9911796707
TMI Blog2015 (3) TMI 1190X X X X Extracts X X X X X X X X Extracts X X X X ..... ncede that the assessing officer has not raised any query in this regard. This itself prove that this is a case of no inquiry. Cash in hand, cash deposited in bank and investment in immovable assets - Held that:- The assessee does not have any leg to stand as in the case of the assessee, the assessing officer has not made inquiries on most of the issues as pointed out by us and even the Ld. A.R also agreed that no questionnaire issued or query was raised by the assessing officer during the course of assessment in respect of these issues. This is not a case of inadequacy of inquiry but a case of no inquiry being conducted by the assessing officer where it was incumbent upon the assessing officer to examine and verify the facts for determining the correct income of the assessee in each of the assessment years. It is not a case where the A.O has accepted the income of the assessee by taking one of the possible views. It is also not a case of inadequate inquiry on all the issues but a case where no inquiry has been conducted by the A.O in three issues out of the five issues on which show cause notice was issued by the CIT u/s 263. Non application of mind on the part of the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 88,185/- without pointing out any discrepancy in the cash flow statement of appellant s father or the ownership of agricultural land in his father s name or the evidence of agricultural income in his father s hands who has given share from agricultural income to the appellant. b) Opening balance of ₹ 2,92,192/- as on 01/04/2000 which is carried forward figure from last year. c) Cash deposited in the bank accounts without even pointing out as to how much cash was deposited and in which account during this year. d) Investment in immovable assets without pointing out as to which investment was made and in which property during this year. e) No proper examination of seized material without pointing out as to which document was not at all examined by the AO. f) Considering the transactions pertaining to other assessment years during this year. ITA No.954/DEL/2011 : 4. The Ld. CIT has grossly erred on facts as well as in law in considering the assessment order as erroneous and prejudicial to the interest of revenue on the following issues :- a) Agricultural income of ₹ 1,39,010/- without pointing out any discrepancy in the cash flow statement of ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther s hands who has given share from agricultural income to the appellant. b) Cash deposited in the bank accounts without even pointing out as to how much cash was deposited and in which account during this year. c) Investment in immovable assets without pointing out as to which investment was made and in which property during this year. d) No proper examination of seized material without pointing out as to which document was not at all examined by the AO. e) Considering the transactions pertaining to other assessment years during this year. f) Non-examination of the loan transactions without referring to any particular transaction which was not at all examined. g) No proper examination of gifts received from father. ITA No.957/DEL/2011 : 4. The Ld. CIT has grossly erred on facts as well as in law in considering the assessment order as erroneous and prejudicial to the interest of revenue on the following issues :- a) Cash deposited in the bank accounts without even pointing out as to how much cash was deposited and in which account during this year. b) Investment in immovable assets without pointing out as to which investment was made and in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 which has been challenged in all these appeals by way of ground nos. 1 to 3 be disposed of on the basis of the facts relating to assessment year 2001-02. The brief facts of the case for the assessment year 2001-02 are that search and seizure operation was conducted u/s 132 by the investigation wing at Hyderabad on 20.10.2006. The assessee filed the return for aforesaid assessment year on 21.08.2008 declaring taxable income of ₹ 2,90,440/- from salary and agricultural income. Assessment u/s 153A /153B r.w.s. 143(3) were completed on 31.12.2008 by the assessing officer, Central Circle-III, New Delhi at the returned income. On examination of the record the CIT invoked the jurisdiction u/s 263 and issued show cause notice to the assessee on 09.07.2010 as per the provision of section 263. The said show cause notice read as under :- The records in your case for the A.Y. 2001-02 were called for and examined by the undersigned on which the following issues have been observed and the same are discussed in as under :- 1. Agriculture income declared: It is seen that during the year under consideration, you have shown agriculture income of ₹ 88,185/-. It is observed that y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng in your possession. The A. also failed to confront you about the source of said claim and genuineness of the said contention. As such, accepting the cash in hand as on 01/04/2000, without any verification, enquiry and application of mind is erroneous and prejudicial to the interest of revenue. 