REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.5009 OF 2016
[Arising out of S.L.P.(C) No.11621 of 2009]
COMMISSIONER OF INCOME TAX, MUMBAI …APPELLANT(S)
VERSUS
AMITABH BACHCHAN …RESPONDENT(S)
WITH
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.
“263 – Revision of orders prejudicial to revenue.-(1) The Principal
Commissioner or 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…………………………………………”
9. Under the Act different shades of power have been conferred on
different authorities to deal with orders of assessment passed by the
primary authority. While Section 147 confers power on the Assessing
Authority itself to proceed against income escaping assessment, Section 154
of the Act empowers such authority to correct a mistake apparent on the
face of the record. The power of appeal and revision is contained in
Chapter XX of the Act which includes Section 263 that confer suo motu power
of revision in the learned C.I.T. The different shades of power conferred
on different authorities under the Act has to be exercised within the areas
specifically delineated by the Act and the exercise of power under one
provision cannot trench upon the powers available under another provision
of the Act. In this regard, it must be specifically noticed that against
an order of assessment, so far as the Revenue is concerned, the power
conferred under the Act is to reopen the concluded assessment under Section
147 and/or to revise the assessment order under Section 263 of the Act.
The scope of the power/jurisdiction under the different provisions of the
Act would naturally be different. The power and jurisdiction of the Revenue
to deal with a concluded assessment, therefore, must be understood in the
context of the provisions of the relevant Sections noticed above. While
doing so it must also be borne in mind that the legislature had not vested
in the Revenue any specific power to question an order of assessment by
means of an appeal.
10. Reverting to the specific provisions of Section 263 of the Act what
has to be seen is that a satisfaction that an order passed by the Authority
under the Act is erroneous and prejudicial to the interest of the Revenue
is the basic pre-condition for exercise of jurisdiction under Section 263
of the Act. Both are twin conditions that have to be conjointly present.
Once such satisfaction is reached, jurisdiction to exercise the power would
be available subject to observance of the principles of natural justice
which is implicit in the requirement cast by the Section to give the
assessee an opportunity of being heard. It is in the context of the above
position that this Court has repeatedly held that unlike the power of
reopening an assessment under Section 147 of the Act, the power of revision
under Section 263 is not contingent on the giving of a notice to show
cause. In fact, Section 263 has been understood not to require any
specific show cause notice to be served on the assessee. Rather, what is
required under the said provision is an opportunity of hearing to the
assessee. The two requirements are different; the first would comprehend a
prior notice detailing the specific grounds on which revision of the
assessment order is tentatively being proposed. Such a notice is not
required. What is contemplated by Section 263, is an opportunity of hearing
to be afforded to the assessee. Failure to give such an opportunity would
render the revisional order legally fragile not on the ground of lack of
jurisdiction but on the ground of violation of principles of natural
justice. Reference in this regard may be illustratively made to the
decisions of this Court in Gita Devi Aggarwal vs. Commissioner of Income
Tax, West Bengal and others[1] and in The C.I.T., West Bengal, II, Calcutta
vs. M/s Electro House[2]. Paragraph 4 of the decision in The C.I.T., West
Bengal, II, Calcutta vs. M/s Electro House (supra) being illumination of
the issue indicated above may be usefully reproduced hereunder:
“This section unlike Section 34 does not prescribe any notice to be given.
It only requires the Commissioner to give an opportunity to the assessee of
being heard. The section does not speak of any notice. It is unfortunate
that the High Court failed to notice the difference in language between
Sections 33-B and 34. For the assumption of jurisdiction to proceed under
Section 34, the notice as prescribed in that section is a condition
precedent. But no such notice is contemplated by Section 33-B. The
jurisdiction of the Commissioner to proceed under Section 33-B is not
dependent on the fulfilment of any condition precedent. All that he is
required to do before reaching his decision and not before commencing the
enquiry, he must give the assessee an opportunity of being heard and make
or cause to make such enquiry as he deems necessary. Those requirements
have nothing to do with the jurisdiction of the Commissioner. They pertain
to the region of natural justice. Breach of the principles of natural
justice may affect the legality of the order made but that does not affect
the jurisdiction of the Commissioner. At present we are not called upon to
consider whether the order made by the Commissioner is vitiated because of
the contravention of any of the principles of natural justice. The scope of
these appeals is very narrow. All that we have to see is whether before
assuming jurisdiction the Commissioner was required to issue a notice and
if he was so required what that notice should have contained? Our answer to
that question has already been made clear. In our judgment no notice was
required to be issued by the Commissioner before assuming jurisdiction to
proceed under Section 33-B. Therefore the question what that notice should
contain does not arise for consideration. It is not necessary nor proper
for us in this case to consider as to the nature of the enquiry to be held
under Section 33-B. Therefore, we refrain from spelling out what principles
of natural justice should be observed in an enquiry under Section 33-B.
