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TMI Blog2002 (9) TMI 385X X X X Extracts X X X X X X X X Extracts X X X X ..... oner, Jabalpur scrutinised the record and issued a show cause notice under section 263 of the Income-tax Act indicating his intention to set aside the assessment under section 263 of the Act. In the show cause notice, the Commissioner issued the assessee to explain the following points : (i)There was under-statement of profit to the extent of Rs. 3,433. (ii)The g.p. and net profit declared by the assessee was low and the Assessing Officer has not examined the reasons thereof. (iii)The perusal of the capital account of the partners indicated certain gifts received by the partners which was introduced by the partners as capital contribution in the assessee s firm. The genuineness of these receipts were not examined by the Assessing Officer. 3. After perusing the submissions of the assessee, the Commissioner was of the opinion that the assessment order passed by the Commissioner was erroneous, inasmuch as, it was prejudicial to the interest of the revenue. Vide his order, the Commissioner set aside the assessment order passed by the Assessing Officer and directed to enhance the profit of the assessee to the extent of Rs. 3,433 where there was apparent under assessment. He also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a credit of Rs. 10,000 on 9-9-1996 wherein there was a credit of Rs. 10,000. Another sum of Rs. 15,000 was received on 17-3-1997 by the assessee by cheque from the L.I.C. of India. The cheque number was also mentioned. In the year under consideration, there was a credit of Rs. 1,03,140 in the account of the partner on 10-6-1997. The amount was received by way of transfer from Bank of Baroda wherein the deposit stood in the name of his father. After the death of the father, the amount was transferred in the bank account of Shri Manoj Kumar Asrani. These details are already mentioned in the copies of account itself. A sum of Rs. 15,000 was received on 31-12-1997 from LIC of India. The cheque number and the entire details are already on the record of the Assessing Officer. Two gifts of Rs. 30,000 each were received on 31st March, 1998 from Shri Gopal Dass and Smt. Rita Devi. The name of the bank from where the amount had come and the name of the donor and the cheque numbers etc. were already mentioned in the copies of account. In the account of Smt. Saraswati Devi, there was a credit of Rs. 7,000 on 31st of Dec. 1997. The amount was received by cheque from LIC of India. It was, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment." 8. From a reading of section 263(1), it is clear that power of suo moto revision can be exercised by the Commissioner only if an examination of any proceedings under the Income-tax Act, he considers that any order passed thereon by the Assessing Officer, was "erroneous" in so far as it is prejudicial to the interests of the revenue". It is not an arbitrary or uncluttered power. It can be exercised only on fulfilment of the requirements laid down in section 263(1). The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of revenue, must be based on materials on record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him, will be illegal and witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as an erroneous order prejudicial to the interests of the revenue, unless the view taken by the Assessing Officer is unsustainable in law. 12. The purpose and scope of section 263 has also been considered by various Courts. In order to exercise the powers under section 263, there must be material for the Commissioner to consider that the order passed by the Assessing Officer was erroneous in so far as it was prejudicial to the interest of the revenue. It is true that for the initiations of proceedings under section 263(1), no conditions are required to be fulfilled but when a statutory authority proceeds to act by virtue of the powers given under a statutory enactment, exercise of which is dependent upon the existence of certain objective factors and when a challenge is thrown that such objective factors were not present and such challenge is made by placing before the Court, factors which the statutory authority consider to be factors relevant for the exercise of powers, it is open to the court to examine whether such factors were relevant for the exercise of the powers. The error envisaged by section 263 is not one which depends on possibility or guess work but it should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Assessing Officer in the case of the partners. The Assessing Officer has examined this issue in the case of the partner and did not make any addition. That influenced the Assessing Officer not to make any addition in the case of the firm. Obviously, it was so because the sources of credit entries in the account of the partners stood explained in their individual cases. As the amount was introduced in the accounts of the firm, the onus of the assessee limited to explain the sources from where the amount has come to the firm. Once the immediate source was already disclosed, the question of any further investigation could have arisen in the case of the individual partner and not in the case of the firm. As the assessee had already discharged his onus cast on it under section 68 of the Act, the question of making further investigation in the matter and that too in the case of a firm did not arise. We, therefore, hold that the Assessing Officer had applied his mind before coming to the conclusion and, therefore, his order cannot be said to be erroneous in so far as prejudicial to the interest of the revenue. The order passed by the Commissioner in respect of those issues where he ..... X X X X Extracts X X X X X X X X Extracts X X X X
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