TMI Blog2007 (1) TMI 579X X X X Extracts X X X X X X X X Extracts X X X X ..... ial relief. The fact remains that the issues on which CIT revised the order u/s 263 had been considered and decided in appeal by the CIT(A). Therefore, as per Expln. (c) to s. 263(1), the CIT, Bhatinda was not justified in assuming jurisdiction u/s 263 in respect of matters already considered and decided in appeal. Such action of the CIT was illegal and without jurisdiction. Therefore, the impugned order passed by the CIT is liable to be quashed on this ground itself. Accordingly, the order passed u/s 263 is quashed and the ground of appeal of the assessee is allowed. From the facts discussed above, it is obvious that the show-cause notice issued to the assessee on 28th March, 2003 was served on the assessee on 29th March, 2003 asking for compliance on 31st March, 2003 at 10.30 A.M. Thus, effectively the assessee was allowed only one day's time for submitting its reply. The opportunity to be allowed to the assessee before passing an order under s. 263 has to be a reasonable and effective opportunity. It is not merely a formality. The various judgments, relied upon by the assessee and referred to above also support this view. In fact, the assessee had requested the CIT to all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... already been subject-matter of appeal under s. 250(6). As such the order passed under s. 263 is unjust and unlawful being patently invalid. (ii) That the learned CIT, Bhatinda, has erred in law and facts in passing order under s. 263 without affording proper opportunity to assessee appellant. Therefore, the order passed is against natural justice, the same be set aside. 3. The facts of the case are that the assessee filed return of income for the assessment year under consideration on 21st Oct., 1998 declaring therein income of ₹ 1,68,896. The assessee was carrying on business of 'Kachi Arhat' (commission agent) in respect of agricultural produce grown by the farmers. The IT authorities carried out survey operation under s. 133A of the Act where a large number of loose papers containing transactions of loans advanced to the agriculturists, interest received on such advances and sale of agricultural crop/produce of the farmers were found. The assessee surrendered income of ₹ 2 lakhs on account of additional income not reflected in the regular books of account. Thereafter, the AO selected the case under scrutiny and issued notices under s. 143(2) from ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 1,26,310 on this point. As regards the addition made on account of peak credits i.e. unexplained investment by way of loans, the learned CIT(A) observed that admittedly these transactions did not appear in the regular books of account. However, he observed that the assessee being an Arhtia, rotated the money fast as number of agriculturists bring their produce for sale and the same was sold on the same day to different parties including Government agencies. Thus, keeping in view the circulation of money, the learned CIT(A) reduced the addition in respect of peak credit from ₹ 1,65,000 to ₹ 85,000 and thereby allowed a relief of ₹ 80,000 on this account. Both the Revenue and the assessee filed appeals against the order of CIT(A) before the Tribunal. The appeal filed by the Revenue was dismissed by the Tribunal, Amritsar Bench vide its order dt. 28th May, 2002on the ground that the tax effect was less than the monetary limit prescribed by the CBDT for filing an appeal before the Tribunal. However, the assessee's appeal filed against the order was pending with the Tribunal. 5. Subsequently, the CIT, Bhatinda issued a show-cause notice dt. 28th March, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Renusagar Power Co. Ltd. v. CIT [1998] 234 ITR 782 (All), the learned counsel submitted that no enforceable order under s. 263 could be passed by the CIT without hearing the assessee. He further relied on the judgment of Hon'ble Andhra Pradesh High Court in the case of CIT v. G.K. Kabra [1995] 125 CTR (AP) 55 : [1995] 211 ITR 336 (AP), the judgment of Hon'ble Madhya Pradesh High Court in the case of CIT v. Chandan Wood Products [1996] 132 CTR (MP) 550 : [1996] 217 ITR 834 (MP). He submitted that opportunity to be granted to the assessee must be effective and cannot be an empty formality. He submitted that in the present case, the CIT issued a show-cause notice on 28th March, 2003 and served on the assessee in the evening of 29th March, 2003 for compliance on 31st March, 2003 at 10.30 A.M. He submitted that despite the fact that the assessee requested for grant of sufficient time so as to enable it to file proper reply, the CIT, Bhatinda, proceeded to pass order under s. 263 on 31st March, 2003. Thus, he submitted that time allowed by the CIT, Bhatinda, just for one day could not be considered as sufficient and, therefore, the order passed by the CIT, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t aside and restored to the file of CIT, Bhatinda for reconsideration of the issue after allowing reasonable opportunity to the assessee. As regards the contention of the learned Authorised Representative that the issues have been subject-matter of appeal and decided by the CIT(A), Bhatinda, the learned CIT (Departmental Representative) submitted that while completing the assessment under s. 144, the AO had not taken into account all the entries for working out the peak amount of unexplained investment and had also not included the entire interest received/accrued on the unexplained advances given to the farmers. Thus, he submitted that it could not be said that the CIT(A) has considered and decided the issues on which CIT passed an order under s. 263. 9. We have heard both the parties and carefully considered the rival submissions, examined the facts, evidence and material placed on record. We have also gone through the orders of the authorities below. The undisputed facts of the case are that while completing the assessment under s. 144, the AO considered the entries noted on the documents found during the course of survey and worked out the peak amount at ₹ 1,65,000 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3, twin conditions i.e. that the order passed by the AO should be an erroneous and prejudicial to the interests of Revenue must be satisfied. Both the conditions must be satisfied simultaneously. If only one condition is satisfied, the order passed by the CIT under s. 263 would be without jurisdiction and bad in law. Reliance in this regard is placed on the judgment of Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC). No doubt, the powers conferred on the CIT are very wide to cover any order passed by the AO, but Expln. (c) to sub-s. (1) of s. 263 of the Act inserted