This Court in Gita Devi Aggarwal v. CIT, West Bengal ruled that Section 33-
B does not in express terms require a notice to be served on the assessee
as in the case of Section 34. Section 33-B merely requires that an
opportunity of being heard should be given to the assessee and the
stringent requirement of service of notice under Section 34 cannot,
therefore, be applied to a proceeding under Section 33-B.” (Page 827-828).
[Note: Section 33-B and Section 34 of the Income Tax Act, 1922 corresponds
to Section 263 and Section 147 of the Income Tax Act, 1961]
11. It may be that in a given case and in most cases it is so done
a notice proposing the revisional exercise is given to the assessee
indicating therein broadly or even specifically the grounds on which the
exercise is felt necessary. But there is nothing in the section (Section
263) to raise the said notice to the status of a mandatory show cause
notice affecting the initiation of the exercise in the absence thereof or
to require the C.I.T. to confine himself to the terms of the notice and
foreclosing consideration of any other issue or question of fact. This is
not the purport of Section 263. Of course, there can be no dispute that
while the C.I.T. is free to exercise his jurisdiction on consideration of
all relevant facts, a full opportunity to controvert the same and to
explain the circumstances surrounding such facts, as may be considered
relevant by the assessee, must be afforded to him by the C.I.T. prior to
the finalization of the decision.
12. In the present case, there is no dispute that in the order
dated 20th March, 2006 passed by the learned C.I.T. under Section 263 of
the Act findings have been recorded on issues that are not specifically
mentioned in the show cause notice dated 7th November, 2005 though there
are three (03) issues mentioned in the show cause notice dated 7th
November, 2005 which had specifically been dealt with in the order dated
20th March, 2006. The learned Tribunal in its order dated 28th August,
2007 put the aforesaid two features of the case into two different
compartments. Insofar as the first question i.e. findings contained in the
order of the learned C.I.T. dated 20th March, 2006 beyond the issues
mentioned in the show cause notice is concerned the learned Tribunal taking
note of the aforesaid admitted position held as follows:
“In the case on hand, the CIT has assumed jurisdiction by issuing show
cause notice u/s 263 but while passing the final order he relied on various
other grounds for coming to the final conclusion. This itself makes the
revision order bad in law and also violative of principles of natural
justice and thus not maintainable. If, during the course of revision
proceedings the CIT was of the opinion that the order of the AO was
erroneous on some other grounds also or on any additional grounds not
mentioned in the show cause notice, he ought to have given another show
cause notice to the assessee on those grounds and given him a reasonable
opportunity of hearing before coming to the conclusion and passing the
final revision order. In the case on hand, the CIT has not done so. Thus,
the order u/s 263 is violative of principles of natural justice as far as
the reasons, which formed the basis for the revision but were not part of
the show cause notice issued u/s 263 are concerned. The order of the CIT
passed u/s 263 is therefore liable to be quashed in so far as those grounds
are concerned.”
13. The above ground which had led the learned Tribunal to interfere with
the order of the learned C.I.T. seems to be contrary to the settled
position in law, as indicated above and the two decisions of this Court in
Gita Devi Aggarwal (supra) and M/s Electro House (supra). The learned
Tribunal in its order dated 28th August, 2007 had not recorded any finding
that in course of the suo motu revisional proceedings, hearing of which was
spread over many days and attended to by the authorized representative of
the assessee, opportunity of hearing was not afforded to the assessee and
that the assessee was denied an opportunity to contest the facts on the
basis of which the learned C.I.T. had come to his conclusions as recorded
in the order dated 20th March, 2006. Despite the absence of any such
finding in the order of the learned Tribunal, before holding the same to be
legally unsustainable the Court will have to be satisfied that in the
course of the revisional proceeding the assessee, actually and really, did
not have the opportunity to contest the facts on the basis of which the
learned C.I.T. had concluded that the order of the Assessing Officer is
erroneous and prejudicial to the interests of the Revenue. The above is
the question to which the Court, therefore, will have to turn to.
