Ramesh Ranganathan, J.@mdashI.T.T.A. No. 74 of 2007 is filed against the order of the Income Tax Appellate Tribunal, Hyderabad, in I.T.A.
No. 1169/Hyd/2004 (assessment year 2001-02) dated May 25, 2006, u/s 260A of the Income Tax Act, 1961. W.P. No. 3647 of 2007 is filed
by the appellant in the I.T.T.A. aggrieved by the order dated December 29, 2006, passed by the Commissioner of Income Tax, Hyderabad, u/s
264 of the Income Tax Act, 1961, for the assessment year 2002-03. The appellant in I.T.T.A. No. 74 of 2007, who is the petitioner in W.P. No.
3647 of 2007, shall hereinafter be referred to as the assessee.
2. During the previous year relevant to the assessment year 2001-02, the assessee, a film producer, entered into a lease agreement with M/s.
Asian Films on December 30, 2000, for releasing a Telugu feature film by name ""Devi Putrudu"" for a sum of Rs. 3.37 crores. The entire amount
was received by the assessee before March 31, 2001. However, in his profit and loss account, the assessee accounted only for Rs. 3.07 crores.
On being questioned by the Assessing Officer, the assessee contended that, while the film ""Devi Putrudu"" was to be released by M/s. Asian Films
(Distributors), in the Nizam area on Friday, i.e., January 12, 2001, the assessee could deliver the prints of the film only on January 14, 2001, and,
as a result, the film was released only on Monday, i.e., January 15, 2001, that M/s. Asian Films, vide letter dated July 13, 2001, addressed to the
Secretary, A.P. Film Chamber of Commerce, sought damages of Rs. 44,09,872, that the Telangana Telugu Film Distributors Association, vide
letter dated October 5, 2001, had informed the assessee that no distributor would come forward to release his forthcoming picture ""Manasantha
Nuwe"" unless the dispute was settled and that the assessee had paid Rs. 30 lakhs to M/s. Asian Films through Telangana Telugu Film Distributors
Association as is evidenced from the deed of agreement entered into by the assessee with M/s. Suresh Movies Film Distribution for distribution of
rights with reference to ""Manasantha Nuwe"" dated October 15, 2001. The assessee contended that this amount of Rs. 30 lakhs was, therefore,
not assessable during the relevant previous year.
3. The Assessing Officer, however, rejected this contention holding that the entire amount of Rs. 3.37 crores, on account of ""Devi Putrudu"", was
received by the assessee from M/s. Asian Films during the previous year relevant to the assessment year 2001-02, that the correspondence
furnished by the assessee showed that the liability for compensation arose during the previous year relevant to the assessment year 2002-03, and
that no evidence had been furnished by the assessee to show that such compensation had accrued during the previous year relevant to assessment
year 2001-02. The Assessing Officer added this amount of Rs. 30 lakhs to the income returned by the assessee.
4. Aggrieved thereby, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), wherein he contended that the
compensation paid of Rs. 30 lakhs was settled by the end of January, 2001 and, as he was maintaining the books of account on the mercantile
basis, the Assessing Officer was not correct in disallowing the same. The Commissioner, on considering the material evidence on record, as also
the asses-see''s letter to the Film Chamber of Commerce dated October 6, 2001, held that it was quite evident that the dispute continued even till
October 5, 2001. The Commissioner noted that the agreement dated October 5, 2001, entered into between the assessee and M/s. Suresh
Movies Film Distributors, only showed payment of Rs. 30 lakhs to M/s. Telangana Telugu Film Distributors Association and not to M/s. Asian
Films and there was no recital therein that payment of Rs. 30 lakhs was due to the dispute between the assessee and M/s. Asian Films. The
Commissioner held that the addition made by the Assessing Officer was justified.
