PANCHAMAN TRADERS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) Writ Appeal is filed against the judgment of the learned Single Judge who upheld the suo motu orders issued by the Commissioner directing revision of appellant's income tax assessment for the year 1992-93 to determine taxable income, consistent with the decision of the Supreme Court in Union of India v. A. Sanyasi Rao, 1996 KHC 783 : 219 ITR 330 (SC) : 1996 (3) SCC 465 : AIR 1996 SC 1219 : 1996 AIR SCW 1251 : JT 1996 (2) SC 425 .

(2.) The appellant - assessee was engaged in arrack business during the previous year relevant for the assessment year 1992-93. Even though Profit and Loss account filed along with the income tax returns showed net income of Rs.10,53,607/- the assessee returned income from arrack business only at Rs.5,25,645/-, which was income assessable under S.44AC of the IT Act. The assessment was completed ignoring the higher income shown in the P & L account as income from arrack business, but by accepting the income under S.44AC of the Act. The original assessment was completed on 07/02/1995. The assessee filed appeal against the assessment before the CIT (Appeals) on some other issues pertaining to addition made of the amount shown in the capital account of other partners. The CIT (Appeals) by order dated 13/12/1995 set aside the assessment and remanded the case back to the assessing officer for the purpose of reconsidering the additions contested by the assessee in appeal. It is thereafter that the Supreme Court pronounced the judgment in Sanyasi Rao's case referred above on 13/02/1996 holding that income from liquor business also should be computed in accordance with S.28 to 43C like any other business income and the provisions of S.44AC and S.206 are only machinery provisions. Therefore it was the duty of the assessing officer to have noticed the judgment of the Supreme Court and made assessment in respect of income from arrack business based on P & L account filed by the assessee. However, while revising the assessment based on the orders in appeal, the assessing officer did not consider the decision of the Supreme Court above referred, but retained the income assessed in respect of arrack business under S.44AC in the revised assessment completed on 06/03/1998. The Commissioner of Income tax on noticing the irregularity committed by the assessing officer, leading to evasion of tax, initiated suo motu revision proceedings under S.263 of the Act and passed orders on 30/03/2000 directing revision of assessment on income from arrack business based on income disclosed in P & L account and in terms of declaration of law by the Supreme Court in Sanyasi Rao's case above referred. Even though statutory appeal was available against S.263 order, the assessee approached this Court in writ proceedings contending that the order is without jurisdiction mainly because it is time - barred. The learned Single Judge upheld the order both on merit as well as on the question of limitation raised by the appellant. This Appeal is against the said judgment and we have heard Sri. P. Balakrishnan, counsel appearing for the appellant and standing counsel appearing for the respondent.

(3.) The first question raised is against the finding of the learned Single Judge that the order passed by the Commissioner under S.263 of the IT Act is within time. The case of the appellant - assessee is that the issue decided by the Officer and which was subject matter of revision by the Commissioner under the impugned order issued under S.263 is with regard to computation of business income from arrack under S.44AC in the original assessment, which should have been made based on P & L account filed by the assessee, which showed higher income from business than the income assessable under S.44AC. Even though appeal was filed against original assessment completed on 07/02/1995, this was not the subject matter of appeal and therefore it was open to the Commissioner to revise the original assessment on this issue within two years from the date of original order which was not done in this case. According to counsel since the issue was not subject matter of appeal, the Commissioner should have revised the assessment even during the pendency of appeal before the first appellate authority or after the first appellate authority disposed of the appeal. The specific case of the assessee therefore is that suo motu revisional order issued on 30/03/2000 is time barred because limitation with regard to suo motu revision power under S.263 has to be considered with reference to original assessment completed on 07/02/1995. On the other hand, standing counsel appearing for the respondent contended that suo motu revision power under S.263 should be considered with reference to revised order issued based on orders in appeal, if the issue raised by the Commissioner under S.263 was not raised or considered by the appellate authority. In this particular case, the specific case of the department is that the Commissioner (Appeals) had in fact set aside the original assessment in appeal and so much so, there was no order available to the Commissioner for revision under S.263 until the Officer revised the assessment. According to standing counsel, revised assessment was issued by the assessing officer on 06/03/1998 without considering the law declared by the Supreme Court in Sanyasi Rao's case and therefore the order prejudicial to the interest of revenue is revised order issued on 06/03/1998 by the assessing officer ignoring the judgment of the Supreme Court above referred and so much so limitation available for revision of order under sub-section (2) of S.263 is upto two years from the end of the financial year in which revised order is passed.