Amitava Roy, J.@mdashThe order dated February 5, 2001, passed by the Commissioner of Income Tax, Guwahati (hereafter referred to as "the CIT"), directing the jurisdictional Assessing Officer to work out the deductions under Sections 80HH and 80-I of the Income Tax Act, 1961 (hereafter referred to as "the Act"), creditable to the petitioner has been impugned arguably being afflicted by the vice of transgression of the statutorily prescribed limits of the said authority.
2. I have heard Dr. A. K. Saraf, senior advocate for the petitioner, and Mr. U. Bhuiyan, learned standing counsel for the Revenue for the respondents.
3. The unrebutted pleaded facts forming the background of the impugned decision and the challenge thereto have to be minuted in brief. The petitioner, a public limited company and a public sector undertaking incorporated under the Companies Act, 1956, has its registered office at Dhali-gaon, Bongaigaon. It is an assessee under the Act. Its three units refinery, petrochemicals and polyster staple fibre were set up and commissioned in the financial years 1979-80, 1985-86 and 1988-89, respectively, and produce articles distinctly different and individually identifiable. According to the petitioner, in terms of Notification No. S. O. 165 No. 7056/P. No. 178/ 171/86-IT(AI), dated December 19, 1986 (see [1987] 165 ITR 294), declaring the entire State of Assam to be a backward area under the Act it is entitled to claim deductions under Sections 80HH and 80-I of the Income Tax Act, 1961. Though eligible, it could not claim the same till the assessment year 1992-93 as its net taxable income in the earlier assessment years was ascertained to be "nil". It was only in the assessment year 1992-93 when its income recorded positive, that it claimed the relief under Sections 80HH and 80-I for its petrochemical industrial unit. It accordingly filed its return on December 29, 1992, claiming a deduction amounting to Rs. 12,71,07,137 each under the above two provisions totalling Rs. 25,42,14,274. The Deputy Commissioner of Income Tax (Assessment), Special Range I, Guwahati, in terms of Section 143(1)(a) of the Act after ascertaining its income and interest payable and/or refundable, computed a sum of Rs. 21,11,204 to be disbursed to it by order dated July 30, 1993. The petitioner thereafter submitted a revised return of income on January 13, 1994, disclosing a total income of Rs. 47,02,12,710 claiming an amount of Rs. 14,11,38,757 each under Sections 80HH and 80-I of the Act, i.e., in all Rs. 28,22,77,514. The revised return was duly processed by the Deputy Commissioner of Income Tax (Assessment), Special Range-I, Guwahati, u/s 143(1)(a) and by order dated November 17,1994, an amount of Rs. 1,57,87,553 was quantified to be refundable to the petitioner. On adjustment of the amount of Rs. 21,11/203 already paid, a sum of Rs. 1,36,76,350 was determined to be defrayed to the petitioner. Subsequent thereto by order dated January 20, 1995, the said authority completed the assessment for the aforementioned year u/s 143(3) of the Act. The said authority though referred to the revised return allowed the deductions as per the original order.
4. Being aggrieved, the petitioner preferred an appeal before the Commissioner of Income Tax (Appeals) who by order dated November 10, 1995, allowed the same and directed the Assessing Officer to allow deductions under the aforementioned legal provisions on the basis of the revised return. In the meantime, however, an audit objection was raised alleging that the petitioner company had claimed excess deductions as on the completion of the unitwise details as in the audited profit and loss account the bifurcation of the overall profit should have been made on the basis of the turnover. In its reply, the petitioner not only stated the reasons for not claiming deduction in the earlier years but also with reference to Sections 80HH(5) and 80-I of the Act, asserted that it being a limited company, no audited profit and loss account was required to be submitted. It underlined that the bifurcation of its profits on the basis of actual workings amongst its different industrial units as per its books of account, was more appropriate than the turnover basis. The petitioner thereafter was served with the notice u/s 263 of the Income Tax Act, 1961, issued by the Commissioner of Income Tax, NE Region, Shillong, mentioning that the Assessing Officer had allowed excess deduction to it under the aforementioned provision thereby rendering the assessment erroneous and as such prejudicial to the interests of the Revenue. The authority concerned recorded that the audited profit and loss account did not reveal any bifurcation amongst the three industrial units by totally overlooking the fact that the petitioner in the course of the assessment proceeding had submitted the unitwise accounts. The Commissioner, therefore, reascertained the profits of the three units.