3. Cash deposited in the accounts held with the Banks etc.: From your bank account, it seen that various cash deposits have been made by you, during the year under consideration. However, the source of all the said deposits were never enquired by the A.O during the course of assessment proceedings. Thus, it is clear that the issue was not properly examined, enquired and verified by the A.O during the course of assessment proceedings. Further it is seen that vide letter dated 22/10/2008, you have furnished the copies of your bank statements. However, the bank statement of ICICI Bank, S.B. A/c No. 05601502207, 47 Mission Street, Pondichery had not been filed by you, though it is mentioned in the covering letter. The A.O did not pointed out this discrepancy, which also shows that the details filed by you were not examined properly. Thus it is apparent that the issue under consideration, wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f seized material by the Assessing Officer is erroneous and prejudicial to the interest of revenue. Therefore, you are hereby required to show cause as to why the order of A.O may not be considered as erroneous and prejudicial to the interest of the revenue on the above issues and the same may be accordingly revised as per the provisions of section 263 of the Act. You are hereby given an opportunity to file submissions on the issues raised, as mentioned above, on or before 30.07.2010. 4. Similar type of notices were issued of the even date in each of the assessment years. In reply to the show cause notice the assessee submitted vide his letter dated 03.12.2010 that initiation of subject proceedings in the case of the assessee is without jurisdiction as the assessments in the case of the assessee were framed after conducting comprehensive inquiries and deliberation on each of the points as stated in the show cause notice. It is a settled principle on the basis of the court decision that an assessment order framed after conducting enquiries cannot be subject to revision u/s 263. Thereafter, the assessee has submitted detailed submissions in respect of each issues raised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... like Khasara / Girdawari document, etc. were neither called for by the Assessing Officer, nor were filed by the assessee, either along with the return of income, or during the course of assessment proceedings. Accordingly show cause notice dated 09.07.2010 was issued to the assessee seeking an explanation as to why the Order passed by the A.O on this issue, may not be taken as erroneous as the same is prejudicial to the interest of the revenue. The assessee in his reply filed on 03/12/2010, vehemently contested that this issue was examined by the Assessing Officer during the course of assessment proceedings. The assessee submitted that he has during the course of assessment proceedings, vide his reply dated 24/11/2008, explained the A.O that he had on several occasions received the share of agricultural income from his father, who is an agriculturist. The assessee mentioned that his father in his statement recorded on 15.11.2006 has deposed that he owns about 15 acres of agricultural land and that the assessee s younger brother does the agricultural work, and this fact which was also confirmed by the younger brother of the assessee in his statement recorded on the same date. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejudicial to the interests of the revenue. Hon ble Karnataka High Court in the case of Thalibai F. Jain Vs ITO [1975] 101 ITR 1 (Kar.). had held that assessments made in undue haste and without an enquiry whether the income offered was that of the assessee or someone, else, are prejudicial to the interests of the revenue. Further, as alleged by the assessee, his father and brother in their statement recorded on 15/11/2006 had never confirmed giving any such share of their agriculture income to the assessee. The father of the assessee has only submitted that he owns agriculture land and he along with younger brother of assessee were earning income from agriculture and sale of milk. Further the statement of Affairs filed by the assessee for the year ending 31/03/2004, it is seen that during the financial year 2003-04, the assessee has shown agriculture income of ₹ 77,804/- and gift from father of ₹ 3,25,000/-. This shows that the two receipts are distinct from each other. Thus it is abundantly clear that assessment order passed by the Assessing Officer, on this issue, is erroneous and prejudicial to the interest of the revenue. 2. Cash in hand as on 01/04/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his unexplained incomes and investments. The assessee s contention that the source of initial capital cannot be examined, is also legally incorrect. The inquiry before assessment is governed by the provisions of section 142 of the Income Tax Act. The proviso to section 142(1) clearly lays down that the Assessing Officer can call for the production of any account relating to a period upto three years prior to the previous year. The source of the initial capital is crucial for any assessment and if that is not done, then the assessment is clearly erroneous and prejudicial to the interest of revenue. Hon ble Patna High Court in the case of CIT Vs. Pushpa Devi [1987] 164 ITR 639 (Pat.) has held that enquiry into the source of the initial capital is crucial for the Assessing Officer. If that is not done, the assessment is bound to be erroneous and hence prejudicial to the revenue. Since, the Assessing Officer has failed to enquire into the source of initial capital as alleged by the assessee, it is clear that assessment order passed by the Assessing officer is erroneous and prejudicial to the interest of the revenue. 3. Cash deposited in the accounts held with the Banks. