# / COMMISSIONER OF INCOME TAX, SHIMLA v. MIS. GREENWORLD. CORPORATION, PARWANOO

- **Citation:** [2009] 8 S.C.R. 175
- **Court:** Supreme Court of India
- **Decided:** 2009-05-06
- **Case number:** Civil Appeal No. 3312 of 2009
- **Bench:** S.B. Sinha, Dr. Mukundakam Sharma
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-income-tax-shimla-v-mis-greenworld-corporation-parwanoo-26036
- **Pages:** 54

## Headnote

Income Tax Act, 1961:
Sections 148, 149, 253 and 263 - Jurisdiction under c
Section 263 - Power to exercise of suo motu of revision is
in the nature of supervisory jurisdiction when the order is
erroneous, or by such erroneous order prejudice has been
caused to the interest of Revenue - Not otherwise - In the
instant case the order under s.263 and consequential notice
D
under·s.148 not maintainable - However, on the facts of the
case, in order to do complete justice between the parties
assessment directed to be reopened - Constitution of India,
Article 142.
Constitution of India, 1950:
E
Article 136 - Jurisdiction under -
In the event an
appropriate case is made out, Supreme Court may either
refuse to exercise its discretionary jurisdiction or quash both
the order if it is found that setting aside of the illegal order F
would give rise to another illegality.
In these appeals, the principal question that arose for
consideration was as.to whether the order of assessment
was passed at the instance of higher authority.
G
Disposing of the appeals, the Court
HELD: 1. An Income Tax Officer while passing an
order of assessment performs judicial function. An
175
H
176
SUPREME COURT REPORTS
[2009] 8 S.C.R.
A appeal lies against his order before the Appellate
Authority. A Revision Application would also lie before the
Commissioner of Income Tax. It is trite that the
jurisdiction exercised by the Revisional Authority
B
pertains to his Appellate jurisdiction. [Para 20] [197-G-HJ
Shankar Ramchandra Abhyankar vs. Krishnaji
Dattatraya Bapat AIR (1970) SC 1 relied on.
2. Considering the jurisdiction of the Commissioner
of Income-tax to issue notice in terms of Section 263 of
C the Income Tax Act, 1961, it is noticed that it provides for
a revisional power. It has its own limitations. An order can
be interfered suo motu by the said authority not only when
an order passed by the Assessing Officer is erroneous
but also when it is prejudici<1I to the interests of the
D Revenue. Both the conditions precedent for exercising
the jurisdiction under Section 263 of the Act are
conjunctive and not disjunctive. [Para 23] [201-D-FJ
2.2. An order of assessment passed by an lncomeE tax Officer, therefore, should not be interfered with only
because another view is possible. The Commissioner of
Income-tax, however, has specified a number of reasons
in support of its order, namely, (1) on non-fulfillment of
pre-requisite conditions for deduction under Section 80IA/80-18 - it was held that the activities of the assessee
F do not amount to manufacturing; (2) little consumption
of electricity and thus manufacturing is without the aid
of power; (3) non-employment of requisite workers in
manufacturing process; (4) non-fulfillment of the
condition of new plant and machinery; (5) extra-ordinary
G high profits; (6) abrupt closure of business; (7) no reason
for more than ordinary profits; (8) books of accounts
incomplete and unreliable; (9) the manufacturing units at
Parwanoo were not genuinely run; (10) high profits have
H
•
·I
COMMNR. OF INCOME TAX, SHIMLA v. GREENWORLD 177
CORP. PARWANOO
been declared. [Para 24] (201-G-H; 202-A-B]
3.1. The scope of provisions of Section 263 of the Act
is no longer res integra. The power to exercise of suo motu
of revision in terms of Section 263(1) is in the nature of
supervisory jurisdiction and same can be exercised only
if the circumstances specified therein, viz., (1) the order
is erroneous; (2) by virtue of the order being erroneous
prejudice has been caused to the interest of the revenue,
exist. [Para 29] (208-A-B]
3.2. It is beyond any doubt or dispute that only in
terms of the directions issued by the Commissioner dated
12.7.2004 under Section 263 of the Act, notices under
Section 148 of the Act were issued. [Para 29] [209-G-H;
210-A]
3.3. Indisputably, CIT (Shimla) had no jurisdiction to
issue directions. Notices issued pursuant thereto would
be bad in law. [Para 30] [210-A]
Malabar Industrial Co. Ltd. vs. CIT 243 ITR 83 (S

## Text

_Characters 0–39,969 of 96,934. This is a partial read: ask again with offset=39969 for what follows._

~
[2009] 8 S.C.R. 175
,
/
COMMISSIONER OF INCOME TAX, SHIMLA
A
v.
MIS. GREENWORLD. CORPORATION, PARWANOO
(Civil Appeal No. 3312 of 2009)
MAY 6, 2009
B
[S.B. SINHA AND DR. MUKUNDAKAM SHARMA, JJ.]
Income Tax Act, 1961:
Sections 148, 149, 253 and 263 - Jurisdiction under c
Section 263 - Power to exercise of suo motu of revision is
in the nature of supervisory jurisdiction when the order is
erroneous, or by such erroneous order prejudice has been
caused to the interest of Revenue - Not otherwise - In the
instant case the order under s.263 and consequential notice
D
under·s.148 not maintainable - However, on the facts of the
case, in order to do complete justice between the parties
assessment directed to be reopened - Constitution of India,
Article 142.
