REPORTABLE IN 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] JUDGMENT RANJAN GOGOI, J. SLP(C) NO. 11621 OF 2009 1. Leave granted. 2. appellant - Revenue seeks to challenge order of High Court dated 7th August, 2008 dismissing appeal filed by it under Section 260A of Income Tax Act, 1961 (hereinafter referred to as Act ) and affirming order of Income Tax Appellate Tribunal, Mumbai Bench ( Tribunal Page 1 for short) dated 28th August, 2007 whereby order dated 20 th March, 2006 passed by Commissioner of Income Tax-1, Mumbai ( C.I.T. for short) under Section 263 of Act was reversed. assessment year in question is 2001-2002 and assessment order is dated 30th March, 2004. 3. After assessment as above was finalized, show cause notice dated 7th November, 2005 under Section 263 of Act was issued by learned C.I.T. detailing as many as eleven (11) issues/grounds on which assessment order was proposed to be revised under Section 263 of Act. respondent - assessee filed his reply to said show cause notice on consideration of which by order dated 20 th March, 2006 learned C.I.T. set aside order of assessment dated 30th March, 2004 and directed fresh assessment to be made. Aggrieved, respondent assessee challenged said order before learned Tribunal which was allowed by order dated 28th August, 2007. 4. Aggrieved by order dated 28th August, 2007 of learned Tribunal, Revenue filed appeal under Section 260A of Act before High Court of Bombay. Page 2 aforesaid appeal i.e. ITA No.293 of 2008 was summarily dismissed by High Court by impugned order dated 7 th August, 2008 holding that as C.I.T. had gone beyond scope of show cause notice dated 7 th November, 2005 and had dealt with issues not covered/mentioned in said notice revisional order dated 20 th March, 2006 was in violation of principles of natural justice. So far as question as to whether Assessing Officer had made sufficient enquiries about assessee s claim of expenses made in re-revised return of income is concerned, which question was formulated as question No.2 for High Court s consideration, High Court took view that said question raised pure questions of fact and, therefore, ought not to be examined under Section 260A of Act. appeal of Revenue was consequently dismissed. Aggrieved, this appeal has been filed upon grant of leave under Article 136 of Constitution of India. 5. We have heard Shri Ranjit Kumar, learned Solicitor General appearing for appellant Revenue and Shri Shyam Divan, learned Senior Counsel appearing for respondent assessee. Page 3 6. assessment in question was set aside by learned C.I.T. by order dated 20 th March, 2006 on principal ground that requisite and due enquiries were not made by Assessing Officer prior to finalization of assessment by order dated 30th March, 2004. In this connection, learned C.I.T. on consideration of facts of case and record of proceedings came to conclusion that in course of assessment proceedings despite several opportunities assessee did not submit requisite books of account and documents and deliberately dragged matter leading to one adjournment after other. Eventually, Assessing Officer, to avoid bar of limitation, had no option but to hurriedly finalize assessment proceedings which on due and proper scrutiny disclosed that necessary enquiries were not made. On said basis learned C.I.T. came to conclusion that assessment order in question was erroneous and prejudicial to interests of Revenue warranting exercise of power under Section 263 of Act. Consequently, assessment for year 2001-2002 was set aside and fresh assessment was ordered. At this stage, it must be noticed that in order Page 4 dated 20th March, 2006 learned C.I.T. arrived at findings and conclusions in respect of issues which were not specifically mentioned in show cause notice dated 7 th November, 2005. In fact, on as many as seven/eight (07/08) issues mentioned in said show cause notice learned C.I.T. did not record any finding whereas conclusions adverse to assessee were recorded on issues not specifically mentioned in said notice before proceeding to hold that assessment needs to be set aside. However, three (03) of issues, details of which are noticed herein below, are common to show cause notice as well as revisional order of learned C.I.T. 7. On appeal, learned Tribunal took view that learned C.I.T. exercising powers under Section 263 of Act could not have gone beyond issues mentioned in show cause notice dated 7th November, 2005. learned Tribunal, therefore, thought it proper to take view that in respect of issues not mentioned in show cause notice findings as recorded in revisional order dated 20 th March, 2006 have to be understood to be in breach of principles of natural justice. learned Tribunal also specifically considered three (03) common issues Page 5 mentioned above and on such consideration arrived at conclusion that reasons disclosed by learned C.I.T. in order dated 20th March, 2006 for holding assessment to be liable for cancellation on that basis are not tenable. Accordingly, learned Tribunal allowed appeal of assessee and reversed order of suo motu revision dated 20th March, 2006. 