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TMI Blog2009 (7) TMI 1248X X X X Extracts X X X X X X X X Extracts X X X X ..... r under consideration for a total consideration of ₹ 2,96,08,100 to one M/s Arihant Jewellers, F-116, Kamdhenu Complex, Polytechnic, Ahmedabad-380015. Subsequently, enquiries made by the learned CIT through Director of Investigation, Ahmedabad, revealed that there was no concern in that name at the address given by the assessee in the course of assessment proceedings, hence, the transaction appeared to be non-genuine. The learned CIT, accordingly, formed an opinion that the AO had failed to make any enquiry in respect of the said transaction, hence, he issued notice under s. 263 of the Act. The assessee was also provided copies of the letters received from Addl. Director of IT (Inv.), Ahmedabad, wherein it was stated that at that address, one M/s Energy System was operating from 1st April, 1994 and the proprietor of this concern, Shri Pravesh Mehta, had stated that he had nothing to do with M/s Arihant Jewellers and neither any business activity was ever carried on by them nor he had granted any permission to the said firm to carry on its business activities at that premises. The assessee submitted that after detailed enquiry in respect of sale of diamond ornaments, the AO ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable for the reason that it was a decision rendered in the context of provisions of s. 158BC of the Act, whereas the present assessment had been framed in accordance with the provisions of s. 153A of the Act. Aggrieved by this, the assessee is in appeal before the Tribunal. 4. Learned counsel for the assessee, firstly, submitted that it was not the case of lack of inquiries, as held by the learned CIT. In this regard, he drew our attention to deficiency letter issued by the AO on 18th Jan., 2002, requiring the assessee to verify the facts of sale of jewellery which was replied by the assessee on 31st Jan., 2002 by submitting necessary evidences. The return was processed under s. 143(1) of the Act accepting the sale transaction; thereafter, in the proceedings under s. 153A of the Act, the AO issued a questionnaire of 12 pages under s. 142(1) of the Act, wherein again the details of sale of jewellery were called for which was also complied by the assessee. Learned counsel for the assessee further submitted that during the course of search, no incriminating evidences were found to doubt the genuineness of the transaction which was transacted through proper banking channel wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. (1993) 114 CTR (Bom) 81: (1993) 203 ITR 108(Bom). The learned counsel for the assessee also relied on various judicial decisions for the proposition that the learned CIT was bound to give conclusive findings by applying his independent mind to arrive at the conclusion that the order passed by the AO was erroneous as well as prejudicial to the interests of Revenue which was not so as the learned CIT, in the notice referred to the observations of the Addl. Director of IT, Ahmedabad, only. 6. Learned Departmental Representative, on the other hand, placed strong reliance on the order of the learned CIT. 7. We have considered rival submissions, orders of the authorities below and the materials available on record. It is noticed that the assessment under s. 143(3) r/w s. 153A of the Act has been passed on 28th Dec., 2006, by the Asstt. CIT, Central Circle-1(4), Nagpur. Before the said assessment order, originally, the assessment was completed under s. 143(1) of the Act after issuing deficiency letter to the assessee who furnished necessary details in regard to the impugned transaction. Subsequently, as a consequence of search proceedings, proceedings under s. 153A of the Act we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the claims of the assessee made in the return, were simply accepted without making any enquiries. As observed by us earlier that the AO has made necessary inquiries with regard to the said transactions and has also mentioned about the same in the assessment order, hence, how the said order can be said to have been passed without inquiries merely for this reason. In this regard, it is worthwhile to note that the assessee has got no control over the AO as to how he should write the order and it is a known fact that in the course of assessment proceedings, various inquiries are made by the AO which are replied by the assessee and generally, the AO does not give any positive finding in respect of items complied by the assessee. Hence, in our opinion, the order of the AO cannot be termed as erroneous or prejudicial to the interests of Revenue merely for the reason that it is a stereotyped order so long as facts of non-application of mind and a legally impossible view are not established. 10. We further find that in para 5 of the order, the learned CIT has given a brief account of the survey carried on by the Department on the business premises of Arihant Jewellers in December, 2001 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsequent to assessment order, has come into possession of the Department, hence, on the basis of same material, the action of the learned CIT amounts to a case of change of opinion. 