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TMI Blog1996 (11) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... see and M/s. Magnum Investments of Old China Bazar Street, Calcutta. By letter dated 9-10-1995, the Assessing Officer called upon the assessee to explain the source of investment in the shares, the profit earned therefrom and also the explanation with regard to the transactions which he referred to as share speculative transaction. The assessee explained the papers by letter dated 24-11-1995. With regard to certain transactions in shares, he stated that they were actual purchase and sale. These details were furnished in Annexure-I to the letter. The assessee also furnished certain other details in Annexure-II which was described by him as a summary statement of speculation profit/loss in shares during the accounting period. According to this statement, there was a net loss of Rs. 4,468.50 p. In the assessment order, the ITO referred to both the Annexures. With regard to the actual transactions in shares, the assessee's explanation for the source of money was also referred to in the assessment order. However, beyond a reference to Annexure-II there was no other reference with regard to what the assessee claimed as speculative transaction in shares. The assessment was finally complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 131 had been accepted by the Income-tax Officer without further enquiry. He was of the opinion that the Income-tax Officer had failed to apply his mind to the case in all its perspective and this itself made the order erroneous and prejudicial to the interests of the revenue. He referred to the decisions of the Supreme Court in Rampriya Devi Saraogi v. CIT [1968] 67 ITR 84 and Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 and set aside the assessment with directions to the Assessing Officer to reframe the same after making enquiries and after allowing the assessee adequate opportunity of being heard. 6. In the order the Commissioner of Income-tax also referred to a note kept by the Assessing Officer in the record wherein, in the words of the Commissioner of Income-tax, the Assessing Officer had "mentioned that he tried to verify the transactions by sending an Inspector to the address of Magnum Investments and in spite of his best efforts, the said company or its owner could not be traced out. He has also mentioned that no evidence could be collected by him to counter the claim of the assessee and, hence, he has accepted the assessee's version." 7. The assessee is in ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the Commissioner of Income-tax. In the Gujarat and Delhi High Courts' decisions cited by the learned D.R. it has been held that mere failure to make any enquiry would itself be an error committed by the Income-tax Officer resulting in prejudice to the interests of the revenue. The question in the present case is whether the Income-tax Officer had made enquiries regarding the genuineness of the assessee's claim. The records show that he has. The enquiry made by him by letter dated 9-10-1995 indicates that he had come to the prima facie conclusion that the seized material indicated speculative transactions done by the assessee. Nevertheless he had called upon the assessee to explain the transactions and show that they have been declared in the accounts of the assessee and to further explain the source of funds employed in those transactions. This is clear from paragraph 14 at page 2 of the letter. The same is reproduced below : "(14) Pages 54 to 60 of AP-2 shows various share trading/speculation transactions done by you. Explain these transactions and show that these transactions have been declared in your accounts. Explain the source of funds employed in these transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share transactions in the share trading account but when he came to the speculative transactions, he stated that they "did not require any funds". Thereafter he went on to explain why the transactions were not shown in the accounts. In the course of the deposition the assessee has also stated, in answer to question No. 6 that he will not be able to produce the books of account of M/s. Magnum Investments since that firm closed its business operations after suffering huge losses some time in the last quarter of 1993 and that the proprietor of the firm Shri Ajay Srinamkar had left Calcutta, according to his information. Apparently in a bid to verify the statement, the Income-tax Officer had sent his Inspector to the address of M/s. Magnum Investments but in spite of the best efforts the firm or the owner could not be traced. The Income-tax Officer has left a note in the record to the above effect and this note has also been adverted to by the Commissioner of Income-tax in the second new paragraph in page 2 of his order. This we have already extracted. The note goes on to say that no evidence could be collected by him (the ITO) to counter the claim of the assessee and, hence, he has ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee made the statement in November 1995. Nevertheless the Income-tax Officer had taken steps to verify the assessee's statement. Now if the assessee's statement that M/s. Magnum Investments had closed its business and its proprietor had left Calcutta for good turned out to be true on enquiry made through Inspector, it can hardly be suggested that the Assessing Officer was at fault. It has also got to be remembered that this is not a case where the assessee's statement made in the return was merely accepted by the Income-tax Officer without any enquiry, as happened in the decision of the Supreme Court cited by the Commissioner of Income-tax towards the end of his order. That was also the case in the Delhi and Gujarat High Courts' decisions cited by the learned representative before us. In all those cases the statement made in the return had been accepted without any enquiry and this was considered by the Commissioner of Income-tax to be erroneous and prejudicial to the interests of the revenue and the High Courts and the Supreme Court upheld the view taken by the Commissioner of Income-tax. The present case is not covered by the ratio laid down in these decisions. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ussion in the assessment order with regard to his query or the assessee's explanation. The Commissioner of Income-tax took proceedings under section 263 and set aside the order of the Income-tax Officer on the ground that it did not disclose any application of mind, which is also the view taken by the Commissioner of Income-tax in the case before us. The Tribunal did not approve the action of the Commissioner of Income-tax. On a reference, it was held by the Bombay High Court that the power under section 263 was not an arbitrary or unchartered power. The Commissioner of Income-tax cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. It was further held that if this is permitted there would be no end to litigation because there can always be new views and new versions as to what should be the inference from the facts or proper inference from the facts brought on record or from the weight of the circumstances. At pages 114-115, it was held that if the income-tax Officer acting in accordance with law makes a certain assessment it cannot be branded as erroneous simply because according to the Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified or permitted. Under the circumstances therefore it is impossible to accept the view taken by the Commissioner of Income-tax that there was no enquiry by the Assessing Officer or that the Assessing Officer has failed miserably to apply his mind to the case in all its perspectives. It has not been suggested either by the Commissioner of Income-tax or by the learned D.R. before us that the Income-tax Officer was not entitled to draw the inference which he drew from the enquiry which he had conducted. If that be so, the mere fact that the Commissioner of Income-tax did not approve of the inference does not authorise him to substitute his opinion for that of the Income-tax Officer. Though the Commissioner of Income-tax has only set aside the assessment for being reframed after making enquiries and after allowing opportunity to the assessee of being heard, such a course cannot be upheld if due regard is had to the principles laid down by the Madras and Bombay High Courts in the decisions cited above. It is significant to note that in his order running to three pages the Commissioner of Income-tax has not referred to any material from which it could be said that the acceptance of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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