TMI Blog2009 (3) TMI 649X X X X Extracts X X X X X X X X Extracts X X X X ..... ries and would charge commission thereon. These cheques could be given as gifts or hundis to them. In the above background, returns of all these assessees for assessment year 1998-99 and onwards which had earlier been processed under section 143(1), were scanned so as to find out whether those assessees had taken accommodation entries from these accounts in the form of hundis or gifts. For that purpose, in all these cases where gifts or hundis had been disclosed, action under section 147, read with section 148, of the Act were initiated. In all these cases, the reasons for reopening are almost identical and one stereo-typed. In all these cases after examining the objections raised and after examing the relevant evidences, in proof of gifts, etc., the ld. Assessing Officer either dropped the (re)assessment proceedings or passed assessment orders under section 143(3)/147/148 after accepting the explanation of the assessees. Against these orders, the ld. CIT(A), Gwalior initiated action under section 263 of the Act after issuing requisite notices and giving opportunity of hearing to the respective assessees. The ld. CIT, found all these orders as erroneous insofar as these were prejud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound that it was coming from one of the several account opened in the names of three persons jointly in Ranipura Branch of UCO Bank where later on the account was closed and also the branch was closed. When statement of those bank account was obtained, it was found that cash was deposited and cheques were issued to various persons and those persons have shown such money as gift in their accounts. The details of the cheques issued form, these account holders on their given addresses to the bank were returned bank unserved. The cases of those beneficiaries were identified. There is information that the kingpin of these money laundering is one Shri Subhash Khurshiramani who had opened 100 or such account in fictitious and non-exiting names deposited cash and issued cheques for hundis and gifts. The beneficiaries had obtained gift or hundis by paying unaccounted cash to Shri Subhash Khushiramani who deposited them into his numerous fictitious bank accounts and then issued cheques for hundis or for gift. 2. In the above background, returns of various assessee filed for the assessment year 1998-99 and onwards and processed under section 143(1) were scanned so as to find out where the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money to give gift, what is the reason of given gift, whether it was accepted by the assessee, whether it is supported by any gift deed or whether it was witnessed by any one, etc. Thus, on account of non-disclosure of full and true facts about alleged gift, a sum of Rs. 2,00,500 should have been taxed as income of the assessee and to this extent, therefore, income has escaped assessment. Accordingly, notice under section 148(1) being issued in this case for the assessment year 2000-01." 3. The assessee filed objections against initiation of proceeding under section 147 and issuance of notice under section 148 of the Act as under: "The Income-tax Officer, 2(1), Gwalior. Ref. : In the case of Shri Radhey Shyam Agarwal (HUF) S/o Shri Ram Gopal Agarwal, J.A. Hospital Campus, Gwalior. Sub : Objection against Initiation of Proceedings under section 147 and Issuance of notice under section 148 regarding. Sir, Please refer to the copy of reasons recorded under section 148 in the case of above assessee following objection about invalidity of the notice issued under section 148 and illegality of the proceeding initiated under section 147 are raised in this case. 1. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s escaped assessment. The Assessing Officer has just issued the notice on experience. The action of the ITO and the issuance of the notice ex facio illegal in view of following Judgments : ( i ) ITO v. Lakshmani Mewal Das [1976] 103 ITR 437 (SC); ( ii ) Sheo Nath Singh v. AAC 82 ITR 147 ; ( iii ) Ganga Saran Sons (P.) Ltd. v. ITO [1981] 130 ITR 1 (SC). Point (b) : The identification of the donor were clearly mentioned in the copy of Gift Deed filed with the return, therefore, the reason mentioned in the notice is wrong, illegal and unjustified. Before initiation of reassessment proceedings, the Assessing Officer must have some material/evidence in his possession on the basis of which he could have formed the belief that assessee has escaped assessment. The attention is drawn to the following judgments which state that when facts are disclosed in accounts which are filed along with the return, it cannot be contended there was no full disclosure of facts : ( a ) Star Automobiles v. ITO 178 ITR 613 (MP); ( b ) Union Carbide (India) Ltd. v. ITO 87 ITR 529 (Cal.) (HC); ( c ) Calcutta Chromotype (P.) Ltd. v. ITO (Cal.) (HC). As regards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial in the reasons recorded by him under section 148(1). Assessing Officer s remarks as mentioned in para 2 do suggest that it is a case of investigation to genuineness of the gift. That is not the same thing a saying that Assessing Officer had any tested, verified and undoubtful material and reason to believe that income has escaped assessment. The notice issues under section 148 is, therefore, prima facie illegal and bad in the eyes of law. Reliances is placed on the following cases : ( i ) Lokendra Singh v. ITO Ratlam (M.P.H.C.) 128 ITR 450; ( ii ) Chhugmal Rajpal v. S.P. Chaliha 79 ITR 603 ; ( iii ) Kanhaiya Lal Damodar Das v. CIT 73 STC 404; ( iv ) Vipin Khanna v. CIT 122 Taxman (Punj. Har.). Further reliance is placed on the following important decisions : ( i ) Johri Lal (HUF) v. CIT 88 ITR 493 SC; ( ii ) Sri Krishna (P.) Ltd. v. ITO 221 ITR 538 SC; ( iii ) Raymond Woollen Mills Ltd. v. ITO 236 ITR 34 ; ( iv ) Phool Chand Bajrang Lal v. ITO 203 ITR 459; ( v ) Indra Prastha Chemicals (P.) Ltd. v. CIT 272 ITR 113 All. ( vi ) Nek Kumar v. Asstt. CIT (Raj. HC) [2004] 191 CTR 207; ( vii ) CIT v. Star Ferro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 259 ITR 19 1 . But, after examining the proof filed by the assessee in relation to gift of Rs. 2,00,000 he was satisfied and accepted the gift as genuine and dropped the proceedings initiated under section 147 on 28-12-2005. Thereafter, ld. CIT, issued a notice under section 263 dated 25-3-2008, proposing to revise order of ld. Assessing Officer, on the ground that he has failed to examine creditworthiness of the donor and the occasion of the gift. The assessee explained that the proceedings under section 147, being ex facie bad in law the proposed action under section 263 cannot give rise to a non est and invalid order, as the notice under section 148 was issued for enquiry and verification of the gift as a substitute to notice under section 143(2) of the Act and that the grounds on which action under section 148 was taken did not exist in this case. It was also explained that the identity, creditworthiness of the donor, copy of donor s Income-tax Return, Bank Certificate, relationship with donor, gift deed, etc., having been established or filed before ld. Assessing Officer the proceedings dated 28-12-2005, is not erroneous and prejudicial to the interest of the revenue. Bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gwalior, but if fact in all these cases no such fact was found to exist. The gifts were found to be genuine and not related to the tainted bank accounts. The ld. Assessing Officer after being satisfied with the explanation(s) of the assessee(s), either dropped the reassessment proceedings or passed orders after accepting the gifts as genuine. It was argued that since the Assessing Officer was satisfied with the genuineness of the gift(s), there remained no reasons to proceed further. It was argued that in that view of the matter, even the action under section 147/148 was not justified and since there was no occasion to raise any appeal, etc., since no addition was made, this legal issue could not be raised but in these proceedings this collateral legal issue can be raised. An argument was advanced that the gift(s) was found explained with reference to the identity and creditworthiness of the donor(s) and the genuinity of the transaction. The Assessing Officer examined the gifts from all possible angles and was satisfied, so, the impugned order(s) cannot be revised, as there cannot be treated as erroneous insofar as there are prejudicial to the interest of the revenue. Reliance was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details of cheque/draft other mode of receipt of alleged gift of whether the donor had money in his account at the time of when alleged gift was given, thus, the basis requirement for a some to be accepted as a gift has not been disclosed in the return of income. In this background, the Assessing Officers initiated. After initiation the Assessing Officers completed the assessments without making the following inquiries : 1. The Assessing Officers have completed the assessments without making any inquiry through Income-tax Inspector. The donor has not been examined on oath. The bank accounts have also not been examined. No office note is available on the record in the regard to action taken to investigate the genuineness of the gifts. 2. In some cases the gift has been received in cash. 3. In some cases the Assessing Officers have completed the assessments after receiving the copies gifts deeds and acknowledgements slips of returns only. 4. In some cases the proceedings under section 147 has been dropped without examining the veracity of the facts. 