by the Finance Act, 1988, w.e.f. 1st June, 1988 circumscribes powers of CIT under s. 263 in cases where the issues have been subject-matter of appeal only to those issues which have not been considered and decided in such appeal. It would be appropriate to reproduce hereunder Expln. (c) to s. 263(1) of the Act : Explanation (c ): where any order referred to in this sub-section and passed by the AO had been the subject-matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the CIT under this sub-section shall extend and shall b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt worked out to ₹ 85,000 and not at ₹ 1,65,000. Therefore, it would not be correct to say that CIT(A) had not considered all the entries noted on the documents found during survey. He also found that exact addition on account of interest worked out to ₹ 5,09,477. Thus, it is clear that the CIT, Bhatinda passed order under s. 263 in respect of both the issues which have already been considered and decided by the CIT(A) in appeal. May be that there was mistake on the part of the AO in working out the quantum of addition on account of unexplained investment and interest accrued/received on the undisclosed advances. But it cannot be said that the issues were not considered by the CIT(A) in appeal. In fact, the learned CIT(A) is vested with wide powers coterminus with that of AO. These powers also include enhancement of income. Now if the learned CIT(A) after referring to the entries was of the view that there was under-assessment, he could have exercised such powers and enhanced the income. But the CIT(A) on the contrary allowed partial relief. The fact remains that the issues on which CIT revised the order under s. 263 had been considered and decided in appeal by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsuance of order passed by the CIT, Bhatinda, under s. 263, the AO completed the assessment under s. 143(3) on 22nd March, 2004 by adding an amount of ₹ 27,09,100 being unexplained investment in the loans advanced to the agriculturists and amount of interest on loans at ₹ 8,07,703. The assessment was completed on a total income of ₹ 34,85,700 after reducing an amount of ₹ 2 lakhs surrendered at the time of survey under s. 133A of the Act. 10.2 Being aggrieved, the assessee filed an appeal before the CIT(A) against the assessment order where grounds relating to legality of order passed by CIT, Bhatinda, under s. 263 were also taken. The grievances of the assessee projected through its grounds before the CIT(A) were that since the issues on which order under s. 263 is passed have already been considered and decided by the CIT(A), the order, passed by the CIT under s. 263 was illegal and bad in law. It was also submitted that the order passed under s. 263 without affording reasonable opportunity in violation of principle of natural justice was illegal and bad in law. The learned CIT(A) considered the submissions and held that since both the issues were consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lained investment was not required to be made on the basis of peak amount but on the basis of entire amount of ₹ 27,09,100. The CIT had further observed that the entire interest of ₹ 8,07,703 accrued/received on the advances was liable to be included in the total income of the assessee. Since such order was binding on the AO, these additions were rightly made by him. Therefore, the observations of the CIT(A) that the AO could not enhance the income while completing the assessment in pursuance of the directions given by the CIT under s. 263 were illegal and without jurisdiction. Since the appeal against order under s. 263 lies with the Tribunal, such observation could have been made only by the appellate authority before whom the appeal is filed. Thus, we set aside the order of the CIT(A) and allow these grounds of appeal of the Revenue. However, considering the fact that the order under s. 263 has already been quashed by this order in the appeal filed by the assessee, this order will not have any effect on the final outcome of this appeal. We order accordingly. 11. We now take up CO filed by the assessee which relates to appeal of the Revenue in ITA No. 576/Asr/2004. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the relevant period, if it is satisfied that there was a sufficient cause for not presenting it within prescribed period. But it is for the party concerned to explain the delay with a sufficient cause. In the case of CIT v. Ram Mohan Kabra [2002] 178 CTR (P H) 274 : [2002] 257 ITR 773 (P H), the Hon'ble Punjab Haryana High Court has held that where the legislature spells out a period of limitation and provides for power to condone the delay as well, such delay can be condoned only for sufficient and good reasons supported by cogent and proper evidence. It is a settled principle of law that provisions relating to the specific period of limitation must be applied with their rigour and effective consequences. In this case, the Tribunal had not condoned the delay of 4 days in filing the appeal. On the basis of reasons given by the Tribunal, the Hon'ble High Court upheld the order of the Tribunal for not condoning the delay. The attention of the learned counsel was drawn to the judgment of the Hon'ble Supreme Court in the case of Vedabai alias Vaijayanatabai Baburao Patil v. Shantaram Baburao Patil Ors. [2002] 173 CTR (SC) 300 : [2002] 253 ITR 798 (SC), wherein the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted, the Tribunal observed that there was no merit in the Revenue's petition for condonation of delay. Therefore, the Tribunal declined to condone the delay. Thus, from the facts discussed above, it is obvious that the assessee failed to explain that delay in filing the CO was caused due to a sufficient reason. Therefore, we are of the considered opinion that it is not a fit case for condoning such inordinate delay. Accordingly, the request of the assessee for condoning the delay is rejected and the CO is dismissed being filed beyond the statutory time limit prescribed in the Act. 11.3 Before parting with this issue, we wish to add that this issue is only of an academic interest. The cross-objections of the assessee relate to the appeal filed against the order of CIT(A) relating to an assessment under s. 143(3) made by the AO in pursuance of order under s. 263 passed by the CIT, Bhatinda. We have already quashed the order under s. 263. Therefore, all subsequent actions taken including the assessment made by the AO in pursuance of order under s. 263 are also illegal and bad in law. Therefore, even if the CO filed by the assessee is dismissed, the same would have no consequ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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