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V.G. Krishnamurthy Vs. Commissioner of Income-tax, Karnataka-ii - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKarnataka High Court
Decided On
Case NumberWrit Petition No. 6634 of 1978
Judge
Reported in[1985]152ITR683(KAR); [1985]152ITR683(Karn); [1985]20TAXMAN65(Kar)
ActsIncome Tax Act, 1961 - Sections 144B, 246, 263 and 263(1)
AppellantV.G. Krishnamurthy
RespondentCommissioner of Income-tax, Karnataka-ii
Appellant AdvocateK.R. Prasad, Adv.
Respondent AdvocateH. Raghavendra Rao, Adv.
Excerpt:
.....a luxurious life and if he is incapable of organizing big house, he should hang himself legal notice from husband was not replied -deceased husband went to house of accused and made a request that accused should join him deceased was harassed and insulted by wife and parents-in-law he felt that he should end his life - consumed poison - police after investigation filed charge-sheet against his wife i.e., accused under section 306 read with section 34 of the ipc - accused sought discharge - trial court rejected request for discharge and framed charges revision against - held, if refusal of wife to make a living with him is taken seriously by deceased and taken drastic step of committing suicide the accused-wife cannot be held responsible for the same. averments and statements are..........factors must simultaneously exist. an order that is erroneous must also have resulted in loss of revenue or prejudicial to the interest of the revenue. unless both these factors co-exist or exist simultaneously, the cit cannot invoke or resort to s. 263 of the act. section 263 cannot be exercised to correct every conceivable error committed by an ito. before the suo motu power of revision can be exercised, the commissioner must at least prima facie find that both the requirements of s. 263 of the act, namely, that the order sought to be revised was prima facie erroneous and prejudicial to the interests of the revenue. if one or the other factor was absent, the commissioner cannot exercise the suo motu power of revision under s. 263 of the act. 11. in maharaja raja pawar dewas v. cit :.....
Judgment:

Puttaswamy, J.

1. For the assessment year 1975-76 relevant to the accounting year ending with March 31, 1975, the petitioner filed his return under the Income-tax Act, 1961 (hereinafter referred to as the 'Act'), before the Income-tax Officer, Assessment 9, Circle-I, Bangalore (hereinafter referred to as the 'ITO'), disclosing a net income of Rs. 1,02,492. On an examination of that return, but without following the mandatory requirements of s. 144B of the Act that had come into force from January 1, 1976, the ITO on January 5, 1979, completed the assessment (Ext. A) enhancing the declared income of the petitioner to Rs. 3,05,582 or Rs. 3,05,580 and issued to him a demand notice thereto under the Act.

2. Against the said order of the ITO, the petitioner has filed an appeal under s. 246 of the Act before the Appellate Assistant Commissioner (hereinafter referred to as the 'AAC') of Income-tax, Range-I, Bangalore, challenging it on diverse grounds. Even before the AAC could hear the said appeal, the Commissioner of Income-tax, Karnataka-II, Bangalore (hereinafter referred to as the 'CIT'), by his notice No. L. Rev. No. 3/78-II, dated May 27, 1975 (Ext. B), proposed to suo motu revise the said assessment order made by the ITO under s. 263 of the Act, the validity of which is challenged by him in this writ petition under art. 226 of the Constitution.

3. When the petition moved this court, the CIT had not passed his final order and in pursuance of an interim order made by this court in the case on July 4, 1978, the CIT had passed his final order and had issued the same also.

4. Among other grounds, the petitioner has urged that the order made by the ITO on January 5, 1978, was not prejudicial to the interests of the Revenue and, therefore, it was not open to the CIT to exercise the suo motu power of revision under s. 263 of the Act, notwithstanding that the same made in contravention of s. 144B of the Act was erroneous.

5. Sri K. R. Prasad, learned counsel for the petitioner, contends that the order made by the ITO made in contravention of s. 144B of the Act, though erroneous, was not prejudicial to the interests of the Revenue and therefore it was not open to the CIT to exercise the suo motu power of revision under s. 263 of the Act. In support of his contention, Sri Prasad strongly relied on a Division Bench ruling of this court in Uchal v. Commissioner of Commercial Taxes [1967] 20 STC 67 (Mys).

6. Sri H. Raghavendra Rao, learned counsel appearing for the respondent, in justifying the impugned notice contends that with the Commissioner passing his final order under the Act which was appealable, this writ petition challenging the show-cause notice has become infructuous. As this later contention urged by Sri Raghavendra Rao goes to the root of the matter, it is necessary to examine the same first and then deal with the merits, if it becomes necessary.