5. The Assessing Officers has failed to obtain the evidences regarding the Identity proof of donor, relationship between don ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have received gift of Rs. 4,20,000 during the period relevant to assessment year 1999-2000. On verification of records it is observed that Assessing Officer has not examined the creditworthiness of donors and genuineness of transaction. It was also observed that evidence regarding Identity, relationship between the donor and donee and occasion of gifts received from 18 persons have not been examined and placed on record by the Assessing Officer. The Assessing Officer has neither examined the bank statement of the donor nor their Identity, creditworthiness and genuineness of gifts, therefore, the CIT set aside the assessment made by the Assessing Officer. The above assessee has also shown to have received gift from 43 persons during the period relevant to assessment year 1998-99 amount to Rs. 2,74,016. Perusal of record revealed that before passing the order the Assessing Officer has not examined the genuineness of the gift and creditworthiness of the donor. The gifts are claimed to have received in cash. Assessing Officer has not verified whether the 43 donors are assessed to tax and whether they are capital worthy. During the assessment proceeding the Assessing Officer has not e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts according to which the identities and financial viabilities would be established. The gift has been given after depositing cash in bank by the donors which has not been examined by the Assessing Officer and necessary evidence has also not called for therefore the creditworthiness and genuineness of transactions remained to be explained. The action dropping the proceedings under section 147 is therefore held erroneous insofar as prejudicial to the interest of revenue by the CIT, Gwalior. ITA No. 27/Agra/08 - Shri Rajeev Kumar Agicha, Gwalior. In this case, gift amounting to Rs. 2 lakh shown to have received from Shri Dilip Kumar Khatwani by way of account-payee cheque dated 14-12-2000 drawn on Bank of India. It was found from the perusal of bank a/c that a sum of Rs. 2 lakh was deposited in the bank Account of donor on 11-12-2000 by clearing and gifted amount of Rs. 2 lakh has been cleared on 14-12-2000. The Assessing Officer has not examined the source of deposit of Rs. 2 lakh in bank account of donor immediately before making a gift. The Assessing Officer has also not obtained any evidence relating to occasion of making a gift of such a huge amount. Therefore the creditwort ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT v. Smt. Rambha Devi [1987] 164 ITR 658 (Pat.); CIT v. Belal Nisa [1988] 171 ITR 643 (Pat.); CIT v. Smt. Kaushalya Devi [1988] 171 ITR 686 (Pat.); It cannot be said that, as a result of the additional material referred to by the Commissioner there has been a violation of the principles of natural justice. That opportunity is reasonably given by stating the basic grounds on which the Commissioner thinks that the Assessing Officers order is erroneous and giving a reasonable opportunity to the assessee even to produce evidence along with facts of the case, or by cancelling the assessment and asking the Assessing Officer to make a fresh assessment according to law after making proper enquiries and investigations with regard to jurisdiction, carrying on of business, possession of initial capital and the sources of moneys invested in the names of the assessees, so that the assessee would again get full opportunity to bring evidence, if any, in support of his case. A Commissioner may not be bound to make any enquiry before making the final order and it cannot be said, in substance, that any prejudice has been caused to the assessee by failure of the Commissioner to enter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings amounted to an order of assessment in pursuance of a return filed in pursuance of a notice under section 148. ( vi ) Trilok Chandra Seth (HUF) v. Commissioner of Wealth Tax [1987] 167 ITR 564 (All.). In this case it was held that the proceedings under section 17 are distinct and separate from those of section 25(2). One is for reassessment whereas the other is for rectification. Merely because proceedings under section 25(2) were taken by issuing notice, the WTO was not debarred from initiating proceedings under section 17. During the course of hearing before Hon ble Bench on 12-2-2009 the counsel for the assessee have wrongly argued that the action taken under section 147 of the Income-tax Act, 1961 by the Assessing Officer in these cases was bad in law in spite of the fact that the appeals were filed by them against order of 263 of the Income-tax Act, 1961 and not against the Assessing Officers action under section 147. The arguments submitted by the counsels for the assessee against the action of section 147 have no relevance at this stage and the same may not be considered while deciding these appeals. This is an interim submission as discussed with the Hon bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment, or any other order to the detriment of the assessee. But a mistake or omission in the assessment order would not justify the setting aside of the whole order. 