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TMI Blog2010 (8) TMI 745X X X X Extracts X X X X X X X X Extracts X X X X ..... mpleting the assess- ment the Income-tax Officer did not inquire into the genuineness of the capital investments of the two partners, Smt. Ratni Devi and Shri Sagar Mal Bardie, for the sums of Rs. 49,000 and Rs. 40,000, respectively, and unsecured loans of Rs. 98,500 taken from M/s. Stutee Chit and Finance (P) Ltd. The Commissioner of Income-tax also observed in the second para- graph of the said notice that no examination of the accounts in respect of manufacturing account was done by the Income-tax Officer. It was further observed that the assessee had shown the previous year ending on June 30, 1980, but for the assessment year 1982-83, the account books appeared to have been closed on March 30, 1982. It was further observed : "Because of the above reasons, the assessment made by the Income-tax Officer appears to be erroneous as well as prejudicial to the interests of the Revenue. I, therefore, propose to set aside the above assessment." 3. The assessee furnished reply to the aforesaid show-cause notice, vide its detailed communication dated March 21, 1987, justifying the order passed by the Income-tax Officer and challenging the initiation of proceedings under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and that the same was set aside. A direction was given to the Income-tax Officer to reframe the assessment after examining the aforesaid issues. 5. Against the order of the Commissioner, the assessee went in appeal to the Tribunal. The Tribunal, by an elaborate order dated February 12, 2009, came to the conclusion that as the Commissioner had failed to substantiate as to how the order passed by the Income-tax Officer was prejudicial to the interests of the Revenue and that too without dealing with the explanation of the assessee furnished before him, the action of the Commissioner could not be supported. The Tribunal was of the opinion that even assuming for the sake of argument that the Income-tax Officer did not apply his mind, the Commissioner did not do any better by not dealing with the explana- tions furnished by the assessee, particularly in respect of the deposits, two of the partners and third of the chit fund and as such, the order passed by him was held to be not tenable in law. Aggrieved by the order of the Tribunal, the Commissioner has come to this court by way of reference of the question set out above under section 256(1) of the Act. 6. We have hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be revised was passed. . . . " 7. The learned counsel for the assessee submitted that every aspect of the matter was dealt with by the Income-tax Officer, though no specific men- tion was made by him in the assessment order and that indeed it was not incumbent upon the Income-tax Officer to pass a detailed order. He further submitted that though the Commissioner had branded the order as "erro- neous", but as to how the same is prejudicial to the interests of the Revenue is not projected by him. The Commissioner had in fact not met or dealt with a single explanation given by the assessee. The Commissioner had only stated as under : "As regards the assessee's contention that the capital investment made by the partners has duly been explained in the respective assessments of the partners and that the partners are existing asses- sees and their assessments for the relevant assessment year have already been made. I find from the records that no such information was furnished by the assessee at the time of assessment. Similar is the position regarding unsecured loans of Rs. 98,500 from M/s. Stutee Chit and Finance Private Ltd. The assessee has not filed any paper regarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 ITR 83 (SC)). 10. As regards the scope and ambit of the expression "erroneous", a Divi- sion Bench of the Bombay High Court in CIT v. Gabriel India Ltd. [1993] 203 ITR 108, held with reference to Black's Law Dictionary that an "erro- neous judgment" means "one rendered according to course and practice of court, but contrary to law, upon mistaken view of law, or upon erroneous application of legal principles" and thus it is clear that an order cannot be terms as "erroneous" unless it is not in accordance with law. If an Income- tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as "erroneous" by the Commissioner simply because, according to him, the order should have been written differently or more elaborately. The section does not visualize the substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is not in accordance with law. 11. Then again, any and every erroneous order cannot be the subject-matter of revision because the second requirement also must be fulfilled. There must be material on record to show that tax which was lawfully exigible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity (see Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 (SC))." It was further observed as under (pages 114 to 117) : "From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Com- missioner simply because, according to him, the order should have been written more elaborately. This section does not visualize a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualized where the Income-tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y erroneous but was prejudicial to the interests of the Revenue. Thus, while the Income-tax Officer is not called upon to write an elaborate judg- ment giving detailed reasons in respect of each and every disallowance, deduction, etc., it is incumbent upon the Commissioner not to exercise his suo motu revisional powers unless supported by adequate reasons for doing so. 15. Applying the aforesaid law to the facts of the present case, we are of the view that the exercise of revisional power by the Commissioner in the instant case was uncalled for and unjustified. It was more in the nature of roving and fishing enquiry. The Commissioner has proceeded on the assumption that no such information, as was furnished to him, was fur- nished at the time of assessment. The Commissioner has mentioned that the Income-tax officer has not examined the cash credits of the partners or deposits of chit fund. Assuming this to be so (though there does not appear to be any justification for the aforesaid observation), this may make the order erroneous, but how it is prejudicial to the interests of the Revenue has not been stated by the Commissioner as he did not deal with the explanation given b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... open to him to remand the matter to the Income-tax Officer for such other investigation or enquiry as might be necessary." 18. We are thus of the opinion that the provisions of section 263 of the Act, when read as a composite whole make it incumbent upon the Commis- sioner before exercising revisional powers to : (i) call for and examine the record, and (ii) give the assessee an opportunity of being heard and there- after to make or cause to be made such enquiry as he deems necessary. It is only on fulfilment of these twin conditions that the Commissioner may pass an order exercising his power of revision. Minutely examined, the pro- visions of the section envisage that the Commissioner may call for the records and if he prima facie considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, he may after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. The twin requirements of the section is manifestly for a purpose. Merely because the Commissioner cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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