5. In response to the notice, the petitioner appeared before the said authority and endeavoured to explain the apparent error in the proposal to bifurcate the profits on turnover basis more particularly in view of the existence of necessary documents disclosing unitwise profit and loss of the three industrial units submitted in the course of the assessment proceedings and also at the time of hearing of the audit objection. The learned Commissioner of Income Tax, however, by order dated March 19, 1997, directed the Assessing Officer to ascertain the correct deductions under the above provisions of the Act in the light of the observations made in the order.
6. In the appeal preferred by the petitioner before the Income Tax Appellate Tribunal, Guwahati Bench, Guwahati (hereafter referred to as "the Tribunal"), reiterating the above contentions by order dated June 18, 1998, while concluding that the assumption of jurisdiction by the Commissioner of Income Tax u/s 263 under the Act was valid, it set aside the direction to bifurcate the profits in proportion to the turnover of the units. Being particularly dissatisfied with the Tribunal''s finding in favour of the Commissioner of income tax''s assumption of jurisdiction u/s 263 of the Act, the petitioner filed an application u/s 256(1) thereof before the Tribunal with a prayer to draw up a statement of the case and to refer the questions set out therein to this Court. The application registered as RA. No. 55 (Gauhati) of 1998, was however, dismissed by the learned Tribunal on March 1, 2000. The petitioner then approached this Court with an application u/s 256(2) of the Act praying for a direction to the learned Tribunal to state the case and refer the questions drawn up. In the application that was registered as ITREF 12/2000 this Court directed the learned Tribunal to state and refer to it the following questions:
1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in coming to the conclusion that the order of the Commissioner u/s 263 of the Act is within the jurisdiction ?
2. Whether, on the facts and circumstances of the case and having regard to the provisions of Sections 80HH(5) and 80-I(7) of the Income Tax Act, 1961, the Appellate Tribunal is justified in upholding that the assessee''s company ought to have submitted audited account in support of the claim for deduction under Sections 80HH and 80-I in respect of its new industrial undertaking from its gross total income ?
7. While the matter rested at that, the petitioner in response to a notice dated June 1, 2000, from the learned Commissioner of Income Tax submitted before him audited unitwise balance-sheet and profit and loss account for the year ending March 31, 1992. The petitioner also by letter dated September 22, 2000, furnished all necessary details about the basis of the bifurcation of the industrial units. It also submitted on October 9, 2000, a copy of the audited pool account sought for by .the learned Commissioner of Income Tax for verifying the transfer of price of the refinery products. By the impugned order dated December 5, 2005, the learned Commissioner of Income Tax set aside the order of the Assessing Officer for the assessment year 1992-93 and directed him to ferret out the deductions under Sections 80HH and 80-I by calculating the profit of the petitioner''s units in proportion to the turnover thereof and to pass a fresh assessment order accordingly. As observed hereinabove, these statements on oath have remained uncontroverted in the absence of any counter by the respondents.
