TMI Blog2005 (12) TMI 240X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of such material, prima facie, it cannot be believed nor could there be any reason to believe that income for this assessment year has escaped assessment. The department has no other material in its possession for having reason to believe that income pertaining to assessment year 1998-99 had escaped assessment. Thus, we are of the considered opinion that action taken u/s 148/147 was wholly illegal because there was no basis for reopening of assessment as has been done in this case. The order was, therefore, without any jurisdiction and thus void. Since the assessment order passed u/s 147/143(3) was itself illegal and void, ld. CIT(A) was having no justification to invoke jurisdiction u/s 263 against such void or now est order. We hold that as the order of the Assessing Officer passed u/s 147/143(3) was itself void, the order of CIT passed u/s 263 for quashing this order was without jurisdiction. Hence, the same is liable to be quashed. We, therefore, quash the order of the ld. CIT passed u/s 263. Thus, we quash the impugned order of ld. CIT passed u/s 263. In our opinion, there is no material before the ld. CIT to record a prima facie finding that the assessee was owne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment order which was the subject-matter of the impugned order under s. 263 was without jurisdiction and bad in law. 4. Because the initiation of proceedings by issue of notice under s. 148 having been issued by the ITO who has no jurisdiction the entire proceedings made in pursuance thereof including the impugned order under s. 263 is bad in law and liable to be quashed. 5. Because in absence of any material to justify the inference that the appellant acquired any diamond or gold jewellery in the previous year relevant to asst. yr. 1998-99, the direction made by the CIT in taking the value of diamond and gold jewellery at the rate prevailing in the previous year relevant to the asst. yr. 1998-99. 6. Because the learned CIT was not justified in law in ignoring the statement on oath and the affidavit given by the appellant categorically denying the allegations and averments made in respect of the VDIS return which the appellant never filed. 7. Because the assessment made in respect of the diamond and gold jewellery which the appellant categorically denied to have acquired and also categorically stated that the appellant was ever in possession of any diamond or gold jewellery the dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter/notice, the assessee was required to appear on 12th Feb., 2002. 5.4 On 12th Feb., 2002, the Authorised Representative of the assessee appeared and the AO drew the order-sheet dt. 12th Feb., 2002, which is as under : Order-sheet, dt. 12th Feb., 2002 Shri M.K. Shukla, advocate attended (sic-and) Sri Basant Bachani the younger brother of Shri I.K. Bachani, attended. They state that though the statements, i.e., the enclosures of the declaration have been signed by Shri I.K. Bachani but the declaration form has never been signed by him. He, i.e., Basant Bachani has also stated that someone who is rival of Shri I.K. Bachani has taken signature on the statements which was not in the knowledge of Shri I.K. Bachani. He had nothing to declare in VDIS. He is an old assessee of Ward 1(5), Kanpur and the return of income, i.e., only interest income on deposit with M/s Raj Laxmi Traders, Naughara, Kanpur. He is required to file an affidavit to that effect. Adjourned for 26th Feb., 2002. 5.5 In compliance to this direction, Shri Inder Kumar Bachani appeared before the AO on 26th Feb., 2002 on which date his statement was recorded (copy available at pp. 28 to 32 of the paper book). Shri Inder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to asst. yr. 1998-99, income could not be assessed from undisclosed income in that year. In para (v), it was specifically submitted that the proceedings of reassessment initiated under s. 148 are unwarranted and without jurisdiction. 5.10 The learned CIT, however, passed order under s. 263 on 29th Jan., 2003 and set aside the order of AO. The relevant observations and direction of the learned CIT are being reproduced as under : 6. As already mentioned above, the assessment under s. 148/143(3) of the IT Act, 1961 was made on the basis of a set of documents forwarded by CIT-II, Surat, regarding declaration made by the assessee under VDIS-1997. The issue involved in the notice under s. 263 of the IT Act was whether the income declared by the assessee under the VDIS-1997 should be taken at Rs. 5,34,312 (being the value of assets as on 1st April, 1987) or whether the value of assets should be taken at the market value during the financial year 1997-98 in which the assets have been treated to be acquired in absence of any immunity available to the assessee. Obviously, the assets were declared for the first time during the financial year 1997-98 and no immunity under VDIS-1997 was availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was explained by the learned counsel that even as per the alleged affidavit and the declaration, etc. the assessee had disclosed income on account of acquisition of diamond, jewellery, cash, etc. for asst. yrs. 1980-81, 1981-82, 1984-85 to 1997-98. In this regard, he made specific reference to statement of voluntarily disclosed income available at pp. 39 and 40 of the paper book and affidavit at p. 42 of the paper book. It was pointed out that even before the AO, the assessee challenged the proceedings on this basis but the AO had not adjudicated the issue while completing the assessment order. In this regard also, he made reference to the letter of the assessee dt. 15th Nov., 2002 available at p. 20 of the paper book and letter dt. 11th Jan., 2003 available at pp. 21 and 22 of the paper book. 6.2 Thus, the argument of the learned counsel for the assessee was that since the order passed under s. 148/143(3) was itself an invalid order, the learned CIT did not have any power to exercise jurisdiction under s. 263 against