1991-VIL-614-ALH-DT
Equivalent Citation: [1991] 189 ITR 769, 100 CTR 170, 56 TAXMANN 24
ALLAHABAD HIGH COURT
Date: 11.01.1991
KN. AGARWAL
Vs
COMMISSIONER OF INCOME-TAX
BENCH
Judge(s) : B. P. JEEVAN REDDY., V. N. MEHROTRA
JUDGMENT
The judgment of the court was delivered by
B. P. JEEVAN REDDY C. J. -This writ petition (No. 387 of 1980) is directed against a show-cause notice issued by the Commissioner of Income-tax under section 263 of the Income-tax Act, 1961, calling upon the petitioner to show cause as to why the assessment order dated September 21, 1978, relating to the assessment year 1975-76 be not revised.
The impugned show-cause notice recites the following facts :
For the assessment year 1975-76, the assessment in the case of the petitioner herein was made by the Income-tax Officer on September 21, 1978, on a total income of Rs. 13,08,902. From the records maintained in the office of the Inspecting Assistant Commissioner (Assessment), Agra, the Commissioner found that the petitioner was a partner in the partnership firm, Shiv Narain Parmendra Narain, Ranghat, Aligarh, with a share of 50%. The petitioner's contention, however, was that 1/3rd of the income received towards the said share alone must be assessed in his hands and the remaining 2/3rds of the said share income should be distributed equally between his wife and his minor son by virtue of an overriding charge created by a memo of partial partition dated November 9, 1985. The Income-tax Officer negatived the said contention of the petitioner and included the entire income pertaining to the said 50% share in the income of the individual. The petitioner filed a revised return in which he disclosed higher figures, and again with the same contention relating to the share income received from the aforesaid partnership-firm. This contention was accepted by the Income-tax Officer and only 1/3rd of the share income was assessed in the hands of the petitioner and the remaining 2/3rds was held assessable equally in the hands of the petitioner's wife and his minor son. The Commissioner is of the opinion that the entire share income is assessable in the hands of the petitioner alone and the assessment made by the Income-tax Officer to the contrary is erroneous in law and prejudicial to the interests of the Revenue. The petitioner is accordingly called upon to show cause against the same.
Without, however, submitting any explanation, the petitioner straight away approached this court against the show-cause notice by way of this writ petition, which was entertained and admitted as far back as in 1980 and all further proceedings stayed. The petitioner's case, as set out in the writ petition, is to the following effect :
A dispute identical to the one mentioned in the impugned showcause notice had arisen in respect of the assessment years 1966-67 to 1974-75. The matter was finally brought to this court by way of a reference and it was decided by this court that the income accruing to the wife and the minor son of the petitioner cannot be clubbed with or included in the income of the petitioner (vide I. T. R. No. 764 of 1978). This decision was rendered by this court following its earlier decision in CIT v. Lakshmi Kant Gupta [1978] UPTC 314). The Income-tax Officer has merely followed the decision of this court. If so, it cannot be held that the order of assessment made by him is erroneous within the meaning of section 263. The impugned show-cause notice is, therefore, without jurisdiction and amounts to harassment of the petitioner.
Though no counter-affidavit has been filed by the respondent, the writ petition has been opposed by Sri Markandey Katju, learned additional standing counsel for the Revenue, on the material before the court. It is submitted that the decision of this court relating to previous years is the subject-matter of an appeal before the Supreme Court and, therefore, it cannot be said that it is final. It is also argued that the writ petition filed against a show cause notice, without even submitting an explanation and without waiting for a decision by the Commissioner, is not maintainable in law. The petitioner must be directed, it is argued, to submit his explanation before the Commissioner and take a decision from him and then, if aggrieved, adopt such remedies as are open to him in law.