8. At this stage, it may be appropriate to reproduce hereunder provisions of Section 263 of Act to appreciate arguments advanced and to understand contours of suo motu revisional power vested in learned C.I.T. by aforesaid provision of Act. 263 - Revision of orders prejudicial to rev- enue.-(1) Principal Commissioner or Commissioner may call for and examine record of any proceeding under this Act, and if he considers that any order passed therein by Assessing Officer is erro- neous in so far as it is prejudicial to in- terests of revenue, he may, after giving assessee opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as circumstances of case justify, including order enhanc- ing or modifying assessment, or can- celling assessment and directing fresh assessment. Page 6 Explanation ... 9. Under Act different shades of power have been conferred on different authorities to deal with orders of assessment passed by primary authority. While Section 147 confers power on Assessing Authority itself to proceed against income escaping assessment, Section 154 of Act empowers such authority to correct mistake apparent on face of record. power of appeal and revision is contained in Chapter XX of Act which includes Section 263 that confer suo motu power of revision in learned C.I.T. different shades of power conferred on different authorities under Act has to be exercised within areas specifically delineated by Act and exercise of power under one provision cannot trench upon powers available under another provision of Act. In this regard, it must be specifically noticed that against order of assessment, so far as Revenue is concerned, power conferred under Act is to reopen concluded assessment under Section 147 and/or to revise assessment order under Section 263 of Act. scope of power/jurisdiction under different provisions of Act would naturally be different. power Page 7 and jurisdiction of Revenue to deal with concluded assessment, therefore, must be understood in context of provisions of relevant Sections noticed above. While doing so it must also be borne in mind that legislature had not vested in Revenue any specific power to question order of assessment by means of appeal. 10. Reverting to specific provisions of Section 263 of Act what has to be seen is that satisfaction that order passed by Authority under Act is erroneous and prejudicial to interest of Revenue is basic pre- condition for exercise of jurisdiction under Section 263 of Act. Both are twin conditions that have to be conjointly present. Once such satisfaction is reached, jurisdiction to exercise power would be available subject to observance of principles of natural justice which is implicit in requirement cast by Section to give assessee opportunity of being heard. It is in context of above position that this Court has repeatedly held that unlike power of reopening assessment under Section 147 of Act, power of revision under Section 263 is not contingent on giving of notice to show cause. In fact, Section 263 Page 8 has been understood not to require any specific show cause notice to be served on assessee. Rather, what is required under said provision is opportunity of hearing to assessee. two requirements are different; first would comprehend prior notice detailing specific grounds on which revision of assessment order is tentatively being proposed. Such notice is not required. What is contemplated by Section 263, is opportunity of hearing to be afforded to assessee. Failure to give such opportunity would render revisional order legally fragile not on ground of lack of jurisdiction but on ground of violation of principles of natural justice. Reference in this regard may be illustratively made to decisions of this Court in Gita Devi Aggarwal vs. Commissioner of Income Tax, West Bengal and others1 and in C.I.T., West Bengal, II, Calcutta vs. M/s Electro House2. Paragraph 4 of decision in C.I.T., West Bengal, II, Calcutta vs. M/s Electro House (supra) being illumination of issue indicated above may be usefully reproduced hereunder: This section unlike Section 34 does not pre- scribe any notice to be given. It only requires Commissioner to give opportunity to Page 9 assessee of being heard. section does not speak of any notice. It is unfortunate that High Court failed to notice difference in language between Sections 33-B and 34. For assumption of jurisdiction to proceed un- der Section 34, notice as prescribed in that section is condition precedent. But no such notice is contemplated by Section 33-B. jurisdiction of Commissioner to proceed under Section 33-B is not dependent on fulfilment of any condition precedent. All that he is required to do before reaching his deci- sion and not before commencing enquiry, he must give assessee opportunity of being heard and make or cause to make such enquiry as he deems necessary. Those require- ments have nothing to do with jurisdiction of Commissioner. They pertain to re- gion of