the process some delay takes place but at the same time it is ensured that no injustice is caused to the CO.
11.10 (a) COs submission:
In the above circumstances the proposed finding of guilt and the consequent levy of penalty of withdrawal of 25% pension PERMANENTLY is harsh and needs to be reviewed. I would seek your kind intervention and revisit the decision to levy the penalty, if necessary, by making fresh reference to UPSC after clearly presenting there in the Boards comment on the legality of action taken by me u/s 264 of IT Act vis. a vis. of order as of ITAT upholding the COs order.
11.10 (b) Our comments:
The UPSC has given its advice in the matter after careful examination of all the aspects and facts related to the case including the records. It is based on facts and cogent reasoning and found acceptable.
103. Thereafter, the draft order of penalty to be imposed upon the applicant was suggested, and put up through Noting dated 10.02.2014 by the DGIT (Vig) & CVO, which was straightaway approved by the Disciplinary Authority, the then Honble Finance Minister, on 28.02.2014, and the penalty under challenge in the present O.A. was imposed upon the applicant, with the approval of his Disciplinary Authority, but, as has been pointed out above, without following the prescribed procedure as per law of a Note of Disciplinary Authoritys disagreement with the findings of the E.O. having been properly prepared and properly approved by the Disciplinary Authority, & service of the Disciplinary Authoritys Note of Disagreement upon the applicant as the delinquent charged Officer, and the Disciplinary Authority then being required to apply his mind to the delinquents reply to such Disagreement Note also, apart from all other records of the D.E. case.
104. In this manner, repeatedly, and in many ways, the respondents failed to adhere and follow the prescribed procedure for conduct of departmental enquiries even under the CCS (CCA) Rules, 1965. Similarly, they also failed to properly follow even the procedure prescribed under the CCS (Pension) Rules, 1972, and even seek and obtain proper Presidential approval under Rule 9 of those Rules for continuing with the D.E. after the applicants retirement.
105. The ITAT case mentioned above had arisen from the order passed by the applicants successor CIT u/s 263 of the Income-tax Act, 1961, examining the merits of the assessment order dated 31.05.2002 passed by late Shri P.M. Makhwana, the then Assessing Officer DCIT, on the date of his superannuation/retirement. Before the ITAT, the assessee had contended that the order passed by the applicants successor Commissioner u/s 263 of the Income-tax Act, whereby he had directed the Assessing Officer to re-examine/re-compute the income, was wrong with respect to the following issues:-
(i) Hypothetical credit of interest in the name of B. Nanji Finance Ltd. and Hindustan Housing Development Corporation.
(ii) Hypothetical credit of Development income which included with respect to following items at page No.10 of the order u/s 263 of the Act.
1. B. Nanji Finance Ltd.
2. Hindustan Hsg. Dev.Corp.
3. Suryarang Owners Assn.
4. Hindustan Home Finance Ltd.
5. Sombandh Electronics P. Ltd.
6. Shiromani Bungalow Project
7. Shilalekh Project
106. The successor-in-office CIT (of the applicant of this OA) had also rejected the assessees objection to an order being passed u/s 263 on 18 grounds, as reproduced in Para 4.1 of ITATs order, which may also be reproduced from the ITATs orders as below, since it throws some light on the appreciation of the events related to the D.E. case against the applicant as viewed by the successor in office CIT, and the ITAT also, to some extent:-
(1) The same is not relevant since the issue in the present case is whether the A.O. has followed the directions of the C.I.T.(C)-II, Ahmedabad or not.
(2) As discussed in detail, order dated 31.5.2002 is erroneous and contrary to the verification report dated 20.03.2002 and also contrary to the directions u/s 264 dated 22.03.2002. The case law is therefore not relevant.
(3) Here the matter related to the assessed income and the returned income which is not relevant for the reasons why the present order dated 31.5.2002 has been held to be erroneous and prejudicial to the interest of revenue.
(4 to 6) .(Not reproduced here) (7) (a) As discussed in the earlier paragraph of this order, the reasons why the order dated 31.5.2002 is found to be erroneous has been discussed in detail and the conditions mentioned by the Gujarat High Court are therefore fully satisfied.
(b) In this case also as discussed in the preceding para, the essential condition that the order dated 31.5.2002 is erroneous and prejudicial to the interest of revenue has been satisfied and the essential conditions mentioned by the Apex Court are therefore fully satisfied.
(8) The essential condition for the order being erroneous are fully satisfied as discussed earlier.
(9) The order dated 31.5.2002 being erroneous, the case law cited is therefore not relevant.
(10) In the present case the issue is not whether the CIT disagrees with I.T.O. but it is a case whether the ITO has followed his own verification carried out by him which was directed to be followed.
(11) As pointed out earlier, the order dated 31.5.2002 is found to be erroneous and the case law cited is not relevant.
(12) The decision of the M.P.HC is not relevant and of help to the assessee since in the present case the A.O. carried out inquiries but did not incorporate the same correctly while giving effect to the directions of the C.I.T. (C)-II, Ahmedabads order u/s 264 dated 22.3.2002.
(13) In the present case it is not a case of change of opinion, but the action is based on existing facts not followed.
(14) The reasons why the order dated 31.5.2002 is erroneous has been discussed elaborately in the earlier part of this order.
(15) The case law is fully relevant in the sense that the reasons why the order dated 31.5.2002 is erroneous has been discussed elaborately in the earlier part of this order.
(16) (Not reproduced here) (17) The case law cited is not applicable since in the present case the factual reasons for the order dated 31.5.2002 being erroneous and prejudicial to the interest of revenue has been discussed in detail.
(18) (Not reproduced here) (Emphasis supplied).
107. Thereafter in Paragraphs-9, 9.1, 9.2,10.11,12 & 13, the ITAT had decided as follows, which is a quasi-judicial determination, no notice of which was ever taken by the respondent Department while putting up any of their numerous Self Contained Notes, as discussed by us above:-
9. So far as present case is concerned, though the aforesaid decisions support the assessees case but before applying the same in assessees favour we consider it necessary to deal with another aspect of the issue which, in our opinion, is as to whether the order passed by the Assessing Officer on 31/05/2002 giving effect to the CITs order u/s 264 passed on 22/03/2002 can be said to have been passed not only in consequence upon order u/s 264 of the Act itself rather on the basis of subsequent directions/approval of the CIT and for this purpose, even for the sake of repetition, we would like to consider the effect of letter dated 31/05/2002 written by ACIT(Cent.II) Ahmedabad for and on behalf of CIT (Central-II), Ahmedabad (copy of which has been placed at page No.48 of the paper book), which reads as under:-
2. I am directed by the CIT. II Ahmedabad to inform you that no further directions are required in this case.
9.1 From the aforesaid letter, the only conclusion to be arrived at is that:-
(i) draft order giving effect to revision order passed u/s 264 of the Act in the case of Labh Construction and Industries Ltd. for Asst. Year 1997-98 was sent to the CIT for approval as per Assessing Officers letter No.DCIT/CC-111/3(3).Miscellaneous/ 02/03 on 24/05/2002, and
(ii) The CIT informed the Assessing Officer as per his letter dated 31/05/2002 that no further directions were required to be given for giving effect to the revision order passed u/s 264 of the Act, and the aforesaid facts on record confirm beyond any doubt that final order giving effect to order u/s 264 of the Act passed by the CIT was passed by the Assessing Officer not only as per directions of the CIT contained in order u/s 264 of the Act but after approval of CIT also.
9.2 The effect of the aforementioned letter is, therefore, nothing, but the fact that order giving effect to the order u/s 264 of the Act was passed by the Assessing Officer on the basis of specific approval of the CIT and, therefore, was not an order of Assessing Officer as envisaged in the provisions of Section 263 of the Act.