Constitution of India, 1950:
E
Article 136 - Jurisdiction under -
In the event an
appropriate case is made out, Supreme Court may either
refuse to exercise its discretionary jurisdiction or quash both
the order if it is found that setting aside of the illegal order F
would give rise to another illegality.
In these appeals, the principal question that arose for
consideration was as.to whether the order of assessment
was passed at the instance of higher authority.
G
Disposing of the appeals, the Court
HELD: 1. An Income Tax Officer while passing an
order of assessment performs judicial function. An
175
H
176
SUPREME COURT REPORTS
[2009] 8 S.C.R.
A appeal lies against his order before the Appellate
Authority. A Revision Application would also lie before the
Commissioner of Income Tax. It is trite that the
jurisdiction exercised by the Revisional Authority
B
pertains to his Appellate jurisdiction. [Para 20] [197-G-HJ
Shankar Ramchandra Abhyankar vs. Krishnaji
Dattatraya Bapat AIR (1970) SC 1 relied on.
2. Considering the jurisdiction of the Commissioner
of Income-tax to issue notice in terms of Section 263 of
C the Income Tax Act, 1961, it is noticed that it provides for
a revisional power. It has its own limitations. An order can
be interfered suo motu by the said authority not only when
an order passed by the Assessing Officer is erroneous
but also when it is prejudici<1I to the interests of the
D Revenue. Both the conditions precedent for exercising
the jurisdiction under Section 263 of the Act are
conjunctive and not disjunctive. [Para 23] [201-D-FJ
2.2. An order of assessment passed by an lncomeE tax Officer, therefore, should not be interfered with only
because another view is possible. The Commissioner of
Income-tax, however, has specified a number of reasons
in support of its order, namely, (1) on non-fulfillment of
pre-requisite conditions for deduction under Section 80IA/80-18 - it was held that the activities of the assessee
F do not amount to manufacturing; (2) little consumption
of electricity and thus manufacturing is without the aid
of power; (3) non-employment of requisite workers in
manufacturing process; (4) non-fulfillment of the
condition of new plant and machinery; (5) extra-ordinary
G high profits; (6) abrupt closure of business; (7) no reason
for more than ordinary profits; (8) books of accounts
incomplete and unreliable; (9) the manufacturing units at
Parwanoo were not genuinely run; (10) high profits have
H
•
·I
COMMNR. OF INCOME TAX, SHIMLA v. GREENWORLD 177
CORP. PARWANOO
been declared. [Para 24] (201-G-H; 202-A-B]
3.1. The scope of provisions of Section 263 of the Act
is no longer res integra. The power to exercise of suo motu
of revision in terms of Section 263(1) is in the nature of
supervisory jurisdiction and same can be exercised only
if the circumstances specified therein, viz., (1) the order
is erroneous; (2) by virtue of the order being erroneous
prejudice has been caused to the interest of the revenue,
exist. [Para 29] (208-A-B]
3.2. It is beyond any doubt or dispute that only in
terms of the directions issued by the Commissioner dated
12.7.2004 under Section 263 of the Act, notices under
Section 148 of the Act were issued. [Para 29] [209-G-H;
210-A]
3.3. Indisputably, CIT (Shimla) had no jurisdiction to
issue directions. Notices issued pursuant thereto would
be bad in law. [Para 30] [210-A]
Malabar Industrial Co. Ltd. vs. CIT 243 ITR 83 (SC) :
(2000) 2 SCC 718; Commissioner of Income-Tax vs. Max
India Ltd. (2007) 295 ITR 28~ (SC); Income-Tax Officer, AWard, Sitapur vs. Murlidhar Bhagwan Das 52 ITR 335 (SC);
S.C. Prashar vs. Vasantsen Dwarkadas (1963) 49 ITR 1 and
N. KT. Sivalingam Chettiar vs. Commissioner of Income-Tax,
Madras 66 ITR -586 (SC), referred to.
4.1. The Noting of the Assessing Officer was specific.
It was stated so in the proceedings sheet at the instance
of the higher authorities itself. No doubt in terms of the
circular letter issued by CBDT, the Commissioner or for
that matter any other higher authority may have
supervisory jurisdiction but it is difficult to conceive that
even the merit of the decision shall be discussed and the
same shall be rendered at the instance of the higher
authority who, as noticed hereinbefore, is a supervisory
A
B
c
D
E
F
G
H
178
SUPREME COURT REPORTS
[2009] 8 S.C.R.
A authority. It is one thing to say that while making the
orders of assessment the Assessing Officer shall be
bound by the statutory circulars issued by CBDT but it
is another thing to say that the assessing authority
exercising quasi judicial function keeping in view the
B scheme contained in the Act, would lose its
independence to pass an independent order of
assessment. [Para 31] [217-B-E]
4.2. When a statute provides for different hierarchies
C providing for forums in relation to passing of an order as
also appellate or original order; by no stretch of
imagination a higher authority can interfere with the
independence which is the basic feature of any statutory
scheme involving adjudicatory process. [Para 32] [219F]
D
Rajinder Nath vs. Commissioner of Income-Tax, Delhi
120 ITR 14 {SC); State of Kera/a & Ors. vs. Kurian Abraham
(P) Ltd. & Anr. (2008) 3 SCC 582; Union of India vs. Azadi
Bachao Ando/an (2004) 10 SCC 1; Commissioner of Police,
E Bombay vs. Gordhandas Bhanji AIR 1952 SC 16; Pancham
Chand & Ors. vs. State of Himachal Pradesh & Ors. (2008) 7
SCC 117; The Purtabpur Company Ltd. vs. Cane
Commissioner of Bihar AIR 1970 SC 1896 and Tarlochan
Dev Sharma vs. State of Punjab & Ors. (2001) 6 SCC 260,
F referred to.
