The Bombay High Court dismissed revenue appeals challenging the ITAT order that permitted time-barred revision jurisdiction under Section 263 of the Income Tax Act regarding non-genuine purchases and earlier assessments, relying on binding precedents.
Appeals dismissed with no order as to costs.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION
INCOME TAX APPEAL NO.2426 OF 2011 WITH INCOME TAX APPEAL NO.2427 OF 2011 WITH INCOME TAX APPEAL NO.2440 OF 2011
The Commissioner of Income Tax-1, Room No.387, Aayakar Bhavan, M.K.Road, Mumbai 400 020.
vs. M/s.Lark Chemicals Ltd., 114, Marine Chambers, 11, New Marine Lines, Mumbai 400 020.
...Appellant.
...Respondent.
Mr.Charanjeet Chandrapal for the Appellant. Ms. V.B.Patel for the Respondent.
CORAM : MOHIT S. SHAH, C.J. AND M.S. SANKLECHA, J. DATE : Reserved on 30 July 2013
Pronounced on 6 Aug. 2013
PC:
These appeals by the revenue under Section 260A of the Income Tax Act, 1961 (“the Act”) challenges the order dated 31 March 2011 of the Income Tax Appellate Tribunal (“the Tribunal”) relating to assessment years 1999-2000, 2001-2002 and 2002-2003 respectively.
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a) Whether the Commissioner of Income Tax-1 Mumbai has a right to revise the order of the Assessing Officer (and also if necessary) set aside the assessment made u/s. 143(3) read with Section 147 as per order u/s. 263 of the Act, 1961, in such circumstances, specifically when it relates to use of bogus bills, non genuine parties by the assessee and such aspects which may constitute a direct attack on the interest of the revenue by dubious means of private assessee but it also opposed to public policy amounting to defrauding the state finances and is the direction of the Commissioner of Income Tax not valid and proper in asking the issues to be reexamined, as per law by the Assessing Officer?
b) Whether a finding of an Assessing Officer which is based on no evidence or non material /non relevant evidence, or rather when the finding is contrary to the evidence and or rather is perverse or there is no direct nexus between a conclusion and a primary fact and when the decision is not only absurd but totally arbitrary and lack of base, cannot the same be revised by CIT, by invoking his powers u/s.263 of the Income Tax Act 1961?
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This would be with specific reference to the fact that a question of fact convert itself to a question of law in such cases when principle of arriving at a proper decision itself have been violated then the principle itself becomes a question to be interpreted. This makes it a question of law.
c) Whether the ITAT is justified in applying inappropriate case law (293 ITR 1 SC and 325 ITR 574 Bom.) when the issues involved in the matter do not concern the case law (the grounds of limitation relied upon in the referred two cases of the ITAT are not applicable at all?
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income filed by the respondent was accepted by the revenue and processed under Section 143(1) of the Act. Thereafter assessment for the assessment year 2002-03 was sought to be reopened by a notice under Section 148 of the Act. This reopening of the assessment was on the ground that the respondent has purchased imported goods/chemicals etc. from three parties viz. I) Casio Pharma 2) M/s. Vishnu Pharma Chem and 3) M/s. Verma Pharmaceuticals who were alleged to be bogus and non genuine. Besides, the unsecured loans in the name of above three parties were alleged to be non genuine. Therefore, Assessing officer had reason to believe that income had escaped for AY 2002-2003.
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which were in fact accepted/assessed by order/intimation under section 143(1) of the Act.
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Therefore, it held that the Commissioner of Income Tax would have no jurisdiction to initiate proceeding under Section 263 of the Act on those issues. Therefore, the impugned order holds that jurisdiction under section 263 of the Act is time barred. In support of its aforesaid conclusion, reliance was placed in the impugned order upon the decision of the Apex Court in CIT vs. Alagendran Finance Ltd. (2007) 293 ITR 1(SC) and of this Court in Ashoka Buildcon Ltd. v. Assistant Commissioner of Income Tax and another (2010) 325 ITR 574 (Bom.).