10. After having considered the facts and circumstances of the case and the aforesaid directions relied upon by the ld. Counsel for the assessee, which are direct on the issue, we are of the opinion that the CIT had no jurisdiction to invoke his powers vested u/s 263 of the Act for revising the order passed by the Assessing Officer on 31/05/2002 giving effect to the order of CIT passed u/s 264 of the Act, dated 22/03/2002 as the same was passed after the approval of the CIT.
11. In view of above discussion, we are of the opinion that the order of the CIT passed u/s 263 of the Act on 18/03/2003 is not maintainable in law for want of jurisdiction and, therefore, the same is cancelled.
12. Since we have cancelled the order passed u/s 263 of the Act on the basis of jurisdiction of the CIT u/s 263 of the Act to revise the orders pass as per directions or approval by the CIT, we do not consider it necessary, at this stage, to consider the issues raised on merits.
13. In the result, the appeal of the Assessee is allowed.
(Emphasis supplied).
DISCUSSION OF OUR UNDERSTANDING OF THE CASE
108. The factual picture which emerges from a careful reading of the ITATs above order dated 16.03.2007 is that the real mischief against the revenue had not flowed from the Revision order of the applicant dated 22.03.2002 u/s 264 of Income-tax Act, but as had been correctly concluded even by the successor CIT of the applicant, in Para-12 of his conclusion (supra), the mischief against the revenue had flowed since in the present case the since deceased Assessing Officer had first carried out the required enquiries, but later he himself did not incorporate the same results of his own enquiries correctly while giving effect to the directions contained in the present applicants order u/s 264 of the Act, dated 22.03.2002. In Para-10 of the same Revision order, the successor CIT of the applicant had also rightly mentioned that this is a case where the issue is as to whether the assessing ITO had followed his own verification carried out by him, which he was directed to follow by the applicant as the then CIT through his order u/s 264 of the Act dated 22.03.2002. So, the departmental opinion, as expressed even by the successor-in-office of the present applicant as Commissioner, till 18.03.2003, was that it was only the Assessment order dated 31.05.2002 passed by the assessing ITO late Shri P.M. Makwana, which was erroneous, since it was not a case of change of opinion by the assessing ITO, but a case of the action of the ITO in his Assessment Order not being based on known and existing facts, which he himself had pointed out and verified earlier, but had later chosen to not follow himself. In order to wrongly give the whole case the colour of the erroneous Assessment order dated 31.05.2002 to be not an order of the Assessing Officer himself, but rather an order of the CIT, the applicant before us, it was the mischief of the assessee, who had made a mischievous submission in this regard, taking shelter behind the letter written by Shri P.C. Trivedi, ACIT (H/Q) (Central-II), Ahmedabad, to inform the Assessing Officer that no further directions are required in this case.
109. After having considered the concerned case law, it was the ITAT, which had, in Para 9.1 (ii) of its order, as already reproduced by us above, come to the conclusion that when once the Assessing Officer had been informed that no further directions were required to be given for giving effect to the revision order passed u/s 264 of the Act, the final Assessment order then passed by the Assessing Officer could then not only be said to be as per the directions of the CIT contained in order u/s 264 of the Act, but also with the approval of the CIT (the applicant before us) also. After arriving at such a specific conclusion in Para-9.2 of its order, that the erroneous assessment order dated 31.05.2002 was not an order only of the Assessing Officer, which could be subjected to another review by the applicants successor Commissioner u/s 263 of the Act, as had been done by the successor Commissioner of the applicant, the ITAT had then held that the second Revisional order of the applicants successor CIT, passed u/s 263 of the Act on 18.03.2003, was not maintainable in law, for want of jurisdiction, and, therefore, the same was cancelled.
110. The respondents did not seem to have been aggrieved by the order of the ITAT, and did not take up the matter further before the Honble Gujarat High Court for a judicial review. Perhaps the reason was only that the amounts involved in the order u/s 263 passed by the applicants successor CIT were very small, being deduction for exclusion of interest amounting to Rs. 1,46,993/-, and deduction for exclusion of interest amounting to Rs.2,31,694/. Also, as has been rightly pointed out by the applicant before us, the department had actually accepted the Assessing Officers assessment as final, and had, in the meanwhile, simultaneously, even issued a refund of Income-tax to the assessee, even while, in parallel, the disciplinary proceedings were being initiated against both the present applicant, as well as the since deceased Assessing Officer, in respect of the same assessment of the assessees income.
111. While we have mentioned above that the initiation of the disciplinary proceedings against the applicant and the late Shri P.M. Makhwana, the then DCIT, Central Circle-2 (3), Ahmedabad, had been suggested by Shri P.L. Roongta, IRS, the then DGIT (Investigation), Ahmedabad, as per the file Noting dated 23.01.2003, from page-11/N of the Noting of Shri R.S. Negi, DDIT(Vig.) Tech.II dated 15.06.2007, from Para-4, it is seen that disciplinary proceedings were also initiated, on the same documents and facts, not only against the applicant, and the Assessing Officer late Shri P.M. Makhwana, but, surprisingly, also against Shri Narendra Gaur, Addl. CIT, against whom even Shri P.L. Roongtas initial report also had not made any allegation whatsoever, which fact, and the conclusion of which disciplinary enquiry, has not at all been mentioned or brought on record anywhere by the respondents. Thus, while the respondents never tried to bring a charge against the applicant, and the since deceased Assessing Officer late Shri P.M. Makwana, about their having accepted flats as illegal gratification from the assessee, even the then Addl. CIT, Shri Narendra Gaur, against whom there was not even an allegation of any sort, was also unnecessarily persecuted.
112. In this case, in a classic case of an illegal administrative review of quasi-judicial orders passed by a CIT u/s 264 of the I.T. Act, detailed Self-Contained Notes had been put up for consideration, by first the DGIT (Vig.), and later by Dr. Simmi Gupta, Addl. Director of Income-tax (Vig.)Tech., to the Honble Finance Minister, on 12.03.2008, as is evident at pages 33 to 42 of the relevant files Note Sheet. Again the same officers Notings had been repeated by Shri A.K. Handa, DGIT, himself also, in his Noting dated 31.03.2008, at pages 44 to 42 n/f, from which portions have already been reproduced by us above, on which the then Honble Finance Minister and Disciplinary Authority had raised the query regarding the portion marked by him as X, and he had demanded to know about the case law in support of that legal proposition. Again the DGIT (Vig.) had put up a Note on 24.04.2008 to Honble Finance Minister, and had also obtained his approval on 28.04.2008, but while in some of these Notings, it has been mentioned that the enquiry against late Shri P.M. Makwana, since deceased, had abated, the facts of the case of the enquiry against Shri Narendra Gaur, as mentioned by Shri R.S. Negi in his Notings dated 25.07.2007, and dated 17.09.2007, has not at all been brought on record anywhere by the respondents in the files produced for our perusal.
113. Even the detailed Notings of Dr. Simmi Gupta amount to a junior officer undertaking an illegal Administrative review of a quasi-judicial order of a CIT u/s 264 of the Income-tax Act, passed by the applicant before us, even though it had later been seen and approved and followed by senior officers in their subsequent Notings. But the law of the land does not permit the application of mind by the CIT in passing a quasi-judicial order u/s 264 of the Act to be gone into by any administrative authority whatsoever, other than through the mechanism of a quasi-judicial review by the ITAT, or a judicial review by the Honble jurisdictional High Court. When in Para-9.2 of its order dated 16.03.2007, ITAT had, in its quasi-judicial examination of the whole sequence of events, and all the relevant orders, come to the definite conclusion that the erroneous order of assessment dated 31.05.2002 passed by late Shri P.M. Makwana was nothing but in fact an order giving effect to the quasi-judicial order u/s 264 of the Act passed by the applicant as the then Commissioner, and on the basis of the specific approval granted by the applicant, if the respondents were aggrieved by that quasi-judicial order of the ITAT, they ought to have approached the Honble Gujarat High Court for a judicial review of that ITAT Order, in writ jurisdiction, which also they did not do. Therefore, it is clear that the respondents did not find anything legally wrong, and were content with the opinion of the applicants successor Commissioner (that the order passed by the Assessing Officer dated 31.05.2002 was wrong) being set aside by the ITAT, which position was acceptable to the respondents.