7. As seen earlier, the petitioner approached this court challenging the very show-cause notice issued by the CIT and sought for stay of further proceedings in pursuance of the same. On June 14, 1978, this court, while issuing rule nisi, notified the CIT and made an interim order on July 14, 1978, permitting him to pass his final order with a direction not to issue any demand notice without the leave of this court. Evidently, this court made that interim order on July 14, 1978, to safeguard the possible interests of the Revenue. But, that interim order and any further order made in pursuance of that order itself cannot be pleaded by the respondent as ground to contend that the writ petition had become infructuous. An order made by the CIT in pursuance of an interim order of this court is subject to the result of the order to be made in this writ petition, which must primarily be decided with reference to the grievance made, when the petitioner approached this court. If this court finds that the notice itself is invalid, then the final order made by the CIT and that too with the leave of this court on the basis of the impugned notice must necessarily fall to the ground. For these reasons, I see no merit in the contention urged by Sir Raghavendra Rao that this writ petition had become infructuous. I, therefore, reject the same. As I have rejected the preliminary objection urged by Sri Raghavendra Rao, it is necessary to examine the merits.

8. Both sides do not dispute that in completing the assessment, the ITO had contravened the mandatory requirements of s. 144B of the Act and his order was, therefore, erroneous and that the first requirement of s. 263 of the Act to suo motu revise did exist. But the question is whether the other requirements did also exist.

9. An examination of the assessment order made by the ITO on January 5, 1976, disclosed that the same was not prejudicial to the assessee. In the order made by the ITO, though erroneous, there was no loss of revenue at all. If anything, the said order was favorable to the Revenue and prejudicial to the assessee.

10. Section 263 of the Act can be invoked by the CIT only when he prima facie finds that the order made by the ITO was erroneous and was prejudicial to the interests of the Revenue. Both these factors must simultaneously exist. An order that is erroneous must also have resulted in loss of revenue or prejudicial to the interest of the Revenue. Unless both these factors co-exist or exist simultaneously, the CIT cannot invoke or resort to s. 263 of the Act. Section 263 cannot be exercised to correct every conceivable error committed by an ITO. Before the suo motu power of revision can be exercised, the Commissioner must at least prima facie find that both the requirements of s. 263 of the Act, namely, that the order sought to be revised was prima facie erroneous and prejudicial to the interests of the Revenue. If one or the other factor was absent, the Commissioner cannot exercise the suo motu power of revision under s. 263 of the Act.

11. In Maharaja Raja Pawar Dewas v. CIT : [1982]138ITR518(MP) , the Madhya Pradesh High Court examining a similar question expressed thus (at p. 524) :

'However, the first argument, viz., that an assessment order without compliance with the procedure laid down in s. 144B of the act is erroneous but not prejudicial to the interests of the Revenue conferring revisional jurisdiction on the Commissioner under s. 263(1) of the Act has force. Under s. 263(1), two pre-requisites must be present before the Commissioner can exercise the revisional jurisdiction conferred on him. First is that the order passed by the ITO must be erroneous. Second is that the error must be such that it is prejudicial to the interests of the Revenue. If the order is erroneous but it is not prejudicial to the interests of the Revenue, the Commissioner cannot exercise the revisional jurisdiction under s. 263(1) of the Act.'

12. With respect, I am in complete agreement with these views.

13. As pointed out by this court in Uchal's case [1967] 20 STC 67 (Mys), the possibility of the appellate authority accepting the case of the assessee in his appeal which also cannot be predicted, cannot be construed as a ground to hold that the order made by the ITO was prejudicial to the interests of the Revenue.

14. On the above discussion, it follows that the order made by the ITO, which was not prejudicial to the interest of the Revenue, was not open to correction by the CIT under s. 263 of the Act for which reason, the impugned notices and the final order made by him on that basis are also liable to be quashed.

15. Before this court, the petitioner had stated that the appeal filed by him before the AAC was pending awaiting the decision of this court in this case. But, if for any reason, the AAC has already disposed of that appeal, it is proper for the AAC to restore that appeal to its original file and dispose of the same on merits.

16. In the light of my above discussion, I quash the impugned notice and the final order dated January 4, 1982.

17. Rule issued is made absolute. But, in the circumstances of the case, I direct the parties to bear their own costs.


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