U.P. CO-OPERATIVE FEDERATION LTD. v. INSPECTING ASSISTANT COMMISSIONER OF INCOME TAX
[Citation -1987-LL-0907-3]

Citation 1987-LL-0907-3
Appellant Name U.P. CO-OPERATIVE FEDERATION LTD.
Respondent Name INSPECTING ASSISTANT COMMISSIONER OF INCOME TAX
Court ITAT
Relevant Act Income-tax
Date of Order 07/09/1987
Assessment Year 1979-80
Judgment View Judgment
Keyword Tags legislative intention • special bench • co-operative
Bot Summary: The plea of the assessee before us was that the Commissioner has powers of cancellation of an order only u/s 263 as this is a section which gives the power but it also provides when the power has to be exercised. In the instant case, the case of consequence was made by IAC and the Act provides f o r cancellation of an order if it is found to be erroneous and prejudicial to interests of the revenue in respect of an order passed by an ITO. By means of a n Explanation, which was introduced, effective from 1-10-1984, it has been clarified that the term 'ITO' would also include IAC with specific reference to sec. The order of assessment is dated 1st February, 1982 and the order of the Commissioner is dated 28th January, 1984. 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 Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee on opportunity of being head and after making or causing to be made such enquiry 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. We have taken a different view from the earlier order of this Bench though taken in the case of the same assessee in view of the fact that in the earlier order the notice and clauses, which brought in the amendment, was not considered. A similar question arose and the observation of their Lordships in the identical question was as under: Now, so far as the first question is concerned, it has to be noted that sub- section of section 125A of the Act provides that where the Inspecting Assistant Commissioner exercises the powers or performs the functions of an Income-tax Officer, in pursuance of an order made by the Commissioner of an order made by the Commissioner of Income-tax under sub-section of section 125A of the Act, reference in the Act or in any rule made thereunder to the Income-tax Officer, shall be construed as reference to the Inspecting Assistant COmmissioner. In our opinion, the Tribunal was justified in holding that the Commissioner of Income-tax was competent to revise under section 263 of the Act, the order passed by the Inspecting Assistant COmmissioner.


This is appeal by assessee who is aggrieved by order of Commissioner passed u/s 263 setting aside order of ITO, pleading that order of Commissioner is bad in law on facts and circumstances of case. 2. plea of assessee before us was that Commissioner has powers of cancellation of order only u/s 263 as this is section which gives power but it also provides when power has to be exercised. In instant case, case of consequence was made by IAC (Asstt.) and Act provides f o r cancellation of order if it is found to be erroneous and prejudicial to interests of revenue in respect of order passed by ITO. By means of n Explanation, which was introduced, effective from 1-10-1984, it has been clarified that term 'ITO' would also include IAC (Asstt.) with specific reference to sec. 125A (4). This amendment having been brought into statute book only with effect from 1-10-1984, it could not be given effect to for order passed earlier to that date. order of assessment is dated 1st February, 1982 and order of Commissioner is dated 28th January, 1984. Therefore, said explanation was not available to CIT when he chose to invoke provisions of sec. 263 and, therefore, order passed by him is bad in law. It was also pleaded that words contained in Explanation introduced in sec. 263 'for removal of doubt' has been considered by Special Bench in Schradar-Scovill Duncan Ltd. v. ITO (1986) 16 ITD 18 (Bom.) and it has been clarified by them that since it was made effective from particular date, it has only prospective affect. Reliance was also placed on CIT v. Karjan Co-op. Cotton Sale, Ginning & Pressing Society Ltd. (1981) 129 ITR 821 (Guj.) and CIT v. Tamil Nadu Co-operative Marketing Federation Ltd. (1983) 144 ITR 74 (Mad.). It was also pleaded that sec. 263 being charging section, strict interpretation has to be made, and in case two views are possible, then view that is favourable to assessee should be taken for which reliance was placed on CIT v. Vegetable Products Ltd. (1973) 88 ITR 192 (SC). assessee also provided copy of order of this Tribunal for assessment year 1978-79 in case of assessee wherein on identical facts order of Commissioner was quashed. It was also pleaded that notice did not even specify reasons for proposal of revision. 