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TMI Blog2007 (1) TMI 579X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the issues in the appeals filed by the assessee and the Revenue as well as CO of the assessee are inter-related and relate to the same assessment year, these were heard together and are being disposed of by this consolidated order for the sake of convenience. 2. First, we take up appeal of the assessee filed against the order passed by the CIT, Bhatinda, under s. 263 of the Act. In this appeal, the assessee has taken the following two grounds of appeal: "(i) That the learned CIT, Bhatinda, has grossly erred in law and facts in passing order under s. 263 setting aside AO order dt. 8th Feb., 2001 by wrongly assuming jurisdiction as the issues involved has already been subject-matter of appeal under s. 250(6). As such the order passed under s. 263 is unjust and unlawful being patently invalid. (ii) That the learned CIT, Bhatinda, has erred in law and facts in passing order under s. 263 without affording proper opportunity to assessee appellant. Therefore, the order passed is against natural justice, the same be set aside." 3. The facts of the case are that the assessee filed return of income for the assessment year under consideration on 21st Oct., 1998 declaring therein income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a copy placed at pp. 40 to 48 of the paper book) where he upheld the action of the AO for completing the assessment under s. 144 of the Act. He also observed that transactions noted on the documents found during the course of search related to the business of the assessee and the assessee was entitled to benefit of Rs. 2 lakhs being income surrendered at the time of survey. The excess amount was liable to be added in the hands of the assessee. However, after appreciating the entries in the seized documents, he reduced the addition in respect of interest income from Rs. 6,35,787 to Rs. 5,09,477 and allowed a relief of Rs. 1,26,310 on this point. As regards the addition made on account of peak credits i.e. unexplained investment by way of loans, the learned CIT(A) observed that admittedly these transactions did not appear in the regular books of account. However, he observed that the assessee being an Arhtia, rotated the money fast as number of agriculturists bring their produce for sale and the same was sold on the same day to different parties including Government agencies. Thus, keeping in view the circulation of money, the learned CIT(A) reduced the addition in respect of peak cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under s. 144 of the Act was erroneous insofar as it was prejudicial to the interest of the Revenue. Accordingly, the CIT, Bhatinda set aside the order with a direction that fresh order be passed after giving reasonable opportunity of being heard to the assessee. Aggrieved with the order of the CIT, Bhatinda, the assessee has filed the present appeal. 6. The learned counsel for the assessee submitted that s. 263(1) of the Act mandates that before passing an order, the assessee must be given an opportunity of being heard. Relying on the judgment of Hon'ble Allahabad High Court in the case of Renusagar Power Co. Ltd. v. CIT [1998] 234 ITR 782 (All), the learned counsel submitted that no enforceable order under s. 263 could be passed by the CIT without hearing the assessee. He further relied on the judgment of Hon'ble Andhra Pradesh High Court in the case of CIT v. G.K. Kabra [1995] 125 CTR (AP) 55 : [1995] 211 ITR 336 (AP), the judgment of Hon'ble Madhya Pradesh High Court in the case of CIT v. Chandan Wood Products [1996] 132 CTR (MP) 550 : [1996] 217 ITR 834 (MP). He submitted that opportunity to be granted to the assessee must be effective and cannot be an empty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal and considered and decided by the CIT(A), the CIT, Bhatinda had no jurisdiction to revise such order under s. 263 of the Act. He, therefore, submitted that such order was illegal and bad in law and, therefore, deserves to be quashed. 8. The learned CIT (Departmental Representative), Sh. Kuldip Singh, was fair enough to concede that in the present case reasonable opportunity has not been allowed by the CIT, Bhatinda before passing an order under s. 263. He submitted that for this purpose, the order of the CIT under s. 263 may be set aside and restored to the file of CIT, Bhatinda for reconsideration of the issue after allowing reasonable opportunity to the assessee. As regards the contention of the learned Authorised Representative that the issues have been subject-matter of appeal and decided by the CIT(A), Bhatinda, the learned CIT (Departmental Representative) submitted that while completing the assessment under s. 144, the AO had not taken into account all the entries for working out the peak amount of unexplained investment and had also not included the entire interest received/accrued on the unexplained advances given to the farmers. Thus, he submitted that it could n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT Act, and if he considers that any order passed therein by the AO or Dy. CIT or Jt. CIT is erroneous insofar 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 inquiry as he deems necessary, pass such order which may also include an order enhancing or modifying assessment or cancelling the assessment and directing a fresh assessment. However, in order to confer jurisdiction on the CIT under s. 263, twin conditions i.e. that the order passed by the AO should be an erroneous and prejudicial to the interests of Revenue must be satisfied. Both the conditions must be satisfied simultaneously. If only one condition is satisfied, the order passed by the CIT under s. 263 would be without jurisdiction and bad in law. Reliance in this regard is placed on the judgment of Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC). No doubt, the powers conferred on the CIT are very wide to cover any order passed by the AO, but Expln. (c) to sub-s. (1) of s. 263 of the Act inserted by the Finance Act, 1988, w.e.f. 1st June, 1988 circumscr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who reduced the addition after