CHOPRA, J. - (1.) THIS reference has been submitted by the Revenue against the respondent M/s Rajasthan Spinning and Weaving Mills Limited, Bhilwara. The question that has been raised through the statement of case is as under: - "whether on the facts and in the circumstances of the case, the Tribunal was right in holding that CIT was not competent to revise u/s 263 the order passed by the ITO in compliance with the directions of the IAC given under Section 144-B of the Income Tax Act, 1961?"
(2.) THE facts giving rise to this reference briefly stated are that for the assessment year 1977-78, the assessee which is a Private Limited Company filed a return for assessment of its income amounting to Rs. 6,79,750/ -. THE income related to the previous year i. e. year 1976-77, the Income-Tax Officer after hearing the assessee and considering the evidence on record came to the conclusion that the additions which he proposes to make would exceed his powers and so he prepared a draft order of assessment and sent it to the Inspecting Assistant Commissioner for his approval, alongwith the objections raised by the assessee. THE Inspecting Assistant Commissioner after giving an opportunity to the assessee, issued necessary directions to the Income-Tax Officer under Sec. 144-B (4) of the Income Tax Act (In short 'act') and directed him to complete this assessment and the assessment was accordingly completed by the Income-Tax Officer holding the income of the assessee amounting to Rs. 21,47,900/- as against the income declared by the assessee, that is Rs. 6,79,750/ -. THE Commissioner of Income-Tax, Jodhpur revised that order on 6. 7. 1980 vide Annex. C in exercise of the powers conferred on him under Sec. 263 (1) of the Act. However, the assessee went in appeal before the Tribunal against the revisional order of the Income-Tax Commissioner, Jodhpur and the Tribunal held that as the assessment order has been passed by the Income-Tax Officer under the directions of the Inspecting Assistant Commissioner issued under Sec. 144-B of the Act, the order was not revisable under Sec. 263 (l) of the Act by the Commissioner and hence aggrieved against this judgment of the Tribunal, the Revenue filed an application before the Tribunal to refer the matter to this court for decision and accordingly the aforesaid question has been referred* to this court by the Tribunal vide Annex. D. Nobody appears on behalf of the assessee inspite of service. We have heard Shri D. S. Shishodia appearing for the Revenue. Section 263 (1) of the Act authorises the Commissioner of Income to revise any order which has been passed by the Income-Tax Officer, if it is against the interest of the Revenue. The so called controversy has arisen in this matter on account of the fact that Annex. A has been passed by the Income-Tax Officer in compliance of the direction given by the Inspecting Assistant Commissioner under Section 144-B of the Act. and therefore it Was claimed that such an order is not revisable by the Income-tax Commissioner. Such a controversy was raised before Andhra Pradesh High Court in Torson. Products Ltd. Vs. Commissioner of Income-tax reported in (1), and the learned Judges of the Division Bench of Andhra Pradesh High Court held that:- "it may be that, as a supervisory authority, certain directions are given by the Inspecting Assistant Commissioner under Section 144-B of the Income-tax Act, 1961. It may also be true that these proceedings before the Inspecting Assistant Commissioner are quashi-judicial in character. The fact, however, remains that the entire exercise is only to enable the Income-tax Officer to make a proper assessment in accordance with the directions of the Inspecting Assistant Commissioner of Income-tax. That does not have the effect of impressing the order ostensibly made by the Income-tax Officer as an order made by the Inspecting Assistant Commissioner. The order continues to be one passed by the Income-Tax Officer. All other consequences under the Act which are associated with an Income-tax Officer passing the order himself are also associated with such order passed by the Income-Tax Officer, although under instructions and directions of the Inspecting Assistant Commissioner of Income-Tax. Hence, such an order cannot be regarded as an order passed by the Inspecting Assistant Commissioner. The Commissioner of Income-tax has, therefore, jurisdiction to revise an order passed by the Income-tax Officer under Section 144-B in accordance with the directions of the Inspecting Assistant Commissioner. " Merely because a reference was made to the Inspecting Assistant Commissioner in compliance with a statutory mandate, the proceeding did not cease to be one before the Income-tax Officer and the order passed by the Income-tax Officer did not lose its statutory character. Keeping in view all these authorities, we are firmly of the view that an order which has been passed by the Income-tax Officer, may be in compliance of the directions issued by the Inspecting Assistant Commissioner under Section 144-B of the Act, does not cease to be an order passed by the Income-tax Officer simply because certain directions have been issued to him by the Inspecting Assistant Commissioner in exercise of his statutory powers under Sec. 144-A or 144-B of the Act. That order does not become an order passed by the appellate authority. It remains to be an order, passed by the Assessment Authority that is the Income-tax Officer and therefore it is very much revisable by the Income-tax Commissioner in exercise of the powers conferred on him under Sec. 263 (1) of the Act. On account of certain conflict in decisions rendered by various High Courts and on account of same confusion that was prevailing amongst the Income Tax Authorities, the law framers, thought it fit to add an explanation to Sec. 263 (1) of the Act and consequently law categorically clarified by the Taxation Laws (Amendment) Act, 1984 which came into force from first October , 1984. That such an order passed by the Income tax Officer in pursuance of the directions given by the Inspecting Assistant Commissioner under Section 144-A or Section 144-B of the Act is an order of the Income Tax Officer and is revisable by the Income Tax Commissioner. As this explanation is only clarificatory, in its operation has to be taken to be retrospective in operation and not prospective, and this is what has been held by the Division Bench of the Madras High Court.
(3.) IN the case of Commissioner of INcome Tax Vs. Vithal Textiles reported in (1), the learned Judges of the Division Bench of Madhya Pradesh High Court; presided over by the then acting Hon'ble Chief Justice Shri G. G. Sohani, as he then was speaking for the court observed that a declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The learned Judges of the Division Bench further held that ': - "explanation clause (a) to Section 263 (1) of the INcome Tax Act, 1961 makes it clear that it was enacted to remove doubts. Though the explanation came into force from October 1, 1984 the amending Act being declaratory, must be held to be retrospective. A perusal of Section 263 shows that the Com-missioner of INcome-Tax has jurisdiction under Section 263 to revise an order if it is passed by the INcome tax Officer and if the Commissioner considers the order to be erroneous and prejudicial to the interest of the Revenue. An assessment order passed by the INcome-tax Officer after giving effect to the directions given by the INspecting Assistant Commissioner under Sec. 144 B is still an order passed by the INcome-tax Officer under Sec. 143 (3) of the Act. The Explanation to Sec. 263 (l) also specifically declares that for the purpose of sub-section (1) of Section 263, an order passed by the INcome-tax Officer shall include an order of assessment made on the basis of directions issued by the INspecting Assistant Commissioner under Sec. 144-B. " The learned Judges have also held that the Commissioner of Income-tax can revise assessment order passed by the Income-tax Officer in accordance with the directions issued to him by the Inspecting Assistant Commissioner under Sec. 144-B. The Tribunal was no right in setting aside the order of the Commissioner of Income tax on that account. A similar view has been expressed by the Division Bench of Orissa High Court in Commissioner of Income-tax vs. Vincentain Orissa Society's case (supra ). ;