THE INSPECTOR GENERAL OF REGISTRATION, TAMIL NADU AND ORS. v. K. BASKARAN

p. 390 Copy page pinpoint

A contemplated under the scheme of the Act, without recourse to sub-section 6 of section 47, wherein the statute has contemplated a procedure of conducting an inquiry and reasonable opportunity. No doubt, the statute empowers the Chief Controlling Revenue Authority-cum-Inspector General of Registration, Chennai, to exercise suo- motu powers under Section 47(6) of the Act, within five years, from the date of passing of an order, under Section 47(2) and (3) of the Act, as the case may be, but the Statute mandates, consideration of the records, in terms of the objective, specifically incorporated in the Section and that he should arrive at a subjective satisfaction, as to whether, the order passed under sub-Sections (2) and (3) of Section 47-A of the Act, is prejudicial to the interests of Revenue. He must record reasons for arriving at the satisfaction.”

30Copy pinpoint30. Sub-section (6) of Section 47-A of the Act empowers the Chief Controlling Revenue Authority, in exercise of suo motu power, to call for and examine the correctness of an order passed under sub- section (2) or sub-section (3) of Section 47-A; and if the order is prejudicial to the interest of Revenue, the Chief Controlling Authority may make such enquiry or cause such enquiry to be made and either revise, modify or set aside such order and pass any order that it deems appropriate. There are some limitations on the exercise of said power, since no proceedings can be initiated against an order passed under sub-section (2) or sub-section (3), if the time for preferring an appeal against that order has not expired, or if more than five years have expired after passing of the order. The intent is clear that if there be sufficient time to prefer a regular appeal challenging that order, the remedy of filing an appeal ought to be taken resort to. Further, if the period of five years has expired, no suo motu power can be exercised. Another limitation is prescribed by sub-section (8), in terms of which no order in exercise of suo motu exercise of power can be passed which may adversely impact a person, unless that person has had reasonable opportunity of being heard. Apart from these limitations, the statutory provisions do not impose any other restriction, and the power is conferred principally to ensure that no order passed under sub-sections (2) or (3) of Section 47-A is prejudicial to the interest of the revenue. The limitation in sub-section (8) of Section 47-A, was high-lighted in paragraphs 33 to 36 of the judgment of the High Court in Rajendran H

THE INSPECTOR GENERAL OF REGISTRATION, TAMIL 391 NADU AND ORS. v. K. BASKARAN [UDAY UMESH LALIT, J.]

v. The Inspector General of Registration, Tamil Nadu and others A (supra). In the present case, adequate notice was issued to the concerned persons and, therefore, there was no infirmity on that count. It is nobody’s case that as on the date when the proceedings were initiated in exercise of the power under sub-section (6) of Section 47-A, the period for preferring the appeal had not expired, or that more than five years had expired after the passing of the order under sub-section (2) or sub-section (3). In the circumstances, none of the limitations which the statute has imposed upon the exercise of power were present.

31Copy pinpoint31. The observations of the High Court in the instant case indicate that while dealing with an appeal preferred by the registrant against an order passed under Section 47-A(2), no suo motu exercise of power could be initiated. It is the correctness of that view which is now in issue.

32Copy pinpoint32. While considering the nature of power conferred by Section 20(3) of the Bengal Finance (Sales Tax) Act, 1941 where the Commissioner “upon application or of his own motion” could revise any assessment or order, this Court in M/s Ram Kanai Jamini Ranjan Pal Pvt. Ltd. v. Member, Board of Revenue, West Bengal36 quoted with approval following passage from the judgment of the High Court of Madras:

13. The following observations made by Ramaswami, J. in East E Asiatic Co. (India) Ltd. v. State of Madras37 are also relevant “The purposes of this Act are twofold viz. the levy of a general tax on the sale of goods to supplement the lost revenues and for promoting the general public good; and secondly, to see that this is done under the provisions of the Act and not by carrying out in a F capricious or arbitrary manner. Therefore, a revisional authority has to be created. What is revision? The essence of revisional jurisdiction lies in the duty of the superior tribunal or officer entrusted with such jurisdiction to see that the subordinate tribunals or officers keep themselves within the bounds prescribed by law G and that they do what their duty requires them to do and that they do it in a legal manner. This jurisdiction being one of superintendence and correction in appropriate cases, it is

36 (1976) 3 SCC 369 37 (1956) 7 STC 299 (Mad) H

p. 392 Copy page pinpoint

A exercisable even suo motu as is clear from the numerous statutory provisions relating to revision found in various Acts and Regulations such as the Civil Procedure Code, Criminal Procedure Code, Income Tax Act, etc. The jurisdiction of suo motu revision is not cribbed and cabined or confined by conditions and qualifications. The purpose of such an amplitude being given suo motu revisions appears to be as much to safeguard the interests of the exchequer as in the interests of the assessee. The State can never be the appellant and if there is an order against the State to its prejudice, and naturally the assessee in whose favour the order is passed does not prefer an appeal, the State would suffer unless its interests are safeguarded by the exercise of such supervisory jurisdiction as the one given to the authorities abovementioned.”

