The Commissioner of Income Tax (Central-Ii) v. Income Tax Appellate Tribunal & Ors

order dated 11.12.2009: - "20. The legal position that cannot be disputed is that when a particular authority is vested with the power of discharge statutory function, like the commissioner who is empowered to pass orders under section 263 of the act, it is that the authority which is to apply its independent mind and arrive at it shown conclusion without being influenced by any other authority, much less the higher authority. Unfettered discretion lies in the commissioner of the income tax to pass orders under section 263 of the act. He is supposed to Examine the records produced before him to arrive at conclusion Whether the assessment order passed by the AO suffers from infirmities and needs to be revised under section 263 of the act the parameter which are laid down in section 263 of the act need to be fulfilled in the exercising such a discretion. It is the commissioner who has to satisfy himself, on the basis of available records, that in the given case the condition stipulated under section 263 of the act are satisfied. In arriving at this conclusion, he is not to be controlled even by a higher authority. Likewise, the higher authority is not to interfere with the independence of his unfettered discretion which is statutorily conferred upon the commissioner, if it is found that the order is passed at the dictates of the higher authority, such an order can be set aside. In the present case, various correspondence and documents which are referred to by the learned senior counsel appearing for the petitioner indicate that M. A.L. Mehta had been writing time and again that income had escaped assessment, therefore, the matter should be looked in to, such communications were addressed to the CBDT as well. The CBDT, in turn, forwarded those communications to the respondent No.4 and wanted the respondent No.4 to decide as to whether the allegations of Mr. Mehta are correct and whether income had escaped assessment or not in the relevant assessment years in which the AO had already passed the assessment orders. No doubt, some anxiety is shown by the CBDT in this behalf. However the argument of the respondents is that the CBDT had wanted the matter to be examined and never intended that the orders are to be passed in one particular manner only. It was pointed out that no such directions were given by the CBDT to the respondent No.4 directing him to pass an order under section 263 of the Act, necessarily reopening the assessments. He was called upon to examine the matter. The Commissioner passed detailed order under section 263 of the Act, which depicts his independent mind, and various observations made in this order are not at the dictates of any authority. It was for this

reason that submission of learned senior counsel for the petitioner was not that any such specific direction was given. Attempt was to demonstrate that the CBDT had "almost dictated the line of action" to the respondent No.4 making him virtually impossible to exercise independent judgment and unfettered discretion in discharge of his statutory function under section 263 of the act. It is not necessary for us to give any authoritative pronouncement on this aspect in the acts of this case. Reason is simple and obvious.

¶21The learned ASG, as noted above, as conceded that an opportunity shall be granted to the petitioner for making its submissions on the merits of the case by the commissioner and thereafter fresh order would be passed. For this reason alone, Once we proceed to set aside the impugned order, the effect would be that the concerned commissioner will have to go into this issue afresh for considering the submissions of the petitioner, which would necessarily involved application of his independent mind. This, coupled with the fact that the commissioner who passed the order is no more the concerned officer, i.e. the respondent no for the matter will have to go to another office discharging the duties in the capacity of respondent No.4. In these circumstances, the very basis of the submission that the impugned order was passed on the dictated lines of CBDT vanishes. At the same time, we make it clear that the present commissioner/ respondent No.4, while exercising his powers under Section 263 of the Act, shall look in to the matter with independent mind without being influenced by the observations made in the impugned order. While doing so, he shall have regard to the submissions that would be made by the petitioner pleading that it is not a case of exercising powers under Section 263 of the Act. We also permit the petitioner to raise the plea that Mr. Mehta is not whistleblower, but is a disgruntled person being an ex-employee of the petitioner, who has been fabricating and filing raise and frivolous complaints against the petitioner."

It was, therefore, contended that in the light of the aforesaid observations the challenge to the jurisdiction of the CIT on the ground that he did not exercise his independent mind must be taken to have been ruled upon and negatived by this Court and, therefore, the assessee could be permitted to urge the same again before the Tribunal and that the Tribunal committed an error in granting stay of the proceedings before the Assessing Officer and in directing the Revenue to produce the assessment records and the records pertaining to the initiation and completion of proceeding sunder Section 263. Reliance

was also placed on the order of the Supreme Court dismissing the assessee"s SLP (extracted earlier).