5.1. An appeal is ordinarily maintainable at the
instance of the Assessing Officer. Not only an order of
assessment was passed but also CIT {Shimla) had
already passed an order. Notices under Section 148 of
G the Act had already been issued much prior thereto. [Para
33] [221-D-E]
5.2. In the instant case, CIT {Shimla) had passed an
order. His order was set aside by the Tribunal. He,
H therefore, in ordinary course could have preferred an
'
COMMNR. OF INCOME TAX, SHIMLA v. GREENWORLD 179
CORP. PARWANOO
~
appeal only by the time when administrative decision
A
could be taken by him to prefer an appeal. The right to
prefer an appeal arose on the date on which the Tribunal
passed an order. It might have taken some time to prefer
an appeal. Ordinarily, he was the authority who could
have preferred an appeal. By preferring an appeal new
B
proceedings were initiated. In any event, nothing has
been shown as to how the assessee was prejudiced. In
a case of this nature, the provisions akin to Section 21
of the Code of Civil Procedure may be held to be
applicable for the purposes of questioning the c
jurisdiction of the High Court to entertain an appeal on
the ground of lack of territorial jurisdiction. In a peculiar
case of this nature, this Court is of the opinion that
prejudice must be shown. [Para 34] [225-8-E]
Commissioner of Income Tax vs. Sahara India Financial
D
Corporation Ltd. 212 CTR 178 (Delhi); Commissioner of
Income- Tax, West Bengal & Anr. vs. Anil Kumar Roy
Chowdhury & Anr. 66 ITR 367 (SC); Uday Shankar Triyar vs.
Ram Kalewar Prasad Singh· & Anr. (2006) 1 SCC 75; Kiran
Singh & Ors. vs. Chaman Paswan & Ors. AIR 1954 SC 340
E
and Mantoo Sarkar vs. Oriental Insurance Co. Ltd. & Ors. •
2008 (16) SCALE 197, referred to.
6.1. Whereas the order under Section 263 of the Act
an~ consequently the notices under Section 148 of the
F
Act have been held to be not maintainable, this Court is
constrained to think that the_ Assessing Officer had
passed an order at the instance of the higher authority
which is illegal. For the aforementioned purpose, there is
no need to go into the question of bona fide or otherwise
G .
of the authorities under the Income Tax Act. They might
..,
have proceeded bona fide but the order of assessment
passed by the Assessing Officer on the dictates of the
higher authorities being wholly without jurisdiction, it was
H
180
SUPREME COURT REPORTS
(2009) 8 S.C.R.
A a nullity. With a view to do complete justice between the
parties, the assessment proceedings should be gone
through again by the appropriate assessing authority.
[Para 35] [227-8-EJ
8
6.2. It is true that despite order passed by the High
Court, CIT (Delhi) has not been impleaded. Presumably,
because of the said defect in the order passed by the
High Court: of Himachal Pradesh at Shimla, Revenue
could not implead CIT (Delhi) as a party in the appeal. CIT
(Delhi), however, has been impleaded as a party in the
C Special Leave Petition (SLP) filed by the Assessee. CIT
(Delhi) has although in an irregular manner filed a
rejoinder. Counter affidavit was filed by the Assessee in
the appeal preferred by the Revenue and the same is on
record. The said authority, therefore, is otherwise before
D this Court. [Para 36] [227-E-G]
7.1. It is now well settled that this Court in exercise
of its extra··ordinary jurisdiction under Article 136 of the
Constitution of India may, in the event an appropriate
E case is made out, either refuse to exercise its
discretionary jurisdiction or quash both the orders if it is
found that setting aside of one illegal order would give
rise to another illegality. [Para 37] [227-G-H; 228-A]
7.2. In exercise of our juriscliction under Article 142
F of the Constitution of India, it is directed that the
assessment be reopened by the Commissioner of
Income-tax, Delhi -VII. [Para 37] [228-C-D]
Transmission Corpn. of A.P. Ltd. vs. Lanco Kondapal/i
G Power (P)Ltd. (2006) 1 SCC 540, referred to.
Case Law Reference:
AIR (1970) SC 1
Relied on
Para 21
H
13.0MMNR. OF INCOME TAX, SHIMLA v. GREENWORLD 181
CORP. PARWANOO
243 ITR .83 (SC)
Referred io
Para 29
A
(2000) 2 sec 11a
~ef~rrecj tQ
P~ra ?~
(2007) 295 ITR 282 (SC) Referred to
Para 29
52 ITR 335 (SC)
Referred to
Para 30
B
(1963) 49 ITR 1
R.eferred to
Para 30
66 ITR &as ($C)
Referred to
P~ra 30
120 ITR 14 (SC)
Referred to
Para 30
c
(2008) 3 sec 582
Referred to
Para 31
(2004) 10 sec 1
Referred to
Para 31
AIR 1952 SC 16
Referred to
Para 32
j
'
D
(2008) 1 sec 111
Referred to
Para 32
AIR 1970 SC 1896
Referred to
Para 32
(2001) s sec 2so
Referred to
Para 32
212 CTR 178 (Delhi)
Referred to
Para 33
E
66 ITR 367 (SC)
Referred to
Para 33
(2oos) 1 sec 75
Referred to
Para 33
AIR 1954 SC 340
Referred to
Para 34
F
2008 (16) SCALE 197 Referred to
Para 34
(2006) 1 sec 540
Referred to
Para 37
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
3312 of 2009.
