J.J. Corporation vs Commissioner of Income Tax and Another

R.K. Abichandani, J.—The petitioner seeks to challenge the order dated October 12, 1992, passed by the Commissioner of Income Tax,

Surat, dismissing three revision petitions filed by the petitioner-assessee against the assessment orders for the assessment year 1985-86 to 1987-

88, and rejecting the petitioner''s claim for additional depreciation and investment allowance on the cash subsidy portion of the cost of acquisition

of the assets and confirming levy of interest under sections 215/217 and 139(8) of the Income Tax Act, 1961, and declining to declining to decide

the contentions raised by the petitioner on the merits.

For the assessment years 1985-86 and 1986-87, the petitioner had filed returns of income disclosing income at Rs. 26,98,650 and Rs.

13,80,979, respectively. The original assessment orders for these two years were passed on February 17, 1986, and May 21, 1986, respectively,

computing the petitioner''s income at Rs. 27,06,786 and Rs. 13,81,278, respectively. It appears that thereafter the assessment proceedings for

these years 1985-86 and 1986-87 were reopened u/s 147 of the Act and in response to the notices issued u/s 148, the petitioner filed returns of

income for the assessment years 1985-86 and 1986-87 disclosing income at Rs. 27,06,786 and Rs. 13,80,979, respectively. In the reassessment

orders for these two years passed on September 30, 1990, the Assessing Officer computed the petitioner''s income at Rs. 30,83,940 and Rs.

37,96,373, respectively. For the assessment year 1987-88, the petitioner had filed a return of income on July 7, 1988, disclosing total income at

Rs. 4,45,196. The assessment order was made by the Assessing Officer on September 30, 1990, computing the petitioner''s total income at Rs.

13,88,443. Three revision petitions were preferred against these three assessment orders. The petitioner had chosen not to file any appeal against

the reassessment orders in respect of these assessment years. In the revision petitions, the petitioner had challenged the additions/disallowance

made by the Assessing Officer in the reassessment orders passed for these assessment years 1985-86, 1986-87 and 1987-88. The Commissioner

of Income Tax, Surat, took into consideration the background of the case of the petitioner and held as under :

Considering this background of the case of the assessee for the three years, in which concealment of income had been repeatedly admitted by the

assessee during the search and seizure operations, I decline to interfere with the assessment orders passed by the Assessing Officers and,

accordingly, the assessee fails to get any relief in the three revision petitions filed.

It will thus, be seen that the Commissioner of Income Tax did not examine the contentions raised by the petitioner in the revision petitions and

virtually refused to exercise jurisdiction on the basis of the background of the case, which disclosed that the petitioner had repeatedly admitted

concealment of income. It is evident that the ground which has been given by the authority for refusing to exercise its revisional powers is totally

extraneous and not borne out from the nature and ambit of the revisional jurisdiction of the authority u/s 264 of the Act. From the provisions of

section 264(1), it would appear that the revisional powers of the Commissioner are wide and the Commissioner may pass orders under the said

provision circumscribed only to the extent that they should not be prejudicial to the assessee. It is, however, clear that the power even though wide

cannot be arbitrarily exercised. The revisional authority must act according to the rules of reasons and justice and not according to whim or

caprice. The revisional power is coupled with a duty to exercise it in the interest of justice to the parties. The revisional authority, therefore, ought

to have considered the contentions which were raised by the petitioner on the merits and ought not to have refused to exercise its revisional

jurisdiction simply on the ground that the petitioner had disclosed concealed income repeatedly. Under these circumstances, in our opinion, the

Commissioner should be directed to consider the revision petition afresh and decide them in the merits in accordance with law. As a result, the

impugned order of respondent No. 1 is set aside with a direction that the three revision petitions filed by the petitioner before respondent No. 1

should be decided on the merits and in accordance with law. Rule is made absolute accordingly with no order as to costs.