Calcutta High Court
Commissioner Of Income-Tax vs S.M. Oil Extraction Pvt. Ltd. on 30 October, 1990
Equivalent citations: [1991]190ITR404(CAL)
JUDGMENT Ajit K. Sengupta, J.
1. In this reference under Section 256(1) of the Income-tax Act, 1961, the following question of law has been referred to this court for the assessment year 1979-80 ;
"Whether the Tribunal was justified in holding that the material which was not in existence at the time when the assessment was made and came into existence afterwards could not form part of the records of the proceedings of the Income-tax Officer at the time he passed the order and cannot be taken into consideration by the Commissioner for the purpose of invoking his jurisdiction under Section 263(1) and, in that view, was correct in cancelling the order passed by the Commissioner of Income-tax under Section 263(1) ?"
2. Shortly stated, the facts are that the Income-tax Officer, while making the assessment under Section 143(3), accepted the value of plant and machinery and electrical installation as reflected in the balance-sheet in toto. The matter of valuation of the aforesaid assets referred to the Valuation Officer, New Delhi, was reported by the Valuation Officer much after the completion of the assessment. The valuation was made by the Valuation Officer at Rs. 16,12,000 as against Rs. 9,39,449 shown in the balance-sheet. The Commissioner of Income-tax took action under Section 263 of the Act and, after hearing the assessee, set aside the assessment and directed the Income-tax Officer to make a fresh assessment after making proper enquiries in accordance with law. Against the said order of the Commissioner of Income-tax the assessee came in appeal before the Tribunal. Counsel for the assessee submitted that the assessment so made by the Income-tax Officer could not be said to be erroneous or prejudicial to the interests of the Revenue inasmuch as the report of the Valuation Officer (P & M), New Delhi, was not in existence at the time of making the assessment. The Tribunal held that the fact that the report of the Valuation Officer (P & M), New Delhi, was not in existence and the assessment was made by the Income-tax Officer on February 1, 1983, was not controverted by the Revenue authorities. Therefore, the material which was not in existence at the time the assessment was made and came into existence afterwards could not form part of the records of the proceedings of the Income-tax Officer at the time he passed the order and cannot be taken into consideration by the Commissioner for the purpose of invoking his jurisdiction under Section 263(1). Reliance has been placed on a decision of a learned single judge of this court in Ganga Properties v. ITO [1979] 118 ITR 447.
3. The short question which calls for determination is whether the Commissioner, in exercising the jurisdiction under Section 263(1), can rely on the valuation report which came into the possession of the Income-tax Officer subsequent to the completion of the assessment. In Ganga Properties v. ITO , the learned single judge of this court held that the word "record" in Section 263(1) cannot mean the record as it stands at the time of examination by the Commissioner but it means the record as it stood at the time the order in question was passed by the Income-tax Officer. Therefore, the materials which were not in existence at the time the order was passed but afterwards came into existence cannot form part of the record of the proceedings of the Income-tax Officer at the time he passed the order and, accordingly, such materials cannot be taken into consideration by the Commissioner for the purposes of invoking his jurisdiction under Section 263(1).
4. Our attention has been drawn to a decision in the case of Jagatjit Distilling and Allied Industries Ltd. v. State [1971] 28 STC 709 (P & H). There, the Punjab and Haryana High Court was concerned with the question of the power of the revisional authority. There, the court held that the power under Section 21 of the Punjab General Sales Tax Act, 1948, cannot be exercised so as to reassess a dealer in respect of any turnover which had escaped assessment or which had been under-assessed in consequence of any definite information which comes into his possession after the original order of assessment was made. The revisional authority has to confine itself to the record which is called for by it. It cannot take into consideration any fresh material in order to come to a different conclusion than the one to which the assessing authority came on the material before it.
5. Our attention has also been drawn to a decision of the Gujarat High Court in the case of State of Gujarat v. Chelabhai Bhanabhai Prajapati [ 1974] 33 STC 147. There, the Gujarat High Court was of the view that, for initiating suo motu revision under Section 57 of the Bombay Sales Tax Act, 1959, the revisional authority could take into consideration only the record of the proceeding before the taxing authority and could not consider materials which did not form part of the record of the assessment.
6. In our view, the record contemplated in Section 263(1) does not mean only the order of assessment but it comprises all proceedings on which the assessment is based. The Commissioner is entitled, for the purpose of exercising his revisional jurisdiction, to look into the whole evidence. The expression "record" as used in Section 263 of the Act is comprehensive enough to include the whole record of evidence on which the original assessment order was based. All proceedings which constitute evidence on which the assessment order is based must normally be regarded as part of the record. So long as the revisional authority does not rely on any extraneous matter, his jurisdiction cannot be questioned. The assessment order which on the face of it was a good order at the time when it was passed may in the light of information which although asked for but received subsequent to the completion of the assessment appear to be erroneous. The Commissioner has the jurisdiction to rectify the order in such a case so as to eliminate the error. It is no doubt true that the Commissioner of Income-tax has to confine himself to the assessment records of the assessee. He does not have to shut his eyes completely to the valuation report which formed part of the assessment records, although such report came to the records subsequently. As indicated earlier, the assessment in question was completed on February 1, 1983. The Income-tax Officer, before he completed the assessment, had referred the matter of valuation of the plant and machinery and electrical installation to the Valuation Officer (P & M), New Delhi. His report was not received by the Income-tax Officer when the assessment was completed, The valuation proceeding is a part of the assessment proceeding. But once the valuation report was received by the Income-tax Officer although subsequent to the completion of the assessment, it forms part of the records of the assessment year in question. The Commissioner of Income-tax, in the light of the said valuation report, found the assessment order erroneous. The revising authority is, therefore, entitled to scrutinise the entire records for ascertaining any illegality or impropriety of an order. The assessment order appeared to the Commissioner of Income-tax erroneous in so far as it was prejudicial to the interests of the Revenue as it was incomplete without the valuation report which came to the records subsequent to the assessment.
7. In our view, only those materials which form part of the records of the particular assessment year can be looked into by the Commissioner of Income-tax. Section 263 says that the Commissioner of Income-tax may call for the record of any proceeding and such record is not confined only to the assessment order.
8. Where any proceeding is initiated in the course of the assessment proceeding having a relevant and material bearing on the assessment to be made and the result of such proceeding was not available with the Income-tax Officer before the completion of the assessment, but the result came subsequently, the revising authority is entitled to look into such material as it forms part of the assessment records of the particular assessment year. An assessment made without considering the valuation report for which proceeding had already been initiated in the course of an assessment proceeding is not a proper assessment and such assessment is erroneous in so far as it is prejudicial to the interests of the Revenue.
9. For the reasons aforesaid, the question in this reference is answered in the negative and in favour of the Revenue.
10. There will be no order as to costs.
Bhagabati Prasad Banerjee, J.
11. I agree.