G
From the Judgment & Order dated 2.03.2006 of the High
Court of Himachal at Shimla, in Income Tax Appeal No. 50 of
2005.
H
A
B
c
D
182
SUPREME COURT REPORTS
WITH
C.A. Nos. 3313-3316 of 2009.
[2009] 8 S.C.R.
I. Venkatanarayana, N.K. Aggarwal, Gaurav Dhingra, B.V.
Balaram Das for the Appellants.
Harish N. Salve, Sunil Gupta, Bhargava V. Desai, Ajay
Vohra, Rahul Gupta, Reema Sharma for the Respondent.
The Judgment of the Court was delivered by
S.B. SINHA, J. 1. Leave granted.
2. These two appeals, being interconnected, were taken
up for hearing together and are being disposed of by this
common judgment.
They arise out of a common judgment and order dated
2.3.2006 in ITA No. 50 of 2005 and Civil Writ Petition No.800
of 2005 as also out of common judgment and order dated
3.4.2007 in Civil Review No. 15 and 16 of 2006 in ITA No.50
E of 2005 and C.W.P. No. 800 of 2005 passed by the High court
of Himachal Pradesh, Shimla.
3. Mis Green World Corporation is a partnership concern
of Shri R.S. Gupta and his wife Smt. Sushila Gupta. They had
set up two units for manufacturing exercise books, writing pads,
F etc. at Parwanoo in the State of Himachal Pradesh in the year
1995. The said purported units were established after
declaration and enforcement of a policy for tax holiday for
certain period specified in the Union Budget. They had also set
up a third unit for manufacturing computer software. They
G started filing income tax returns from the Assessment Year
1996-97 showing huge profits. In the return for the Assessment
Year 2000-01 they disclosed their total sales to the tune of
Rs.1,51,69,515/- out of which a sum of Rs.74,69,314/- was
shown as net profit. Thus, the profits bore a proportion of 49%
H to the gross sales. For the earlier assessment year, i.e. 1999-
•
)
COMMNR. OF INCOME TAX, SHIMLA v. GREENWORLD 183
,/
CORP. PARWANOO [S.B. SINHA, J.]
2000, the proportion of the net profit to the total sales was as
A
high as 66% because out of the total sales of Rs. 2,97, 12, 106/
- net profits were declared to be to the tune of Rs.1,96,77,631/
- For the subsequent three assessment years i.e. 2001-2002,
2002-2003 and 2003-2004, the proportionate net profits to the
gross sales were 81%, 95% and 95% respectively.
B
It is furthermore stated that the total investment on plant and
machinery for unit No. 1 was shown to be just Rs.1,25,000/- and
a very small amount of money was shown to have been spent
on plant and machinery for the second unit.
c
4. On or about 7.2.2000, the Assessing Officer ('AO')
conducted a survey at the premises of the assessee in terms
of Section 133-A of the Income Tax Act, 1961 (hereinafter
referred to for the sake of brevity as, "the said Act") and verified
for herself: (a) factum of the existence and actual working of
D
Unit; (b) Installation of Plant and machinery working with the aid
of power; (c) Presence of requisite number of workers, some
of whose statement were records; (d) available of stock of raw,
semi-finished and finished material prior to Assessment year
2000-2001.
E
On or about 19.12.2002, AO after completing the
__,,
proceeding for assessment passed an order, which reads as
under:
"Return declaring nil income after deduction under Section
F
8018 on the profit of Rs.74,79,995/- was filed on
31.10.2000 which was processed under Section 143(1)(a)
on 26.7.2001 at returned income by my predecessor.
~
Survey under Section 133A was conducted in the G
business premises of the assessee on 7.2.2000 by the
then ITO. The case was selected under compulsory
scrutiny. Detailed questionnaire along with statutory notices
under Section 143(2)/142(1) was issued and in response
to the same, Shri Surinder Babbar, CA attended the
H
184
SUPREME COURT REPORTS
[2009] 8 S.G.R.
A
assessment proceedings from time to time. Various
details/information called for were supplied which were
verified. The case is discussed as under:
B
c
D
E
F
G
H
The assessee details in nianufacturir19 of Exetcisa
books and Writing pads. The firm has two partners namely
Shri Radhey Shyam Gupta and Smt. Sushila Gupta. Two
units were set up by the assessee for manufacturing of
Exercise Books in Unit-I and that of Writing Pads in Unit11. Separate books of account were maintained for both the
units and 11 workers were found working at the time of
survey. Certain discrepancies as per cash book to that of
day book were found which could not explain by the
Accountant at the time of survey which were reconciled by
the counsel of the assessee during the ccwrse of
assessment proceedings. On sale of Rs.88,55,592/- gross
profit of Rs.57,28,980/- giving rate of 64.69% for unit - 1
and on sale of Rs.63, 16,392/-, gross profit of
Rs.19, 12,565/- for Unit-II giving 30.29% has been declared
by the assessee. Sales were made both on credit as well
as cash basis. Confirmed copy of account of the creditors
has been produced, which is placed on record.
Keeping in view the information supplied by the
assessee and facts on file, the income returned by the
assessee is hereby accepted."