114. If that be so, after the order of ITAT had been pronounced on 16.03.2007, on the facts of the same case, the respondent Authorities were further totally without any jurisdiction to record their Notings to the contrary on the administrative side, as they have done from page-5 of the Note Sheets (File No.DGIT(V)/DP/211/06), in none of which notings the facts regarding the quasi-judicial findings arrived at by ITAT on 16.03.2007 have been mentioned. Neither did Shri R.S. Negi, DDIT(Vig.)Tech-II mention anything about the orders of the ITAT in any of his Notings dated 30.05.2007, 15.06.2007, 27.06.2007, 25.07.2007, 17.09.2007, 27.09.2007, 05.10.2007, 25.10.2007, 06.11.2007, 15.11.2007 (page-9,11,12,13,15,16,18,20,21,22,24,25 &26 of the Note file), nor in his subsequent Notings at pages 27,28,29,30,31, Shri Negi had mentioned anything about the appreciation of the facts of the case quasi-judicially by the orders of the ITAT dated 16.03.2007.
115. In her Noting dated 12.03.2008, from pages 33 to 42, n/f, Dr. Simmi Gupta, Addl. Director of Income-tax (Vig.)Tech., also did not mention anything about the quasi-judicial conclusions arrived at by the ITAT, which had changed the complexion of the case of the Department against the present applicant, and could have resulted in an immediate closure of the D.E. case against the applicant. As already mentioned above, even the DGIT was not truthful in his Noting dated 24.04.2008, put up to the Honble Finance Minister, inasmuch as neither did he mention anywhere, in more than 8 pages of his Notings, anything about the quasi-judicial orders of the ITAT dated 16.03.2007, arising from the same case, and nor did he bring to the notice of the applicants Disciplinary Authority, the then Honble Finance Minister, any facts regarding the parallel D.E. cases initiated against Shri Narendra Gaur, Addl. CIT, and late Shri P.M. Makwana, DCIT, flowing from the same facts.
116. It is a travesty of justice that a quasi-judicial order passed by the applicant as CIT u/s 264 of the Income-tax Act, which the respondents were not even in a position to assail before either the ITAT, or before the Honble Gujarat High Court, and were not even able to criticize properly in the quasi-judicial proceedings before the ITAT, as recorded by the ITAT in its order dated 16.03.2007, has gone on to be examined administratively, in a manner in which a junior Officer could record file notings to disagree not only with the departmentally unassailable quasi-judicial order of a CIT u/s 264 of the Income-tax Act, but that she had even gone on to disagree with the quasi-judicial findings of another further Senior Officer, Shri R.C. Sethi, the CCIT Ahmedabad-II, who was the Enquiry Officer of the DE against the applicant, and she had then gone on to suggest disagreement with the Enquiry Officers quasi-judicial findings also, on very-very flimsy grounds, which flimsyness of the grounds was not seen through by any of her superiors. Even at the late stage of the applicants comments having been called for, after the opinion of the CVC had been obtained, the applicant had made very relevant legal points in making his submissions, which were again summarized by Dr. Simmi Gupta in her tangential Noting dated 04.09.2008 as follows:-
7. In response thereto the CO vide his letter dated 23.7.2008 has filed the following submissions.
COs submissions The CO has submitted that the charges have been leveled in respect of action taken in the normal course of discharge of his quasi judicial functions. In regard to the allegation that the assessee was allowed to rewrite the books, the fact is that the books were never rewritten, only additional relief was claimed in petition u/s 264. In case books were rewritten, the AO in the remand report should have commented for rewriting or manipulation of books. Thus, this charge was unfounded and baseless.
The case in which 264 was done that was that of a company and the audited accounts were filed with the returns at the time of assessment. Such audited accounts are governed by Company Law. The question of rewriting the books therefore does not arise. In the course of Income Tax proceedings, the assessee is well within his rights to adduce additional evidence in support of any claim admissible under the Income Tax Act, even if such evidence does not form part of the audited accounts.
The DA has resorted to use of words without understanding the meaning e.g. catena of judgments. It is well known to all officials of the Income Tax Department who have worked in the field that they are bound by the ratio laid down by the jurisdictional High Court.
The comments of DA smacks of prejudice and malice when he rejects the IOs findings wherever IO has held that the CO has not committed an error of judgement or acted negligently. The IO was appointed by the DA in order to examine the facts and circumstances and give his findings. IO was right in holding that the CO had based his actions on a series of judgment raised by the assessee. It is not the job of IO to bring any evidence to suggest that the additional ground raised was bonafide or was without good reasons.
The DA cannot reject IOs findings for holding that the assessee claimed only additional relief and never rewrote the books.
The CO has submitted that he directed the AO on every issue to ascertain the correct facts and then decide on its admissibility. Such a direction effectively fulfills the requirements sought to be enforced by the DA. Every issue raised in the 264 petition which were examined in the order of the AO and allowed thereof have all become final after getting the approval of its admissibility at various appellate forums for both earlier and later years at CCIT(A) and ITAT level.
A. Admissibility of application u/s 264 The order of AO has neither been rectified nor cancelled and stands valid as on date. Even refund has been issued after issuance of charge memo, which indicates that even after issuance of charge memo no mistake was found in the order of the AO.
While passing the order u/s 263 or while issuing the show cause notice u/s 263, CIT (Central) has not found any mistake.
B. Other issues
(a) Deduction of interest in respect of B.Nanji & Co.Rs.78, 247/-.
The AO has allowed the interest. The order of AO has neither been rectified nor cancelled and stands valid as on date. Even refund has been issued after issuance of charge memo, which indicates that even after issuance of charge memo no mistake was found in the order of the AO. The successor CIT (Central) in his order u/s 263 passed subsequently has stated on page 11 that deduction was rightly allowed.
(b) Interest income Sunil B. Patel Rs.21,97, 630/-.
The AO has not allowed this interest. The successor CIT (Central) in his order u/s 263 has stated that deduction was rightly allowable. The CIT (A) has allowed this deduction in A.Y. 98-99.
(c) Hindustan Housing Development
Rs.13,09,878/-
The order of AO has neither been rectified nor cancelled and stands valid as on date. Even refund has been issued after issuance of charge memo, which indicates that even after issuance of charge memo no mistake was found in the order of the AO. In order u/s 263 deduction allowed by the AO was accepted and therefore, order of the AO was accepted on this issue.
(c) Suryarang Owners Association Rs.1,46,993/-
The AO allowed this deduction on its own. As on date neither the order of the AO was rectified nor it was cancelled and stands valid as on date. On the basis of AOs order, refund for other years was issued as no demand was created rectifying this order. This relief was withdrawn u/s 263 by CIT(C) However, the order of CIT(C) under 263 was cancelled by ITAT.
(e) Hindustan Homefina Ltd. Rs.34,95,341/-
The AO allowed this interest on its own. As on date this order has not been cancelled and stands valid. CIT (Central) has accepted the order of the AO u/s 263, which means no fault was found in AOs order.