natural justice. Breach of principles of natural justice may affect legality of order made but that does not affect juris- diction of Commissioner. At present we are not called upon to consider whether order made by Commissioner is vitiated because of contravention of any of principles of natural justice. scope of these appeals is very narrow. All that we have to see is whether before assuming jurisdiction Commissioner was required to issue notice and if he was so required what that notice should have con- tained? Our answer to that question has al- ready been made clear. In our judgment no no- tice was required to be issued by Commis- sioner before assuming jurisdiction to proceed under Section 33-B. Therefore 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 nature of enquiry to be held under Section 33-B. Therefore, we refrain from spelling out what principles of natural justice should be observed in enquiry under Section 33-B. This Court in Gita Devi Aggarwal v. CIT, West Page 10 Bengal ruled that Section 33-B does not in ex- press terms require notice to be served on assessee as in case of Section 34. Sec- tion 33-B merely requires that opportunity of being heard should be given to assessee and stringent requirement of service of no- tice under Section 34 cannot, therefore, be ap- plied to proceeding under Section 33-B. (Page 827-828). [Note: Section 33-B and Section 34 of Income Tax Act, 1922 corresponds to Section 263 and Section 147 of Income Tax Act, 1961] 11. It may be that in given case and in most cases it is so done notice proposing revisional exercise is given to assessee indicating therein broadly or even specifically grounds on which exercise is felt necessary. But there is nothing in section (Section 263) to raise said notice to status of mandatory show cause notice affecting initiation of exercise in absence thereof or to require C.I.T. to confine himself to terms of notice and foreclosing consideration of any other issue or question of fact. This is not purport of Section 263. Of course, there can be no dispute that while C.I.T. is free to exercise his jurisdiction on consideration of all relevant facts, full opportunity to controvert same and to explain circumstances surrounding such facts, as may be considered Page 11 relevant by assessee, must be afforded to him by C.I.T. prior to finalization of decision. 12. In present case, there is no dispute that in order dated 20th March, 2006 passed by learned C.I.T. under Section 263 of Act findings have been recorded on issues that are not specifically mentioned in show cause notice dated 7th November, 2005 though there are three (03) issues mentioned in show cause notice dated 7 th November, 2005 which had specifically been dealt with in order dated 20th March, 2006. learned Tribunal in its order dated 28 th August, 2007 put aforesaid two features of case into two different compartments. Insofar as first question i.e. findings contained in order of learned C.I.T. dated 20 th March, 2006 beyond issues mentioned in show cause notice is concerned learned Tribunal taking note of aforesaid admitted position held as follows: In case on hand, CIT has assumed jurisdiction by issuing show cause notice u/s 263 but while passing final order he relied on various other grounds for coming to final conclusion. This itself makes revision order bad in law and also violative of principles of natural justice and thus not maintainable. If, during course of revision proceedings CIT was of opinion that order of Page 12 AO was erroneous on some other grounds also or on any additional grounds not mentioned in show cause notice, he ought to have given another show cause notice to assessee on those grounds and given him reasonable opportunity of hearing before coming to conclusion and passing final revision order. In case on hand, CIT has not done so. Thus, order u/s 263 is violative of principles of natural justice as far as reasons, which formed basis for revision but were not part of show cause notice issued u/s 263 are concerned. order of CIT passed u/s 263 is therefore liable to be quashed in so far as those grounds are concerned. 13. above ground which had led learned Tribunal to interfere with order of learned C.I.T. seems to be contrary to settled position in law, as indicated above and two decisions of this Court in Gita Devi Aggarwal (supra) and M/s Electro House (supra). learned Tribunal in its order dated 28th August, 2007 had not recorded any finding that in course of suo motu revisional proceedings, hearing of which was spread over many days and attended to by authorized representative of assessee, opportunity of hearing was not afforded to assessee and that assessee was denied opportunity to contest facts on basis of which learned C.I.T. had come to his conclusions as recorded in order dated 20th March, 2006. Despite Page 13 absence of any such finding in order of learned Tribunal, before holding same to be legally unsustainable Court will have to be satisfied that in course of revisional proceeding assessee, actually