In the said order of assessment, AO recorded a note,
which reads as under:
"After receiving a call from Shimla on 3.12.2002, I visited
the office of Worthy CIT, Shimla on 4.12.2002 along with
all the assessment records and relevant documents of M/
s Green World Corporation. The case was thoroughly
discussed with (sic) records and relevant worthy CIT,
Shimla in the presence of learned Addi. CIT, Solan Range,
Solan. All the documents and queries raised and further
reply submitted by the assessee was properly glanced
•
....
-
COMMNR. OF INCOME TAX, SHIMLA v. GREENWORLD 185
CORP. PARWANOO [S.B. SINHA, J.]
through by the worthy CIT and after going through the
A
questionnaire issued to the assessee on 18.10.2002 and
reply submitted by the assessee in response to that on
7.11.2002, 13.11.2002 and 25.11.2002, worthy CIT has
directed that since the reply submitted by the assessee is
satisfactory and upto the mark, no more information is
B
required to be called for and to assess the case as such.
He, therefore, directed in presence of the learned Addi.
CIT, Solan Range, Solan to incorporate that discussion in
the body of the order sheet. Needful has been done as
directed. A copy of the draft assessment order was sent c
to the Addi. CIT, Solan Range, Solan under the office letter
No. ITO/PWN .2002/03/2127 dated 13.12. 2002 for
according necessary approval. Approval to complete the
assessment was received through telephonic from the
office of the Addi. Commissioner of Income Tax, Solan
Range Solan and assessment has been completed and
D
the assessment order has been served upon the assessee
on 19.12.2002."
5. Indisputably, the Commissioner of Income Tax ("CIT', for
short) on whose dictates the order of assessment dated
E
19.12.2002 purported to have been passed was transferred and
~his successor on or about 5.12.2003 issued notice to the
·-'
assessee purported to be under Section 263 of the Act for the
Assessment Year 2000-2001 only, inter alia on the premise
that the said order of assessment dated 19.12.2002 was
F
prejudicial to the interests of the Revenue.
Assessee filed its reply thereto on or about 16.3.2004.
6. He inter alia on account of his old age, ill-health, etc.
G
also filed an application for transfer of its cases from CIT
i
(Shimla) to CIT (Delhi) on 4.5.2004.
The CIT (Shimla) passed an order dated 12.7.2004 under
Section 263 of the Act inter alia on the premise that the
Assessing Officer while finalizing the Assessment had not
H
186
SUPREME COURT REPORTS
[2009] 8 S.C.R.
A examined the case properly. In the said order, the following
directions were issued:
B
c
D
E
F
G
H
"16.3 Under the circumstances, I am left with no
alternative but to decide the proceedings on the
basis of material 0.1 record. In the assessment year
under review, I estimate the assessee's income
from Units at Parwanoo at 5% of the declared
turnover. The income shown in excess of 5%
amount is treated as undisclosed income from
undisclosed sources. As the assessee does not
fulfill many of the conditions for being entitled to
deduction u/s 801A/IB, no part of the total income,
not even the one estimated @ 5% of the turnover
at Parwanoo, would be entitled for deductioh u/s
80IA/IB.
16.4 Charge interest u/s 2348/C for non-payment of
advance tax. Penalty proceedings u/s 271 (1 )(c) are
initiated separately for furnishing of in-accurate
particulars of income assessed. The Assessing
Officer is directed to calculate the tax and interest
on this income and issue Demand Notice and
Challan to the assessee firm.
17.
Similar conditions i.e. non fulfillment of the
prerequisite conditions for deduction u/s 801A/IB
and excessive declared profits prevailed in the
preceding assessment years i.e. A.Y. 1996-97 ,
1997-98, 1998-99 and 1999-2000; and succeeding
assessment years i.e. A.Y. 2001-02, 2002-03 and
2003-04 also. It is thus obvious that either the whole
or substantially the whole of income shown by the
assessee in the aforementioned different
assessment years could not be said to be income
derived from the business of industrial undertaking
and was therefore not entitled to deduction u/s 801A/
18. Thus substantial taxable income for these
•
i
....
-I
'
1
COMMNR. OF INCOME TAX, SHIMLA v. GREENWORLD 187
CORP. PARWANOO [S.B. SINHA. J.]
assessment years have escaped assessment
A
because of non fulfillment of the pre-requisite
conditions for deduction u/s 801A/801B. The
Assessing Officer is hereby directed to examine
the case records for all the preceding assessment
years including those for assessment year 1996-97
B
and initiate necessary proceedings u/s 148 within
a week. The Assessing Officer is further directed
to examine the succeeding assessment years also
i.e. A.Y. 2001-02, 2002-03 and 2003-04 and initiate
appropriate action u/s 148/143(2) as may be c
applicable, in a week's time."
Pursuant thereto or in furtherance thereof, notices under
Section 148 of the Act were issued to the Assessee for the
Assessment Years 1996-97 to 1999-2000, 2001-2002 and
2002-2003.
D
7. Assessee preferred an appeal against the order dated
12.7.2004 before the Income Tax Appellate Tribunal (for short,
"ITAT"). In its memo of appeal, the assessee raised contentions
relating to: (1) jurisdiction, (2) bias on the part of the CIT
E
(Shim la), and (3) on merit of the matter. The Income Tax Officer
of CIT (Shimla) himself remained personally present before
IT AT for the purpose of defending his order under Section 263
of the Act.