33Copy pinpoint33. The essence of revisional jurisdiction is thus accepted to be in the duty of the superior tribunal or officer to ensure that the subordinate tribunal or officers remain within the bounds prescribed by law and discharge their functions in accordance with law. The nature of such power to be exercised “suo motu”, or “on its own motion”, has also been dealt with in following decisions: A) While considering Section 38-B of the Orissa Estates Abolition Act, 1951, which did not impose any restriction akin to those found in sub- section (7) of Section 47-A of the Act, this Court in State of Orissa and others v. Brundaban Sharma and another38 observed:- “12. ..…. When and under what circumstances the suo motu inquiry would be initiated and orders passed is left to the discretion of the Board of Revenue depending on the facts and circumstances of each case.” After considering some of the decisions of this Court, it was observed:- “16. It is, therefore, settled law that when the revisional power was conferred to effectuate a purpose, it is to be exercised in a G reasonable manner which inheres the concept of its exercise within a reasonable time. Absence of limitation is an assurance to exercise the power with caution or circumspection to effectuate the purpose of the Act, or to prevent miscarriage of justice or violation of the provisions of the Act or misuse or abuse of the power by the 38 H (1995) Supp. 3 SCC 249

THE INSPECTOR GENERAL OF REGISTRATION, TAMIL 393 NADU AND ORS. v. K. BASKARAN [UDAY UMESH LALIT, J.]

lower authorities or fraud or suppression. Length of time depends on the factual scenario in a given case. Take a case that patta was obtained fraudulently in collusion with the officers and it comes to the notice of the authorities after a long lapse of time. Does it lie in the mouth of the party to the fraud to plead limitation to get away with the order? Does lapse of time an excuse to refrain from exercising the revisional power to unravel fraud and to set it right? The answers would be no.” B) In Vijayabai and others V. Shriram Tukaram and others39 this Court expressed caution as under: - “9. The Tahsildar while exercising his suo motu power under C Section 49-B has to initiate on the basis of the materials before him not arbitrarily. Every exercise of suo motu power explicitly or implicitly reveals to correct an error crept in under a statute, what ought to have been done was not done or which escaped the attention of any statutory authority, or error or deliberate omission or commission by the subject concerned requires correction, of course, within the limitation of any such statute. This has to be based on some relevant material on record, it is not an omnipower to be exercised on the likes and dislikes of such an authority. Though such a power is a wide power but it has to be exercised with circumspection within the limitations of such statute. Wider the power, the greater circumspection has to be exercised.”

34Copy pinpoint34. In Sree Balaji Rice Mill, Bellary v. State of Karnataka40 the basic facts were stated in the decision rendered by a Bench of three Judges of this Court as under:- “3. The Additional Commissioner of Commercial Taxes, F Devangere Zone, Devangere issued notices dated 16-2-1994 and 21-3-1994 under Section 22-A of the Act proposing to revise the order of assessment dated 12-7-1990 passed by the assessing authority on the ground that the assessment order was erroneous and prejudicial to the interest of the Revenue. In the notices, the G revisional authority had made observations to the effect that the books of accounts have not been properly maintained. In response to the notices, the appellant filed reply on 4-4-1994 denying the 39 (1999) 1 SCC 693 40 (2005) 4 SCC 21 H

p. 394 Copy page pinpoint

A observations made by the revisional authority and had requested the said authority to drop the proceedings initiated under Section 22-A of the Act. The revisional authority on 8-4-1994 issued a further notice under Section 22-A(1) of the Act making the same proposal as made in the earlier notices and further proposed to levy penalty under Section 18-A of the Act. The revisional authority B confirmed the proposals made in the notices issued under Section 22-A of the Act vide order dated 2-6-1994 and modified the set- off granted by the assessing authority.” One of the questions that came up for consideration was set out in paragraph 11 as under:- C “11. The following questions of law arise for consideration by this Court: (a) …… (b) …… D (c) While purporting to revise an order under Section 12-A which neither expressly nor impliedly refers to any proceeding under Section 18-A and was thus not within the contemplation of the assessing authority while passing the order under Section 12(3), is it open for the Commissioner, while purporting to act under E Section 22-A in respect of the order under Section 12(3) to pass an order under Section 18-A either as a part of the order under Section 22-A or separately as such under Section 18-A? (d) ……”