14. To determine the above question we have read and considered the
order of the Assessing Officer dated 30th March, 2004; as well as the order
of the learned C.I.T. dated 20th March, 2006. From the above
consideration, it appears that the learned C.I.T. in the course of the
revisional proceedings had scrutinized the record of the proceedings before
the Assessing Officer and noted the various dates on which opportunities to
produce the books of account and other relevant documents were afforded to
the assessee which requirement was not complied with by the assessee. In
these circumstances, the revisional authority took the view that the
Assessing Officer, after being compelled to adjourn the matter from time to
time, had to hurriedly complete the assessment proceedings to avoid the
same from becoming time barred. In the course of the revisional exercise
relevant facts, documents, and books of account which were overlooked in
the assessment proceedings were considered. On such re-scrutiny it was
revealed that the original assessment order on several heads was erroneous
and had the potential of causing loss of revenue to the State. It is on
the aforesaid basis that the necessary satisfaction that the assessment
order dated 30th March, 2004 was erroneous and prejudicial to the interests
of the revenue was recorded by the learned C.I.T. At each stage of the
revisional proceeding the authorized representative of the assessee had
appeared and had full opportunity to contest the basis on which the
revisional authority was proceeding/had proceeded in the matter. If the
revisional authority had come to its conclusions in the matter on the basis
of the record of the assessment proceedings which was open for scrutiny by
the assessee and available to his authorized representative at all times it
is difficult to see as to how the requirement of giving of a reasonable
opportunity of being heard as contemplated by Section 263 of the Act had
been breached in the present case. The order of the learned Tribunal
insofar as the first issue i.e. the revisional order going beyond the show
cause notice is concerned, therefore, cannot have our acceptance. The High
Court having failed to fully deal with the matter in its cryptic order
dated 7th August, 2008 we are of the view that the said orders are not
tenable and are liable to be interfered with.
15. This will bring us to a consideration of the second limb of the
case as dealt with by the learned Tribunal, namely, that tenability of the
order of the learned C.I.T. on the three (03) issues mentioned in the show
cause notice and also dealt with in the revisional order dated 20th March,
2006. The aforesaid three (03) issues are:
“i) Assessee maintaining 5 bank accounts and AO not examining the 5th
bank account, books of account and any other bank account where receipts
related to KBC were banked.
ii) Regarding claim of deposits of Rs.52.06 lakhs in Special Bench A/c
No.11155 under the head “Receipts on behalf of Mrs. Jaya Bachchan and
iii) Regarding the claim of additional expenses in the re-revised return.”
16. On the above issues the learned Tribunal had given detailed
reasons for not accepting the grounds cited in the revisional order for
setting aside the assessment under Section 263 of the Act. The reasons
cited by the learned Tribunal insofar as the first two issues are concerned
may not justify a serious relook and hence need not be gone into. The third
question would, however, require some detailed attention. The said
question is with regard to the claim of additional expenses made by the
assessee in its re-revised return which was subsequently withdrawn.
17. The assessee in the re-revised return dated 31st March, 2003
had made a claim of additional expenses of 30% of the gross professional
receipts (Rs.3.17 crores). It appears that the Assessing Officer required
the assessee to file requisite details in this regard. The assessee
responded by letter dated 13th February, 2004 stating as follows:
“With regard to the 30% estimated expenses claimed, we have to submit that
these are the expenses which are spent for security purposes by employing
certain Agencies, guards etc. for the personal safety of Shri Bachchan as
he has to protect himself from various threats to his life received by him
and to avoid extortion of money from gangsters. The names of such Agencies
cannot be disclosed/divulged as there is a possibility of leakage of
information of Agencies’ names from the office staff, which will obviously
be detrimental to the interests of Shri Bachchan. The payments have been
made out of cash balances available and lot of outstanding expenses are to
be paid which could not be paid for want of income.”
18. Thereafter by letter dated 13th March, 2004 the assessee informed the
learned C.I.T. that the claim was made on a belief that the same is
allowable but as it will not be feasible for the assessee to substantiate
the same, the re-revised return of income may be taken to the withdrawn.
It appears that thereafter the Assessing Officer issued a notice to show
cause as to why the provisions of Section 69-C should not be invoked and
the expenses claimed should not be treated as unexplained expenditure. In
reply, the assessee by letter dated 24th March, 2004 submitted that the
claim was made as a standard deduction and that the assessee had been
wrongly advised to make the said claim and as the same has been withdrawn,
Section 69-C will have no application. The record of the assessment
proceedings disclose that the said stand was accepted by the Assessing
Officer and the matter was not pursued any further.