8. Dr. Saraf has urged that in the absence of the essential preconditions for exercise of powers u/s 263 of the Act, the order impugned is patently illegal and without jurisdiction. He has maintained that the order of the Assessing Officer, on completion of assessment read with the order dated November 10, 1995, of the Tribunal not being erroneous and, therefore, not prejudicial to the Revenue, the learned Commissioner of Income Tax acted without jurisdiction in passing the impugned order in purported exercise of powers u/s 263 of the Act. As the order of the Assessing Officer does not suffer from any jurisdictional error, patent illegality or procedural contraventions, no interference therewith is comprehended in exercise of the revisional jurisdiction under the aforementioned provision of the Act. The learned Commissioner of Income Tax having clearly exceeded his jurisdiction and forayed into the prerogatives of other authorities conferred by the Act the impugned exercise being clearly inconsistent with the framework of the legislation involved, it is liable to be adjudged ineffectual and non est in law, he urged. Dr. Saraf contended that as the satisfaction comprehended in the provisos to Sections 80HH(6) and 80-I(8) about the exceptional difficulties in computing the profits and gains of the industrial undertaking, etc., justifying computation on reasonable basis, has to be of the Assessing Officer, the learned Commissioner of Income Tax out stepped his jurisdiction in substituting his view for that of the Assessing officer and directing him to determine the profit of the petitioner''s industrial units on the basis of their turnover. The Assessing Officer while completing the assessment not having encountered any such difficulty, the interference by the learned Commissioner of Income Tax in the manner so done is wholly unwarranted besides being without any authority of law, Dr. Saraf urged. He submitted that the learned Tribunal by its order dated June 18, 1998, passed in I. T. A. No. 188/Gauhati of 1997 having set aside the earlier direction of the learned Commissioner of Income Tax, to identify the deductions available to the petitioner by determining the profit of its industrial units on the basis of the turnover thereof, reiteration of the same in the impugned order besides being per se illegal, betrays bias and a predetermined mind of the said authority and on that count as well the same is liable to be set aside. This is further evident, according to learned senior counsel from the fact that the exercise to overturn the assessment already completed was on account of an audit objection so much so that the impugned order is attuned thereto reflecting absence of independent application of mind to the facts and law.
9. Learned senior counsel contended that in view of the decision of this Court in
10. Mr. Bhuiyan as against this has fairly conceded that the determination in
11. The rival submissions have been duly considered. The objection with regard to the maintainability of the writ petition in the face of availability of an alternative remedy under the Act may be attended to at the threshold to clear the deck, for dealing with the other questions. True it is that an appeal lay before the learned Tribunal against the order impugned in the instant proceeding. As a matter of fact, the petitioner had availed of that course of remedy on the earlier occasion. However, as the instant petition was entertained to be heard on the merits, at this instant point of time, I do not feel persuaded to reject the same on the ground of non-exhaustion of alternative remedy. The plea raised on behalf of the Revenue in this regard therefore fails. While the legal principle enunciated in
12. A plain reading of Section 263 of the Act, presents the essential prerequisites for the exercise of powers thereunder. It mandates that interference as contemplated therein is comprehended only if the Commissioner considers that any order passed in a particular case by the Assessing Officer is erroneous so much so that it is prejudicial to the interests of the Revenue. Error in the order of the Assessing Officer and resultant prejudice to the interests of the Revenue are twin factors to co-exist for conferring the authority on the Commissioner to invoke his powers thereunder. This Court in Shri Rajendra Singh [1990] 79 STC 10, while dealing with Section 21 of the Tripura Sales Tax Act, 1976, which is in pari materia with Section 263 of the Act, held that two circumstances, i.e., (1) order is erroneous and, (2) it is thereby prejudicial to the interests of the Revenue, have to subsist so as to enable the Commissioner to exercise the power of suo motu revision thereunder. Dilating on the expression "erroneous assessment", it elucidated the same to signify an assessment in deviation from law and vitiated by a defect that is jurisdictional in nature. It ruled that the provision did not visualise substitution of the judgment of the Commissioner for that of the officer, who had passed the order even if the former on a perusal of the records would hold an opinion different from that of the latter on the merits. The power exercised by the Assessing Officer being quasi-judicial in nature and vested in him in law, a conclusion arrived at by him by invoking the same in accordance with law could not be branded as erroneous only because the Commissioner chose not to agree with him, it held.