F The question was considered as under: “14. Section 18-A of the Act prohibits excess collection of tax by an assessee. If any person contravenes Section 18, penalty is provided under Section 18-A of the Act. The question is G when at the time of assessment, if no penalty is imposed by the assessing authority, can the revisional authority, by invoking his suo motu powers under Section 22-A of the Act impose penalty for the first time on the ground that the order of assessment is prejudicial to the interests of the Revenue?

THE INSPECTOR GENERAL OF REGISTRATION, TAMIL 395 NADU AND ORS. v. K. BASKARAN [UDAY UMESH LALIT, J.]

17. It must be noted that there is a difference between exercise of revisional powers over orders passed by lower authority and exercise of revisional powers in the assessment proceeding itself. A revision of an order may be confined to what the order contains or dealt with. But when the assessment proceedings themselves are before the revisional authority it can go beyond the order of the assessing authority and pass such orders as the assessing authority could or should have passed.

22. The argument of the learned counsel for the appellant that the revising authority or the appellate authority higher than the assessing authority is not competent to levy a penalty for the first time when no penalty has been levied by the assessing authority is wholly untenable, without statutory basis and unreasonable from any point of view. The said plea is liable to be rejected. The necessity for there to be an order under Section 18-A for the exercise of revisionary jurisdiction under Section 22-A is once again fallacious. The non-levy of penalty is itself an illegality caused by a failure to exercise the jurisdiction by the assessing authority and therefore, prejudicial to the interests of the Revenue.”

35Copy pinpoint35. For exercising revisional power “suo motu” or “on its motion”, the concerned authority must be satisfied that an order has been passed by the authority or officer subordinate to it. which may be prejudicial to the interest of the revenue. As indicated in some of the hypothetical instances noted in the decisions quoted hereinabove, the error may have crept in unknowingly, or there may be a genuine mistake, or in some cases there could be a deliberate attempt to prejudice the interest of revenue. If an infirmity or illegality is brought to the notice or knowledge of the revisional authority, through normal and regular process of reporting by the subordinate officer or authority, the power of revision can certainly be exercised. The requisite knowledge enabling the revisional authority to exercise the power vested in it, can also be gathered from the appeal preferred by the registrant himself. That may only be an occasion or a G source which enables the authority to gather information about the possible infirmity or illegality in the process. Upon being so aware, the revisional authority would thereafter be exercising power vested in it. Qualitatively, it makes no difference as to what was the source of the information or knowledge, so long as the power is exercised within the H

p. 396 Copy page pinpoint

A confines of the limitations or restrictions imposed by the statute, and is in accordance with law. Apart from the restrictions imposed by the statute, none can be read into the exercise of power on the ground as to the nature or source of information. While entertaining an appeal, if an obvious illegality is noticed by the revisional authority, it can certainly exercise suo motu power to undo the mistake, or rectify an error committed by the subordinate officer or authority, subject to such restrictions as are imposed on the exercise of the power by the statute.

36Copy pinpoint36. There is nothing in the scheme of the Act which purports to restrict the exercise of suo motu power under Section 47-A, and confines it to cases where knowledge of any illegality or infirmity in the proceedings undertaken by the subordinate officers must be gathered from sources other than through a pending appeal. Unless the statute expressly or even by necessary implication restricts the exercise of power, there would be no occasion to read into the power, any other limitations. The High D Court has not found the exercise of power to be invalid on any count, nor was any such submission advanced before the High Court. The High Court had simply gone on the existence of power rather than on the exercise of power. It is not as if the assessment made by the appellate authority was either opposed to principles of natural justice, or was so E palpably incorrect, that it could never be sustained. In our view, the High Court completely erred in setting aside the exercise of power undertaken by the concerned authority. The exercise of power was definitely designed to obviate an obvious illegality and prejudice to the interest of the revenue. The exercise was, thus, absolutely correct, and there was no occasion to set aside the orders passed in pursuance thereof. We, F therefore, answer question No.3 accordingly.

37Copy pinpoint37. Having thus considered and answered all the questions which have arisen for our consideration, all these appeals deserve to be allowed. We order accordingly, and set aside the decisions of the High Court under appeal and restore the orders passed by the appellate authority. G No costs.

Devika Gujral Appeals allowed.