¶19The contention of the learned ASG certainly deserves deep consideration. However, there is difficulty in accepting the same as it would run counter to the established legal position adumbrated in the judgments of the Supreme Court to which we have referred earlier. This Court no doubt observed that the CIT passed a detailed order under Section 263 of the Act depicting his independent mind and not at the dictates of any higher authority and it was only after realising this position that the learned senior counsel for the petitioner did not put forth any submission to the effect that specific directions were given by the higher authority to the CIT and that the attempt was only to demonstrate that the CBDT had "almost dictated the line of action" to the CIT making him virtually impossible to exercise his independent judgment and unfettered discretion. Having made these observations this Court, however, also observed that it was not necessary for it to give any authoritative pronouncement in the facts of the case, the reason being that once the order of the CIT was set-aside, then the effect would be that the CIT will have to go into the issue afresh for considering the submissions of the assessee, which would necessarily involve application of his independent mind and that because of this fact, coupled with the fact that the CIT who passed the order on 19.06.2008 was no longer in charge and a new incumbent has taken over, the very basis of the submission that the impugned order was passed on the dictates of the CBDT vanished. The crucial direction of this Court at paragraph 21 of its order dated 11.12.2009 was that the CIT "shall look into the matter with independent mind without being influenced by the observations made in the impugned order". The other crucial direction is at paragraph 23 of the order where liberty was granted to the CIT "to properly deal with the matter and pass fresh order after giving opportunity of being heard to the petitioner on various points canvassed before us or which it intends to raise at the time of fresh hearing. We also make it clear that we have not authoritatively pronounced on the contentions raised by the petitioner, either way, and the Commissioner shall deal with such contentions objectively without being influenced by any observations in this judgment".

¶20We have to read and understand this Court"s order dated 11.12.2009 as a whole and taking all the observations made therein together in order to appreciate the true scope and tenor of the order. To understand the order as barring the assessee from questioning the order passed by the CIT on 01.04.2010 on the ground that he did not exercise his independent mind but merely proceeded on the lines as dictated by the CBDT would not be proper, for no Court can plausibly lay down the grounds on which an order, which is to be passed, can be challenged by the aggrieved party. At the time when this Court passed the order, the order of the CIT was not in existence. It was yet to be passed. Neither the petitioner, nor the respondent in the writ proceedings nor even this Court could have delved into the mind of the CIT and attempt to anticipate the grounds on which he would rest his order. That apart, there is ample authority for the proposition, as we have earlier referred to, that neither consent or waiver can confer jurisdiction upon the authority. Moreover, the rule of estoppel and the principle of res judicata have been held to be inapplicable where the question involved is the competence or the jurisdiction of an authority or Court over the subject matter. The observations of this Court can, therefore, only be understood in the context of the order of the CIT that was before it. It cannot be understood as placing an embargo on the assessee from raising the plea, when the authority considered the matter afresh, that that order suffers from the same jurisdictional defect, namely, that it did not show an independent application of mind and was authorised by the dictates of some other authority. In any event, even if the plea of the petitioner to the effect that the objection to the jurisdiction of the CIT to initiate proceedings under Section 263 vanished after the order of this Court, either by consent or waiver is accepted, since these acts on the part of the assessee have been held insufficient in law to clothe the CIT with jurisdiction to pass orders under Section 263, the assessee cannot be estopped from putting forth that plea before the CIT in the fresh round of proceedings. The assessee cannot also be prevented from taking up the plea in the appeals filed before the Tribunal against the orders passed by the CIT on 01.04.2010. Consequently, the Tribunal cannot be faulted for directing, by its order dated 06.07.2010, the Revenue to produce the assessment records and the records relating to the proceedings under Section 263 for the relevant

assessment years. Unless these records are made available to the Tribunal, it will not be able to take a view on the assessee"s challenge that the CIT did not exercise his independent mind while initiating proceedings under Section 263.

¶21So far as the order of the Tribunal passed on 21.05.2010 is concerned, it is well settled by the judgment of the Supreme court in ITO v. Mohd. Kunhi, (1969) 71 ITR 815 that the Tribunal, while exercising its appellate powers under the Income Tax Act has also the power to ensure that the fruits of success are not rendered futile or nugatory and for this purpose it is empowered, to pass appropriate orders including orders of stay. In ITO v. Khalid Mehdi Khan, (1977) 110 ITR 79 the Andhra Pradesh High Court, applying the rule laid down in Mohd. Kunhi (supra), stayed the assessment proceedings pending before the Assessing Officer consequent to the directions of the CIT given in orders passed under Section 263 of the Act. The stay order passed by the Tribunal on

21.05.2010 is, therefore, supported by ample authority. It is part of the exercise of the appellate power of the Tribunal under Section 254 (1). The object of the order is twofold: the first is to prevent multiplicity of proceedings and harassment to the assessee, with the possibility of the proceedings before the Assessing Officer becoming meaningless if ultimately the order passed by the CIT is found to be invalid on grounds of jurisdiction or on merits and, second, to ensure that the fruits of success in the appeals are not rendered meaningless or nugatory. It has not been shown before us by the petitioner as to what error was committed by the Tribunal in passing the stay orders, nor was it argued that the Tribunal did not exercise its discretion on the basis of settled parameters for granting stay of proceedings.