12. We are further of the view that in view of the order of the Tribunal in the case of Smt. Sudha Agrawal (supra), the issue stands covered in favour of the assessee on merits for the reason that decision has been accepted by the Department and, therefore, this issue has attained finality. In this view of the matter, we are of the humble opinion that the learned CIT should have dropped proceedings as this decision had been pointed out to him by the assessee, however, the learned CIT did not follow the same for the reason that the assessment proceedings in that case were completed under s. 158BC of the Act whereas the case was covered under s. 153A of the Act which, in our opinion, is not justified as irrespective of the sections under which the assessment proceedings were concluded, the fact remains that the ratio of that decision as regard to genuineness of identical transactions is applicable. 13. Thus, in the above facts and circumstances and for the reasons stated hereinabove, we hold that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g sold diamond jewellery to M/s Arihant Jewellers is verified. I shall also be grateful for communication of the results of verification expeditiously. Sd/ (K. Chandrahas) CIT-III, Nagpur 15. From the perusal of para 3 of the aforesaid letter, it is apparent that the then learned CIT called this information for the purpose of assessment under s. 153A of the Act whereas the fact is that the assessment under that section had already been completed much before, i.e., on 28th Dec., 2006, hence, the action of the learned CIT appears to be out of context and contrary to the facts on record. This fact further propelled various queries in our mind as regards to the scope of power of the learned CIT under s. 263 of the Act, what could constitute record for assuming jurisdiction under s. 263 of the Act. 16. In this regard, we consider it necessary to discuss, in brief, the scope of this section. It is a known fact that there is no provision in the Act which allows Department to prefer an appeal against any order passed by the AO, hence, when an order passed by the AO is considered as erroneous as well as prejudicial to the interests of Revenue, these provisions have been brou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessees relevant to the assessee in whose case action under s. 263 is proposed or proceedings in the case of the assessee in other years or some information received from other Departments can be considered by the learned CIT. Likewise, in a case where the matter had been referred to the DVO by the AO but due to limitation of period for completion of assessment, the assessment was completed without such report and subsequently, the report of DVO indicated something adverse against the assessee, then, such report can also be considered as record for the purpose of s. 263 of the Act now. On this aspect, we made efforts to find out other possible situations, however, we could not find any case which could suggest that the action of the learned CIT in this case, in the form of obtaining information through Addl. Director of IT could result into treating such information as record for the purpose of s. 263 of the Act. In this process, we also took note of the decision of the Hon'ble Supreme Court in the case of CIT vs. Shree Manjunathesware Packing Products Camphor Works (1997) 143 CTR (SC) 406: (1998) 231 ITR 53(SC), wherein the meaning of the term record was considered. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trued as part of the record for the purpose of s. 263 of the Act, hence, the action of learned CIT is void ab initio. In our view, such action amounts to making a preliminary enquiry so as to invoke the provisions of s. 263 of the Act which is not permissible under the Act. In this regard, we would like to draw support from the decision of the Hon'ble Bombay High Court in the case of Jamnadas Madhavji Co. vs. J.B. Panchal, ITO (1986) 58 CTR (Bom) 1: (1986) 162 ITR 331(Bom), wherein the AO issued summons under s. 131(1) to an assessee to furnish information and produce the documents and books of account so as to enable the ITO to investigate whether these assessments could be reopened. In that situation, the Hon'ble Bombay High Court held that since no proceeding was pending when the AO issued summons, hence, such summons were liable to be quashed. In this decision, the Hon'ble Bombay High Court referred to the decision in the case of Gaya Ram Gabbu Lal vs. CIT (1951) 19 ITR 114(All) and has reproduced the relevant observations of the said decision which read as under : In support of the contention that the ITO has no right to make a preliminary enquiry before issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, the limitations as aforesaid, would be applicable on CIT as well. Having stated so, now, we consider it appropriate to take account of powers of the CIT with regard to making of enquiries as relevant for the purposes of s. 263. The CIT's power for calling information or making inquiries can be exercised under ss. 131(1), 133(6) and 135 of the Act. The power under s. 131(1) can be exercised only when some proceeding is pending and not otherwise which is also evident from the provisions of s. 131(1A) of the Act whereby different categories of officers have been authorized to collect information and conduct inquiries even where no proceedings are pending. The power under s. 133(6) of the Act, as stated earlier, can be exercised both in relation to a