(f) Sambandh Electronics Rs.2,31,694/-
The AO allowed this deduction on its own and the order of the AO has not been disturbed by CIT (Central)
(g) Shiromani Bunglow Rs.30,13,134/-
The AO allowed this deduction on its own. As on date neither the order of the AO was rectified nor it was cancelled and stands valid as on date. On the basis of AOs order, refund for other years was issued as no demand was created rectifying this order. On this issue similar additional ground was accepted by CIT (Appeals) for A.Y. 96-97 &^ 97-98 relying upon the decision of Supreme Court in the case of Jute Corpn., of India Vs. CIT and Anr. 187 ITR 688 (SC)
(h) The AO allowed this deduction. As on date the order of the AO has neither been rectified nor cancelled and stands valid order. Even the refund was given for other years considering this order as valid order. This relief was withdrawn u/s 263 by CIT(C). However, the order of CIT (C ) under 263 was cancelled by ITAT.
From the above, it will be very clear that the DA is chasing a mirage in the hope of foisting some charges. The figure of Rs.2 crores was mentioned just to highlight the gravity of charges. The figure of Rs.2 crores was mentioned just to highlight the gravity of charges were leveled if the figures of demand raised in the order giving effect to order u/s 264 and in the order passed after order u/s 263 were considered, the total effect was Rs.891,193 and not Rs.2 crores.
It has been discussed by ITAT that additional ground can be admitted on the basis of real income theory and same has been accepted by CIT(A) for A.Ys. 1996-97, 1998-00 and 1999-2000 also.
The CO has submitted that the IO was not correct in holding that he allowed additional grounds to be raised without bringing on record that the grounds were bonafide. In this case, the additional ground was considered during the course of 264 proceedings and by allowing the issue to be considered by the AO while passing consequential order he only exercised the powers conferred on him by proviso to Section 264(3).
The fact was that the failure of Shilalkeh project was brought on record by the assessee in the course of 264 proceedings and the same was allowed to be considered by the AO because all other issues were open before the AO for inquiry and final orders. Its admissibility have all since been upheld by the CIT(A) and the ITAT for earlier years also.
It is well settled in law that even if a wrong decision is given by an authority in exercise of quasi-judicial functions but the said decision has been arrived at in a bonafide manner and without any evidence of wrong doing or motive to cause unlawful gain to someone or unlawful loss to the government, the same would not qualify as a misconduct, let alone a misconduct warranting initiation of major penalty proceedings under Rule 14 of the CCS (CCA) Rules.
It has been held by various Courts that any error of judgment cannot be a misconduct and also charge sheet cannot be issued merely on the basis of quasi judicial functions.
The role of the CIT as a supervisory authority cannot be measured or documented. It cannot also be quantified or presented in a tabular form to counter any vague unsubstantiated allegation. The supervisory functions exist but mot overtly displayed for future analysis except in form of prescribed inspections and writing of reports on the officers performance.
Comments The CO in his submission has merely repeated what had earlier been stated by him. He has stressed upon the fact that the interest from 6 parties were not actually earned or accrued to the company, although such income was credited to the P&L Account. That most of the accounts were advances given for acquisition of land and as per terms of agreement, no interest was receivable. The receipts were then misclassified as income. He has submitted that the AO had allowed the deduction of these interest and no mistake was found in the order of AO even the CIT Central subsequently held that deduction had rightly been allowed.
Similarly, regarding development charges of Rs.30,13,134/- in respect of Shiromani Bungalow project had been credited to the P&L Account in anticipation of success of the project on a prospective basis. The CO had stated that the AO had allowed this deduction on the basis that no agreement for purchase of land has been entered into the said development charges are required to be excluded while computing total income. Even though the relief was withdrawn u/s 263 by CIT (Central), however the same was cancelled by ITAT.
The CO has discussed the merits/demerits of various deductions allowed by the AO in consequence of order u/s 264. He has failed to address the main issue about proper and judicious use of power even when conferred by the act. Thus even if a power is conferred on any authority to revise an order, the authority is entitled to examine the correctness, legality and propriety of the order and to pass such suitable orders as the authority may think fit in the circumstances of the particular case before it.
In this case it should have been clear to the CO that the assessee was attempting to reopen settled issues under the garb of provisions of section 264. The CO in his capacity as CIT (Central), should have exercised more care and caution while dealing with petition u/s 264, including supervising his subordinates vis-a-vis their reports on such petitions filed.
Thus even after considering the COs submissions the charges against the CO may continue to be held as proved.
Conclusion & Proposal In view of the discussion above, the COs submissions may not be accepted, and both the articles of charge may continue to be held as fully proved. If approved, statutory advice of the UPSC may be obtained.
In view of above, FMs approval may be solicited for
(a) holding both the articles of charge as proved.
(b) accepting the second stage advice of the CVC that this case merits levy of a suitable major penalty on the CO.
(c) making a reference to the UPSC for their statutory advice with the above view.
117. Thus, in her administrative comments recorded at pages 67 & 68 n/f, she had gone on to disagree with the quasi-judicial orders of three of her Seniors, firstly the Revisional Commissioner-applicant, secondly the successor Commissioner of the applicant, and thirdly Shri R.C. Sethi, the Enquiry Officer of the D.E. against the present applicant.
118. Therefore, we are of the firm view that the whole D.E. proceedings against the applicant, which had been continued and conducted beyond the date of ITATs order dated 16.03.2007, even overlooking the quasi-judicial order of the ITAT also, was only a witch-hunt, in order to somehow scuttle and eliminate the applicants chances of promotion. We do not know as to what fate befell Shri Narendra Gaur, as it is not apparent from the records submitted before us. And, it is clear from reading of the ITAT order that if at all there was any mischief, as the respondents had contended, it was on the part of the DCIT assessing ITO, late Shri P.M. Makwana only, whom nature saved, as the disciplinary proceedings against him abated after his death. No willful mischief having been committed by the applicant can be discerned from a reading of the ITAT order, which was the only quasi-judicial review ever undertaken of the facts on the basis of which the present D.E. proceedings had been initiated.
119. In the impugned order dated 13.03.2014, which purports itself to have been passed on behalf of the Disciplinary Authority, and By order and in the name of the President of India though signed by Under Secretary, the Enquiry Officers findings in respect of Article of Charge-I(a) were also not found to be acceptable to the Disciplinary Authority, and even that charge was held to have been proved. In respect of Article of Charge-I(b), where the Enquiry Officer had taken the Article of Charge-I(b) to be proved, it was stated that the Disciplinary Authority had agreed with those findings, and had held that charge to have been fully proved. In respect of Article of Charge-I(c), in respect of which the Enquiry Officer had held the same to have been only partly proved, it was stated that the Disciplinary Authority had disagreed, and held that Article of Charge-I(c) to also have been fully proved. But these specific agreements and disagreements of the Disciplinary Authority (the Honble F.M.) himself do not appear to have been recorded anywhere, or even approved anywhere in the file, after the Disciplinary Authority himself having applied his own mind, in a quasi-judicial manner.
120. In respect of Article of Charge-II, which the Enquiry Officer had found to have been only partially proved, it was stated that the Disciplinary Authority had held this Article of Charge-II also as proved. But, once again, from a conjoint reading of the file notings and the impugned order purported to have been passed for and on behalf of the Disciplinary Authority, and stating for it to have been passed By order and in the name of the President of India though signed by the Under Secretary, it is clear that all the above cited case law on the nature of the powers of the Revisional Commissioner u/s 264 of the Income-tax Act, as discussed in great detail by us above, had not at all been properly and correctly understood and appreciated, and, thereafter, applied to the instant D.E. case by the Respondent Department properly. The glaring bias, as contained in the impugned order, to somehow punish the applicant, is clear in Paragraphs-5.1.1, 5.1.2, 5.1.3, 5.1.4, 5.1.5 from the following wordings:-
..Merely, by taking support from a catena of judgments, the assessee was able to raise Additional grounds and he was allowed to do so without going in to the facts of the case and verifying the same. On undertaking a detailed investigation based on the above facts, in all probabilities the circumstances emerging from the same would have distinguished the case of the assessee from the ones cited by him.