5. Aggrieved thereby, the assessee filed an appeal before the Income Tax Appellate Tribunal. Before the Tribunal, the assessee contended that, as
per Accounting Standard-4, paragraph 8, the assessee had the right to take into account subsequent events till the balance-sheet date, i.e., the date
on which the financial statements were approved and, as the audit was completed only on October 25, 2001, he was justified in claiming deduction
of Rs. 30 lakhs. The assessee contended that, even though there was no compensation Clause in the agreement dated July 13, 2001, he had made
such payment on account of business expediency and, therefore, the same should be allowed. He alternatively pleaded that if the amount was
found not to be allowable during the current assessment year, i.e., 2001-02, a direction may be given to allow it in the next assessment year, i.e.,
2002-03. It was, however, contended on behalf of the Revenue that the Accounting Standard-4 did not help the case of the assessee, that the
auditors report did not contain any note mentioning the specific facts claimed by the assessee, that the evidence furnished by him was subsequent
to the date of the balance-sheet, i.e., March 31, 2001, and that the auditors had not followed Accounting Standard-4. It was further contended
that, as the liability did not accrue during the relevant previous year, the same could not be allowed as a deduction. The Tribunal held that whatever
evidence had been furnished by the assessee, with reference to the disputed amount, was subsequent to the date of the balance-sheet, i.e., March
31, 2001, that the dispute relating to compensation amount did not crystallize before March 31, 2001, and, as the liability did not accrue during the
relevant previous year, the same could not be allowed as a deduction. The Tribunal found no reason to interfere with the concurrent findings of the
Assessing Officer and the Commissioner on the disputed amount of Rs. 30 lakhs. The appeal was dismissed. With regard to the alternative plea,
that a direction be issued for the subsequent assessment year, the Tribunal held that, the same being not the subject-matter of the relevant previous
year, no such direction could be issued. Aggrieved thereby, the present appeal.
6. Sri A.V. Krishna Kaundinya, learned Counsel for the assessee, would contend that, since the total receipts of the film ""Devi Putrudu"" were
realized and accounted for during the assessment year 2001-02, the liability arising out of the said receipt was required to be allowed in the same
assessment year as per the accounting principles. Reliance is placed by learned Counsel on Accounting Standard-4 issued by the Institute of
Chartered Accountants of India to contend that the assessee had the right to take into account events which had happened till the date of approval
of the financial statements. It is contended that the Tribunal had failed to see that the audit of the accounts was completed only on October 25,
2001, and that the assessee was justified in claiming deduction of Rs. 30 lakhs which was paid to M/s. Telangana Telugu Film Distributors
Association as compensation.
7. The Accounting Standards relied on behalf of the assessee are those prescribed by the Institute of Chartered Accountants of India. Thereunder,
the definition ""events occurring after the balance-sheet date"" are those significant events, both favourable and unfavourable, that occur between the
balance-sheet date and the date on which the financial statements are approved by the board of directors in the case of a company and by the
corresponding approving authority in the case of any other entity. Under paragraph 8.1, events, which occur between the balance-sheet date and
the date on which the financial statements are approved, may indicate the need for adjustments to assets and liabilities as at the balance-sheet date
or may require disclosure. Under paragraph 8.2, adjustment to assets and liabilities are required for events occurring after the balance-sheet date
that provide additional information materially affecting the determination of the amounts relating to conditions existing at the balance-sheet date.
8. As has been contended before the Tribunal, on behalf of the Revenue, even the audit report does not contain any note mentioning the specific
facts as claimed by the assessee. There is nothing on record before us to indicate that the auditors had followed Accounting Standard No. 4. In
such circumstances it is wholly unnecessary for us to examine whether Accounting Standard No. 4 would have required the assessing authority to
take note of events which took place after the end of the assessment year in question.
9. The Tribunal, after extracting the assessee''s petition to the Film Chamber of Commerce dated October 6, 2001, held that the assessee had
disputed the liability of M/s Asian Films and the Telangana Telugu Film Distributors Association. The Tribunal held that it was clear that the
assessee did not recognize the liability during the previous year relating to the assessment year 2001-02 and the dispute, if at all, arose after the
closure of the accounting period ending March 31, 2001. The Tribunal observed that the assessee had claimed to have made payment to M/s.
Asian Films through M/s. Suresh Movie Film Distributors only on October 15, 2001, the date relevant to the assessment year 2002-03.
