TMI Blog2007 (10) TMI 355X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 26-3-1998 set aside the assessment order with following observations: (i) The Assessing Officer had failed to conduct investigation in respect of the claim of the assessee that she was carrying on business; (ii) The Assessing Officer should conduct further enquiries in respect of names and addresses of customers to find out whether or not the business was carried on; (iii) The claim of loss from business should be further gone into; (iv) The Assessing Officer should examine the confirmation of the lease transactions concerned. In pursuance to the above directions the Assessing Officer completed the assessment on 20-3-2000 and determined the income at Rs. 28,86,030. This assessment order was a giving effect order in pursuance to CIT(A) s order dated 26-3-1998. Incidentally this assessment order was also passed under section 144 of the Income-tax Act. The CIT considered this order as erroneous and prejudicial to the interests of the revenue and accordingly he issued notice under section 263 on 18-1-2002 on the following reasons : (i) Assets totalling Rs. 3,49,683 referred to in that report were not reflected in the trial balance filed and, therefore, remained to be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectified after 27-3-1999. He further submitted that without prejudice to the above, (i) the copy of the report of the DVAC is a mere statement of allegations by a police officer, tire correctness of which, till date had not been established; (ii) the CIT had no material, except the vague allegations contained therein lobe satisfied that the order was erroneous or prejudicial to the revenue; (iii) the CIT had not even applied his mind to satisfy himself whether allegations therein were correct; (iv) his order itself is vague; (v) The charge-sheet filed by DVAC cannot be considered as record relating to the proceedings under this Act; (vi) Power cannot be exercised for starting fishing and roving enquiries CIT v. Gabriel India Ltd. [1993] 203 ITR 108 (Bom). It was further submitted on behalf of the assessee that the Assessing Officer could not have travelled beyond the directions of the CIT(A) in view of the judgment in the cases of : (a) CIT v. Jawoharlal Nagpal [1988] 171 ITR 136 (Bom.) wherein it is held that in the fresh assessment proceedings after the original assessment had been set aside the ITO had no jurisdiction to tax new source of income; (b) Kartar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power is not arbitrary or unchartered and cannot be used for starting fishing enquiry Gabriel India Ltd. s. He further submitted that on facts additions suggested by him have been considered and accepted by same officer in the hands of the respective owners, all of whom are assessees on the file of the same Assessing Officer and same CIT. He submitted that the entire property had been let out for 12 months and therefore there could not have been any reconstruction. He further submitted that during the course of the last hearing the learned Departmental Representative had referred to a number of decisions to which the assessee responds as follows : (i) In the cases reported in (i) K.A. Ramaswamy Chettiar v. CIT [1996] 220 ITR 657 (Mad.) (ii). CIT v. M.N. Sulaiman [1999] 238 ITR 139 (Mad.) and (iii) CIT v. Lakshmi Machine Works Ltd. [2000] 241 ITR 53 (Mad.) deal with materials found during the course of search under the Income-tax Act or the valuer s report which the Assessing Officer had asked for but not received at the time of assessment and it was held that these were records relating to the proceedings under this Act ; (ii) In Seshasayee Paper Boards Ltd. s case it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... technical persons and other such staff members and examine them to find out whether or not the business was in fact carried out. The appellant should be given fresh opportunity to produce relevant books of account, documents and employees for examination and other such evidence. The ownership and use of vehicles as also the claim that the actual expenses on running and maintenance were reimbursed by the customers concerned should also be examined. It should also be found out whether any evidence in the form of documents, books of account, etc., were found during the course of search of the appellant s or some connected persons premises by the State agencies. The material so found, if any, should be taken into consideration. Similarly statements given to the State authorities for explaining the deposits, investments, etc. should also be taken into consideration while deciding the issue. Further he submitted that the report from the Directorate of Vigilance and Anti Corruption, Government of Tamil Nadu (DVAC) which carried out the search in the case of Miss J. Jayalalitha on 7-12-1996 was submitted to the Assessing Officer on first occasion on 24-7-1997. As per this report the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12,060.00 41 cents of dry land in S. No. 198 of Velagapuram Village (Doc No 1587/93 dated 28-10-1993 of SRO, Uthukottai) 3,498.00 ----------- 3,49,683.70 ----------- These facts though available on record the Assessing Officer