and really, did not have opportunity to contest facts on basis of which learned C.I.T. had concluded that order of Assessing Officer is erroneous and prejudicial to interests of Revenue. above is question to which Court, therefore, will have to turn to. 14. To determine above question we have read and considered order of Assessing Officer dated 30 th March, 2004; as well as order of learned C.I.T. dated 20 th March, 2006. From above consideration, it appears that learned C.I.T. in course of revisional proceedings had scrutinized record of proceedings before Assessing Officer and noted various dates on which opportunities to produce books of account and other relevant documents were afforded to assessee which requirement was not complied with by assessee. In these circumstances, revisional authority took view that Assessing Officer, after being compelled to adjourn matter Page 14 from time to time, had to hurriedly complete assessment proceedings to avoid same from becoming time barred. In course of revisional exercise relevant facts, documents, and books of account which were overlooked in assessment proceedings were considered. On such re-scrutiny it was revealed that original assessment order on several heads was erroneous and had potential of causing loss of revenue to State. It is on aforesaid basis that necessary satisfaction that assessment order dated 30 th March, 2004 was erroneous and prejudicial to interests of revenue was recorded by learned C.I.T. At each stage of revisional proceeding authorized representative of assessee had appeared and had full opportunity to contest basis on which revisional authority was proceeding/had proceeded in matter. If revisional authority had come to its conclusions in matter on basis of record of assessment proceedings which was open for scrutiny by assessee and available to his authorized representative at all times it is difficult to see as to how requirement of giving of reasonable opportunity of being heard as contemplated by Section 263 of Act had been breached in present case. order of learned Tribunal insofar as first issue i.e. Page 15 revisional order going beyond show cause notice is concerned, therefore, cannot have our acceptance. High Court having failed to fully deal with matter in its cryptic order dated 7th August, 2008 we are of view that said orders are not tenable and are liable to be interfered with. 15. This will bring us to consideration of second limb of case as dealt with by learned Tribunal, namely, that tenability of order of learned C.I.T. on three (03) issues mentioned in show cause notice and also dealt with in revisional order dated 20 th March, 2006. aforesaid three (03) issues are: i) Assessee maintaining 5 bank accounts and AO not examining 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 head Receipts on behalf of Mrs. Jaya Bachchan and iii) Regarding claim of additional expenses in re-revised return. 16. On above issues learned Tribunal had given Page 16 detailed reasons for not accepting grounds cited in revisional order for setting aside assessment under Section 263 of Act. reasons cited by learned Tribunal insofar as first two issues are concerned may not justify serious relook and hence need not be gone into. third question would, however, require some detailed attention. said question is with regard to claim of additional expenses made by assessee in its re-revised return which was subsequently withdrawn. 17. assessee in re-revised return dated 31 st March, 2003 had made claim of additional expenses of 30% of gross professional receipts (Rs.3.17 crores). It appears that Assessing Officer required assessee to file requisite details in this regard. assessee responded by letter dated 13th February, 2004 stating as follows: With regard to 30% estimated expenses claimed, we have to submit that these are expenses which are spent for security purposes by employing certain Agencies, guards etc. for 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. names of such Agencies cannot be disclosed/divulged as there is possibility of leakage of information of Agencies names from office staff, which will Page 17 obviously be detrimental to interests of Shri Bachchan. 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 assessee informed learned C.I.T. that claim was made on belief that same is allowable but as it will not be feasible for assessee to substantiate same, re-revised return of income may be taken to withdrawn. It appears that thereafter Assessing Officer issued notice to show cause as to why provisions of Section 69-C should not be invoked and expenses claimed should not be treated as unexplained expenditure. In reply, assessee by letter dated 24 th March, 2004 submitted that claim was made as standard deduction and that assessee had been wrongly advised to make said claim and as same has been withdrawn, Section 69-C will have no application. record of assessment proceedings disclose that said stand was accepted by Assessing Officer and matter was not pursued any further. 