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing officer, it is seen that 16 discrepancies did not even exist in the accounts of the assessee. It is seen that the A.O asked the assessee to explain the cash deposits pertaining to the period, when the said bank account were not even opened by the assessee. For example the Assessing Officer has asked the assessee to explain the cash deposit in the Account No. 1190020852 made on 01/04/2000, 09/01/2005 and 06/02/2005. This is contrary to the fact that this account was opened by the assessee on 17/02/2005. This itself shows how the accounts were examined by the Assessing Officer and discrepancies were. Besides, it is observed that the assessing officer vide notice dated 18/08/2008, has asked the assessee to furnish copies of the bank statements of various bank accounts operated by the assessee during the block period and also explain the entries contained therein. However, the assessee in compliance thereof had only furnished copies of bank statements, without any narration or explanation (inspite of the fact that the same were specifically requested by the assessing officer). In the absence of narration and explanation, it is clear, that the entries contained therein could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the A.O did not make any further correspondence with Govt. of Mizoram or Investigation Wing of the Department in this regard. Accordingly in the notice dated 09.07.2010, the assessee was show cause as to why the Order passed by the A.O., without verification of various investments made by him, either in his own name, or name of any other person and accepting the same without proper enquiry, verification and application of mind may not be considered erroneous and prejudicial to the interest of the revenue. The A.R of the assessee in the reply filed on 03/12/2010 submitted that the assessing officer, during the course of assessment proceedings, vide letter dated 18/08/2008, has raised the query with respect to investment in properties with reference to seized material, which was duly replied by him vide letter dated 24/11/2008. The above contention of the assessee were considered and examined and it was found that the same is misleading and incorrect. In the covering letter dt. 24/11/2008(combined reply for A.Y. 2001-02 to 2006-07), it is mentioned that copies of the property statement furnished by the assessee to his employer alongwith sources of investment in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote regarding sum of ₹ 6,39,000/- received and expenditure of ₹ 6,66,000/- on purchase of building, the assessee did not furnished any reply and documentary evidence to substantiate the same, though there was specific query of this issue. However, inspite of the above mentioned discrepancies and inaccurate particulars, the assessing officer, did not made any further query / verification on this issue, and completed the assessment, without any adverse observations. Since, the assessing officer has completed the assessment without examining the issue under consideration and without enquiring into the source of the investments and as held by the Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd Vs. CIT, incorrect assumption of facts and without application of mind. Hence, it is clear that assessment order passed by the assessing officer is erroneous and prejudicial to the interest of the revenue. 5. Non examination of the seized material : It is seen that during the course of search proceedings, a diary marked as Annexure A/RK/311/3, Laptop and various other incriminating documents were found and seized from room no.311 of the Hotel Manohar (marked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contents of diary seized. However, the assessee instead of explaining the entries contained therein, submitted a vague reply that information contained in the said diary does not has any financial implications. The reply of the assessee filed before the assessing officer is as follows:- It may be appreciated that the annexure A/RK/311/3 is a personal diary of the assessee pertaining to the calendar year 2005. The said diary is full of jottings, scrubbings and notings relating to his personal chores / assignments / contacts / information which are devoid of any financial transactions having implications of any nature whatsoever. As per the normal practice in assessment proceedings after the query raised the assessing officer, it is the duty of the assessee to explain the contents of the seized material, and there after it is the bounden duty of the assessing officer to analyze and examine the same, and decide if there is any financial implication or not. However, it is seen that the assessee instead of furnishing the details, has himself jumped into the chair of the assessing officer and has given the verdict. Regarding the forensic examination of the laptop, perusal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 3,41,600/- was incurred by his father. Perusal of the above submission of the assessee, shows that the assessee has given details of ₹ 5,21,600/- (1,80,000 + 3,41,600), whereas the amount invested as per the document was ₹ 6,66,000/-. Moreover, as per the document, the investment was made by the assessee out of receipts of ₹ 6.39 lakhs and not from internal accruals. Besides the assessee has neither furnished any details of the property which was renovated, nor any documentary evidence thereof, in support of his alleged contention. The assessing officer, also failed to appreciate that the statement of the father of the assessee was recorded during the course of search proceedings, wherein he has not mentioned making any such investment or giving any such sum to the assessee. Thus it is apparent that the document found and seized during the course of search proceedings, as mentioned above, refers to altogether different transaction, which the A.O failed to examine during the course of assessment proceedings. Since, the assessing officer has completed the assessment without proper examining of the seized material, it is clear that assessment order passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, the High Court or the Supreme Court. Explanation.