while passing the assessment order dated 20-3-2000 did not consider them. Further the learned Departmental Representative submitted as follows : (a) The CIT has revised the order of the Assessing Officer under section 263 on the ground that it is erroneous and prejudicial to the revenue. The CIT(A) did not give any specific order or direction to the Assessing Officer on remand but had clearly said that the entire assessment was set aside to be finalized afresh after carrying out enquiries and providing opportunity to the assessee. There is no direction regarding any aspect of income to be assessed or deductions to be granted etc. Thus, the entire assessment was open before the Assessing Officer who ought to have made proper enquiries and thereafter passed the assessment or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. (v) Vallabhdas Vithaldas case After amendment of section 263, statements in third parties cases also can be treated as record . (vi) CWT v. S.V. Sivarathina Pandian [2000] 241 ITR 146 (Mad.); M.N. Sulaimam case CIT can direct the officer to re-do the assessment based on valuation report received subsequently. (d) The appellant s contention and case law relied upon to the effect that the error envisaged under section 263 cannot depend on the possibility of guesswork are not at all relevant to the facts of this case, where the error has been detected not on the basis of guesswork, but substantial evidence brought out in a proceeding under the Prevention of Corruption Act, as also the DVAC s report. The remand is not for the purpose of making a roving enquiry, but to look into facts available by way of DVAC s report, charge-sheet filed in a connected matter, etc., to come to the correct conclusion on facts. (e) The order of the Assessing Officer was clearly erroneous and prejudicial to the interest of the revenue inasmuch as he had not made proper enquiries regarding source of funds of the assessee for purchase of agricultural land, machinery, renovation and additional co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are no material on record on the basis of which it can be said that the CIT acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him ill be illegal and without jurisdiction. The CIT cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond 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. The first requirement to exercise the power suo motu is that the order is erroneous. Secondly it should be prejudicial to the interests of Revenue. If the order is erroneous but not prejudicial, CIT cannot exercise the power under section 263. Every erroneous order cannot be the subject-matter of revision because second requirement must also be fulfilled. There must be prima facie material on record to show that tax which was lawfully eligible was not imposed or by application of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an adopted one of the courses permissible in law and it has resulted in loss of revenue or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Income-tax Officer is unsustainable in law. When an order of the Assessing Officer is erroneous and granted relief not in accordance with law and secondly when the Assessing Officer has failed to make out a case as is expected from him because he is an adjudicator as well as investigator, he cannot remain passive. It is the duty of the Assessing Officer to invoke an enquiry. If the Assessing Officer has failed to make an enquiry to unearth the true facts the order is said to be erroneous. In the present case the Assessing Officer is not doing the original assessment. The Assessing Officer was to give effect to CIT(A) s order dated 26-3-1998. The CIT(A) in para 16 of that order directed as follows : In the light of the foregoing the entire assessment is set aside with the direction to finalise the assessment afresh after carrying out enquiries providing pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revision of order dated 27-3-1997. To sum up the assessment order dated 20-3-2000 is not erroneous though it was prejudicial to the interests of Revenue, since the Assessing Officer has carried out the direction given by the CIT(A) vide order dated 26-3-1998 and he limited his findings to the extent which was subject matter of appeal before, the CIT(A) and he is not expected to consider any extraneous issue while passing the giving effect order. Further, we draw support from the judgment of to Supreme Court in the case of Alagendran Finance Ltd. wherein it is held as follows : Held, affirming the decision of the High Court, that the Commissioner had sought to revise only that part of the order of assessment which related to lease equalisation fund; but the proceedings for reassessment had nothing to do with that item of income. The doctrine of merger did not apply in a case of this nature : the period of limitation commenced from the dates of the original assessments and not from the reassessments since the latter had not had anything to do with the lease equalisation fund. This was not a case where the subject-matter of reassessment and the subject-matter of the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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