taking into consideration the rival submissions and on appreciation of the evidence and material placed on record. He also gave reasons as to why peak amount required to be reduced as fast rotation of money by the assessee. Thus, he was of the view that entire amount of credit appearing in the names of parties did not deserve to be added. His finding is not (sic) based on the reasoning that as per entries noted and considered by the AO, the peak amount worked out to Rs. 85,000 and not at Rs. 1,65,000. Therefore, it would not be correct to say that CIT(A) had not considered all the entries noted on the documents found during survey. He also found that exact addition on account of interest worked out to Rs. 5,09,477. Thus, it is clear that the CIT, Bhatinda passed order under s. 263 in respect of both the issues which have already been considered and decided by the CIT(A) in appeal. May be that there was mistake on the part of the AO in working out the quantum of addition on account of unexplained investment and interest accrued/received on the undisclosed advances. But it cannot be said that the issues were not considered by the CIT(A) in appeal. In f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue's appeal in ITA No. 576/Asr/2004 where the Revenue has taken the following two effective grounds of appeal: "(i) On the facts and the circumstances of the case, the learned CIT(A) has erred in law and on facts in commenting on the order of the CIT, Bhatinda. (ii) The learned CIT(A) has erred in law and facts in holding that the AO was not within his powers to make any enhancement." 10.1 Briefly stated, the facts of the case are that in pursuance of order passed by the CIT, Bhatinda, under s. 263, the AO completed the assessment under s. 143(3) on 22nd March, 2004 by adding an amount of Rs. 27,09,100 being unexplained investment in the loans advanced to the agriculturists and amount of interest on loans at Rs. 8,07,703. The assessment was completed on a total income of Rs. 34,85,700 after reducing an amount of Rs. 2 lakhs surrendered at the time of survey under s. 133A of the Act. 10.2 Being aggrieved, the assessee filed an appeal before the CIT(A) against the assessment order where grounds relating to legality of order passed by CIT, Bhatinda, under s. 263 were also taken. The grievances of the assessee projected through its grounds before the CIT(A) were that sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de the grounds relating to specific additions made by the AO on merits which was within his jurisdiction. Further, once the order is passed by the CIT under s. 263 of the Act, it is binding on the AO. The AO cannot ignore directions given by the CIT while completing the assessment in pursuance of order under s. 263. Now in the order under s. 263, the CIT, Bhatinda, had recorded a clear finding that the addition on account of unexplained investment was not required to be made on the basis of peak amount but on the basis of entire amount of Rs. 27,09,100. The CIT had further observed that the entire interest of Rs. 8,07,703 accrued/received on the advances was liable to be included in the total income of the assessee. Since such order was binding on the AO, these additions were rightly made by him. Therefore, the observations of the CIT(A) that the AO could not enhance the income while completing the assessment in pursuance of the directions given by the CIT under s. 263 were illegal and without jurisdiction. Since the appeal against order under s. 263 lies with the Tribunal, such observation could have been made only by the appellate authority before whom the appeal is filed. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled. Here again, this could not constitute a sufficient cause for the delay in filing the CO. The attention of the learned Authorised Representative was drawn to these facts at the time of hearing of the appeal. However, he could not give any satisfactory reply to the same. 11.1 Sub-s. (5) of s. 253 of the Act vests the Tribunal with powers to condone the delay in filing an appeal or cross-objections after the expiry of the relevant period, if it is satisfied that there was a sufficient cause for not presenting it within prescribed period. But it is for the party concerned to explain the delay with a sufficient cause. In the case of CIT v. Ram Mohan Kabra [2002] 178 CTR (P&H) 274 : [2002] 257 ITR 773 (P&H), the Hon'ble Punjab & Haryana High Court has held that where the legislature spells out a period of limitation and provides for power to condone the delay as well, such delay can be condoned only for sufficient and good reasons supported by cogent and proper evidence. It is a settled principle of law that provisions relating to the specific period of limitation must be applied with their rigour and effective consequences. In this case, the Tribunal had not condoned the dela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by Tribunal, Calcutta Bench in the case of Asstt. CIT v. Taggas Industries Development Ltd. [2002] 75 TTJ (Cal) 569 : [2002] 80 ITD 21 (Cal), where a request of the Department for condonation of delay in filing an appeal attributing it partly to CIT's office and partly at AO's level was considered. There was a delay for 13 days for filing the appeal. On the basis of explanation and evidence submitted, the Tribunal observed that there was no merit in the Revenue's petition for condonation of delay. Therefore, the Tribunal declined to condone the delay. Thus, from the facts discussed above, it is obvious that the assessee failed to explain that delay in filing the CO was caused due to a sufficient reason. Therefore, we are of the considered opinion that it is not a fit case for condoning such inordinate delay. Accordingly, the request of the assessee for condoning the delay is rejected and the CO is dismissed being filed beyond the statutory time limit prescribed in the Act. 11.3 Before parting with this issue, we wish to add that this issue is only of an academic interest. The cross-objections of the assessee relate to the appeal filed against the order of CIT(A) rel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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