DAs views:
The IO has taken a narrow view of the matter by holding that as the assessee never re-wrote the books and only claimed Additional relief, that part of the charge cannot be held as proved. On taking a holistic view of the entire issue it is found that in this case the CO facilitated the assessee to understate its income for A.Y. 97-98 by an amount in excess of Rs.2 crores vis-a-vis the returned income. The fact that this was in respect of those very years where books results had been adopted by the assessee company and reflected in the Income tax Return was overlooked by the IO and by merely repeating the COs contention, he held this part of the charge as not proved. The IOs findings were not acceptable for the above reasons. The DA accordingly held this part of Article-I as proved.
.The preliminary aspects including verification of the nature of advances, whether paid as advance with interest or land purchase advance (without interest); verification of claim of loss of records in fire with evidence; action taken, if any, against the auditors for not preparing proper account; evidence for the claims of suspicion on over statement of income by directors, claim of retrenchment of staff, claim of delay in receipt of TDS certificate etc. which were crucial to consider the admissibility of the application, were not directed to be looked into by the CO in his capacity as the CIT which dealing with a Petition u/s 264. The IOs findings were, therefore, unacceptable in view of the above facts.
IOs findings:
On the issue of admissibility of Additional ground which was raised for the first time on 21.02.2002 before the CO and much after the date of revision Petition dated 29.03.2001, the IO has held as the charge as proved.
DAs Views:
The IOs findings were acceptable in view of the limit laid down in section 264. The IO has rightly appreciated the fact that as per sub-section3 of the section264.
IOs findings:
..Similarly as regards the taxability of income from Shilalek Project, the IO has held that the directions of the CO to recompute the income as per the report of the considered decision was rendered by him. Hence with respect to the above two points the IO held the charge as proved.
DAs Views:
the CO in his order u/s 264 did not pass any precise order to facilitate the AO to take a position in the matter. The AO himself in the remand report had left the conclusions of his investigation unclear, even though the OA had mentioned many critical negative features of the assessees submission thereon. Hence in view of the fact that since the AO did not conclusively round up the results of his investigation, the COs order requiring the AO to follow his remand report was vague and unsuitable for deciding the terms of the assesses application.
(ii) Regarding the exclusion of income in respect of Shilalek Building Project, the circumstances of the case show that the very basis of the Additional ground was uncertain. The CO failed to note in his order that the Additional ground raised was not bonafide and why the same could not have been raised earlier for good and sufficient reasons.
(Emphasis supplied).
121. Further, in respect of the same Article of Charge-II, where the Enquiry Officer had correctly recognized the fact that the charge was not at all in respect of the powers of the applicant as Revisional Commissioner u/s 264 of the Income Tax Act, but was in respect only of an administrative lapse on his part, in respect of his exercise of his functions in the supervisory capacity, and the Enquiry Officer had held that no illegality or irregularity is fastened on the applicant flowing from this Charge-II from any legal or statutory point of view as per the provisions of Income Tax Act, still the Department had, in the name of the Disciplinary Authority, gone on an entirely wrong track, as if this Article of Charge-II also was somehow related to the exercise of revisional powers of the applicant in his capacity as Commissioner u/s 264 of Income Tax Act, and had gone ahead on that basis to hold the charge as proved, which is entirely wrong, illegal, and incorrect, in view of the fact that the very charge levelled against him itself did not flow from Section-264 of Income Tax Act. Therefore, the purported conclusion of the Disciplinary Authority in respect of Article of Charge II, stated to also flow from the Section 264 of Income Tax Act, was entirely wrong and illegal, when it had gone beyond the notings as put up to the Honble Finance Minister for his approval on file, and, contrary to those notings, had totally tangentially gone ahead to hold as follows, which view was never approved by the Honble F.M. as the applicants Disciplinary Authority anywhere in the files:-
5.2 Article-II: Failed to detect apparent contradiction between the AOs remand report and the draft order giving effect to the revision order.
IOs findings.(not reproduced here once again) DAs Views:
.Even in terms of the legal powers conferred on the CIT, the provisions of section 264 are meant to give relief when there is miscarriage of justice. In this case there was no miscarriage of justice because all the issues brought up in the Petition related to items of income disclosed by the assessee in his return after due audit by the statutory auditors. Hence it should have been clear to the CO that the assessee was attempting to reopen settled issues by misinterpreting and misusing the provisions of section264 and the CO in his capacity as Commissioner of Income Tax, requiring to deal with Petition u/s 264, should have taken more care and exercised caution while dealing with this issue, including supervising his subordinates vis-a-vis their reports on such Petitions filed. Hence the IOs finding that no irregularity is fastened on him from legal or statutory point of view as per provisions of IT Act was not acceptable. The DA accordingly held this part of Article-II also as proved.
(Emphasis supplied).
122. While the order passed by the applicant on 22.03.2002 was under the extra-ordinary revisional powers of the Commissioner u/s 264 of the Income Tax Act, those extra- ordinary powers were certainly not available under the law to the E.O., when he, without having any legal authority to do so, took it upon himself to try to weigh as to what aspects of the facts of the case of the revision petition had been covered by the Revisional Commissioner in his order u/s 264, and as to in his opinion in what manner the concerned matter ought to have been covered by the applicant, while considering the revision petition as the CIT. There cannot be such an administrative or even a quasi-judicial review within the Department, by any of the superiors of the CIT, of the revisional orders of a Commissioner passed under Sections 263 or 264 of the Income-tax Act, 1961. If the Department finds any such revisional orders to be wrong, and prejudicial to the revenue, the remedy lies only by way of an appeal to be filed before the ITAT for a quasi-judicial review of such an order, or a Writ Petition to be filed for a judicial review before the jurisdictional High Court under Article 226, as discussed by us above also. The position of law, as it has emerged from the various case law, as discussed in detail by us above, is such that it places the quasi-judicial order passed by the Revisional Commissioner of Income Tax under his extra-ordinary powers (u/s 263 and) u/s 264 of the Income-tax Act on such a high pedestal, that a charge in respect of that quasi-judicial order ought not to have been framed against the present applicant at all, ab-initio, in the absence of any charge as permissible under K.K. Dhawan (supra), and cannot at all be framed in future also, in any future contemplated D.E., against any Revisional Commissioner, by stating that while passing his quasi-judicial order (u/s 263 or) u/s 264 of the IT Act, he should have appreciated the evidence available before him in a particular alternative manner, and not in the manner he had actually done. Even the E.O. trying to do so in the course of the submission of his report in respect of the D.E. conducted by him, it amounts to the E.O. trying to place himself in the shoes of the Revisional Commissioner (u/s 263 or) u/s 264, and then trying to re-appreciate the evidence as was earlier available before the Revisional Commissioner (u/s 263 or) u/s 264, which is impermissible under the law. Thus, even the E.O. trying to take it upon himself to try to perform the revisional functions (u/s 263 or) u/s 264 of the Act, is a blatant illegality, which function, even in his otherwise quasi-judicial capacity, the E.O. is not at all competent to perform, and which renders his Enquiry Report in respect of the D.E. conducted by him in the instant case null and void in the eyes of the law.