10. Inasmuch as, even, according to the assessee, payment of Rs. 30 lakhs was made only on October 15, 2001, much after the assessment year
2001-02 and since no material has been placed to show that the audit report, for the previous year relating to the assessment year 2001-02, has
made any reference to such subsequent event of payment of damages, the order of the Tribunal is valid and does not necessitate interference.
I.T.T.A. No. 74 of 2007 is dismissed.
11. As noted above, W.P. No. 3647 of 2007 was filed to have the order dated December 29, 2006, passed by the Commissioner of Income
Tax, Hyderabad, u/s 264 of the Income Tax Act, 1961, for the assessment year 2002-03, set aside.
12. For the assessment year 2002-03, the assessee had filed a return of income on October 31, 2002, declaring a total income of Rs. 22,09,270.
He did not claim deduction of Rs. 30 lakhs in the said return as, according to him, he had been agitating for the assessment year 2001-02. After
giving notices under Sections 143(2) and 142(1), the Assessing Officer completed the assessment, by his order dated February 23, 2005,
determining a total income of Rs. 25,11,208. The assessee preferred a revision u/s 264 of the Income Tax Act, 1961, before the Commissioner of
Income Tax and requested him to direct the Assessing Officer to allow deduction of Rs. 30 lakhs paid by the assessee, as damages, to M/s. Asian
Films. The assessee contended before the Commissioner that he had originally claimed this amount in the assessment year 2001-02 and, since the
dispute arose by January, 2001, the liability had crystallized by the time the accounts for the assessment year 2001-02 were audited and that the
Assessing Officer had taken the view that it was not allowable deduction since the payment was made during the previous year relevant to the
assessment year 2002-03. The Commissioner, in his order dated December 29, 2006, rejected the assessee''s application for revision holding that
the assessment order for the year 2002-03 made no reference to any claim of deduction of Rs. 30 lakhs having been made by the petitioner in his
profit and loss account, that no such issue arose in the assessment year 2002-03 and that the subject-matter of the petition u/s 264 had no bearing
on the assessment made for the assessment year 2002-03. Aggrieved thereby, the present writ petition is filed.
13. Sri A.V. Krishna Kaundinya, learned Counsel for the assessee, would contend that the Commissioner had refused to exercise jurisdiction
merely on a technical ground which had resulted in denial of a genuine deduction available to the assessee, that it was the positive stand of the
Assessing Officer in his order, for the assessment year 2001-02, that the liability for compensation had arisen during the previous year relevant to
the assessment year 2002-03 and that the Revenue cannot now be permitted to totally deny the relief.
14. In his return of income filed on October 31, 2002, the assessee did not claim deduction for the amount said to have been paid by him of Rs.
30 lakhs and as such the Assessing Officer had no occasion to examine this claim in the order of the assessment dated February 23, 2005. It was
for the first time in revision before the Commissioner of Income Tax that the assessee had raised this claim for deduction.
15. The question which arises for consideration is whether the Commissioner, u/s 264 of the Income Tax Act, is entitled to examine a question
raised for the first time before him and which does not form part of the record before the Assessing Officer or even the order of assessment?
16. Section 263 of the Income Tax Act, relates to revision of orders prejudicial to the Revenue and Section 264 to revision of other orders.
Sections 263(1) and 264(1) read thus:
263. Revision of orders prejudicial to Revenue.--(1) The Commissioner may call for and examine the record of any proceeding 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.--For the removal of doubts, it is hereby declared that, for the purposes of this Sub-section ,-
(a) an order passed on or before or after the 1st day of June, 1988, by the Assessing Officer shall include
(i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income Tax Officer on the basis of the directions
issued by the Joint Commissioner u/s 144A;
(ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred
on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner
authorised by the Board in this behalf u/s 120;
(b) ''record'' shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of
examination by the Commissioner;
(c) where any order referred to in this Sub-section and passed by the Assessing Officer had been the subject-matter of any appeal filed on or
before or after the 1st day of June, 1988, the powers of the Commissioner under this Sub-section shall extend and shall be deemed always to have
extended to such matters as had not been considered and decided in such appeal.