3. On part of revenue, learned Departmental Representative Mr. Srivastava submitted that M. P. High Court in M. P. Financial Corpn. v. CIT (1987) 165 ITR 765 had considered this very issue of Explanation contained in sec. 263 and had held that term 'ITO' included 'IAC (Asstt.)' also. He also relied on several Tribunal's decisions - East Coast Marine Products (P.) Ltd. v. ITO (1973) 4 ITD 73 (Hyd.) (SB), Salonah tea Co. Ltd. v. ITO (1984) 8 ITD 710 (Cal.), M. A. Lateef v. IAC (1985) 14 ITD 68 (Hyd.), Indian Telephone Industries Ltd. v. IAC (1984) 10 ITD 338 (Bang.) and apeejay Structural Works (P.) Ltd. v. IAC (1984) 10 ITD 542 (Cal.). plea further raised was that notice issued by Commissioner calling for explanation categorically indicated that deduction u/s 80p was granted without proper enquiry. Since no enquiry was made, setting aside was proper for which reliance was placed on Rampyari Devi Saraogi v. CIT (1968) 67 ITR 84 (SC), Smt. Tara Devi Aggarwal v. CIT (1973) 88 ITR 323 (SC), 1975 99 ITR 386 (sic), Thalibai F. Jain v. ITO (1975) 101 ITR 1 (Kar.) and Addl. CIT v. Mukur Corpn. (1978) 111 ITR 312 (Guj.). 4. We have carefully considered arguments that have been advanced by both parties. Sec. 125 found its way into statute book by means of finance (No. 2) Act, 1977 effective from 10th July, 1977. provisions contained in clause (1) and clause (4) of this section are reproduced below: "125A. (1) Commissioner may, by general or special order in writing, direct that all or any of powers or functions conferred on, or assigned to, Income-tax Officer of Income-tax Officers by or under this Act in respect of any area, or persons or classes of persons, or incomes or classes of income, or cases or classes of cases, shall be exercised or performed concurrently by Inspecting Assistant Commissioner. ** ** ** (4) Where order is made under sub-section (1) and Inspecting Assistant Commissioner exercises powers or performs functions of Income-tax Officer in relation to any area, or persons or classes of persons, or incomes or classes of incomes, or cases or classes of cases, references in this Act or in any rule made thereunder to Income-tax Officer shall be construed s references to Inspecting Assistant COmmissioner and any provision of this Act requiring approval or sanction of Inspecting Assistant Commissioner shall not apply." When above clauses were introduced simultaneously, amendments were made in sec. 246 as well as sec. 264 but somehow or other Legislature, it appears, overlooked provisions contained in section 263. provision as contained in sec. 263 sub-sec. (1) reads as under: "263. (1) Commissioner may call for and examine record of any proceeding under this Act, and if he considers that any order passed therein by Income=-tax Officer is erroneous in so far as it is prejudicial to interests of revenue, he may, after giving assessee on opportunity of being head and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as circumstances of case justify, including order enhancing or modifying assessment, or cancelling assessment and directing fresh assessment." Legislature perhaps woke up sometime in year 1984 partly due to assessee's raising technical objection on ground similar to one that is before us. They, therefore, brought in Explanation by means of Taxation Laws (Amendment) Act. of 1984, notes on clauses contained following Explanation, paragraph necessitating introduction of Explanation to sub- sec. (1) of sec. 263. Explanation and reasoning therefor is given below: "Explanation: For removal of doubts, it is hereby declared that, purposes of this sub-section, order passed by Income-tax Officer shall include:- (a) order of assessment made on basis of directions issued by Inspecting Assistant Commissioner under section 144A or section 144B; and (b) order made by Inspection Assistant Commissioner in exercise of t h e powers or in performance of function of Income-tax Officer conferred on, or assigned to, him under clause (a) of sub section (1) or section 125 or under sub-section (1) of section 125 A." Along with this Explanation, there was one other clause that was introduced u/s 263 which Legislature intended to be effective from 1-10- 1984. Considering sequence of various provisions, that is, introducing class of IAC specifically for purposes of making of assessment from 1978, who are for all practical purposes or for performance are discharging functions of ITO and considering their status, Legislatures have provided that sections 144A and 144B would not become operational as far as assessment made by them. This is followed by fact that appeal against their orders shall lie to CIT (A). Legislature perhaps initially did not think of any necessity of introducing Explanation as perhaps they felt that sub-sec. (4) of sec. 125 was absolutely clear and obvious that in those circumstance, I C being ITO would be squarely covered or is covered u/s 263 for Commissioner to revise orders. COnsequently, perhaps objections being raised on technicalities, Legislatures thought it worth-while to clarify position and it is with this intention that they had introduced Explanation and used words "for removal of doubts". term "for removal of doubts" clearly indicated that contents following these words were existing all time. Even Special Bench in case of Schradar