123. The Enquiry Officers role, if such a D.E. in respect of a CITs order (u/s 263 or) u/s 264 can at all be instituted, after the fulfillment of the requirements of any one of the six criteria as laid down in K.K. Dhawan (supra), can, therefore, be limited only to see as to whether any portion of the order of revision passed (u/s 263 or) u/s 264 of the Act shows prima-facie that the revisional order of the Commissioner had been passed malafide, under influence, or in exercise of corrupt means, with a culpable mens rea, to do a wrong to the revenue, in order to unduly and illegally secure for himself a wrongful gain, by trying to illegally benefit the assessee, who had filed the application u/s 264, for any type of consideration, of whatever nature, of whatever kind, and of whatever magnitude!!! It goes without saying that, therefore, the Articles of Charges can also be framed by the Disciplinary Authority in respect of any Revisional Order of any C.I.T., who has passed an order under his inherent powers u/s 263 and/or u/s 264 of the I.T. Act., 1961, only if any of the above enabling circumstances are apparent on the face of the records!!! CONCLUSIONS AND FINDINGS
124. Therefore, to our mind, the scope of a disciplinary enquiry in respect of any orders passed by the Revisional Commissioner of Income Tax Act (u/s 263 and ) u/s 264 is very-very limited, as firstly the Articles of charges themselves have to disclose any of the above mentioned type of perversities, and then, cross the hurdle of at least one of the six tests as laid down by the Honble Apex Court in K.K. Dhawan (supra) being satisfied, and even after that, the Enquiry Officer does not have the freedom of having been placed by the CCS (CCA) Rules, 1965, on that high pedestal, as available under law to a revisional CIT (u/s 263 and) u/s 264 of the Income-tax Act, and for the E.O. to try to decide the revision application afresh, on the given facts, and then give his own alternative or different opinion by virtue of his limited powers under the CCS (CCA) Rules, 1965, different than the high pedestal on which the law makers have placed the orders passed by a CIT under the revisional powers of a Commissioner (u/s 263 or/and) u/s 264 of Income-tax Act, 1961.
125. In a similar case, of another officer of the Indian Revenue Service itself, Shri S. Rajguru vs. Union of India in OA No.2815/2012 in the judgment and order co-authored by one of us, and pronounced on 01.02.2013, it had been held as follows:-
17.. The decision arrived at by him may be a mistake in law or error in law but the same cannot be the basis for taking disciplinary action against him as the respondents/disciplinary authority have not pointed out any malafide, question of integrity/dishonesty and no nexus has been established between him and the decision the applicant has taken in those four cases. In the absence of any malafide intention and with no linkage of dishonest action of the applicant, the decision taken by him cannot be considered to be lack of devotion to duty, nor it can be called to be lack of integrity and unbecoming of a government servant. The quasi-judicial authority has to function independently, transparently and should not be biased either by the views of the Government or by the views of the affected parties. In order to ensure that the CIT (A) functions as an independent quasi-judicial authority he has to be free from the fear or favour impact/effect. If there is fear of suffering a disciplinary action in case his decision goes against the Government, no quasi-judicial authority can function independently, fairly and in a transparent manner. As the Honble Supreme Court has held in the judgment referred to above, the CIT (A)-a quasi judicial authority has to be protected against the fear of proceeding against the disciplinary cases on decision taken by him, unless the same can be attributed to be the result of malafide/arbitrary action and with certain dishonest motive. In the instant case, there is no iota of dishonest motive and question on the applicants integrity. The charge memo does not reveal that the decision taken by the applicant was based on certain malafide or arbitrary action. At best the Disciplinary Authority can attribute negligence against the applicant but even that negligence in discharging the quasi judicial functions cannot be treated as illegality and misconduct for which the applicant should face disciplinary action.
18. Now the question arises - whether a quasi judicial order if found to be wrong, can be the basis to treat the quasi judicial authoritys decision as misconduct? Let us examine what constitutes misconduct under CCS (Conduct) Rules.
19. The Hon'ble Supreme Court observed in the case of M. M. Malhotra Vs. Union of India [2005 -8-SCC-351] that the range of activities which may amount to acts which are inconsistent with the interest of public service and not befitting the status, position and dignity of a public servant are so varied that it would be impossible for the employer to exhaustively enumerate such acts and treat the categories of misconduct. "It has, therefore, to be noted that the word "misconduct" is not capable of precise definition. But at the same time though incapable of precise definition, the word "misconduct" on reflection receives its connotation from the context, the delinquency in performance and its effect on the discipline and the nature of the duty. The act complained of must bear a forbidden quality or character and its ambit has to be construed with reference to the subject-matter and the context wherein the term occurs, having regard to the scope of the statute and the public purpose it seeks to serve."
20. In view of the well settled legal position, we are of the considered view that the applicant as CIT (A) functioned as quasi-judicial authority and discharged quasi-judicial functions. Further, in the absence of any alleged link of the applicant with malafide motive, arbitrary action and question of his integrity, we opine that he is not liable to disciplinary action.
126. This aspect is relevant not only in this instant case before us, but should perhaps guide the respondent-Union of India, in all future cases also, in which disciplinary enquiries are under contemplation, and are un-necessarily being sought to be initiated against any CIT in respect of the orders of revision passed by him (u/s 263 or/and) u/s 264 of Income Tax Act, 1961. At the cost of repetition, it may be again stated that the law as settled under the I.T. Act, 1961, itself does not at all allow either any of the superiors of the Revisional Commissioner (in his capacity as a supervisory officer CCIT, or the Board of C.B.D.T., or as an Enquiry Officer in a D.E.), or even the Disciplinary Authority of the Revisional Commissioner, the Honble Finance Minister himself, to try to place themselves in the shoes of the Revisional Commissioner u/s 263 or u/s 264 of the IT Act, 1961, and to try to re-appreciate the evidence on the basis of which the Revisional Commissioner had exercised his extra-ordinary powers under the Act, and passed his quasi-judicial order. If the revenue is aggrieved by any such Revisional Order passed by any C.I.T., then also they can only approach the ITAT for a quasi-judicial review in appeal, or the jurisdictional High Court under Article 226 for a judicial review of the Commissioners order. So would be the case for an aggrieved assessee-Revision Petitioner also.
127. The law as laid down u/s 264 of the IT Act specifically and clearly provides that whatever order the Revisional CIT may pass under this particular section cannot be to the detriment of the assessee, who has approached the Revisional Commissioner by filing a Revision Petition u/s 264. After the CITs order, the assessee Revision Petitioner cannot walk away in a position that is worse than that which had prevailed in respect of the assessment of his income before his filing the Revision Petition u/s 264. Since that is so, as per the express provisions of the law, there can be only two kinds of orders which can be passed by the Revisional CIT u/s 264, first type being to decline to interfere with the assessment orders, and any other orders which have been sought to be revised in the revision petition filed u/s 264, or, the second type being to accept the revision petition either in full, or in part, accepting either in full or in part the contentions of the revision petitioner assessee u/s 264 of the IT Act, as raised by him, against the conclusions arrived at by the Assessing Officer in his Assessment Order/any other order.
128. It is clear that the second type of such order of revision passed by the CIT can, therefore, only be to the detriment of the revenue. Therefore, if a Revisional Commissioner can u/s 264 pass only two types of orders, first type being for declining to interfere, or second type being to pass an order fully or partly in favour of the Revision Petitioner assessee, and thus against the revenue, and he is specifically prohibited by the law itself from passing an order to the detriment of the assessee Revision Petitioner, this appears to have become an easy tool in the hands of the Departmental and Vigilance Authorities to try to assail the bona-fides of the Officers at the level of Commissioners, and thus try to effectively scuttle their chances of future promotions. Therefore, we feel that unless and untill a very strong case of malafide, malfeasance, misfeasance, gross negligence, corrupt practice, and a presence of mens rea, to deliberately try to deprive the revenue of the tax due from the Revision Petitioner-assessee, can first be made out from the records, and then proved, even the disciplinary enquiry itself cannot, or ought not, be instituted in respect of any revisional orders passed by any CIT in respect of his exercise of his extra-ordinary powers under the law (u/s 263 and) u/s 264 of the Income-tax Act. Any CIT passing an order u/s 264 of the I.T. Act becomes an easy prey, and a likely victim of inter-departmental rivalry, which the law makers could have never intended while enacting the said section 264. The Allahabad Bench of this Tribunal had also found the arguments of the present applicant on these lines to be attractive, in para 9 of its orders dated 30.03.2007, as already reproduced above, and we are in full agreement with that coordinate Bench on this aspect. Similar was the conclusion and purport of the orders of the Calcutta Bench of this Tribunal dated 27.02.2007 in the OA No.06/2006 Baljit Singh Sondhi (supra).