-In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded. 7. Fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the preceding paragraphs. 10. From these reasons it is apparent that it was noted by CIT from the assessment records so far as agricultural income is concerned that during the course of assessment proceedings document to substantiate the agricultural return like khasra / Girdawari document were neither called for by the assessing officer nor filed by the assessee. Before the CIT the assessee has taken a plea that his father owns 15 acres of agricultural land and his brother has carried out cultivation and he has received sum of ₹ 88,185/- as gift by his father on account of his share in agriculture income. Agriculture income earned by the father of the assessee cannot be the agriculture income of the assessee. We ask the Ld. A.R in the open court whether any query has been raised by the assessing officer about the earning of the agricultural income or whether you have filed any reply in this regard which may prove that the issue regarding the earning of the agricultural income was examined by the assessing officer. The Ld. A.R was fair enough to concede that the assessing officer has not raised any query in this regard. This itself prove that this is a case of no inquiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of a house within the block period, details of ₹ 6,39,000/- received, and also the details of expenditure for purchase of building for ₹ 6,66,000/-. Simply a letter was written to Govt. of Mizoram, but no further correspondence was made. Again when we inquired of from the Ld. A.R, he could not drawn our attention to any material which may prove that the assessing officer has inquired or examined this issue. 11.3 In respect of non-examination of the seized material the CIT observed that during search, a diary marked as annexure A/RK/311/3, laptop and various other incriminating documents were found and seized from Room No.311 of the Hotel Manohar (marked as A/RK/311/1 to 6) by the Investigation Wing. The assessing officer during the course of assessment proceedings asked the assessee to explain the contents of diary seized but the assessee instead of explaining the entries contained therein submitted that information contained in the said diary does not have any financial implication. Similarly in respect of the laptop found the CIT observed that the assessing officer issued questionnaire on 18.08.2008 but after operation of laptop on 25.11.2008 no query was raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the Commissioner of Income-tax has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. From this case of ITO Vs DG Housing Projects Ltd(supra) as relied by the Ld. A.R, we noted the Hon ble Delhi High Court took the view that the CIT while exercising the jurisdiction u/s 263 of the act and in the absence of the finding that the order is erroneous and prejudicial to the interest of revenue, exercise of jurisdiction under the said section is not sustainable. It was further held that in most cases of alleged inadequate investigation , it will be difficult to hold that the order of the assessing officer, who had conducted inquiries and ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This expression postulates an error which makes an order unsustainable in law. 12. The Assessing Officer is both an investigator and an adjudicator. If the Assessing Officer as an adjudicator decides a question or aspect and makes a wrong assessment which is unsustainable in law, it can be corrected by the Commissioner in exercise of revisionary power. As an investigator, it is incumbent upon the Assessing Officer to investigate the facts required to be examined and verified to compute the taxable income. If the Assessing Officer fails to conduct the said investigation, he commits an error and the word erroneous includes failure to make the enquiry. In such cases, the order becomes erroneous because enquiry or verification has not been made and not because a wrong order has been passed on the merits. 