COMMISSIONER OF FNCOME TAX, BANGALORE versus SHREE MAN.JUNATHESWARE PACKING PRODUCTS AND CAMPHOR WORKS

Citation: [1997] SUPP. 6 S.C.R. 109 · Decided: 02-12-1997 · Supreme Court of India · Bench: G.T. NANAVATI · Disposal: Appeal(s) allowed

Judgment (excerpt)

COMMISSIONER OF fNCOME TAX, BANGALORE 
v. 
SHREE MAN.JUNATHESWAREPACKING PRODUCTS 
AND CAMPHOR WORKS 
DECEMBER 2, 1997 
IG.T. NANAVATI AND M. JAGANNADHA RAO, JJ.] 
!11come Tax Act, 1961: Sectioll 263( 1). 
A 
B 
Income Tat-AY 1977-78-Revisional Power of Commission of 111-
C 
come Tax (CIT)-Valuatimz repo11 in re.\]Ject of a building was submitted by 
Depwtmental Valuation Officer (DVO) after completioll of assessment by 
Income Tax Officer (ITO )-CIT, under S.263( 1), called for and examilled 
DVO's rep01t and directed ITO to pass fresh assessment orde1-Validity 
of-Held: The word "record" in S.263( 1) is not confined to the record avail-
able at the time of assessment by the ITO but all the records available at the D 
time of examinatioll by CIT-H e1Zce, CIT entitled, at the time of examination, 
to take into collsideration the DVO's repmt-Tlzis is the legal position even 
with respect to pre-1988 pe1iod-Fina1Zce Acts, 1988 and 1989. 
Collstitution of India, 1950: Alticle 136. 
SLP-Summmy dismissal-Effect of-Held: Would not mean approval 
of the view taken by High Cowt. 
Words and Phrases : 
E 
"Record''-Meaning of-In the context of S.263( 1) of the Income Tax F 
Act, 1961. 
The respondent-assessee had constructed a cinema theatre and in 
the return filed by it for the assessment year 1977-78 it had shown the cost 
of its construction at a certain amount. The Income Tax Officer (ITO) G 
wrote to the Departmental Valuation Officer (DVO) 
to ascertain and 
report the correct cost of construction of the cinema theatre. However, the 
DVO's report was not available before the date of completion of the 
assessment. The ITO, therefore, without waiting for the DVO's report, 
passed an order of assessment accepting the valuation mentioned by the 
assessee in its return. The DVO determined the cost of construction at an H 
109 
110 
SUPREME COURT REPORTS [1997] SUPP. 6 S.C.R. 
• 
A amount, which was much higher than that shown in the return. Therefore, 
B 
the Commissioner of Income Tax (CIT) issued a notice under Section 
263(1) of the Income Tax Act, 1961 to the assessee on the ground that 
investment not accounted by the assessee-firm should have been brought 
to tax and ,the ITO having not done so, his order was erroneous and 
prejudicial to the interest of the Revenue. Before the CIT, it was contended 
by the assessee that as the Valuation Report was not available to the ITO 
at the time of passing the assessment order and did not form part of the 
record of the proceeding, it could not be a valid basis for initiating an 
action under Section 263 of the Act and, therefore, the proceeding deserved 
to be dropped. On 3.3.1982 the CIT rejected this contention on the ground 
C that the term 'record' occurring in Section 263(1) of the Act would include 
all records available at the time of examination by him, set aside the 
assessment made by the ITO and directed him to pass a fresh assessment 
order in the light of the observations ~ade by him. In the meanwhile 
amendments were made on 1.6.1988 with retrospective effect in Section 
D 263(1) by the Finance Acts of 1988 and 1989 by which the term "record" 
meant all records relating to the proceeding available at the time of 
examination by the CIT. The High Criurt allowed the appeal filed by the 
assessee. Being aggrievecl the appellant-Revenue preferred the present 
appeal. 
E 
F 
On behalf of the respondent-assessee it was contended that the 1988 
and 1989 amendments to Section 263 (1) although retrospective, could not 
validate the order passed by the CIT on a date prior to 1.6.1988; and that 
in a similar case this Court had summarily dismissed the Special Leave 
Peti~ion filed against the judgment of a High Court and thus the view of 
the High Court was uphelld by this Court. 
Allowing the appeal, this Court 
HELD : 1.1. It cannot be said that the correct and settled legal 
position, with respect to the meaning of the word "record" occurring in 
G Section 263(1) of the Income Tax Act, 1961 till 1.6.1988, was that it meant 
the record which was available to the Income Tax Officer (ITO) at the time 
of passing of the assessment order. Further, such a narrow interpretation 
of the word "record" was not justified, in view of the object of the provision 
and the nature and scope of the power conferred upon the Commissioner 
H of Income Tax (CIT). The revisional power conferred on the CIT under 
C.1.T. v. MANJUNAIBESWAREPACKING PRODUCTSANDCAMPHOR WORKS 
111 
Section 263 of the

Excerpt shown. Read the full judgment & AI analysis in Lexace.