19. The learned C.I.T. took the view that notwithstanding the
withdrawal of the claim by the assessee, in view of the earlier stand taken
that the said expenses were incurred for security purposes of the assessee,
the Assessing Officer ought to have proceeded with the matter as the
assessee was following the cash system of accounting and the filing of the
re-revised return, prima facie, indicated that the additional expenses
claimed had been incurred. In this regard, the following findings/reasons
recorded by the learned C.I.T. in the order dated 20th March, 2006 would be
of particular relevance:
“Withdrawal of claim by assessee can be for variety of reasons and this
does not mean that Assessing Officer should abandon enquiries regarding
sources for incurring expenses. Assessee follows cash system of accounting
and the claim regarding additional expenses was made through duly verified
revised return. The claim was pressed during assessment proceedings
carried on by A.O. after filing revised return and it was specially stated
in letter dated 13.02.2004 that expenses were for security purposes and
that payments have been made out of cash balances available etc. Under the
circumstances, the Assessing Officer was expected to examine the matter
further to arrive at a definite finding whether assessee incurred expenses
or not and in case, actually incurred, then what were sources for incurring
these expenses. Assessing Officer was satisfied on withdrawal of the claim
and in my view, his failure to decide the matter regarding actual incurring
of additional expenses and sources thereof resulted into erroneous order
which is prejudicial to the interest of revenue.”
20. An argument has been made on behalf of the assessee that notice
under Section 69-C was issued by the Assessing Officer and thereafter on
withdrawal of the claim by the assessee the Assessing Officer thought that
the matter ought not to be investigated any further. This, according to
the learned counsel for the assessee, is a possible view and when two views
are possible on an issue, exercise of revisional power under Section 263
would not be justified. Reliance in this regard has been placed on a
judgment of this Court in Malabar Industrial Co. Ltd. vs. CIT[3] which has
been approved in Commissioner of Income-tax vs. Max India
Ltd. [4]
21. There can be no doubt that so long as the view taken by the
Assessing Officer is a possible view the same ought not to be interfered
with by the Commissioner under Section 263 of the Act merely on the ground
that there is another possible view of the matter. Permitting exercise of
revisional power in a situation where two views are possible would really
amount to conferring some kind of an appellate power in the revisional
authority. This is a course of action that must be desisted from. However,
the above is not the situation in the present case in view of the reasons
stated by the learned C.I.T. on the basis of which the said authority felt
that the matter needed further investigation, a view with which we wholly
agree. 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. We, therefore, are of the opinion that
the learned C.I.T. was perfectly justified in coming to his conclusions
insofar as the issue No.(iii) is concerned and in passing the impugned
order on that basis. The learned Tribunal as well as the High Court,
therefore, ought not to have interfered with the said conclusion.
22. In the light of the discussions that have preceded and for the
reasons alluded we are of the opinion that the present is a fit case for
exercise of the suo motu revisional powers of the learned C.I.T. under
Section 263 of the Act. The order of the learned C.I.T., therefore, is
restored and those of the learned Tribunal dated 28th August, 2007 and the
High Court dated 7th August, 2008 are set aside. The appeal of the Revenue
is allowed.
SLP(C) No.861 of 2013
23. Leave granted.
24. Pursuant to the revisional order dated 20th March, 2006 under
Section 263 of the Income Tax Act setting aside the assessment order for
the assessment year 2001-2002 and directing fresh assessment, a fresh
assessment had been made by the Assessing Officer by order dated 29th
December, 2006. Against the said order the respondent assessee filed an
appeal before the learned Commissioner of Income Tax (Appeals). By order
dated 18th October, 2007 the learned Commissioner of Income Tax (Appeals)
had set aside the assessment order dated 29th December, 2006 as in the
meantime, by order dated 28th August, 2007 of the learned Income Tax
Appellate Tribunal the revisional order dated 20th March, 2006 under
Section 263 of the Act was set aside. The Revenue’s appeal before the
learned Tribunal against the order dated 18th October, 2007 was dismissed
on 11th January, 2000 and by the High Court on 29th February, 2012.
Against the aforesaid order of the High Court this appeal has been filed by
the Revenue. As by the order passed today in the Civil Appeal arising out
of Special Leave Petition (Civil) No.11621 of 2009 we have restored the suo
motu revisional order dated 20th March, 2006 passed by the learned C.I.T.,
we allow this appeal filed by the Revenue and set aside the order dated
11th January, 2010 passed by the learned Tribunal and the order dated 29th
February, 2012 passed by the High Court referred to above. However, we
have to add that as the re-assessment order dated 29th December, 2006 had
not been tested on merits the assessee would be free to do so, if he is so
inclined and so advised.
25. The appeals are disposed of in the above terms.
….……………………….,J.[RANJAN GOGOI]
……………………….,J.[PRAFULLA C. PANT]
NEW DELHI
MAY 11, 2016
———————–
[1] (1970) 76 ITR 496
[2] (1971) 82 ITR 824
[3] (2000) 243 ITR 83 (SC)
[4] (2007) 295 ITR 282 (SC)
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