13. From this aforesaid decision itself, in our opinion the assessee does not have any leg to stand as in the case of the assessee, the assessing officer has not made inquiries on most of the issues as pointed out by us and even the Ld. A.R also agreed that no questionnaire issued or query was raised by the assessing officer during the course of assessment in respect of these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him. The same does not constitute any finding of fact reached after making any enquiry by the Assessing Officer. It thus is apparent that the Assessing Officer accepted the claim on its face without performing his functions as are required of him as a quasi judicial authority. The assessment order thus made was erroneous and under the circumstances of the case, it was not necessary for the learned CIT to make further enquiries before setting aside the order and find out himself all such relevant facts in a manner as are required to be done by the assessing authority. The aspect of deduction of interest paid on income tax was neither enquired nor shown to have been verified by the Assessing Officer and thus the order of assessment is erroneous on that count as well. 13. Admittedly the Assessing Officer being a quasi-judicial authority had three functions (i) to collect the materials and information (ii) to process the materials and information; and (iii) to adjudicate on the consideration of such materials and information. In a case like this, where the Assessing Officer has failed to perform his duties in number (i) and (ii) above and proceeds to adjudicate, such orders are tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have gone through the decision of CIT vs. Vodafone Essar South Ltd. 212, Taxmann 184 (Del.). We noted that this decision will also not assist the Assessee. In this decision the Hon‟ble High Court relied on the earlier decision of the High Court in the case of CIT vs. Sunbeam Auto Ltd., 332 ITR 167 in which it was held that if there is some inquiry by the AO in the original proceedings, even if inadequate, that cannot clothe the Commissioner with jurisdiction u/s 263 merely because he can form another opinion. In this case on the basis of this decision, Hon‟ble High Court took the view that if there was any inquiry, even inadequate, that would not by itself give occasion to the Commissioner to pass orders u/s 263 of the Act merely because he has a different opinion in the matter. It is only in cases of lack of inquiry , the Commissioner can pass order u/s 263. In this decision under para 11 Hon‟ble High Court clearly laid down that that was not a case of no inquiry. In the case of the Assessee we noted the A.O has not made any inquiry in respect of three issues out of the five issues. 17. In the case of DIT vs Jyoti Foundations, 357 ITR 388 (Del.), we noted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ves non application of mind on the part of the Assessing Officer and accepting the income of the assessee without making an enquiry will tantamount that the order is erroneous and prejudicial to the interest of the Revenue. Hon'ble Supreme Court in the case of Malabar Industrial Co. (Supra) while holding so has relied on the decision of Hon'ble Supreme Court in the case of Rampyari Devi Saraogi vs. Commissioner of Income-tax, 67 ITR 84 (SC). In this case the Income Tax Officer accepted the return of the assessee in respect of the initial capital, gift received and sale of jewellery, the income from business etc. without any enquiry or evidence whatsoever. For that reason the CIT held the order to be erroneous. In revision, he cancelled the order and ordered the Income Tax Officer to make fresh assessment 22. Thus, the law as may be stated after going through both the decisions of Supreme Court is very clear that if the assessment has been made without making the inquiry and application of mind, the order is erroneous and prejudicial to the interest of Revenue. Unlike the Civil Court which is neutral to give a decision on the basis of evidence produced before it, an Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the assessee in the return. The reason is obvious. Unlike the civil court which is neutral to give a decision on the basis of evidence produced before it, an Assessing Officer is not only an adjudicator but is also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further enquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word 'erroneous in section 263 emerges out of this context. The word 'erroneous' in that section includes cases where there has been failure to make the necessary inquiries. It is incumbent on the Assessing Officer to investigate the facts stated in the return when circumstances make such an inquiry prudent and the word 'erroneous' in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an enquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct. In the instant case, the Assessing Officer failed to make any enquiry in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en there was an error on the part of the Assessing Officer upon which action u/s 263 can be justified. Thus, considering all these aspects, we are of the view that learned Commissioner has rightly taken cognizance u/s 263 of the Act because Assessing Officer has not conducted any inquiry on these two issued. 26. This clearly proves that the Tribunal has also taken the view that lack of inquiry will tantamount to be that the order is erroneous and prejudicial to the interest of Revenue. The CIT has already restored this issue to the file of the Assessing Officer and the Assessing Officer, after giving proper opportunity to the assessee has to re-reframe the assessment after giving the opportunity to the assessee. 27. In view of aforesaid discussion, the order passed u/s 263 has to be upheld as, in our opinion, it has passed through test of fulfilment of both the conditions by the CIT that the order passed by the A.O is erroneous as well as prejudicial to the interest of the revenue. We, therefore, dismiss the ground nos. 1 to 3 by upholding the order passed u/s 263. 28. So far the ground no.4 is concerned in all the appeals, in our opinion, this ground is infructuous as CI ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
