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TMI Blog1997 (6) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... e then issued a notice under s. 133(6) of the IT Act, 1961, to RSI Ltd. and ESTC India Ltd. who have supplied the total quantity of 555.90 M.T. of plastic powder to the assessee. On 20th March, 1996, the assessee received replies from the aforesaid parties which were broadly in conformity with the 'Note' provided in the balance sheet of the assessee. In the replies given by the aforesaid two parties, they have confirmed having supplied the specified quantity of HDPE powder to Plastic Concern for processing on their behalf and further stated that since the material was given for processing, it was not treated as sale. Upon receiving the replies from the aforesaid parties, AO issued a show-cause notice dt. 20th March, 1996 to the assessee calling for the following information: (1) Original bill showing purchase of materials of 555.90 M.T. (2) Original sale bill showing sale of finished products processed but of that raw materials. (3) Processing charges received from the above-named two creditors, and (4) To produce the production register. Assessee promptly replied by letter dt. 22nd March, 1996, furnishing the information as desired by the AO. Sub-para (1) of para 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not be treated as erroneous in so far as it is prejudicial to the interests of the Revenue on the ground that the AO failed to make further investigation with regard to the claim of liability for purchases amounting to Rs. 2,08,46,250. Assessee replied on 17th Aug., 1996, wherein it is stated that the aforesaid aspect was fully investigated by the AO in the course of hearing which is evident from the information obtained by the AO from the two parties by issuing notice under s. 133(6) of the Act and also by the reply given by the assessee. It was further submitted that the evidence gathered by the AO could be considered as sufficient enquiry before framing an assessment order and there is no error in the order of the AO. A letter dt. 30th March, 1993 addressed by the assessee to RSI Ltd. was also enclosed to the reply which contains the facts that the assessee informed RSI Ltd. of the consumption of the materials supplied by them. It was also stated that when compared to the price of the goods purchased from the Department of Customs, Govt. of India, the liability actually provided by the assessee against the raw materials supplied by the aforesaid two parties is much less and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adequate enquiry ought to have been made by the AO and the failure to make such enquiry makes the assessment order erroneous in so far as it is prejudicial to the interest of the Revenue. He thus set aside the order of the AO with a direction to reframe the assessment after considering all the aspects of the case. 5. Aggrieved by the order of the CIT, assessee is in appeal before us. The learned counsel fairly reiterated the submissions made by him before the revisional authority. The main plunk of the submission of the assessee is that the AO has made reasonable enquiries and the information gathered by the AO having matched with the note given by the assessee in its accounts, the AO was justified in completing the assessment without making any addition in that regard and the CIT cannot substitute his opinion to that of the AO in coming to the conclusion that the AO has not conducted proper enquiries. He further submitted that even during the course of the revisional proceedings, there is no evidence to remotely suspect that the transactions are bogus and thus submitted that there is no error in the order of the AO so as to invoke the jurisdiction under s. 263 of the Act. He ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontention: (a) Kalra Glue Factory vs. Sales Tax Tribunal (1987) 65 CTR (SC) 233 : (1987) 167 ITR 498 (SC); (b) R.B. Shreeram Durga Prasad Fatechand Narsingadas vs. Settlement Commission (1989) 75 CTR (SC) 187 : (1989) 176 ITR 169 (SC) and (c) Kishanchand Chellaram vs. CIT (1980) 19 CTR (SC) 360 : (1980) 125 ITR 713 (SC). The learned counsel also submitted that at no stage the confidential note of the AO was put to the assessee and, at any rate, CIT is not justified in revising the assessment order, inasmuch as, it amounts to extending the limitation for making assessment which the CIT is not empowered to. 8. We have carefully considered the rival submissions and perused the record. Broadly two issues emerge from the aforementioned facts : (a) whether the AO, having obtained statements from two parties, i.e., RSI Ltd. and STC India Ltd. under s. 133(6) of the Act, is justified in completing the assessment without making any addition in that regard and whether the issue required further investigation by the AO and also whether the assessment order is erroneous in the absence of such enquiry; and (b) whether the CIT, by taking cognizance of the confidential-note of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to make enquiry in the matter in the case of his assessee. A proper remedial action for asst. yr. 1993-94 will be taken after completion of enquiries, if found necessary. (2) In furtherance on the administrative direction, the case was discussed with Dy. CIT, Range-13, Calcutta quantum of addition having exceeded Rs. 2 lakhs. (3) Copy of the assessment order is sent for information to CIT, WB-VIII, Calcutta, with reference to guidance provided in this case through Dy. CIT, Range 13, Calcutta." 