19. learned C.I.T. took view that Page 18 notwithstanding withdrawal of claim by assessee, in view of earlier stand taken that said expenses were incurred for security purposes of assessee, Assessing Officer ought to have proceeded with matter as assessee was following cash system of accounting and filing of re-revised return, prima facie, indicated that additional expenses claimed had been incurred. In this regard, following findings/reasons recorded by learned C.I.T. in 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 claim regarding additional expenses was made through duly verified revised return. 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 circumstances, Assessing Officer was expected to examine matter further to arrive at 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 claim and in my view, his failure to decide matter Page 19 regarding actual incurring of additional expenses and sources thereof resulted into erroneous order which is prejudicial to interest of revenue. 20. argument has been made on behalf of assessee that notice under Section 69-C was issued by Assessing Officer and thereafter on withdrawal of claim by assessee Assessing Officer thought that matter ought not to be investigated any further. This, according to learned counsel for assessee, is possible view and when two views are possible on issue, exercise of revisional power under Section 263 would not be justified. Reliance in this regard has been placed on judgment of this Court in Malabar Industrial Co. Ltd. vs. CIT3 which has been approved in Commissioner of Income-tax vs. Max 4 India Ltd. 21. There can be no doubt that so long as view taken by Assessing Officer is possible view same ought not to be interfered with by Commissioner under Section 263 of Act merely on ground that there is another possible view of matter. Permitting exercise of revisional power in Page 20 situation where two views are possible would really amount to conferring some kind of appellate power in revisional authority. This is course of action that must be desisted from. However, above is not situation in present case in view of reasons stated by learned C.I.T. on basis of which said authority felt that matter needed further investigation, view with which we wholly agree. Making claim which would prima facie disclose that expenses in respect of which deduction has been claimed has been incurred and thereafter abandoning/withdrawing same gives rise to necessity of further enquiry in interest of Revenue. notice issued under Section 69-C of Act could not have been simply dropped on ground that claim has been withdrawn. We, therefore, are of opinion that learned C.I.T. was perfectly justified in coming to his conclusions insofar as issue No.(iii) is concerned and in passing impugned order on that basis. learned Tribunal as well as High Court, therefore, ought not to have interfered with said conclusion. 22. In light of discussions that have preceded and for reasons alluded we are of opinion that Page 21 present is fit case for exercise of suo motu revisional powers of learned C.I.T. under Section 263 of Act. order of learned C.I.T., therefore, is restored and those of learned Tribunal dated 28th August, 2007 and High Court dated 7th August, 2008 are set aside. appeal of Revenue is allowed. SLP(C) No.861 of 2013 23. Leave granted. 24. Pursuant to revisional order dated 20th March, 2006 under Section 263 of Income Tax Act setting aside assessment order for assessment year 2001-2002 and directing fresh assessment, fresh assessment had been made by Assessing Officer by order dated 29 th December, 2006. Against said order respondent assessee filed appeal before learned Commissioner of Income Tax (Appeals). By order dated 18th October, 2007 learned Commissioner of Income Tax (Appeals) had set aside assessment order dated 29th December, 2006 as in meantime, by order dated 28 th August, 2007 of learned Income Tax Appellate Tribunal revisional order dated 20th March, 2006 under Section 263 of Page 22 Act was set aside. Revenue s appeal before learned Tribunal against order dated 18 th October, 2007 was dismissed on 11th January, 2000 and by High Court on 29 th February, 2012. Against aforesaid order of High Court this appeal has been filed by Revenue. As by order passed today in Civil Appeal arising out of Special Leave Petition (Civil) No.11621 of 2009 we have restored suo motu revisional order dated 20th March, 2006 passed by learned C.I.T., we allow this appeal filed by Revenue and set aside order dated 11th January, 2010 passed by learned Tribunal and order dated 29th February, 2012 passed by High Court referred to above. However, we have to add that as re-assessment order dated 29 th December, 2006 had not been tested on merits assessee would be free to do so, if he is so inclined and so advised. 25. appeals are disposed of in above terms. . ......................,J. [RANJAN GOGOI] . ......................,J. [PRAFULLA C. PANT] Page 23 NEW DELHI MAY 11, 2016 Page 24 Commissioner of Income-tax, Mumbai v. Amitabh Bachchan