Having regard to the fact that the writ petition was admitted more than ten years ago and proceedings were stayed in pursuance of the impugned show cause notice, we do not think it would be a proper exercise of discretion to dismiss the writ petition summarily on the ground that it is directed against a mere show-cause notice, more particularly when there is no factual dispute involved herein. It is evident from the record that in the case of this very petitioner-assessee, this court has held earlier with respect to the preceding assessment years that the entire share income received from the aforesaid partnership firm is not liable to be included or assessed in the hands of the petitioner. It was held that only 1/3rd of the said share income received should be included in the petitioner's income and the rest 2/3rds in the respective incomes of the petitioner's wife and minor son. True, it is submitted that the said decision is the subject-matter of an appeal pending before the Supreme Court, but can it be said on that account that the assessment order made by the Income-tax Officer following the decision of this court is erroneous within the meaning of section 263. It is well-settled that for invoking the power under section 263, two grounds must exist, namely, (i) the order proposed to be revised must be erroneous and (ii) it must be prejudicial to the Revenue. The second ground may be said to have been satisfied in this case, but not the first one. Just because an appeal is pending, the decision of this court cannot be treated as not final, nor can it be ignored. It is binding upon the authorities within the territories of this State. The Income-tax Officer had no option but to follow this decision of this court in the case of this assessee.
During the course of hearing, a doubt arose in our minds whether the Commissioner can invoke his revising power under section 263 with a view to keep the dispute alive, awaiting the decision of the Supreme Court. In short, the issue was whether it is open to invoke this power with a view to protect the interest of the Revenue awaiting the decision of a higher court or Tribunal as the case may be. It may very often happen that a decision of an appellate authority or tribunal pertaining to an earlier assessment year on a particular point is in favour of the assessee and that is followed in the assessment relating to subsequent assessment years. It may also happen that the Commissioner may consider that such decision of the appellate authority or Tribunal is not in accordance with law and he may also find that such decision is the subject-matter of further appeal or revision, as the case may be. He may expect that the higher court or authority may ultimately decide in favour of the Revenue, but that may take a number of years. He may be of the further view that, by the time the decision of the higher court or authority arrives, a number of years may elapse, by which time the exercise of power under section 263 may become barred. It is true again that the judgment of a High Court or the Supreme Court can be treated as information within the meaning of section 147 but even that may be barred in many cases. Can the Commissioner say in such cases that he would invoke his power of revision and keep it pending awaiting the decision of a higher court or authority ? To put it in the language of section 263, can he, in such a case, act on the footing that the order of the assessing authority is erroneous ? After giving our earnest consideration to the matter, we are of the view that it is difficult to sustain the exercise of reviewing power in such a situation for the simple reason that the order of the assessing authority cannot be said to be erroneous if he merely follows a decision of a higher authority or court on the same point in the case of the same assessee. Indeed, the orders of the Tribunal and the High Court are binding upon the Assessing Officer and since he acts in a quasi-judicial capacity, the discipline of such functioning demands that he should follow the decision of the Tribunal or the High Court, as the case may be. He cannot ignore it merely on the ground that the Tribunal's order is the subject-matter of revision in the High Court or that the High Court's decision is under appeal before the Supreme Court. Permitting him to take such a view would introduce judicial indiscipline, which is not called for even in such cases. It would lead to a chaotic situation. True it is that the dilemma of the Revenue is also real and substantial in such cases, but such a situation cannot be provided for by judicial interpretation by courts, but only by an appropriate agency.
We find that a similar view has been taken by Sabyasachi Mukherji J. (as he then was) as a judge of the Calcutta High Court in Russell Properties v. A. Chowdhury [1977] 109 ITR 229. In that case, the Income-tax Officer passed assessment orders following the decision of the Appellate Tribunal which was sought to be revised by the Commissioner. The learned judge held that it cannot be done because the order of assessment cannot be said to be erroneous in the circumstances. We may also refer to a Division Bench decision of this court in CIT v. Late Sunderlal [1975] 96 ITR 310, where too it was held that where the Assessing Officer follows the decision of an appellate authority, it cannot be said that his decision is erroneous merely because the decision of the appellate authority is the subject-matter of a further appeal.
For the above reasons, the writ petition is allowed and the impugned show-cause notice dated August 23, 1980, is quashed. No costs.
C. M. W. P. No. 388 of 1980 : Though the facts in this case are said to be similar to those in C. M. W. P. No. 387 of 1980, Mr. Upadhyaya, learned counsel for the petitioner, fairly stated that the decision, which the Income-tax Officer followed in making the assessment in this case is not in the case of this very assessee, but a decision rendered in similar circumstances. Since the decision followed is not in the case of the assessee himself, but in some other matter, and since it is a matter of further verification, we do not think it proper to quash the notice in this writ petition. Let the petitioner file his explanation and the Commissioner shall pass orders thereon according to law keeping in view the observations made by us in C. M. W. P. No. 387 of 1980.
This writ petition is accordingly dismissed with the above observations. No costs.
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