10. From a reading of the aforesaid confidential-note, it could be seen that the revisional authority has looked into the facts of the case and also the material available on record in coming to the conclusion that no addition could be made at that juncture on the basis of the available material and thus gave a consent to the AO to proceed to make assessment accordingly, subject to taking proper remedial action, if necessary, after making enquiry subsequent to the completion of assessment of revisional authority in his administrative capacity, is duty bound to supervise the work of the officers in his charge. He is responsible to see that all scrutiny assessments are taken up in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity." In our opinion, the spirit of the observations of the Hon'ble Supreme Court equally applies to the instant case in view of the very peculiar facts obtained herein. If the AO is laxing in his duty, either on his own or because of ineffective supervision by the Dy. CIT or CIT and takes up scrutiny assessment for further enquiry at the fag end of the limitation period, the revenue loss, if any, is inevitable. It is the true law that the limitation period under s. 153 of the Act cannot be extended by a supervisory authority and it is also quite recognised principle of law that an act, which cannot be done by an authority directly, cannot be done indirectly by him. 13. In the instant case, in our opinion, the CIT has proceeded on the aforesaid line by setting aside the order of the AO so as to give him further two years' time to complete the assessment at leisure. In our opinion, the jurisdiction of the CIT is not unchartered and cannot be extended to whereby the AO, who cannot make further enquiries for want ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax some more money to the treasury. Their Lordships further observed that the power is to be invoked not as a jurisdictional corrective or as a review of a subordinate's order in exercise of the supervisory power. Their Lordships opined that it has to be invoked and employed only for the purpose of setting right distortions and prejudices to the Revenue which is a unique conception which has to be understood in the context of and in the interest of revenue administration. In the opinion of the Hon'ble Court, the revisional power cannot be regarded as approaching in anyway the appellate jurisdiction or even the ordinary revisional jurisdiction conferred on the CIT under s. 264 of the Act. Thus, in our opinion, the order of the CIT has no legs to stand in the light of the facts narrated above. 17. The matter can also be looked into from another angle. Admittedly, the AO has discussed the issue with the Dy. CIT as well as the CIT prior to passing of the assessment order. The AO has also recorded, in his confidential note, that the CIT has consented on the issue of passing the assessment order for the time being, subject to making further enquiry at a later period. Thus, the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some further light on the issue. But mere possibility of gathering more material to prove the claim of the assessee wrong, may not automatically make the assessment proceedings erroneous as long as AO acted judiciously on the basis of the information available on record. One has to look to the facts as they stand at the time of completion of the assessment order at best the facts available at the time of initiating revisional proceedings to prove as to whether the assessment order is erroneous and whether he ought to have made further investigation in that regard. Applying the test in the instant case, the AO having caused reasonable enquiries, in the absence of any other basic material to prove the action of the AO wrong, in our opinion, the assessment order cannot be termed as erroneous. As explained in the preceding paragraphs, the information gathered by the AO from the two parties and the explanation of the assessee in support of the 'Note' in the balancesheet, do not contain any such material, even remotely, to suspect that the liability shown by the assessee in its books is sham or fictitious. Under such circumstances, it is, in the normal course, not necessary for an AO to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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