¶22For the above reasons we dismiss the writ petition. All interim orders are vacated. It will be open to the Tribunal to proceed with the hearing of the appeals. It is desirable that the appeals are disposed of as expeditiously as possible (and in any case within three months from today). In the circumstances, there will be no order as to costs.

R.V.EASWAR, J

S. RAVINDRA BHAT, J August 03, 2012 hs

* IN THE HIGH COURT OF DELHI AT NEW DELHI Reserved on:3rd July, 2012 % Date of Decision: 3rd August, 2012 + W.P. (C) No.4684/2010 THE COMMISSIONER OF INCOME TAX (CENTRAL-II) .....Petitioner Through: Mr. A. S. Chandhiok, ASG with Mr. Ritesh Kumar, Ms. Rashmi Chopra, Ms. Shweta Gupta and Mr. Piyush Sanghi, Advocates. Versus INCOME TAX APPELLATE TRIBUNAL & ORS. ....Respondent Through: Mr. Ajay Vohra, Ms. Kavita Jha and Mr. Somnath Shukla, Advocates. CORAM: MR. JUSTICE S. RAVINDRA BHAT MR. JUSTICE R.V. EASWAR 1. Whether Reporters of local papers may be allowed to see the judgment? 2. To be referred to the Reporters or not? Yes 3. Whether the judgment should be reported in the Digest? Yes R.V. EASWAR, J.: 1. This writ petition under Article 226/ 227 of the Constitution of India has been filed by the Commissioner of Income Tax seeking the issuance of a writ of certiorari or any other appropriate writ, order or direction quashing the orders dated 21.05.2010 and 06.07.2010, both passed by the Income Tax Appellate Tribunal, Delhi Bench "F", New Delhi (hereinafter referred to as "Tribunal"), passed in Stay Application Nos.24 to 30/Del/2010 (in ITA Nos.2057 to 2063/Del/2010) and in ITA Nos.2057 to 2063/Del/2010 respectively. These orders were passed by the Tribunal in the stay applications and in the appeals filed by the NIIT before the Tribunal. The petitioner has arrainged/ arrayed the Tribunal as the first respondent and NIIT Ltd. (hereinafter referred to as the "Assessee") as the second respondent. 2. The events leading to filing of the present writ petition are somewhat longish and we shall try to refer briefly to them. The assessee is a public limited company engaged in the business of information technology education and export of software services. We are concerned with the assessment year 1999-2000, the relevant previous year being the financial year ended on 31.03.1999 and in this year the assessee, besides the above income, derived income from export business, capital gains and income from other sources. A search was conducted under Section 132 (1) of the Income Tax Act, 1961 (hereinafter referred to as the "Act) in the office premises of the assessee and the residential premises of its Director on 10.11.2004. On 05.10.2005 the assessee filed its return for the assessment year under consideration, declaring an income of `10,11,66,660/-. An assessment order under Section 153A read with Section 143(3) of the Act was passed on 01.06.2006 determining the total income at `10,36,86,880/-, the only addition made being the disallowance of the technical know-how fees of `25,20,000/-. 3. On 23.07.2007 the CIT sought to revise the assessment order under Section 263 of the Act on the ground that it was erroneous and prejudicial to the interest of the Revenue and accordingly issued a show-cause notice to the assessee. After hearing the assessee, he passed an order under Section 263 on 19.06.2008 by which he set-aside the assessment order dated 01.06.2006 with directions to the Assessing Officer to frame the assessment afresh after affording an opportunity of being heard to the assessee and after making proper inquiries and verification. The assessee challenged the order passed by the CIT as above in W.P. (C) No.4722/2007, in which the principal contentions were that the order of the CIT was in violation of principles of natural justice, that the assessment order dated 01.06.2006 was passed after being monitored by the CIT/ Central Board of Direct Taxes (CBDT), that the proceedings under Section 263 were on the instructions of the authorities superior to the CIT and that no satisfaction was arrived at by the CIT independently to the effect that the assessment order was erroneous and prejudicial to the interest of the Revenue. 4. On 15.07.2009 this Court passed an interim order in the aforesaid writ petition allowing the assessee (petitioner in the writ petition No.4722/2007) to inspect the records of the CIT. It would appear that similar pr