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TMI Blog1982 (10) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... allotted by the Haryana Government, the licences were not in the name of the firm constituted of four partners. In view of the judgment of the Punjab and Haryana High Court in the case of CIT vs. Hardit Singh Pal Chand and Co (1979) 8 CTR (P H) 365; (1979) 120 ITR 289 (P H), the assessee was not entitled to registration. To this audit objection, the ITO objected by pointing out that the assessment was completed on 30th Nov., 1979. In fact, the last date of hearing as per his record was 15th Nov., 1979. The judgment of the Hon'ble Punjab and Haryana High Court, according to the ITO, was reported some time in Dec., 1979 and, therefore, the ITO could not have been aware of the said decision and that his decision on the facts of the case and the relevant provisions of law when the assessment was made was in order. 4. The CIT, as is clear from an abstract of order-sheet obtained from his file by us, received a proposal under s. 263 endorsed by the IAC. This proposal was based upon audit objection referred to supra. The CIT made a note that the ITO should be asked to verify from the Excise Department records whether the Excise Department's permission was taken or not for the formation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of an audit report forwarded to him by his subordinate authority. This he could not do. For this proposition he placed reliance upon the judgment of the Calcutta High Court in the case of Jeewan Lal (1929) Ltd. (1977) 108 ITR 407 (Cal). The ld. counsel for the assessee also submitted that the CIT has not given a clear cut finding in his impugned order that the order made by the ITO which he sought to review, was erroneous so as to be prejudicial to the interest of revenue. Since in the impugned order he did not disclose tha basis on which he assumed jurisdiction, the order was bad in law in view of the ratio of the judgment of the Punjab and Haryana High Court in the case of R.K. Metal Wors (1978) 112 ITR 445 (P H). 6. The ld. counsel for the assessee further contended that under s. 263, the CIT could not issue directions either to grant or to refuse to grant registration to the assessee firm because once the firm had been registered, such registration could be cancelled only as laid down by s. 186 of the Act. For this proposition, he placed reliance upon the judgment of the Tribunal Ahmedabad Bench 'A' in ITA Nos.607 to 610 of 1973-74 dt. 24th Feb., 1976. He emphasis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l provisions. In this regard, he submitted that it is not necessary that the partner who was not shown in the licence also was found in possession of the liquor or excisable goods at anytime during the year or that he had effected the sales of those goods. It is submitted that the business of the firm can be carried on by all or anyone of them acting for all. Since there is no finding to the effect that the partner whose name was not in the licence also handled the liquor, it cannot be said as finding of fact that there was contravention of the Excise Rules. Therefore, when the ITO granted registration to the firm, his satisfaction was based upon facts and the then prevailing law. This could not be changed by the CIT because there was neither patent mistake of law nor anything on facts which he did not consider. 10. The submissions were opposed by the Revenue strongly. It was contended by Mrs. Sudha Sharma that the assumption of jurisdiction by the CIT under s. 263 cannot be challenged by the assessee because the jurisdiction of the Commr. to proceed under s 263 is not dependent on the fulfilment of any condition precedent. She placed reliance upon the judgment of the Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad the basis and the powers to take action under s. 263 as he did. 13. In the rejoinder, the ld. counsel for the assessee reiterated that the CIT never called for and examined the record for an application of mind and merely acted mechanically on the reports sent to him by the lower authorities and as such his order for lack of application of mind and lack of application of mind and lack of mention of the basis on which proceeded under s. 263, was bad in law. 14. We have given careful consideration to the rival submissions. We have also very carefully perused the impugned order of the CIT. The CIT has necessarily to state in the order under s. 263 in what manner he considered the order of the ITO as erroneous so as to be prejudicial to the interest of revenue and what the basis for such a conclusion are in view of the ratio of the judgment of the Punjab and Haryana High Court in the case of R.K. Metal Works referred to supra. When we examine the order of the CIT in the light of these observations of the Hon'ble High Court, we find that the CIT in the very opening para of his order narrates the constitution of the firm and the factum of there being a legal restriction on carry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in question by the CIT merely because subsequent to the order of the ITO some audit party happened to point out to him that in view of a judgment the order of the ITO needed a change. In this regard, it is very pertinent to note that the ld. counsel for the assessee has on merits contended that there is no finding given by the CIT that the person i.e., the person whose name was not registered in the licence or in other words who was not shown as one of the licences had in fact handled the prohibited goods under the Excise Law. This is very important because unless such a person in fact handled the goods which were prohibited to be handled by him, the judgment of the Punjab and Haryana High Court may not have applied. Without this being clear to the CIT, he could not have assumed jurisdiction under s. 263 to set aside the order of the ITO which he had made with due care and caution and after application of his judicial discretion in the matter. On this ground also the order of the CIT setting aside the order of the ITO made under s 185(1)(a) is bad in law and has to be cancelled. It is cancelled. 16. Before we close, however we would like to observe that we do not find tha conte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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