pending proceeding or an enquiry which may result into a proceeding and, both of these cannot be considered as a proceeding for the purpose of s. 263 of the Act as action under s. 263 can be taken only in respect of a concluded proceeding, hence, provisions of s. 133(6) of the Act to this extent cannot be of any help to the CIT. Further, it has also been observed that no proceeding was pending against the assessee at the relevant p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry or other statutes or judicial decisions. In this regard, we find that as per the provisions of s. 136 of the Act, proceedings under the Act are judicial proceedings, hence, all the incidents of such judicial proceedings have to be observed before the result is arrived. As per Black's Law Dictionary, the word proceedings in a general sense means the form and manner of conduct of juridical business before a Court or judicial officer . Thus, assessment in the context of IT Act, 1961, appeal and/or second appeal can be described as proceedings in general sense subject to specific provisions of the Act such as ss. 131(1A), 132(2), 133A, wherein the term proceedings has been defined otherwise. Further, as noticed judicially, the word proceedings has different shades of meaning and can be given a narrow or wide import depending upon the nature and scope of the enactment in which it is used and in particular context of the language of the enactment in which it appears (refer to the decision of the Hon'ble Supreme Court in the case of Ramchandra Agrawal vs. State of Uttar Pradesh AIR 1966 SC 1888. Similar view was expressed by the Hon'ble Orissa High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appeal or writ of error; (12) the remittitur, or sending back of the record to the lower Court from the appellate or reviewing Court; (13) the enforcement of the judgment, or a new trial, as may be directed by the Court of last resort, 'Edwin E, Bryant, The Law of Pleading Under the Code of Civil Procedure 3-4 (2nd Ed. 1899). 22. The term enquiry as per Chamber's Dictionary 20th Edn., has been defined as to ask; to question; to make in investigation; eager to acquire information; to ask, to seek, to make an examination . Though, on the face of it, such meaning may give an appearance to possess the attributes of a proceeding, however, the word enquiry in the context of provisions of s. 133(6) has been interpreted by the Hon'ble Karnataka High Court in the case of U.G. Upadhya vs. Director of IT (2002) 174 CTR (Kar) 412: (2002) 255 ITR 502(Kar), as a step necessary prior to initiation of any proceedings. If we read the provisions of s. 4 of Cr.PC, then it is apparent that an enquiry is something different from a trial and that enquiry stops when trial begins. In the context of provisions of the Act, the trial is akin to a proceeding, hence, in our view, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-application of mind which is not the objective of the legislature as power under s. 263 of the Act is not an unbridled power and it has to be exercised with great caution so as to ensure that the finality of concluded assessment is not disturbed in a routine manner. For this view, we derive strength from the following observations of the Hon'ble Bombay High Court in the case of CIT vs. Gabrial India Ltd. (supra) : We, therefore, hold that in order to exercise power under sub-s. (1) of s. 263 of the Act there must be material before the CIT to consider that the order passed by the ITO was erroneous insofar as it is prejudicial to the interests of the Revenue. We have already held what is erroneous. It must be an order which is not in accordance with the law or which has been passed by the ITO without making any enquiry in undue haste. We have also held as to what is prejudicial to the interests of the Revenue. An order can be said to be prejudicial to the interests of the Revenue if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realised or cannot be realised. There must be material available on the record call ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the assessee and it has also been noted that decision of the Tribunal in one of the cases involving M/s Arihant Jewellers had already been decided in favour of the assessee and the Department had also accepted that the decision by not filing any further appeal. It is also pertinent to note that both the present assessee and that assessee fall under the jurisdiction of the same CIT. It has also been noted earlier that in this case, a search was conducted wherein also no incriminating material was found. It has also been noted that Shri Pravesh Mehta had reiterated the same facts in the course of enquiry by Addl. Director of IT, Ahmedabad, which had earlier been stated by him in the course of survey proceedings, hence, how he could deviate from the stand taken by him once. It has also been noticed that the Investigation Wing of the Department had also prepared report on these types of transactions in 2005. These facts, though appeared to be repetition but have been stated again just to point out that the proceedings under s. 263 of the Act should not have been initiated at all in the present case and that too by creating a material by the learned CIT himself. We further state ..... X X X X Extracts X X X X X X X X Extracts X X X X
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