1982 (6) TMI 90 - AT - Income Tax

Summary

Issues Involved:
1. Legality and limitation of the CIT's order.
2. Jurisdiction of the CIT.
3. Validity of the khasra girdawari as evidence.
4. Enquiry by the ITO regarding the cultivation of the land.
5. CIT's decision under Section 263 of the IT Act.

Detailed Analysis:

1. Legality and Limitation of the CIT's Order:
- The assessee initially raised the issue that the CIT's order was illegal, wrong, bad in law, and barred by limitation. However, this ground was withdrawn by the assessee's counsel during the hearing and was subsequently dismissed.

2. Jurisdiction of the CIT:
- The assessee contended that the CIT erred in law and on facts in assuming jurisdiction where he had none. The CIT issued a notice under Section 263 of the IT Act, arguing that the land in question was not used for agricultural purposes and the lease allowed for non-agricultural use. The CIT considered the lease rent as non-agricultural income, thus including it in the total income as income from other sources.

3. Validity of the Khasra Girdawari as Evidence:
- The assessee argued that the khasra girdawari, which indicated the land was used for agricultural purposes, was conclusive evidence. The CIT, however, set aside this evidence, stating that the ITO did not sufficiently inquire into whether the land was being cultivated.

4. Enquiry by the ITO Regarding the Cultivation of the Land:
- The CIT found that the ITO did not make adequate inquiries into whether the land was being cultivated, relying instead on the lease deed and the assessee's representative's statements. The ITO accepted the agricultural income based on the lease deed, which mentioned the land was used for agricultural purposes.

5. CIT's Decision Under Section 263 of the IT Act:
- The CIT's decision to set aside the ITO's order under Section 263 was contested. The assessee argued that the CIT's show cause notice and the final order were based on different reasons, violating natural justice principles. The Tribunal found that the ITO had indeed considered the lease deed and the khasra girdawari, and there was no lack of inquiry or application of mind. The Tribunal also noted that the CIT's reasons in the show cause notice differed from those in the final order, which invalidated the CIT's action under Section 263.

Conclusion:
- The Tribunal concluded that the ITO had made sufficient inquiries and applied his mind to the facts of the case. The CIT's order under Section 263 was found to be invalid due to the discrepancy between the show cause notice and the final order, as well as the lack of additional inquiry required by the ITO. The appeal was allowed, and the CIT's order was canceled.