Madhya Pradesh High Court
Commissioner Of Income-Tax vs Shriram Development Company on 17 January, 1986
Equivalent citations: [1986]159ITR812(MP)
JUDGMENT G.G. Sohani, J.
1. By this reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), the Income-tax Appellate Tribunal, Indore Bench, has referred the following question of law to this court for its opinion :
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the order of the Income-tax Officer was not erroneous and thus holding that the Commissioner of Income-tax's assumption of jurisdiction under Section 263 of the Income-tax Act, 1961, is bad in law ?"
2. The material facts giving rise to this reference, briefly, are as follows:
The assessee is a firm carrying on business of developing residential colonies. Certain parcels of land belonging to the assessee were acquired by the State Government on May 26, 1966. The Collector awarded compensation to the assessee, but, on a reference, the learned Additional District Judge, Indore, by his order dated May 10, 1974, enhanced the amount of compensation and awarded interest amounting to Rs. 1,50,217 for the period May 26, 1966, to May 10, 1974, on the enhanced amount of compensation. The assessee received this amount of interest on July 10, 1975. In framing the assessment for the assessment year 1976-77, the Income-tax Officer upheld the claim of the assessee that the amount of interest received on additional compensation was taxable on accrual basis from year to year and that it was not accordingly taxable in the relevant accounting year. While examining the record of the case, the Commissioner of Income-tax considered that as the amount of interest was taxable in the assessment year 1976-77, the assessment order passed by the Income-tax Officer for the assessment year 1976-77 was erroneous in so far as it was prejudicial to the interests of the Revenue. Acting under Section 263 of the Act, after giving the assessee an opportunity of hearing, the Commissioner of Income-tax set aside the order of assessment passed by the Income-tax Officer for the assessment year 1976-77 and directed the Income-tax Officer to make a fresh assessment according to law. Aggrieved by the order passed by the Commissioner of Income-tax, the assessee preferred an appeal before the Tribunal. The Tribunal observed as follows:
"On perusal of the notice issued by the Commissioner of Income-tax under Section 263, it is clear that he came to the conclusion that the order of the Income-tax Officer is erroneous after the decision of the High Court in the case of CIT v. H.H. Maharaja Yashwant Rao Pawar [1981] 127 ITR 650, where their Lordships held that the right to receive interest on additional compensation was acquired by the assessee only when such interest was awarded by the court on the enhanced amount of compensation and that he had no such right before the passing of such a decree. The aforesaid judgment was pronounced by the High Court of Madhya Pradesh on December 5, 1979, whereas the assessment order which was sought to be revised by the Commissioner of Income-tax was passed by the Income-tax Officer on June 23, 1979. From the aforesaid fact, it is very clear that on the date of passing of the assessment order, the judgment relied upon by the Commissioner of Income-tax was not in existence. It, therefore, follows that the Income-tax Officer has applied the law as it stood at the time of passing of the order and came to the conclusion that the interest accrued from year to year and will not accrue on the date of receipt. Further, it has been the consistent view of the Tribunals that when the Income-tax Officer has applied his mind and decided a particular point, the Commissioner of Income-tax cannot invoke the provisions of Section 263 as the order passed by the Income-tax Officer is not erroneous."
3. The Tribunal, therefore, held that the Commissioner of Income-tax had no jurisdiction under Section 263 of the Act to set aside the order passed by the Income-tax Officer. In this view of the matter, the Tribunal allowed the appeal. Aggrieved by the order passed by the Tribunal, the Department sought a reference and it is at the instance of the Department that the aforesaid question of law has been referred to this court for its opinion.
4. Having heard the learned counsel for the parties, we have come to the conclusion that the reference has to be answered in the negative and against the assessee. Under Section 263 of the Act, the Commissioner of Income-tax has jurisdiction to pass any order contemplated by that provision if after examining the record of any proceeding under the Act, he considers that any order passed therein is erroneous in so far as it is prejudicial to the interests of the Revenue. The contention advanced on behalf of the assessee which was upheld by the Tribunal was that on June 23, 1979, when the Income-tax Officer passed the order, the judgment of the High Court in CIT v. H. H. Maharaja Yashwant Rao Pawar [1981] 127 ITR 650, holding that the right to receive interest on the enhanced amount of compensation accrues to a person only when such interest is awarded by a court was not pronounced and, hence, it could not be held that on the basis of the material on record, the order of assessment passed by the Income-tax Officer was erroneous. Reliance was placed on the decision in Ganga Properties v. ITO [1979] 118 ITR 447 (Cal). Now, though it is true that revisional jurisdiction under Section 263 of the Act has to be exercised in the light of the record as it stood at the time the order was passed by the Income-tax Officer, the judgment of the High Court or the Supreme Court in another case which deals with any issue which arises in a case, cannot be said to be part of the record of that case. The relevant provisions of law and the judgments pronounced by the courts in other cases do not form part of the record of any case. The decision in Ganga Properties v. ITO [1979] 118 ITR 447 (Cal), relied upon by the learned counsel for the assessee, is distinguishable on facts. In that case, the order of the Valuation Officer passed in the reference under Section 55A of the Act was not in existence at the time the Income-tax Officer passed the order and, hence, it was held that it was not part of the record as it stood when the Income-tax Officer passed the order and could not, therefore, form the basis for holding that the order of the Income-tax Officer was erroneous. Judgments of courts on points arising in a case cannot be equated with reports of a Valuation Officer on matters referred to him in a particular case by the Income-tax Officer under Section 55A of the Act.
5. Having given our anxious consideration to the matter, we have come to the conclusion that by its decision in H.H. Maharaja Yashwant Rao Pawar's case [1981] 127 ITR 650 (MP), the High Court did not bring into existence any new fact. It merely expounded the provisions of law which were already in existence when the Income-tax Officer had passed the order of assessment in this case. The Tribunal, in our opinion, erred in holding that the fact that the judgment in Maharaja Yashwant Rao Pawar's case [1981] 127 ITR 650 (HP) was not in existence on the date when the order of assessment was passed by the Income-tax Officer was decisive of the matter. The Tribunal failed to appreciate that the Commissioner of Income-tax had jurisdiction to pass an order under Section 263 of the Act if he considered that any order passed by the Income-tax Officer in any case was erroneous in so far, as it was prejudicial to the interests of the Revenue. It is not disputed in the instant case, that the order of assessment passed by the Income-tax Officer was prejudicial to the interests of the Revenue. The Commissioner of Income-tax was right in considering that in the light of the decision in Maharaja Yashwant Rao Pawar's case [1981] 127 ITR 650 (MP), the order of assessment passed by the Income-tax Officer was erroneous. The Tribunal was, therefore, not justified in holding that the order of the Income-tax Officer was not erroneous and that the Commissioner of Income-tax had no jurisdiction to pass an order under Section 263 of the Act.
6. For all these reasons, our answer to the question referred to this court is in the negative and against the assessee. In the circumstances of the case, parties shall bear their own costs of this reference.