a void and non est order. In support of this contention, the learned counsel for the assessee placed reliance on the decision of the Cochin Bench of the Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had not been able to substantiate such version. Neither any FIR was filed by the assessee against any such fraud nor any specific details of such fraud had been given. It may be that the assessee might have prepared some documents but later on might have not filed the same and somebody else taking advantage of the situation might have sent the papers to the office of CIT, Surat. However, in absence of any strong explanation, it cannot be believed that the papers were signed by the assessee under some misrepresentation, fraud or coercion. Thus, we hold that the papers of VDIS were prepared by the assessee and the same have been signed by him as also admitted by him. 8.1 So far as the next contention is concerned, we find full force in the submissions of the learned counsel for the assessee. In the VDIS, the disclosure pertains to other assessment years and not to asst. yr. 1998-99. We consider it proper to reproduce the statement of VDIS, which is as under : Sr. No. Amount of Income declared (in figures and words (Rs.) Assessment year(s) to which the income relates If the income is represented by cash (including bank deposits), jewellery, bullion, investment in shares, deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out that except these two documents, there is no other material with the Department to hold that the assessee had acquired any jewellery or any property in the previous year relevant to the asst. yr. 1998-99. In fact, in this aspect of the matter, no enquiry was conducted by the Department. Thus, there is no material on record to show that the assessee had acquired any jewellery or any other property in previous year relevant to asst. yr. 1998-99. The only material available with the Department were the documents relating to VDIS, referred to and reproduced above. Whatever conclusion could be drawn about acquisition of property and year of acquisition, has to be only on the basis of such documents which constituted the only material available before the Departmental authorities. 8.4 We may point out that addition under s. 69A can be made only when it is found that the assessee is owner of any money, bullion, jewellery, etc. or other valuable article, etc., in the financial year relevant to the assessment year in which addition on account of unexplained money, etc., is made. The provisions of s. 69A are as under : 69A Where in any financial year immediately preceding the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er passed under s. 147/143(3) was itself illegal and void, learned CIT was having no justification to invoke jurisdiction under s. 263 against such void or non est order. In the case of Paul John, Delicious Cashew Co. (supra), the Cochin Bench of the Tribunal had considered the similar matter and has observed as under : 9. Sec. 263 empowers the CIT to call for the records and examine of any person and on examining if he forms an opinion that the order passed by the AO is erroneous insofar as it is prejudicial to the interest of Revenue, he may after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such orders thereon as the circumstances of the case justify, enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. From the above it is very clear that first of all the order passed by the AO should be erroneous and also it should be prejudicial to the interest of Revenue. If the order is not erroneous, even if it is prejudicial to the interest of Revenue, the CIT has no revisionary power. If the AO has no jurisdiction to pass an order, it is not an order at all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g satisfied with the explanation of the assessee. This decision of the ITO could not be held to be 'erroneous' simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the CIT himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the ITO to re-examine the matter. That was not permissible. The Tribunal was justified in setting aside the order passed by the CIT under s. 263. 8.11 In view of the ratio of the said decision and further in view of the decision of Tribunal, Mumbai Bench in the case of Patel Cotton Company Ltd. vs. Asstt. CIT (supra), we are of the considered opinion that the learned CIT was not justified in holding that the order of the AO was erroneous or prejudicial to the interest of Revenue. On this ground also, the order of learned CIT is liable to be quashed. 8.12 In the result, the appeal of the assessee is allowed and is disposed of as above. 9. Now, we take up appeal No. 623/Lucknow/2005. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arguments have been discussed by us while deciding that appeal. The learned counsel also placed reliance on the decision reported in the case of Smt. Kamini Hanskamal Grover vs. ITO (supra) and pointed out that in that case also, facts were similar and Ahmedabad Bench of Tribunal has held the assessment order as illegal. 13. On going through the record, it is clear that with regard to accounting year relevant to asst. yr. 1998-99, no undisclosed income was declared by the assessee in the alleged VDIS papers and, therefore, there was no material to have reason to believe that the income of the assessee had escaped assessment. It is thus not discernible as to how the AO prima facie believed that the income for the asst. yr. 1998-99 has escaped assessment. As there was no material to form any belief for reopening the assessment for this assessment year and also there was no information or material in possession of the AO to authorise him to believe that reasons existed for opening the assessment for asst. yr. 1998-99, the assumption and jurisdiction by the AO for initiating action for reassessment cannot be justified. In our opinion, the AO ought not have reopened the assessment for t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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