129. In Para-6 of the impugned order, the Disciplinary Authority has quoted that the matter was referred to CVC for its second stage advice, and that the advice of CVC was that the applicants case was a fit case for imposition of a suitable major penalty. In this context, it may be noted that a Coordinate Bench of this Tribunal at Jodhpur had (in a judgment and order authored by one of us), in Prem Prakash vs. Union of India in OA 89/2009, decided on 14.12.2011 (supra), held any such consultation with the CVC to be illegal, as CVC is concerned only with the vigilance aspect, and does not form a part of the hierarchy of the disciplinary authorities who are competent to consider the case of a delinquent Government Official under the CCS (CCA) Rules, 1965. However, since a Writ Petition against that judgment and order has been preferred before the Jodhpur Bench of Honble High Court of Rajasthan, and that judgment & order has not yet attained finality, we would not cite from that order, and we cannot, on that ground, set aside the present departmental enquiry proceedings against the applicant, on the ground of the illegality of CVC having been consulted in this case by the Disciplinary Authority, which consultation is not provided for in any of the Rules of the CCS (CCA) Rules, 1965.
130. However, the fact remains that under the law of the land the advice of the CVC could not have formed the basis for the Disciplinary Authority to arrive at any of its conclusions, which the CCS (CCA) Rules, 1965, require it to arrive at independently, by applying his own mind, in a quasi-judicial manner. Even otherwise, the advice of the CVC was only for levy of a major penalty under the CCS (CCA) Rules, 1965, while the penalty actually levied on the applicant in the instant case is the penalty of a cut in his pension, which, as has been rightly contended by the applicant, and emphasized by his learned counsel, is not one of the minor or major penalties as prescribed under the CCS (CCA) Rules, 1965. Cut in pension being ordered is only possible when an enquiry is initiated and conducted under the CCS (Pension) Rules, 1972, which powers the respondents have claimed to have utilized in passing the impugned order. Therefore, in any case, the advice of CVC has not been ultimately followed by the Disciplinary Authority in this case, since the applicant had superannuated in the interregnum, and a major or minor penalty under the CCS (CCA) Rules, 1965, could not have been imposed upon him. But, even the Rule 9 of the CCS (Pension) Rules, 1972, can be resorted to only when the two necessary pre-requisites for applying that Rule have been fulfilled - that the delinquent is found guilty of grave misconduct or negligence during the period of service, and a (determinable or determined quantum of) pecuniary loss has been caused to the Government on account of such grave misconduct or negligence on his part. In the instant case, no finding of a grave misconduct has ever been recorded by his Disciplinary Authority against the applicant, either in the Note-Sheets of the files, or in any of the orders communicated to him, after their having been approved properly by the Disciplinary Authority, after due application of his own mind.
131. The further contention of the learned counsel for the applicant that the use of the powers available to the Disciplinary Authority under Rule-9 of the CCS (Pension) Rules, 1972, read with Rule-11 of the CCS (CCA) Rules, 1965, are mutually exclusive, is, however, not fully correct. While it is true that an order passed under Rule-9 of CCS (Pension) Rules, 1972, has to fully conform to the requirements of the clause (1) of that Rule-9, and cannot, for it to be upheld, try to derive any sustenance from any of the portions of the provisions of the Rule 11 of the CCS (CCA) Rules, 1965, but, since Rule 9 (2)(a) of the CCS (Pension) Rules, 1972, itself permits such enquiries instituted before the superannuation of the charged delinquent officer to be continued, therefore, the very premise of the impugned order passed mentioning it to have been passed under Rule-9 of the CCS (Pension) Rules, 1972, read with Rule-15 of the CCS (CCA) Rules, 1965, does not vanish, so long as the two pre-requisites of the clause (1) of that Rule-9 have been fulfilled. But, in the absence of those two pre-requisites having even been alleged, the impugned order in the present case is illegal to that extent also.
132. Also, even though in the instant case initial permission on the file had certainly been obtained from the then Honble Finance Minister for initiating a DE against the applicant, but since the final Charge Sheet/Charge Memo, as served on the applicant before us, had not been put up for consideration and approved by the Disciplinary Authority, the then Honble Union Minister, in terms of the law of the land after the judgment in B.V. Gopinath (supra), the very initiation of the D.E. against him through a defective Charge Sheet against the present applicant was illegal. Therefore, when the very Charge Memo issued to him, and the charges as levied against him, do not stand the scrutiny of due process of law, the whole D.E. proceedings against the applicant, therefore, stand vitiated, and are liable to be set aside.
133. The charge-sheet which was issued to the applicant only with the approval of the DGIT (Vig.), cannot by any stretch of imagination whatsoever, be construed to have been properly issued even under the delegated powers of the Appointing or the Disciplinary Authority of the applicant, nor has any authorization been issued to him in this regard under Article 77 of the Constitution of India, as would be required under the law as laid down by the Honble Delhi High Court in Labh Singh Atma Singh Vs. Union of India & Ors., AIR 1970 Delhi 171 on 18.09.1969.
134. The law that the framing of Memorandum of Articles of Charges, and the list of documents by which the charges would be proved, and also the list of witnesses through whom the charges are intended to be proved, and the Articles of Charges as are made-out, have all to be in the language as approved by the Disciplinary Authority alone, after application of his own independent mind, had been examined earlier also in the cases of Sukhendra Chandra Das Vs. Union Territory of Tripura, AIR 1962 Tripura 15, Manihar Singh Vs. Superintendent of Police, AIR 1969 Assam 1; Union of India Vs. J.A. Munsaff, 1968 (17) FLR 14 SC; and Shardul Singh Vs. State of M.P., AIR 1966 MP 193, with concurring judicial pronouncements, even before the Calcutta High Courts authoritative judgment in Paresh Chandra Dutta (supra), and the Honble Apex Courts seal of approval through its judgment in B.V. Gopinath (supra).
135. Even the acceptance or rejection of the report of the Enquiry Officer also has to be done personally himself by the Disciplinary Authority only, i.e., the Honble Union Minister for Finance in the case of the applicant. Even though the impugned order states at the end for it to have been issued By order and in the name of the President of India, but since in the case of the applicant the President of Indias powers could have been exercised only by the then Honble Union Minister for Finance himself personally, and the respondents have failed to prove that (a) the Charge Memo was issued with the approval of the then Honble Union Minister for Finance himself personally, or that (b) the Note of Disagreement was ever approved by the Honble F.M. personally, or (c) that the impugned order was passed with the approval of the then Honble Union Minister for Finance himself personally, as the applicants Disciplinary Authority, acting under the delegated powers of the President of India under Article 77 of the Constitution, therefore, the impugned order prima facie appears to have been passed without the approval of the Competent Authority, the then Honble Union Minister for Finance, and cannot be sustained in the eyes of law.