264. Revision of other orders--(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 of 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.
17. It is also necessary to note that the Explanation to Section 263 was substituted by the Finance Act, 1988, with effect from June 1, 1988.
18. The power of revision, u/s 263 of the Income Tax Act to call for and examine the records, would arise only if the Commissioner considers that
the order of the Assessing Officer is erroneous and is prejudicial to the interests of the Revenue. On coming to such a conclusion the Commissioner
is empowered to pass orders after giving the assessee an opportunity of being heard and after making or causing an enquiry to be made. Section
264, on the other hand, applies to cases other than those where the Commissioner considers that the order passed by the Assessing Officer is
prejudicial to the interests of the Revenue. In cases where the assessment order is not prejudicial to the interests of the Revenue, and is considered
by the assessee to be prejudicial to his interest, the remedy of revision is only u/s 264 of the Act.
19. Unlike Section 263 which contains an Explanation, and under Clause (b) thereof the word ""record"" has been defined to include all records
relating to any proceedings under the Act available at the time of examination by the Commissioner, Section 264 does not contain any such
Explanation. The manner in which the word ""record"" in Section 264 should be considered shall be considered hereinafter. Suffice to note that the
judgments of the Madras High Court in Farm Tea Estates Syndicate Vs. Agricultural Income Tax Officer and Another, , M. Chettyappan and
Others Vs. Commissioner of Agricultural Income Tax, and Viswanathan Silk Centre Vs. Commissioner of Income Tax, , the Supreme Court in
Additional The Additional Commissioner of Income Tax, Gujarat Vs. Gurjargravures Private Ltd., , Parekh Brothers Vs. Commissioner of Income
Tax and Others, , all arose prior to the substitution of the Explanation to Section 263 by the Finance Act, 1988, with effect from June 1, 1988.
20. Sri A.V. Krishna Kaundinya, learned Counsel for the assessee, would also place reliance on the judgments of the Supreme Court in CIT v.
Shree Manjunathesware Packing Products and Camphor Works [1998] 231 ITR 53 the Division Bench of this Court in Commissioner of Income
Tax Vs. K.C. Rangaiah and Co., , the Division Bench of the Gujarat High Court in Ramdev Exports Vs. Commissioner of Income Tax, , and the
Calcutta High Court in Smt. Phool Lata Somani Vs. Commissioner of Income Tax and Others, .
21. In Shree Manjunathesware Packing Products and Camphor Works [1998] 231 ITR 53 the question which was referred to the Kamataka
High Court was (page 55):
Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the word ''record'' used in Section
263 of the Act would not mean the record as it stands at the time of examination by the Commissioner, but it means the record as it stands at the
time the order in question was passed by the Income Tax Officer.
22. The Karnataka High Court held that the ""record"" contemplated by Section 263(1) did not mean only the order of assessment, but comprised
of proceedings on which the assessment was based. The question was answered in the affirmative in favour of the assessee and against the
Revenue and when the matter was carried in appeal, the Supreme Court observed (page 62):
It, therefore, cannot be said, as contended by learned Counsel for the respondent, that the correct and settled legal position, with respect to the
meaning of the word ''record'' till June 1, 1988, was that it meant the record which was available to the Income Tax Officer at the time of passing
of the assessment order. Further, we do not think that such a narrow interpretation of the word ''record'' was justified, in view of the object of the
provision and the nature and scope of the power conferred upon the Commissioner. The revisional power conferred on the Commissioner u/s 263
is of wide amplitude. It enables the Commissioner to call for and examine the record of any proceeding under the Act. It empowers the
Commissioner to make or cause to be made such enquiry as he deems necessary in order to find out if any order passed by the Assessing Officer
is erroneous in so far as it is prejudicial to the interests of the Revenue. After examining the record and after making or causing to be made an
enquiry if he considers the order to be erroneous then he can pass the order thereon as the circumstances of the case justify. Obviously, as a result
of the enquiry he may come in possession of new material and he would be entitled to take that new material into account. If the material, which
was not available to the Income Tax Officer when he made the assessment could thus be taken into consideration by the Commissioner after
holding an enquiry, there is no reason why the material which had already come on record though subsequently to the making of the assessment
cannot be taken into consideration by him. Moreover, in view of the clear words used in Clause (b) of the Explanation to Section 263(1), it has to
be held that while calling for and examining the record of any proceeding u/s 263(1) it is and it was open to the Commissioner not only to consider
the record of that proceeding but also the record relating to that proceeding available to him at the time of examination....
