Income Tax Act, 1961 – Section 260A – Making a claim which would prima facie disclose that the expenses in respect of which deduction has been claimed has been incurred and thereafter abandoning/withdrawing the same gives rise to the necessity of further enquiry in the interest of the Revenue. The notice issued under Section 69-C of the Act could not have been simply dropped on the ground that the claim has been withdrawn.
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
[RANJAN GOGOI] AND [PRAFULLA C. PANT] JJ.
MAY 11, 2016
CIVIL APPEAL NO.5009 OF 2016
[Arising out of S.L.P.(C) No.11621 of 2009]
COMMISSIONER OF INCOME TAX, MUMBAI …APPELLANT(S)
AMITABH BACHCHAN …RESPONDENT(S)
CIVIL APPEAL NO.5010 OF 2016
[Arising out of S.L.P.(C) No.861 of 2013]
J U D G M E N T
RANJAN GOGOI, J.
SLP(C) NO. 11621 OF 2009
1. Leave granted.
2. The appellant – Revenue seeks to challenge the order of the High Court dated 7th August, 2008 dismissing the appeal filed by it under
Section 260A of the Income Tax Act, 1961
(hereinafter referred to as ‘”the Act”) and affirming the order of the Income Tax Appellate Tribunal, Mumbai Bench (“Tribunal” for short) dated 28th August, 2007 whereby the order dated 20th March, 2006 passed by the Commissioner of Income Tax-1, Mumbai (“C.I.T.” for short) under Section 263 of the Act was reversed. The assessment year in question is 2001-2002 and the assessment order is dated 30th March, 2004.
3. After the assessment as above was finalized, a show cause notice dated 7th November, 2005 under Section 263 of the Act was issued by the learned C.I.T. detailing as many as eleven (11) issues/grounds on which the assessment order was proposed to be revised under Section 263 of the Act. The respondent – assessee filed his reply to the said show cause notice on consideration of which by order dated 20th March, 2006 the learned C.I.T. set aside the order of assessment dated 30th March, 2004 and directed a fresh assessment to be made. Aggrieved, the respondent – assessee challenged the said order before the learned Tribunal which was allowed by the order dated 28th August, 2007.
4. Aggrieved by the order dated 28th August, 2007 of the learned Tribunal, the Revenue filed an appeal under Section 260A of the Act before the High Court of Bombay. The aforesaid appeal i.e. ITA No.293 of 2008 was summarily dismissed by the High Court by the impugned order dated 7th August, 2008 holding that as the C.I.T. had gone beyond the scope of the show cause notice dated 7th November, 2005 and had dealt with the issues not covered/mentioned in the said notice the revisional order dated 20th March, 2006 was in violation of the principles of natural justice. So far as the question as to whether the Assessing Officer had made sufficient enquiries about the assessee’s claim of expenses made in the re-revised return of income is concerned, which question was formulated as question No.2 for the High Court’s consideration, the High Court took the view that the said question raised pure questions of fact and, therefore, ought not to be examined under Section 260A of the Act. The appeal of the Revenue was consequently dismissed. Aggrieved, this appeal has been filed upon grant of leave under Article 136 of the Constitution of India.
5. We have heard Shri Ranjit Kumar, learned Solicitor General appearing for the appellant Revenue and Shri Shyam Divan, learned Senior Counsel appearing for the respondent – assessee.
6. The assessment in question was set aside by the learned C.I.T. by the order dated 20th March, 2006 on the principal ground that requisite and due enquiries were not made by the Assessing Officer prior to finalization of the assessment by order dated 30th March, 2004. In this connection, the learned C.I.T. on consideration of the facts of the case and the record of the proceedings came to the conclusion that in the course of the assessment proceedings despite several opportunities the assessee did not submit the requisite books of account and documents and deliberately dragged the matter leading to one adjournment after the other. Eventually, the Assessing Officer, to avoid the bar of limitation, had no option but to “hurriedly” finalize the assessment proceedings which on due and proper scrutiny disclosed that the necessary enquiries were not made. On the said basis the learned C.I.T. came to the conclusion that the assessment order in question was erroneous and prejudicial to the interests of the Revenue warranting exercise of power under Section 263 of the Act. Consequently, the assessment for the year 2001-2002 was set aside and a fresh assessment was ordered. At this stage, it must be noticed that in the order dated 20th March, 2006 the learned C.I.T. arrived at findings and conclusions in respect of issues which were not specifically mentioned in the show cause notice dated 7th November, 2005. In fact, on as many as seven/eight (07/08) issues mentioned in the said show cause notice the learned C.I.T. did not record any finding whereas conclusions adverse to the assessee were recorded on issues not specifically mentioned in the said notice before proceeding to hold that the assessment needs to be set aside. However, three (03) of the issues, details of which are noticed herein below, are common to the show cause notice as well as the revisional order of the learned C.I.T.
7. On appeal, the learned Tribunal took the view that the learned C.I.T. exercising powers under Section 263 of the Act could not have gone beyond the issues mentioned in the show cause notice dated 7th November, 2005. The learned Tribunal, therefore, thought it proper to take the view that in respect of the issues not mentioned in the show cause notice the findings as recorded in the revisional order dated 20th March, 2006 have to be understood to be in breach of the principles of natural justice. The learned Tribunal also specifically considered the three (03) common issues mentioned above and on such consideration arrived at the conclusion that the reasons disclosed by the learned C.I.T. in the order dated 20th March, 2006 for holding the assessment to be liable for cancellation on that basis are not tenable. Accordingly, the learned Tribunal allowed the appeal of the assessee and reversed the order of the suo motu revision dated 20th March, 2006.
8. At this stage, it may be appropriate to reproduce hereunder the provisions of Section 263 of the Act to appreciate the arguments advanced and to understand the contours of the suo motu revisional power vested in the learned C.I.T. by the aforesaid provision of the Act.