Scovill Duncan Ltd. (supra), learned Members have observed: "It may be that when Legislature uses expression 'for removal of doubts', it ordinarily means that legislative intention has all along been same and that new provision has been introduced to clarify position. This would only mean that adverse inference cannot be drawn from absence of such provision earlier." Therefore, when we look at provisions as they are and since harmonious interpretation of sections is called for it is only proper for us to come to conclusion that Commissioner u/s 263 has and can rightly revise order of IAC (Asst.) for reason that such IAC (Asst.) by virtue of provisions contained in sec. 125A (4) was acting as ITO. 5. One of arguments that was raised was regarding mention of date while Explanation was introduced by Taxation Laws (Amendment) Act, 1984. In this regard, we have to observe that Taxation Laws (Amendment) Bills brought Explanation as well as amendment to provisions contained in sec. 263 and for harmonious construction and interpretation of section effective date of 1-10-1984 is relatable to amendment contained in sub-sec. (2) of section 263. To this conclusion we have come to, in view of fact that otherwise provisions contained in statute would become nugatory. It is also our view that Legislatures wanted cut off date in respect of revision of orders passed by authorities below which was earlier to be made within period of two years from date of orders so sought to be revised, which by virtue of amendment two years would run from end of financial year in which order sought to be revised has been passed. In these circumstances, reliance placed on Schrader Scovill Duncan Ltd.'s case (supra), Special Bench, where Explanation was introduced mentioning therein effective date as 1.4.1979 cannot be applied in view of our observations made above and, therefore, we have to make our observations in light of provisions in their sequence. 6. In assessment year 1978-79, this 'A' Bench of Tribunal in case of assessee on similar set of facts had taken view that since Explanation was appearing in statute book from 1-10-1984, it does not have retrospective operation. We have taken different view from earlier order of this Bench though taken in case of same assessee in view of fact that in earlier order notice and clauses, which brought in amendment, was not considered. We were also compelled to take different view in view of Madhya Pradesh High Court's decision in case of M. P. Financial Corpn. (supra). similar question arose and observation of their Lordships in identical question was as under: "Now, so far as first question is concerned, it has to be noted that sub- section (4) of section 125A of Act provides that where Inspecting Assistant Commissioner exercises powers or performs functions of Income-tax Officer, in pursuance of order made by Commissioner of order made by Commissioner of Income-tax under sub-section (1) of section 125A of Act, reference in Act or in any rule made thereunder to Income-tax Officer, shall be construed as reference to Inspecting Assistant COmmissioner. This Provision leaves no room for doubt that orders passed COmmissioner. This Provision leaves no room for doubt that orders passed by Inspecting Assistant Commissioner (Assessment), in exercise of powers conferred on him by virtue of order made under subsection (1) of section 125 of Act, are subject to revision under section 263 of Act, in accordance with provisions of that section. Therefore, in our opinion, Tribunal was justified in holding that COmmissioner of Income-tax was competent to revise under section 263 of Act, in accordance with provisions of that section. Therefore, in our opinion, Tribunal was justified in holding that Commissioner of Income-tax was competent to revise under section 263 of Act, order passed by Inspecting Assistant COmmissioner (Assessment). Our answer to first question referred to us is in affirmative and against assessee." learned counsel for assessee could not bring to our notice any contrary decision of any High Court dealing with this particular situation and in view of Bombay High Court's ruling in case of CIT v. Smt. Godavaridevi Saraf (1978) 113 ITR 589, there being no other contrary decision of any other High Court is law of land which would have binding nature and we have necessarily only to follow said decision also. It is for these reasons that we have taken different view than one taken in assessee's own case by this Bench. On issue of merits, regarding deduction u/s 80-P, learned CIT had only observed that there are contrary views available which necessitates enquiry into matter. With this observation of CIT, there can be no grievance as assessee would have ample opportunity of putting forth all its explanations and objections to ITO. We, therefore, confirm order of CIT (A) in setting aside order of IAC and dismiss appeal. *** U.P. CO-OPERATIVE FEDERATION LTD. v. INSPECTING ASSISTANT COMMISSIONER OF INCOME TAX
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