In South India Steel Rolling Mills, Madras Vs. Commissioner of Income Tax, Madras, the Commissioner in exercise of his power undei Section
263 had withdrawn the development rebate granted for the years 1962-63, 1963-64, 1967-68 and 1968-69 on the ground that since the
partnership stood dissolved on March 3, 1968, on the death of one of the two partners, before the expiry of eight years, the asses-see-firm was
not entitled to the benefit of the development rebate u/s 33(1)(a) of the Act. The said order passed by the Commissioner was challenged before
the Tribunal but the assessee''s appeal had failed. At its instance the following question was referred to the Madras High Court (page 656) :
''Whether, on the facts and circumstances of the case, the revision of assessment u/s 263 by the Commissioner for withdrawing the development
rebate granted for the assessment years 1962-63, 1963-64, 1967-68 and 1968-69 is proper and justified?
The High Court also decided against the assessee. In the appeal filed by the assessee the order of the Commissioner was challenged, inter alia, on
the ground that the power u/s 263 could have been invoked on the basis of the record as it stood when the order was passed by the Income Tax
Officer and that it was not open to the Commissioner to take into account dissolution of the assessee-firm, which took place after passing of the
assessment order because that circumstance was not disclosed by the record which was before the Income Tax Officer. Rejecting this contention
this Court held (page 662): ''As regards his taking into consideration an event which had occurred subsequent to the passing of the order by the
Income Tax Officer, it may be stated that in Explanation (b) in Section 263 there is an express provision wherein it is prescribed that ''record shall
include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by
the Commissioner''. The death of one of the two partners resulting in the dissolution of the assessee-firm on account of such death took place prior
to the passing of the order by the Commissioner and it could, therefore, be taken into consideration by him for the purpose of exercising his
powers u/s 263 of the Act.'' In that case also the amendment was held applicable to an order passed before June 1, 1988.
We, therefore, hold that it was open to the Commissioner to take into consideration all the records available at the time of examination by him and
thus to consider the valuation report submitted by the Departmental Valuation Cell subsequent to the passing of the assessment order and, so the
order passed by him was legal. The High Court was wrong in taking a contrary view. We, therefore, allow this appeal, set aside the judgment and
order passed by the High Court and answer the question referred to the High Court in the negative, i.e., in favour of the Revenue and against the
assessee. In view of the facts and circumstances of the case, there shall be no order as to costs. Appeal allowed.
(Here printed in italics.)
23. In Commissioner of Income Tax Vs. K.C. Rangaiah and Co., , for the assessment year 1980-81 the assessee-firm was granted registration u/s
185 of the Income Tax Act. In exercise of his revisional power u/s 263, the Commissioner set aside the order of registration on August 12, 1983.