13. The apex court in State of Kerala v. K.M. Cheria Abdulla and Co. [1965] 16 STC 875, was seized of the question as to whether the Deputy Commissioner of Commercial Taxes in exercise of his revisional jurisdiction u/s 12(2)(i) of the Madras General Sales Tax Act, 1939, was right in revising the order of the Deputy Commercial Tax Officer after embarking on a fresh enquiry in respect of the relief of exemption grantable to the respondent-company under the statute. Subba Rao J., in his judgment, while distinguishing the scope and content of the remedies of appeal and revision held that in the latter, the revisional authority in the absence of any express conferment of power by the legislation concerned has no authority to review the evidence on record. Shah J., in his separate rendering, while recognising the power of the Deputy Commissioner of Commercial Taxes to make or direct further enquiry under Rule 14A of the Madras General Sales Tax Rules, 1939, as found necessary, held that the prerogative has to be essentially subject to the scheme of the Act so much so that the revising authority is not equipped with the dominion to relaunch enquiries at large so as to trench upon the powers which have been exclusively reserved by the Act or the rules for other authorities or to ignore limitations inherent in the exercise of those powers. In no uncertain terms his Lordship held that neither Section 12 nor Rule 14A authorised the revising authority to enter generally upon enquiries, which may appropriately be made by the assessing authorities, and to reopen assessments.
14. The amplitude of the power of the revisional authority u/s 36 of the Assam General Sales Tax Act, 1993, was examined by this Court, in San-talal Mehendi Ratta, (HUF) [2002] 1 GLR 197 : [2006] 143 STC 511 . Drawing sustenance, inter alia, from the ratio of the decisions in
The revisional authority for various good reasons may be inclined to view an assessment order from a negative standpoint. The revisional authority may likewise disagree with the views of the primary authority in its interpretation of the law imposing the liability or the extent or quantum thereof. It may disagree with the primary authority with regard to the determination of the amount of tax to be paid. It may also disagree with the primary authority on matters relating to deductions allowable under the statute. All such situations as aforesaid may render the order of the primary authority wrong or erroneous as commonly understood. Such situations, however, would not be facets of an erroneous decision in so far as the meaning of the said expression as appearing in Section 36 of the Act is concerned. Judicial opinion is unanimous that the expression as appearing in Section 36 must be confined to jurisdictional errors otherwise there would be no distinction between the different aspects of the corrective power conferred by the provisions of the Act for application in different situation. No distinction between the power to reopen an assessment and the appellate or revisional power or the power to rectify would exist. There would be an intermingling of the powers resulting in confusion and uncertainty, a situation definitely not contemplated by any statute.
15. While reiterating the same view in Shree Automobiles P. Ltd. v. Commissioner of Taxes [2003] 132 STC 125, this Court held that a suo motu exercise of the revisional jurisdiction would be warranted if the error is jurisdictional in nature or is a yield of a wrong or illegal exercise of the jurisdiction apparent on the face of the records. It was of the view that any and every error would not be amenable to such revisional power and has to be corrected by adopting other modes as contemplated by the statute.
16. The above judicial pronouncements therefore adumbrate the essence and extent of the revisional jurisdiction of an authority akin to the Commissioner of Income Tax under the Act. Not only is the exercise of the suo motu power conceptualised therein hedged by the two conditions of error in the order sought to be revised and the consequential prejudice to the Revenue, but no interference is permissible unless the same is afflicted by a jurisdictional error or a patent illegality rendering the same ex facie invalid and non-existent in law. The process to derive the satisfaction that the order is erroneous and is thus prejudicial to the interests of the Revenue, the sine qua non for invocation of the power, thus logically has to be informed with the above limitations.
17. Entertainment of a view different from the one adopted by the Assessing Officer, if plausible would not clothe the Commissioner with the power to interfere therewith under the said provision of the Act. Differently put, an error within the jurisdiction of the Assessing Officer on an evaluation of the materials available would not be exposed to interference in exercise of suo motu revisional powers u/s 263 of the Act. The provision though permits the Commissioner to initiate an enquiry as he may deem necessary does not authorise a roving probe into the facts with the disposition to pick out errors to sustain the eventual interference, This assumes great significance in the context of the statutory framework of the Act outlining the jurisdictional contours of different authorities to adjudicate the issues as legislatively stipulated. The Commissioner in exercise of his revisional powers cannot arrogate to himself a status to surrogate the other authorities and supplant their roles under the Act. The Commissioner is not a substitute for the other statutorily prescribed fora with codified functions dischargeable in terms of the prescribed procedure in the situations comprehended thereby. The Commissioner, therefore has to be rigorously held to the limits of his suo motu revisional jurisdiction lest any transgression of statutorily ordained prerogatives of other authorities under the Act result from an unbridled exercise of such power. The Act envisages a compartmentalisation in the functioning of the authorities prescribed who have to dwell within the legally stipulated parameters so much so that it would be impermissible to overreach the legislatively mandated frontiers. Any other approach would be antithetical to the scheme and alignment of the Act.