9. From the plain reading of the above provision it is manifestly clear that an order can be revised if and only if the twin conditions, viz., one that the order is erroneous and two - that to that extent it is prejudicial to the interest of the revenue co-exist. Or in other words, an order can be revised if it is both erroneous as well as prejudicial to the interests of the revenue. An order, which is only erroneous but not prejudicial, cannot be revised. Likewise an order, which is only prejudicial to the interest of the revenue but not erroneous, cannot be revised. To put it in, still simpler words, it is mandatory for the Commissioner to revise an order that both the above conditions must "co-exist". An order which is not "erroneous" cannot be revised even if it is prejudicial to the interest of the revenue, and the vice versa. 10. The subject of "revision under section 263" has been vastly examined and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the revenue. Both the conditions must be fulfilled. ( ii )Section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it is only when an order is erroneous, that the section will be attracted. ( iii )An incorrect assumption of facts or an incorrect application of law will suffice for the requirement of order being erroneous. ( iv )If the order is passed without application of mind, such order will fall under the category of erroneous order. ( v )Every loss of revenue cannot be treated as prejudicial to the interest of the revenue and if the Assessing Officer has adopted one of the courses permissible under law or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order, unless the view taken by the Assessing Officer is unsustainable under law. ( vi )If while making the assessment, the Assessing Officer examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income, the Commissioner, while exercising his power under section 263, is not permitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UCO Bank, Sarrafa Bazar, Gwalior and 011083 dated 23-10-2001. The Assessing Officer also examined the sources of income of the donors, as mentioned in his order closing the proceedings. In these circumstances, it is not understandable as to how these gifts can then be treated ingenuine even if the ld. Commissioner has different perception from the same set of facts and proofs produced even before him. The Power under section 263 vested in the ld. Commissioner is not unfettered. He cannot revise the assessment order according to his liking. If the Assessing Officer has taken a possible view on the basis of evidences available before him and after verifying the same, even if these were not written in so many words, the order cannot be branded as erroneous insofar as it is prejudicial to the interests of the revenue. All the evidences, which were filed before the ld. Assessing Officer have been enclosed in the paper book filed before us, also. We have examined them in their correct perspective. Reliance has been placed by the ld. A.R. on various decisions including that of Hon ble jurisdictional High Court, ( i.e., M.P. High Court) rendered in the case of CIT v. Mehrotra Bros. [2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evisional powers of the Commissioner only to the effect that the order can be revised only if the order is erroneous insofar as it is prejudicial to the interests of the revenue. Therefore, the ratio of the above decisions squarely apply to the facts of the case under reference. The finding of the Hon ble Supreme Court given in the celebrated decision of Malabar Industries Co. Ltd. v. CIT [2000] 243 ITR 83 are relevant for ready reference and so these are being extracted herein below : "A bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous insofar as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of twin conditions, namely, ( i ) the order of the Assessing Officer sought to be revised is erroneous; and ( ii ) it is prejudicial to the interests of the revenue. If one of them is absent - if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue-recourse cannot be had to secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment under section 263 and ordering de novo assessment on grounds of low GP rate and higher expenses towards commission - No finding by CIT that expenses were bogus and similar expenses to same parties allowed in earlier as well as subsequent assessment years - Record showing that Assessing Officer made detailed enquiry before completing the assessment - Condition precedent for invoking revisional jurisdiction not present - Revisional order quashed." 