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28 June 2006 passed under Section 143(3)/147 of the Act dealt only with the issue of non genuine purchases. The impugned order holds that the issue dealt with in the order dated 28 June 2006 is not erroneous. This issues has been accepted by the revenue as no question with regard to that has been formulated. All other issues considered in the order passed under Section 263 of the Act by the Commissioner of Income Tax were not the subject matter of the reassessment order dated 28 June 2006 but of assessments done earlier under Section 143(1) of the Act. Therefore, the issues on which the revisional jurisdiction is being exercised were admittedly issues which arose in the proceeding/assessment done prior to reopening of the assessment. In view of passage of time jurisdiction to exercise powers under Section 263 of the Act with regard to assessment done under Section 143(1)of the Act had lapsed. Ms. Vasanti Patel further submits that the Tribunal has merely followed the binding decisions of the Apex Court in the matter of Alagendran Finance Ltd. (supra) and of this Court Ashoka Buildcon Ltd.(supra). Consequently, no question of law arises for consideration by this Court.
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by virtue of an intimation under Section 143(1) of the Act which admittedly was done beyond a period of two years prior to notice dated 17 March 2009 issued under Section 263 of the Act. Section 263(2) of the Act provides that no order would be made in exercise of jurisdiction under Section 263(1) of the Act after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. It is an admitted position that the Commissioner of Income Tax has not exercised revisional jurisdiction in respect of order/intimation passed Section 143(1) of the Act within two years of it being passed. Therefore, exercise of jurisdiction on those issues under Section 263 of the Act is time barred as held by this Court in CIT vs. Anderson Marine & Sons (P) Ltd. 266 ITR 694. Moreover, in view of the decision of the Apex Court in the matter of Alagendran Finance Ltd. as well as our Court in the matter of Ashoka Buildcon Ltd.(supra) jurisdiction under Section 263 of the Act cannot be exercised on issues which were not subject matter of consideration while passing the order of reassessment under Section 143(3) /147 of the Act but a part of an assessment done earlier under the Act.
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of limitation provided under the Act. This is an issue which would fall within the domain of the Parliament so as to make suitable amendment to the law after considering the various competing interests. So far as the submission of Mr. Chandrapal learned Counsel for the revenue with regard to the decision of the Supreme Court in Alagendran Finance Ltd. (supra) and of this Court Ashoka Buildcon Ltd. (supra) being inapplicable merely on the ground that they do not deal with the issues of bogus bills or non genuine purchases is in fact no distinction. The principle laid down in the aforesaid decisions is that a notice under Section 263 of the Act cannot be issued beyond the period of two years from the date when the order sought to be revised is passed. The case law relied upon in the impugned order are clearly applicable to the present facts.
costs.
CHIEF JUSTICE
M.S. SANKLECHA, J.
3 issues framed by the court
Whether the period of limitation under Section 263 of the Income Tax Act can be ignored in cases involving bogus bills and non-genuine purchases defrauding the State.
Whether jurisdiction under Section 263 can be exercised on issues adjudicated in earlier orders not subject of the reopening.
Whether case law in Alagendran Finance and Ashoka Buildcon is applicable despite not explicitly dealing with bogus bills.
Colour shows how this judgement treated each authority
CIT vs. Alagendran Finance Ltd.Referred¶39
(2007) 293 ITR 1 SC
Ashoka Buildcon Ltd. v. Assistant Commissioner of Income TaxRelied on¶39
(2010) 325 ITR 574 Bom.
CIT vs. Anderson Marine & Sons (P) Ltd.Referred¶47
266 ITR 694
5 provisions across 1 enactments
The Commissioner of Income Tax-1
M/s. Lark Chemicals Ltd.
Mohit S. Shah
M. S. Sanklecha
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