8. By reason of an order dated 15.4.2005, ITAT allowed
F
the appeal filed by the assessee setting aside the order of the
CIT (Shimla) on the jurisdictional issue alone. It did not enter
into the merit of the matter. It was held:
"43. As such, considering all the facts of the case and legal
G
·position emanating from the aforesaid judicial
pronouncements, we are of the considered opinion from
the assessment in the present case was made by the
Assessing Officer after making proper and adequate
enquiries as required in the facts of the case and since
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[20091 8 S.C.R.
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the claim of the assessee for deduction u/s 80-IA was
allowed by her on proper application of mind to the
detailed submissions made on behalf of the assessee as
well as the other relevant material including the findings of
the survey, there was no error in her order as alleged by
B
the learned CIT. On the other hand, the learned CIT held
the said assessment to be erroneous mainly on the basis
of surmises and conjectures without there being any
material to support and substantiate the same and he
having virtually reviewed the assessment order passed by
c
the Assessing Officer applying his mind again to the entire
material available on record and by making fresh enquiry
brushing aside totally the examination made by the
Assessing Officer, we hold that his impugned order
passed u/s 263 was not sustainable in law. The same is,
D
therefore, set aside restoring back the order of the
Assessing Officer passed u/s 143(3).
44. It is worthwhile to note here that the claim of the
assessee for deduction u/s 80-IA was allowed by the
Assessing Officer in the immediately preceding years
E
involving identical facts and circumstances and this
'
material and relevant aspect again appears to have been
•
ignored by the learned CIT while exercising his powers
conferred u/s 263. On the contrary he directed the
'"
Assessing Officer by issuing notices u/s 148 and also
F
directed him to examine the returns filed by the assessee
for the subsequent years by his impugned order which was
beyond the jurisdiction conferred on him u/s 263 since the
same was confined only to the year for which the
assessment order was sought to be revised. We,
~ .
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therefore, direct that the said directions pertaining to the
~
years other than the year under consideration as contained
in the impugned order be omitted.
45. As a result of our decision on ground Nos. 1 to 5
r
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cancelling the impugned order passed by the learned CIT
COMMNR. OF INCOME TAX, SHIMLA v. GREENWORLD 189
CORP. PARWANOO [S.B. SINHA, J.]
u/s 263, the other grounds raised by the assessee in this
A
appeal have been rendered only of academic nature. We,
therefore, do not deem it necessary or expedient to
consider and decide the same on merits."
On or about 5.7.2005, notice under Section 148 of the Act
8
was also issued for the Assessment year 2000-2001.
9. Assessee questioned the legality of the notice under
Section 148 of the Act by filing a Writ Petition before the
Himachal Pradesh High Court on or about 5.8.2005, which was
marked as Civil Writ Petition No. 800 of 2005.
C
10. Indisputably, the Central Board of Direct Taxes (for
short, "CBDT"), on the application for transfer of the case filed
by the assessee on 4.5.2004, passed an order dated 1.9.2005
transferring the case from the jurisdiction of CIT (Shimla) to that
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of CIT (Delhi) with effect from 5.9.2005, stating:
"In exercise of powers conferred by clause (b) of subsection (2) of Section 127 of the Income Tax Act, 1961 [43
of 1961], the Central Board of Direct Taxes hereby orders
the transfer,of the jurisdiction over the case of "The Green
E
World Corporation" [PAN NO. AAAFG6719Q] from the
Income Tax Officer, Parwanoo in the Commissionerate of
Income Tax, Shimla in the region of Chief Commissioner
of Income Tax, Shimla to the Income Tax Officer, Ward 19
[3], New Delhi in the Commissionerate of Income Tax,
F
Delhi-VII, New Delhi, in the region of Chief Commissioner
of Income Tax, Delhi-VII, New Delhi.
The said order shall take effect from 5th September,
2005."
G ·
CIT (Shimla) preferred an appeal before the High Court
under Section 260A of the Act on or about 17.10.2005.
On or about 30.11.2005, the High Court while condoning
the delay admitted the appeal without formulating the substantial
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[2009) 8 S.C.R.
A questions of law as required under Section 260A.
B
c
D
E
F
G
H
By reason of an order dated 9.1.2006, the High Court
entertained the appeal, stating:
"Learned Counsel for the appellant states that though CIT,
Shimla has locus-standi to file the present appeal, but as
an abundant caution appeal may also be taken to have
been filed by CIT, Delhi as well and CIT Delhi may be
ordered to be impleaded as appellant No. 2. Ordered
accordingly, Registry to make necessary correction in the
memo of parties.
Learned Counsel for the appellants undertakes to file
amended memo of parties and also the Vakalatnama for
appellant No. 2 in the Registry.
Arguments heard. Judgment reserved."
11. Assessee filed Special Leave Petition No. 3273 of
2006 before this Court questioning the orders dated
30.11.2005 and 9.1.2006 passed by the High Court.
12. By reason of the impugned order dated 2.3.2006, the
High Court· while allowing the Appeal filed by CIT (Shimla)
dismissed the writ petition filed by the assessee, inter alia,
opining:
(1) The order of the Assessing Officer, having been
based on 'uncalled for interference' in the judicial functions
of the Commissioner, was bad in law.
(2) The issue in regard to the maintainability of the
appeal vis-a-vis the locus standi of the CIT (Shimla) was
significant as CIT (Delhi) had also been impleaded
(3) As the Assessing Officer had acted under the
dictates and pressure of CIT (Shimla), the order of
assessment was not maintainable.
"
COMMNR. OF INCOME TAX, SHIMLA v. GREENWORLD 191
CORP. PARWANOO [S.B. SINHA, J.]