The assessee-firm carried the matter in appeal before the Income Tax Appellate Tribunal and the Tribunal took the view that the Commissioner
was in error in cancelling the registration. The question which arose before the Division Bench of this Court was whether Section 263 empowered,
by an amendment of the Finance Act, 1988, with effect from June 1, 1988, to take into consideration the material which was not available on
record at the time of granting registration and it is in this context that the Division Bench observed (page 391):
In K.A. Ramaswamy Chettiar and Another Vs. Commissioner of Income Tax, the assessee had purchased some properties. Without making any
enquiries about the value of the properties, the order of assessment was made for the assessment years 1974-75 and 1975-76. It appears that
search in the premises of the sellers was conducted and certain documents were recovered from their possession. On the basis of the record the
Commissioner of Income Tax exercised jurisdiction u/s 263 of the Act and set aside the assessment. On appeal, the order of the Commissioner
was upheld by the Income Tax Appellate Tribunal. On a reference to the High Court of Madras, one of the questions that was referred related to
exercise of power by the Commissioner u/s 263, based on material which came to light after the order of assessment. The Division Bench of the
Madras High Court has held that Clause (b) of the Explanation was inserted in Section 263(1), which provides that the word ''record'' shall include
and shall be deemed always to have included all records in relation to any proceeding under the Act available at the time of examination of an
order by the Commissioner to revise the same even if the order under revision was passed during the period prior to June 1, 1988, and, therefore,
the Commissioner could make use of the materials gathered by him on the date when he assumed jurisdiction u/s 263 of the Act. It held that there
was no infirmity in the order of the Tribunal upholding the order of the Commissioner. Here we refer to an earlier judgment of the Madras High
Court in South India Steel Rolling Mills Vs. Commissioner of Income Tax, Madras, which arose out of an order passed by the Commissioner in
exercise of revisional power u/s 263(1) cancelling the development rebate granted by the Income Tax Officer. There, both learned Counsel
conceded that the Commissioner had jurisdiction to take proceedings in exercise of the revisional power on the basis of the material which was not
before the assessing authority. That judgment of the Madras High Court was affirmed by the Supreme Court in South India Steel Rolling Mills,
Madras Vs. Commissioner of Income Tax, Madras, . Before the Supreme Court one of the contentions urged was that the Commissioner should
not have invoked his jurisdiction u/s 263 of the Act as the matter could have been dealt with by the Income Tax Officer in exercise of his power of
rectification u/s 155 of the Act. That contention was negatived holding that the revisional power conferred on the Commissioner u/s 263 is of wide
amplitude and that power cannot be limited with reference to Section 155. It was observed as follows (page 662).
As regards his taking into consideration an event which had occurred subsequent to the passing of the order by the Income Tax Officer, it may be
stated that Explanation (b) in Section 263 there is an express provision wherein it is prescribed that ""record shall include and shall be deemed
always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner"". The death
of one of the two partners resulting in the dissolution of the assessee-firm on account of such death took place prior to the passing of the order by
the Commissioner and it could, therefore, be taken into consideration by him for the purpose of exercising his powers u/s 263 of the Act.
From the above observation of the Supreme Court it has to be now taken settled law that material which came to light, after the order of the
Income Tax Officer but before the revisional power was exercised, could be taken into consideration for exercise of revisional power u/s 263(1).
(Here printed in italics.)
24. Both the aforesaid judgments related to revision proceeding u/s 263 of the Income Tax Act.
25. Now, the judgments u/s 264 of the Income Tax Act.
26. In Ramdev Exports Vs. Commissioner of Income Tax, it was contended on behalf of the assessee, that the assessee had not claimed certain
deductions u/s 80HHC at the time when the returns were filed and as the facts with regard to eligibility of the assessee for the deduction had come
to the notice of the assessee at a subsequent stage, the respondent ought to have entertained the revision application and should not have rejected
the revision application on the ground that the Assessing Officer had accepted the income of the assessee as returned. It is in this context that the
Division Bench of the Gujarat High Court observed (page 875):
Upon perusal of the impugned order, we are of the opinion that the revisional authority did not exercise the jurisdiction vested in it. This Court has
decided in the case of C. Parikh and Co. Vs. Commissioner of Income Tax, Baroda, and in the case of Digvijay Cement Company Limited Vs.
Commissioner of Income Tax and Another, that it is open to the revisional authority to look into the deductions, which might be claimed by the
assessee even for the first time. In other words, even if the return as submitted by the assessee is accepted by the Assessing Officer and if
thereafter the assessee comes to know about some mistake committed, where either he was eligible for more deduction or had paid more tax, he
can definitely approach the revisional authority, and in such an event, it is open to the revisional authority to exercise its jurisdiction u/s 264 of the
Act.
