TMI Blog2010 (8) TMI 745X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act ), the Income-tax Appellate Tribunal ( the Tribunal ) has referred the following question of law at the instance of the Revenue : Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct both on facts and in law for holding that the provisions of section 263 of the Income-tax Act have not been rightly invoked in this case for the assessment year 1982-83 ? 2. This reference relates to the assessment year 1982-83. The assessment for the aforesaid year was completed by the Income-tax Officer on Sep- tember 19, 1984, on a total income of ₹ 90,031 as against the returned income of ₹ 69,500. On going through the assessment records of the assessee, the Commissioner of Income-tax served a notice to the assessee dated March 17, 1987, stating therein that while completing the assess- ment the Income-tax Officer did not inquire into the genuineness of the capital investments of the two partners, Smt. Ratni Devi and Shri Sagar Mal Bardie, for the sums of ₹ 49,000 and ₹ 40,000, respectively, and unsecured loans of ₹ 98,500 taken from M/s. Stutee Chit and Finance (P) Ltd. The Commissioner of Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was submitted that the said amount was withdrawn from the said chit fund. The assessee-firm had subscribed the chit of the above com- pany and the same was received on account of bid in the auction held on January 24, 1981. It was explained that a cheque of ₹ 1,30,000 was received in favour of the firm which was drawn on the Bank of India, Taya- buri Industrial Area, New Delhi. A photocopy of the pass book of the said chit fund company was placed before him. It was further stated that M/s. Stutee Chit and Finance (P) Ltd. is assessed to income-tax with the Income-tax Officer, Company Circle XXI under GIR No. 379-S. A photo- copy of the assessment order for the assessment year 1982-83 was placed on record. Regarding the discrepancy for the date of closing of the account- ing year, it was explained in detail. Notwithstanding the Commissioner of Income-tax by his order dated March 27, 1987, held that the assessment order passed by the Income-tax Officer was erroneous and prejudicial to the interests of the Revenue and that the same was set aside. A direction was given to the Income-tax Officer to reframe the assessment after examining the aforesaid issues. 5. Against the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorized by the Board in this behalf under section 120 ; (b) 'record' shall include and shall be deemed always to have included all records relating to any proceeding under this Act avail- able at the time of examination by the Commissioner ; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject-matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. . . . 7. The learned counsel for the assessee submitted that every aspect of the matter was dealt with by the Income-tax Officer, though no specific men- tion was made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertake the exercise of answering the reference, it is deemed expedient to reiterate the governing principles laid down by courts with regard to the exercise of power by the Commissioner under the pro- visions of section 263 of the Act. The power of suo motu revision exercis- able by the Commissioner is undoubtedly supervisory in nature. The open- ing words of section 263 empowers the Commissioner to call for and examine the record of any proceedings under the Act. A bare reading of section 263 also makes it clear that 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 it is prejudicial to the Revenue-recourse cannot be had to section 263(1) of the Act (See Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC)). 10. As regards the scope and ambit of the expression erroneous , a Divi- sion Bench of the Bombay High Court in CIT v. Gabriel India Ltd. [1993] 203 ITR 108, held with ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the earlier finding of the Income-tax Officer was erroneous and prejudicial to the interests of the Revenue and that fresh determination of the case is warranted. There must be material to justify the Commis- sioner's finding that the order of the assessment was erroneous in so far as it was prejudicial to the interests of the Revenue. 13. It is also trite that there is a fine though subtle distinction between lack of inquiry and inadequate inquiry . It is only in cases of lack of inquiry that the Commissioner is empowered to exercise his revisional powers by calling for and examining the records of any proceedings under the Act and passing orders thereon. In Gabriel India Ltd. [1993] 203 ITR 108 (Bom), it was expressly observed (page 114) : The Commissioner 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-judi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r on being satisfied with the explanation of the assessee. Such decision of the Income-tax Officer cannot be held to be erroneous simply because in his order he did not make an elaborate discussion in that regard. 14. From the above, in our considered opinion, it is clear that in the ultimate analysis it is a pre-requisite that the Commissioner must give reasons to justify the exercise of suo motu revisional powers by him to reopen a con- cluded assessment. A bare reiteration by him that the order of the Income- tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, will not suffice. The exercise of the power being quasi-judicial in nature, the reasons must be such as to show that the enhancement or modification of the assessment or cancellation of the assessment or direc- tions issued for a fresh assessment were called for, and must irresistibly lead to the conclusion that the order of the Income-tax Officer was not only erroneous but was prejudicial to the interests of the Revenue. Thus, while the Income-tax Officer is not called upon to write an elaborate judg- ment giving detailed reasons in respect of each and every disallowance, dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicial to the inter- ests of the Revenue, the Tribunal was justified in reversing that order. 17. Similar view was expressed by the Punjab and Haryana High Court in CIT v. R. K. Metal Works [1978] 112 ITR 445 (P H) as follows (page 447) : When the assessee filed a detailed written statement before him, the Commissioner did not deal with any of the points raised in the statement. He thought that the best course in the circumstances was to remand the matter to the Income-tax Officer for consideration of the points raised in the assessee's written statement. That certainly was not the proper course to be adopted by him. It was necessary for the Commissioner to state in what manner he considered that the order of the Income-tax Officer was erroneous and prejudicial to the interests of the Revenue and what the basis was for such a conclu- sion. After indicating his reasons for such a conclusion, it would cer- tainly have been open to him to remand the matter to the Income-tax Officer for such other investigation or enquiry as might be necessary. 18. We are thus of the opinion that the provisions of section 263 of the Act, when read as a composite whole make it in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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