(4) Assessee not being a new unit, the order of
A
assessment was bad in law.
(5) CIT could issue directions for reopening the
proceedings for the other Assessment Years apart from
Assessment Year 2000-2001 also, subject of course to the
law of limitation.
B
13. Feeling aggrieved by the said judgment and order
dated 2.3.2006, Assessee filed two Review Petitions being
Civil Review Nos. 15 and 16 of 2006. Civil Review No.14 of
2006 was also filed by the Income Tax Officer, Shimla against c
the same. Another Civil Review No. 22 of 2006 also came to
be filed by the Mr. D. Khare, who was the CIT at the time of
passing of the Assessment Order dated 19.12.2002 as certain
strictures were passed in the said order dated 2.3.2006 against
him without giving an opportunity of hearing to him. A Special
D
Leave Petition No. 1789 of 2007 was also filed by the CIT
(Shimla) against the said High Court's judgment and order
dated 2.3.2006.
14. On or about 7.4.2006, this Court dismissed the Special
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Leave Petition No. 3273 of 2006 filed by the Assessee as
infructuous.
.i
On or about 14.11.2006, Civil Review No. 14 of 2006 filed
by the Income Tax Officer, Shimla was dismissed.
F
15. By reason of an order dated 3.4.2007, the High Court
while allowing Mr. Khare's Civil Review No. 22 of 2006
expunging all observations made in the order dated 2.3.2006
rejected the assessee's review petitions to recall order against
it founded on the same observations.
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16. The High Court in its impugned order dated 3.4.2007
inter alia held:
"4. We have heard the learned counsel for the review
petitioner. It is true that no notice was issued to the review
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[2009] 8 S.C.R.
A
petitioner nor any opportunity of being heard was granted
to him by this Court before making the observations. But
the aforesaid observations are not the findings of this Court
that the review petitioner in fact interfered with the
functioning of the Assessing Officer, Solan or pressurized
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her into closing the inquiry and passing tne order of
accepting the return as such. These observations are
based on the interpretation and construction of the note
appearing below the order dated 19.12.2002 of the
Assessing Officer, Solan. Even though the observations
c
are based on the interpretation and the construction of the
note below the aforesaid order of the Assessing Officer,
still at certain points in para 16 and particularly in para 41
this Court has not specifically said that these observations
are based on the interpretation of the said note and one
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may gather an impression (from some of the observations,
about which there is no specific reference) that the same
l.
are the Court's own observations/findings. As a matter of
fact there was no material before this Court suggesting
whether what was written in the note was true or untrue.
E
The observations were made because the note appears
below the order. The purpose of making the observations
in para 16 was to elaborate that the order of the
Assessing Officer was bad having been passed on
account of interference and under pressure from the
...
Superior authority, according to the Assessing Officer
F
herself. Whether the interference and the pressure
mentioned in the said note, were real or imaginary, that
was not gone into by this Court nor was it necessary to
do so for the purpose of disposing of the appeal, because
in their case (that is to say, in the case of the interference
G
and pressure being real or even in the case of it being
unreal or imaginary) the order was bad because of its
being not based on any reasoning and hence an order
passed without application of mind.
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5. In view of the above stated position, we allow the present
COMMNR. OF INCOME TAX, SHIMLA v. GREENWORLD 193
CORP. PARWANOO [S.S. SINHA, J.)
petition (Civil Review Petition No. 22 of 2006) and order
A
the expunction of all those observations appearing in para
16 or 41 or elsewhere in the judgment, which give the
impression that the review petitioner stands indicted for
interfering with the working of the Assessing Officer, Solan
or pressurizing her into accepting the return as submitted
B
by the assessee, without making any further probe. In fact
the inquiry ordered by this Court, vide para 41 of the
judgment, is for the purpose of finding out whether the
review petitioner had actually interfered with the working
of the Assessing Officer, Solan and pressurized her into c
passing the order of acceptance of the return as stated in
the foot note of the order of Assessing Officer.
6. Two other Review Petitions No. 15 and 16 of 2006 have
been filed by the assessee. The contents and the pith and
D
j.
substance of both the two review petitions are the same.
Instead of one, two petitions have been filed because by
the judgment of this Court not only the appeal filed against
the assessee by the Revenue but also a writ petition filed
by the assessee were disposed of. One petition is for the
review of the order passed in the writ petition and the other
E
for the review of the judgment passed in the appeal.
7. We have heard the learned counsel for the assessee.
,,
The points raised by him are:
(a) The appeal itself was not maintainable, because it was
F
the Commissioner of Income Tax, New Delhi (to whom the
area, where the assessee was doing his business, stands
transferred) who had the competence to file the appeal,
but the same had been filed by the Income Tax
G
Commissioner, Shimla.
-<
(b) Appeal was admitted on twelve questions as submitted
to the Court by the appellant - Commissioner of Income
Tax, but this Court formulated two questions after the
conclusion of the hearing and answered only those two
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[2009] 8 S.C.R.
A
questions, which was contrary to the spirit of Section 260A of the Income Tax Act;
(c) Questions which this Court dealt with, while disposing
of the appeal, did not arise out of the order of the Tribunal
B
as the Tribunal dealt with only the question of jurisdiction
while disposing of the appeal and it did not touch the
merits.
