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TMI Blog1995 (9) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the material extraneous to the record received subsequently was merely academic ? 4. Whether the Appellate Tribunal had no material to interfere with the order of the Commissioner of Income-tax setting aside the assessment for being redone notwithstanding that the authorities for registration and acquisition were satisfied about the stated consideration ?" Mr. V. V. Ramaswamy Chettiar and Mr. K. A. Ramaswamy Chettiar are partners in a partnership firm. They are the assessees herein. The assessment years involved in the case of both the assessees are 1974-75 and 1975-76. Mr. V. V. Ramaswamy Chettiar is an individual deriving income from property and share income from a firm, viz., V. V. Ramaswamy Chettiar and Company. The original assessments have been completed on incomes of Rs. 53,210 and Rs. 3,98,290 for the assessment years 1974-75 and 1975-76, respectively. He had purchased the properties one on November 28, 1973, and the other on July 5, 1974, and the documents indicated the purchase consideration at Rs. 47,250 and Rs. 45,000, respectively, during the two years under consideration. The purchases have been made from two members of the family of Raja of Venkatagiri. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 263 of the Act. It was also claimed that the records and the alleged admission of the sellers were one sided and could not have been even otherwise treated as a basis for any inference of prejudicial assessment. It was claimed that the valuation was considered fair for the purposes of stamp duty and no acquisition proceeding was also taken by the income-tax authorities for understatement. In these circumstances, it was submitted that the order of the Commissioner of Income-tax was bad in law. The Tribunal found that there was no enquiry as to the actual consideration paid for the properties and that by itself justified the jurisdiction of the Commissioner of Income-tax. It was also pointed out that the Commissioner himself had the power of enquiry and that his reference to the allegations subsequently brought to his notice did not invalidate the notice because of mere reference to such subsequent facts. It did not consider it necessary to deal with the assessee's arguments regarding the necessity for strict proof of cross-examination and the alleged corrections of the price with reference to the other criteria like stamp duty, valuation, conclusion of the acquisition a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t made by his clerk. The Commissioner of Income-tax also came into possession of the proceedings held before the Settlement Commission wherein the sellers admitted having received considerations more than what were stated in the sale deeds. The Commissioner of Income-tax also mentioned that he received a letter dated January 30, 1979, from the seller stating that he has received consideration more than what were stated in the sale deeds. The show-cause notice under section 263 of the Act was issued on January 24, 1979. While so, the letter said to have been sent by the seller would have been received only after the show-cause notice, was sent to the assessee. Therefore, according to learned counsel for the assessee, all the materials gathered after the assessment was over cannot be utilised for the purpose of exercising the jurisdiction under section 263 of the Act. The Explanation to section 263 of the Act, especially with regard to clause (b), which was inserted by the Finance Act, 1989, came into effect from June 1, 1988. Therefore, the assessment years under consideration being prior to June 1, 1988, the Commissioner of Income-tax has got no jurisdiction to make use of the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 263 of the Act for the purpose of coming to the conclusion that the order passed by the Income-tax Officer is erroneous and prejudicial to the interests of the Revenue. Therefore, according to learned standing counsel, the Explanation introduced to section 263 would apply retrospectively for the period even prior to June 1, 1988, since the Explanation is only declaratory in nature. We have heard the rival submissions. According to the Commissioner of Income-tax, the order passed by the Income-tax Officer is erroneous and prejudicial to the interests of the Revenue since the Income-tax Officer failed to conduct an enquiry before accepting the sale consideration as stated in the registered sale deeds. Therefore, the order passed by the Income-tax Officer is erroneous and prejudicial to the interests of the Revenue. It remains to be seen that at the time of completing the assessment, the assessee produced registered sale deeds to show that the sale considerations were paid by the assessee for the purpose of purchasing houses. What are the exact implications of the expression " assessment made " in undue haste and without proper enquiry or investigation by the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn when circumstances would make such an enquiry prudent that 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 case of Add CIT v. Mukur Corporation [1978] 111 ITR 312, 323 (Guj), it was held that " in the present case it was obvious that the Income-tax Officer had committed an error in not making enquiry into the details as regards both the deductions but also that want of such enquiry had resulted in prejudice to the interests of the Revenue. To this extent the initiation of action under section 263 by the Commissioner was quite proper ". In Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC) " where an assessee is assessed on an income voluntarily returned, it is not prejudicial to the interests of the Revenue only if it is found that the assessment was made on the basis that the income had been earned by the assessee which was assessable. Where an income has not been earned and is not assessable, merely because the assessee wants it to be assessed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) v. Mukur Corporation [1978] 111 ITR 312 and the decision of the Supreme Court in Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323, cited supra. Another submission made by learned counsel for the assessee was that clause (b) in Explanation to section 263(1) was introduced or inserted by the Finance Act, 1989, which came into effect from June 1, 1988. In clause (b) it is stated that the word " record " shall include and shall be deemed always to have included all records relating to any proceedings under this Act, available at the time of examination by the Commissioner. It is the contention of learned counsel for the assessee that inasmuch as this amendment came into force with retrospective effect from June 1, 1988, for the matters arising before June 1, 1988, under section 263 of the Act this clause (b) cannot be made applicable. In order to support this contention reliance was placed upon the following decisions : (1) CIT v. Godavari Sugar Mills Ltd. [1992] 198 ITR 196 (Bom) ; (2) S. Murugappa Chettiar v. CIT [1992] 197 ITR 586 (Ker) (sic) ; (3) Ritz Ltd v. Union of India [1990] 184 ITR 599 (Bom) ; (4) CIT v. Orissa Oil Industries Ltd. [1992] 193 ITR 183 (Orissa). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are conflicting views of the various High Courts in the matter of applicability of the Explanation to section 263(1) of the Act beyond the period of June 1, 1988. According to us, the Explanation to section 263(1) of the Act was introduced by the Finance Act, 1988, with effect from June 1, 1988, which contains clauses (a) to (c). Therefore, from June 1, 1988, onwards the Explanation is in the statute book. Once the Expla nation is incorporated in the statute book, then what is stated in the Explanation is to be followed both for the period earlier to June 1, 1988, and later to June 1, 1988. Thus, we see that there is no controversy in the matter of considering whether the Explanation would be applicable before June 1, 1988, or not because after June 1, 1988, clause (b) in the Explanation states that the word " record " shall include and shall be deemed always to have included all records relating to any proceedings under the Act available at the time of examination by the Commissioner. Hence, after June 1, 1988, as per clause (b) of the Explanation, it is applicable for all times even for the period prior to June 1, 1988. In that view of the matter, we hold that the Explanation to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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