15. The Hon ble Agra Bench of ITAT has taken a similar view that if the assessment order is not written more elaborately, the same cannot be branded as erroneous by the Commissioner. This view was taken in the case of Goyal Iron Steel Works (India) Ltd. v. CIT [2002] 120 Taxman 208 (Mag.). Again Hon ble Agra Bench has taken similar view while deciding the case of Urmila Gupta v. Asstt. CIT [IT Appeal No. 4 (Agra) of 2005 vide order dated 23-2-2006]. The Hon ble Nagpur Bench of ITAT has also taken a view which supports our above finding in the case of P.K. Bhatia, Corba v. CIT [2006] 5 ITJ 235 (copy on record). The Hon ble Bench has held as under: "Revision - Under section 263 of the Income-tax Act, 1961 - The re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Revision whether it was valid or not. The Hon ble Third Member held that the Revision was not valid because it was obligatory on the part of the CIT to show for the purpose of section 263 that the assessment was erroneous insofar as it is prejudicial to the interest of the revenue. The facts of the above case are more or less on the same and similar lines as are the facts of the given case. Thus, we also draw support from the Third Member decision ( supra ). 18. It was recently decided by this Bench that once the objection filed by the assessee stand accepted, the assessee cannot be further called upon to participate in the same matter. This decision was rendered by following the decision of Hon ble Apex Court in the case of G.K.N. Driveshafts (India) Ltd. ( supra ). The decision of the Tribunal was rendered in a bunch of cases, the first case being that of Smt. Babita Arora v. CIT [IT Appeal Nos. 338, 341 to 344 and 351 to 355 (Agra) of 2008 and order dated 30-1-2009]. In this case, it was held that the order under section 263 as bad in law and, thus, was set aside. The facts, the circumstances, the reasons for re-opening, etc., of Smt. Babita Arora s case ( supra ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is no legal bar against the action of ld. CIT in case he is of the view that the Assessing Officer has not made proper enquiries prior to the passing of the reassessment order to revise the same is not tenable. This argument of ld. DR is not valid as per law. The powers of ld. CIT are not universal as said above and, moreover, it is the satisfaction of the Assessing Officer which primarily matters. Even, in a case, the ld. CIT arrives at a different conclusion on same set of facts but if the ld. Assessing Officer has taken a different but a plausible view, the same cannot be substituted by ld. CIT by his view. The other argument of ld. CIT (DR) that by setting aside and restoring the matter back, the assessee should not have grievance is also of no moment, there has to be an end and finality to litigation. The length of the assessment order or the reassessment order does not matter if the Assessing Officer has properly examined the disputed issue(s). The Hon ble Allahabad High Court has gone even to the extent in holding that even if the order of Assessing Officer is Cryptic this cannot be revised. It was so held in the case of CIT v. Mahendra Kumar Bansal [2008] 297 ITR 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he department are on different footing arising out of entirely different set of facts. The Assessing Officer has made the entire requisite enquires, therefore, the decision of Hon ble Supreme Court in the case of Rampyari Devi Saragoi v. CIT [1968] 67 ITR 84 and Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 relied by ld. CIT(DR) are not of any help to her cases. We are in agreement with ld. CIT (DR) that the order dropping the (re)assessment proceedings is a revisable order. We have, ourselves, carefully treaded through each and every case before us and are satisfied that none of these cases is found to be related with the alleged scam cases. Thus, there is no point in further awaiting for a additional written submission for that purpose only. 23. The above finding is true in all the other cases before us and, the aforesaid reasoning are also applicable to them. The facts, the circumstances, the reasons for reopening and the involvement of gift(s), etc., the nature and extent of examination of evidences so produced and the notice under section 263 and the reasons given in the order under appeal are all, mutatis mutandis, identical, therefore, the arguments, reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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