TMI Blog2003 (3) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... on something which was not stated in the show-cause notice. In this connection reference may be made to the decision of Hon'ble Calcutta High Court in the case of Shakuntla Devi vs. CIT (1971) 82 ITR 416 (Cal) and to another judgment of the same Hon'ble High Court in the case, of CIT vs. General Trading Agencies (1973) Tax Law Reports 1383. In the light of above legal position, we may refer to show-cause notice issued by the CIT(A) under s. 263, dt. 7th Jan., 1999. The assessment made by the AO dt. 25th March, 1997, was considered as erroneous and insofar as prejudicial to the interest of the Revenue under s. 263 for the following reasons: "(i) No partnership deed or certified copy of partnership deed was filed along with the return of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was not every error or mistake which should induce the CIT to resort to exercise of powers under s. 263 of the Act. 5. On the question of taxability of Rs. 4,588 allowed as interest to the assessee under s. 244A, the learned CIT agreed that the sum involved was small but directed the AO to verify the contention of the assessee. 6. As far as question of constitution of the assessee-firm was concerned, the learned CIT(A) observed that a change in the constitution of the firm took place in asst. yr. 1996-97. He noted the salary which was to be paid to the partners in the partnership deed operative from asst. yr. 1993-94 and the salary actually paid in the period under consideration. From the observations of the learned CIT, it is fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the same time, at pp. 2 and 3 of his order, the CIT has recorded that revised partnership deed was not placed on record. It has never been the case of the assessee that any change in the instrument of partnership took place in the period under consideration. The assessee had paid lesser remuneration and interest to partners for certain reasons and the same according to the assessee was fully justified in accordance with law. At any rate, the learned CIT could not go beyond the show-cause notice. He raised only the question that instrument of partnership was not filed by the assessee and, therefore, it was not clear to him whether salary and interest were paid in accordance with the instrument of partnership. It was not open to the CIT to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of both the parties and examined them in the light of material available on record. It is essential condition of exercise of power under s. 263 that CIT must find the assessment as erroneous and insofar as prejudicial to the interest of the Revenue. If both the above referred to conditions are not satisfied, jurisdiction under s. 263 cannot be assumed. While exercising above jurisdiction, the learned CIT has to afford fair and reasonable opportunity to the assessee and comply with principles of natural justice. The CIT cannot go beyond the issues the assessee was asked to meet in the show-cause notice. 13. We find from record that the AO while treating the assessee as a firm took note of instrument of partnership filed along with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at no change had taken place in the partnership in the period relevant to asst. yr. 1996-97. In his connection, it is relevant to mention that in the fresh assessment order passed on 15th March, 2001, in compliance to directions under s. 263, the AO has not mentioned any non-filing of instrument of partnership or revised partnership deed. He has also referred to cls. (4) and (7) of the original partnership deed (asst. yr. 1993-94). We are, therefore, of the view that the CIT was not justified in assuming jurisdiction under s. 263 for failure of the assessee to file a partnership deed or a certified copy of partnership deed. The partnership deed for asst. yr. 1993-94 was valid and operative in the asst. yr. 1996-97. Admittedly the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case, it cannot be held that the learned CIT validly assumed jurisdiction by satisfying conditions of s. 263 of the Act or exercised the jurisdiction under the above section in accordance with law. The learned CIT did not refer to or state the facts at the time of initiation of proceedings or in show-cause notice which he took into account in the final decision. Therefore, we are unable to uphold the action of the learned CIT. 16. We are further unable to uphold the order in respect of Rs. 4,588 allowed to the assessee and interest under s. 244A of the Act. The learned CIT had himself accepted that the amount was petty and tax effect on this was still pettier and, therefore, not fit enough to assume jurisdiction under s. 263. Eve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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