18. The jurisdiction exercisable u/s 263 of the Act being supervisory in nature, permitting suo motu review of any assessment already made, the statutorily enjoined sanctions circumscribing the same have to be rigorously construed. The legislative intendment of conditioning the plenitude of the power conferred is manifest in the two preconditions lodged in the section. To sustain the delicate balance between this supervisory and other remedial jurisdictions, as designed by the lawmakers, a constricted connotation and purport of the enabling prerequisites for the exercise of the revisional powers is an imperative necessity.
19. Admittedly the assessment for the year in question qua the petitioner was finally concluded on January 20, 1995, and by dint of the order dated November 10, 1995, passed by the Commissioner of Income Tax (Appeals), Guwahati, the deductions prayed for by it in full were granted. The proceeding u/s 263 of the Act was initiated on the basis of an audit objection to the effect that the petitioner had claimed excess deduction and that in the absence of unitwise details in the audited profit and loss account, the bifurcation of the overall profit ought to have been made on the basis of the turnover of the industrial units. In its reply to the said objection, the petitioner had by its communication dated December 14, 1996, clarified that its profit and loss account along with the balance-sheet had been duly audited under the Companies Act, 1956, and in terms of Sections 80HH(5) and 80-I(7) unitwise profit and loss statement was not required to be audited it being a company. It also referred to the profit and loss statement submitted in the assessment proceedings bifurcating the net profits for the three industrial units separately on the basis of the actual working as available in the books of account maintained by it. It, therefore, contended that the profits of different units as set out in the revised return were duly substantiated by the said profit and loss statements. The Commissioner of Income Tax on a reappraisal of the materials available along with the audit objection was, however, of the view that no basis in arriving at the profit or loss bifurcation in the three units of the petitioner had been provided and that therefore the profits thereof were to be worked out on the proportion of their turnover. By his order dated March 19, 1997, the assessment for the year 1992-93 was thus set aside and the Assessing Officer was directed to work out the correct deduction in the light of his observations. In appeal though the learned Tribunal upheld the assumption of jurisdiction by the Commissioner of Income Tax u/s 263 of the Act it set aside the above direction to the Assessing Officer in the following terms:
Moreover, one of the grounds of the assessee-company is that the learned Commissioner of Income Tax in order to pass the order u/s 263 before it becomes time-barred had not applied his mind properly. After going through the directions issued by the learned Commissioner of Income Tax, N.E.R., Shillong, u/s 263 of the Income Tax Act, 1961, we are of the opinion that these need modification as there is no provision under Sections 80HH and 80-I which authorises him to issue such type of direction unless the case is covered by Sections 80HH(6)/(7) and 80-I(8)/(9) of the Income Tax Act, 1961. Nowhere the learned Commissioner in his order u/s 263 has stated under which provision of law directions to bifurcate the profit in proportion to turnover were issued. We, therefore, hereby set aside the order of the Commissioner of Income Tax, NER, Shillong, to the limited extent, with a direction to modify the direction issued, which should be in accordance with provision contained in Sections 80HH and 80-I of the Income Tax Act, 1961, after giving an opportunity of being heard to the assessee-company.
20. The learned Tribunal therefore in essence directed the Commissioner of Income Tax to pass appropriate orders in accordance with Sections 80HH and 80-I of the Act. It was of the view that the said authority had no power to issue such a direction unless permissible u/s 80HH(6) and Section 80-I(8). During the pendency of the proceedings before the Commissioner of Income Tax, thereafter, the petitioner submitted the audited unitwise profit and loss accounts of its industrial units for the year ending March 31, 1992, as well as the audited pool account. It also furnished other necessary information sought for by the Commissioner of Income Tax for verification of the transfer price of the refinery products.