136. Therefore, the OA is allowed, and the impugned order of cut in pension of the applicant is set aside. The reasons, as discussed above in detail, may be again summarized as follows:-
i) A revisional order of Commissioner of Income Tax u/s 263 or u/s 264 of the Income-tax Act can only be appealed against in quasi-judicial proceedings before the ITAT, or subjected to judicial review through a Writ Petition filed before the jurisdictional High Court under Article 226 of the Constitution of India;
ii) Even though both the Enquiry Officer and the Disciplinary Authority perform fully quasi-judicial functions, but the law as enacted u/s 263 & 264 of the Income-tax Act by the Parliament, as well as the case law on the subject, as discussed above, specifically in the context of Section-264 of the Income-tax Act, prohibits even any quasi-judicial authorities within the department to try to put themselves into the shoes of the Revisional Commissioner u/s 263 & 264 of the Income-tax Act, and to try to re-appreciate those facts, which had formed the basis for the revisional order of the CIT concerned, under his extra-ordinary powers;
iii) As a general rule, no disciplinary proceedings whatsoever can lie against a Revisional Commissioner in respect of an order passed by him u/s 263 & 264 of the Income-tax Act, unless at least one of the six possible circumstances as laid down by the Honble Apex Court in K.K. Dhawan (supra) are satisfied, and there is reason to suspect and demonstrate that there has been an element of moral turpitude on the part of the CIT, and the order can be assailed on the grounds of malafide, malfeasance, misfeasance, corrupt practice, and a presence of mens rea to deliberately try to deprive the revenue of the tax due from the revision Petitioner-assessee, for wrongful gains to himself, and the charges can be made out against the concerned Revisional Commissioner, a Charge Memo framed accordingly, and then proved;
iv) There appears to be merit in the oral submissions of the learned counsel for the applicant that such disciplinary proceedings, as were initiated in the case of the applicant after a delay of four years, and just on the eve of his coming into the zone of consideration for promotion as a CCIT, are often resorted to only due to inter-departmental rivalry, in order to cut out the promotional chances of the less influential among the incumbents, who could be competitors to those Officers who are otherwise more powerful and influential within the department, who then gain promotions, and rise in the hierarchy, because of such departmental enquiries having been foisted, many a time without much substantive basis, against unsuspecting and innocent officers, which argument is quite attractive, since the Department had never appealed to the ITAT, or approached the Gujarat High Court under Article 226, against the applicants Revisional order even four years after it had been passed;
v) The charge-sheet, in the instant case, had not been personally approved by the then Honble Union Minister for Finance, exercising the powers of the Appointing and Disciplinary Authority of the applicant, on behalf of the President, under his delegated power under Article 77 of the Constitution, as was required under the law as laid down in Paresh Chandra Dutta (supra), and in B.V. Gopinath (supra) since then;
vi) Because the Enquiry Officer had submitted an Enquiry report, in which he had misdirected himself, and had tried to re-appreciate the evidence in relation to a Revision Petition u/s 264 of the Income-tax Act, which he was not empowered to do under any of the provisions of that Act, and as the E.O. he could have only looked for and proved or disproved any of the above mentioned types of the lacunae or faults in respect of the manner in which the applicant had performed his statutory duties, and deliberately caused a loss to the revenue, for personal gains, fulfilling at least one of the six possible scenarios laid down by the Honble Apex Court in K.K. Dhawan (supra);
vii) Because the impugned order of the Disciplinary Authority has also done the same thing of trying to re-appreciate the evidence on which the applicants quasi-judicial order had been passed, which it could not have done as per law, more so, when it had not been aggrieved enough by the revisional order passed by the applicant as CIT on 22.03.2002 to file an appeal against the same for over more than four years thereafter, for getting it set aside by the ITAT in a quasi-judicial proceedings, or to get it subjected to judicial review before the Honble Gujarat High Court through appropriate Writ Petition under Article-226 of the Constitution of India;
viii) It is not as if the respondents are not aware as to what is the correct procedure for challenging an order of revision passed by the Revisional Commissioner (u/s 263 or) u/s 264 of the Income-tax Act, because the law in this regard has been recorded on the file in the Note-Sheet portion in response to a query raised by the then Honble Finance Minister, and it has further come on record that the respondents had unsuccessfully challenged before ITAT the revisional order passed much later by the applicants successor CIT u/s 263 of the Income-tax Act, and if they were really aggrieved by the applicants much earlier revisional order u/s 264 of the Act, they could very well have filed an appeal before the ITAT against that also, much earlier;
ix) Because the impugned order of the Disciplinary Authority appears to have been passed without the then Disciplinary Authority Honble P.M. & F.M. having ever properly approved a Note of Disagreement, and without ever serving upon the applicant a Note of Disagreement, allowing him to respond to it, and also without application of mind, inasmuch as it has treated even the Article of Charge-II levelled against the applicant to be emanating from his revisional order u/s 264 of the Income-tax Act, while even the Enquiry Officer, the then Chief Commissioner of Income-tax, Ahmedabad, had been vigilant enough to notice and state in his Enquiry Report of the D.E. that the Article of Charge-II had no connection whatsoever with the revisional order passed by the applicant on 22.03.2002, as we have already discussed in detail earlier. Therefore, the impugned order of penalty has also been passed totally without any proper application of mind, and is, therefore, set aside;
x) It has come on record that UPSC had suggested a penalty of 25% of cut in pension being imposed upon the applicant. It has no where come on record that the Disciplinary Authority, the then Honble Union Minister for Finance, acting under the powers of the President of India delegated to him under Articles 74 to 77 of the Constitution, had ever considered as to what was the quantum of loss of tax revenue caused on account of the actions of the applicant, and as to whether the quantum of 25% cut in pension as proposed by U.P.S.C. was higher or lower, or a lower 20%, 15%, 10% or 5% cut in pension penalty would have sufficed, if at all such a penalty required to be imposed, which application of mind has to be that of the Disciplinary Authority, or the Appointing Authority, himself alone, as per the law in this regard. The requirement of recommendations of the UPSC being obtained is mandatory under the Constitution of India. However, after having obtained such recommendations, it is necessary and essential that the Disciplinary Authority applies his own mind to those recommendations, and specifically states on file that it accepts, rejects or modifies the recommendations of the UPSC, and as to why. Even if the Honble Union Minister for Finance had to accept the advice of the UPSC as it is, he was required to record his own reasons also for not increasing or decreasing the quantum of the cut in pension proposed by the UPSC to be imposed as a penalty upon the applicant. The respondents have miserably failed to disclose any such application of mind by the Disciplinary Authority of the applicant, at either the stage of framing of Charges against him, or at the stage of preparing a Note of Disagreement, when no such Note of Disagreement was ever prepared, or at the final stage of acceptance of the UPSCs recommendations, before deciding to impose the penalty of a huge cut in the pension of the applicant on a permanent basis;
xi) Though not by way of a ratio decidendi, but by way of an obiter dicta, we may state as a guideline for the future that the Ministry of Finance, Department of Revenue, and the Central Board of Direct Taxes, should be loath to, and should be absolutely careful in initiating any disciplinary proceedings whatsoever in future against any incumbent Revisional CIT, who has passed an order of revision u/s 263 or u/s 264 of the Income-tax Act, unless and untill there is sufficient material on record to prove that there has been an element of moral turpitude, etc. etc., and the order as passed is absurd on the face of it, and satisfies at least one of the six possible scenarios as laid down by the Honble Apex Court in K.K. Dhawan (supra).
137. The applicants O.A. having been allowed, the respondents are further directed to open the sealed cover in respect of the applicant, and, if the DPC had held him to be otherwise eligible for promotion, provide to the applicant all the consequential promotional benefits, as would have been due to him, but for the present disciplinary enquiry proceedings, even by holding further DPCs for any further promotions also, if any, beyond the level of CCIT also, which ought to have perhaps accrued to him in the normal course, within a period of three months from the date of receipt of a copy of this order. No costs.
138. The Departmental Files submitted are ordered to be returned to the Respondents counsel.
(Sudhir Kumar) (Syed Rafat Alam) Member (A) Chairman cc.