In the instant case, it is very clear that, without going into the merits of the claim made by the assessee in the returns for the assessment years
referred to hereinabove, the revisional authority became technical and rejected the revision application merely on the ground that the deductions,
which had been claimed before the revisional authority, were not claimed before the Assessing Officer.
(Here printed in italics.)
27. In Smt. Phool Lata Somani Vs. Commissioner of Income Tax and Others, , the order declining to entertain the application for revision was
passed by the Commissioner, u/s 264, on the ground that, despite being given an opportunity, the assessee had failed to produce the evidence
regarding the investment made by him before the Assessing Officer and, therefore, the discretion u/s 264 need not be exercised in entertaining this
application for revision for making an enquiry. Aggrieved thereby, the jurisdiction of the Calcutta High Court was invoked by the assessee. A single
judge of the Calcutta High Court, while examining the power of revision u/s 264 of the Income Tax Act, observed (page 224):
According to me the Commissioner in this case on receipt of the application instead of relying solely on the reports or the records of the case,
should have made enquiry considering the documents placed before him by the petitioner. At least this should have been reflected in the impugned
order that he had taken note on the date of making application of the revision, of the tax exempting investment. There might be varieties of reasons
for not producing evidence at the time of the assessment, this does not mean that the assessee is precluded from producing evidence of
contemporaneous nature at a later stage by filing an application for revision. The power u/s 264 of the Commissioner in my opinion is to do justice,
to prevent miscarriage of justice being rendered. It appears from the records that the petitioner produced unimpeachable documents showing
investment which is otherwise liable to be taken note of for granting exemption and if it were allowed by the Commissioner then the petitioner
would not have suffered for over-assessment. The expression ''order prejudicial'' means the prejudicial effect of an order passed by the revising
officer on the merits.
(Here printed in italics.)
28. As noted above, under Explanation (b) to Section 263(1), the word ""record"" shall include and shall always be deemed to have included all the
records, relating to any proceedings under the Act, which are available at the time of examination by the Commissioner. The words ""shall be
deemed always"" would signify that, even in cases where the orders of revision were passed prior to the amendment, ""records"" would include those
available at the time of examination by the Commissioner and not merely those records which were available before the assessing authority or
those referred to in the order of assessment. It is significant to note that while Parliament has chosen to insert Explanation (b) to Section 263(1), by
the Finance Act, 1988, with effect from June 1, 1988, no such Explanation has been inserted to Section 264. The omission is significant. Since the
power of revision, u/s 263(1), is required to be exercised in cases where it is prejudicial to the interests of the Revenue, the power of the
Commissioner is not limited only to the material which was available before the Assessing Officer and, in order to protect the interests of the
Revenue, the Commissioner is entitled to examine any other records which are available at the time of examination by him and to take into
consideration even those events which arose subsequent to the order of assessment. Absence of a similar Explanation u/s 264 would necessitate
the conclusion that the records of any proceedings under the Act which the Commissioner is empowered to call for, are the records of the
proceedings before the Assessing Officer, i.e., the material on record before the Assessing Officer and those reflected in the assessment order
including the assessment order itself. The Commissioner, while exercising his powers of revision u/s 264, is not entitled to take into account any
material which is not placed before the assessing authority or events which took place subsequent to the order of assessment.
29. We must express our inability to agree with the opinion of the Division Bench of the Gujarat High Court, in Ramdev Exports Vs.
Commissioner of Income Tax, since the conscious omission by Parliament to insert a provision in Section 264(1), similar to Explanation (b) of
Section 263(1), was not noticed. The opinion of the learned single judge of the Calcutta High Court in Smt. Phool Lata Somani Vs. Commissioner
of Income Tax and Others, does not commend to us. Since the ""record"" u/s 264 is only the record of proceedings before the assessing authority
and, as the assessee did not claim any such deduction in the return filed by him before the assessing authority, he is not entitled to raise this question
for the first time in revision proceedings u/s 264(1) of the Act.
30. The order of the Commissioner dated December 29, 2006, does not necessitate interference in proceedings under Article 226 of the
Constitution of India. The writ petition fails and is, accordingly, dismissed. However, in the circumstances, with costs.