21. Sections 80HH(5) and 80-I(7) bear out the petitioner''s contention that it being a company, submission of audited accounts for ascertaining the profits and gains to grant the benefit of deduction thereunder is not obligatorily essential. The petitioner''s unambiguous and consistent assertion of having submitted unitwise profit and loss statement on the basis of actual working of the units in the assessment as well as audited unitwise balance-sheet and profit and loss account thereof for the relevant year and the audited pool account in response to the queries made by the Commissioner of Income Tax has remained unrebutted by the Revenue.
22. Sub-section (6) of Section 80HH and Sub-section (8) of Section 80-I enact a procedure for the computation of the profits and gains of the asses-see specified therein for the purpose of determining the deduction to which they are entitled thereunder. The provisos appearing under the sub-sections permit the Assessing Officer to compute such profits and gains on a reasonable basis as he would deem fit in case in his opinion the computation of the profits and gains in terms of the procedure prescribed presents exceptional difficulties. The power of computation of the profits and accounts for the purpose of determining the deduction grantable to asses-sees under the above provisions of the Act is located in the Assessing Officer and is exercisable by him subject to his opinion as above. If on the basis of the facts and data available to the Assessing Officer, computation of the profit and loss in terms of the procedure sanctioned by Section 80HH(6) and Section 80-I(8) is possible and the Assessing Officer is not confronted with any exceptional difficulty, computation of the profit and loss on reasonable basis would not be warranted. It is thus primarily the satisfaction of the Assessing Officer to decide if the computation of the profits and gains on a reasonable basis is called for acting within the parameters of the provisos. The legislative paradigm as available does not admit of the intervention of the Commissioner of Income Tax in the purported exercise of powers u/s 263 of the Act to suggest any mode of computation different from the one adopted by the Assessing Officer. The provisions of the Act referred to neither contemplate nor approve substitution of the views of the Assessing Officer in the matter of computation of profits and gains for the purpose of quantifying the deduction to which an assessee thereunder is entitled by indulging in a fact-finding enquiry on the basis of additional materials provided the assessment sought to be interfered with embodies a plausible view recognisable in law.
23. The impugned order discloses that the Commissioner of Income Tax overhauled the facts and the materials available and assumed the role of an appellate authority in the suo motu exercise of his revisional jurisdiction and on a reappreciation of the available data concluded that the computation of profit of the petrochemical unit of the petitioner in the manner provided in Sub-section (6) and Sub-section (8) of Section 80HH and Section 80-I presented exceptional difficulties requiring determination of the profit of the different units in proportion to the turnover thereof there being no better way of doing so under the circumstances to arrive at the actual profit. The order of the Assessing Officer was set aside and a direction was issued to him to fix the correct amount in the light of the discussion recorded in the impugned order.
24. While the initiation of the revisional proceedings acting on the audit objection per se was not impermissible, the course charted by the Commissioner of Income Tax to analyse and review the materials on record, by usurping the role of the Assessing Officer is in disregard of the established restrictions on the exercise of his revisional powers. In the contextual facts, the decision of the Allahabad High Court in
25. Apart from the fact that the operative direction in the impugned order, is exactly similar to the one set aside by the learned Tribunal by its order dated June 18, 1998, in I. T. A. Gau of 97, the Commissioner of Income Tax in the opinion of this Court, having regard to the process undertaken by him had clearly breached the limits of his jurisdiction u/s 263 of the Act. The approach adopted by him flies in the face of the preponderant judicial opinion noticed hereinabove and the views expressed in the instant narrative.
26. Incidentally, this Court in
27. In the result, the petition succeeds and is allowed. The order dated 27 February 5, 2001, passed by the learned Commissioner of Income Tax, Guwahati, is set aside. There would be no orders as to costs.