8. We find no merit in any of the aforesaid submissions.
Question of maintainability of the appeal, which was initially
c
filed by the Income Tax Commissioner, Shimla and to
which the Income Tax Commissioner, Delhi was later on
added as a co-appellant, was considered by this Court
while passing the judgment and the contention raised by
the counsel for the assessee was dismissed with a clear
D
cut finding that the appeal was maintainable. It is not open
to the review petitioner to assail and challenge the said
finding by way of review.
9. Coming to the next point, it is true that the appeal was
E
admitted on twelve questions, but while making their
submissions the counsel for the parties confined
themselves only to a few points, which were covered partly
by one and partly by some other questions and so the
...
questions were re-formulated into two questions, confining
F
their scope only to those points about which submissions
were made by the learned counsel for the parties.
Otherwise also, by the judgment, in question, this Court
decided not only the appeal but also a writ petition filed
by the review petitioner itself and this also necessitated
G
reformulation of questions.
10. As regards submission [CJ above, learned counsel
submitted that this court gave the finding that the order of -.
the Assessing Officer, Solan was bad but that such a
question did not arise out of the appeal decided by the
H
Income Tax Appellate Tribunal as the Tribunal had dealt
COMMNR. OF INCOME TAX, SHIMLA v. GREENWORLD 195
CORP. PARWANOO [S.B. SINHA, J.]
with the question of jurisdiction only and hence this court
A
exceeded its appellate jurisdiction while holding that the
order was bad on account of non-application of mind. The
submission is factually incorrect. The Tribunal while
accepting the appeal of the assessee held that the order
had been passed by the Assessing Officer under Section
B
263 of the Income· Tax Act on the basis of the inquiry
conducted by her and that the Commissioner of Income
Tax could not have interfered with the said order merely
because he formed a different view on scanning the
record. Appellate Tribunal clearly said that the order of the c
Assessing Officer was based on an inquiry conducted by
her. This court did not approve of this finding of the
Tribunal, because the note appearing below the order of
the Assessing Officer clearly shows that it is not passed
on application of mind but on the interference by the
D
Commissioner of Income Tax.
·11. Since none of the submissions made by the learned
counsel has any merit, both the review petitions (petition
Nos. 15 and 16 of 2006) filed by the assessee, i.e. M/s
The Green World Corporation, are dismissed."
E
17. Mr. Harish N. Salve and Mr. Sunil Gupta, learned
,,
Senior Counsel appearing on behalf of the Assessee inter alia
would submit:
i.
Having regard to the order of transfer passed by
F
CBDT transferring the case from CIT (Shimla) to
CIT (Delhi), CIT (Shimla) had no locus standi to
maintain the appeal preferred before the High Court
under Section 260A of the Act.
ii.
Despite order by the High Court, CIT (Delhi) having
not been impleaded as a party, it must be held that
the CIT (Shimla) has no locus standi to maintain the
appeal.
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[2009] 8 S.C.R.
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iii.
Notice under Section 263 having been issued in
respect of Assessment Year 2000-2001 only,
directions in respect of the past and the future years
of Assessments could not have been issued; some
of them being barred by limitation.
B
iv.
The order of the CIT (Shimla) being biased, the
Tribunal has rightly interfered therewith as the
notices under Section 148 of the Act had been
..
issued pursuant to the directions of the CIT
c
(Shimla), the same are not maintainable.
v.
Mere error of law and/or a different view from that
of the Assessing Officer by itself could not have
been a ground for exercising the jurisdiction under
Section 263 of the Act.
D
vi.
Section 150(1) of the Act whereupon reliance has
been placed by the Revenue is not applicable.
vii.
Special Leave Petition filed by CIT (Shimla) on the
self same reasons is not maintainable.
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viii.
CIT (Shimla) has not raised any question that the
order of assessment was passed at the behest of
the CIT, the High Court committed a serious error
in passing the impugned judgment relying on or on
...
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the basis of the said footnote. The said footnote
was issued having regard to the circular letter
issued by the CBDT itself dated 3.7.2001.
ix.
In any event, the Tribunal having not entered into the
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merit of the matter, the only option available to the
High Court was to remand the matter back to the
Tribunal and not to enter into the merit itself.
x.
CIT's direction to the Assessing Officer to initiate
action under Section 148 of the Act for the earlier
H
and subsequent years was illegal and bad in law,
COMMNR. OF INCOME TAX, SHIMLA v. GREENWORLD 197
CORP. PARWANOO [S.B. SINHA, J.)
and, thus, the proceedings so initiated were also
A
illegal, bad in law and were liable to be quashed.
18. Mr. I. Venkatanarayana, learned Senior Counsel
appearing on behalf of the Revenue, on the other hand, would
contend:
B
i.
CIT (Shimla) had the locus standi to prefer an
~
appeal before the High Court as he had passed the
order prior to the order of transfer.
ii.
The Assessee having played fraud on the c
Department as it had shown a huge amount of profit
without there being sufficient number of workmen
..
engaged and without consuming requisite units of
electrical energy only with a view to enjoy the tax
holidays, CIT (Shimla) had rightly interfered
D
therewith.
iii.
The amount of profit shown from the Parwanoo
having been holding disproportionate to the
investment made, the High Court was correct in
E
passing the impugned judgment.
iv.
In any event, the Assessee cannot be said to have
.)
been prejudiced in any manner whatsoever by the
order of the High Court, as the appeal although was
improperly filed may be held to be maintainable.
F
19. The principal question which arises for consideration
is as to whether the order of assessment was passed at the
instance of the Higher Authority.
20. An Income Tax Officer while passing an order of G
· assessment performs judicial function. An appeal lies against
his order before the Appellate Authority.