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Kavadi Narsimha Versus Commissioner of Income Tax, Central - II, New Delhi.

Validity of order passed u/s 263 - agricultural income undisclosed - Held that:- It was noted by CIT from the assessment records so far as agricultural income is concerned that during the course of assessment proceedings document to substantiate the agricultural return like khasra / Girdawari document were neither called for by the assessing officer nor filed by the assessee. Before the CIT the assessee has taken a plea that his father owns 15 acres of agricultural land and his brother has carri .....

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al income was examined by the assessing officer. The Ld. A.R was fair enough to concede that the assessing officer has not raised any query in this regard. This itself prove that this is a case of no inquiry.

Cash in hand, cash deposited in bank and investment in immovable assets - Held that:- The assessee does not have any leg to stand as in the case of the assessee, the assessing officer has not made inquiries on most of the issues as pointed out by us and even the Ld. A.R also agr .....

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aking one of the possible views. It is also not a case of inadequate inquiry on all the issues but a case where no inquiry has been conducted by the A.O in three issues out of the five issues on which show cause notice was issued by the CIT u/s 263. Non application of mind on the part of the Assessing Officer and accepting the income of the assessee without making an enquiry will tantamount that the order is erroneous and prejudicial to the interest of the Revenue.

In view of aforesai .....

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r the Appellant : Shri Sudesh Garg, Adv. For the Respondent : Shri Sulekha Verma, CIT, D.R. O R D E R PER P.K. BANSAL Since ground nos. 1 to 3 involved in all these appeals are common, therefore, these appeals are disposed of by this common order. All these appeals have been filed by the assessee against the respective orders of CIT, Central-II, New Delhi dtd. 24.12.2010 for the assessment years 2001-02 to 2007-08. However, ground nos. 1 to 3 are common in all the appeals whereas ground no.4 of .....

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the appellant. 3. The Ld. CIT has grossly erred on facts as well as in law in setting aside the assessment order u/s 263 and in directing the AO to make further enquiries / investigation as according to him, the enquiries / investigation conducted by the AO during assessment proceedings were not enough / proper. 2. The ground no.4 taken in each of the appeals is reproduced as under in respect of each appeal:- ITA No.953/DEL/2011 : 4. The Ld. CIT has grossly erred on facts as well as in law in c .....

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d forward figure from last year. c) Cash deposited in the bank accounts without even pointing out as to how much cash was deposited and in which account during this year. d) Investment in immovable assets without pointing out as to which investment was made and in which property during this year. e) No proper examination of seized material without pointing out as to which document was not at all examined by the AO. f) Considering the transactions pertaining to other assessment years during this .....

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me to the appellant. b) Cash deposited in the bank accounts without even pointing out as to how much cash was deposited and in which account during this year. c) Investment in immovable assets without pointing out as to which investment was made and in which property during this year. d) No proper examination of seized material without pointing out as to which document was not at all examined by the AO. e) Considering the transactions pertaining to other assessment years during this year. f) Non .....

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s name or the evidence of agricultural income in his father s hands who has given share from agricultural income to the appellant. b) Cash deposited in the bank accounts without even pointing out as to how much cash was deposited and in which account during this year. c) Investment in immovable assets without pointing out as to which investment was made and in which property during this year. d) No proper examination of seized material without pointing out as to which document was not at all ex .....

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crepancy in the cash flow statement of appellant s father or the ownership of agricultural land in his father s name or the evidence of agricultural income in his father s hands who has given share from agricultural income to the appellant. b) Cash deposited in the bank accounts without even pointing out as to how much cash was deposited and in which account during this year. c) Investment in immovable assets without pointing out as to which investment was made and in which property during this .....

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ment order as erroneous and prejudicial to the interest of revenue on the following issues :- a) Cash deposited in the bank accounts without even pointing out as to how much cash was deposited and in which account during this year. b) Investment in immovable assets without pointing out as to which investment was made and in which property during this year. c) No proper examination of seized material without pointing out as to which document was not at all examined by the AO. d) Considering the t .....

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ointing out as to how much cash was deposited and in which account during this year. b) Investment in immovable assets without pointing out as to which investment was made and in which property during this year. c) No proper examination of seized material without pointing out as to which document was not at all examined by the AO. d) Considering the transactions pertaining to other assessment years during this year. e) Non-examination of the loan transactions without referring to any particular .....

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hich investment was made and in which property during this year. c) No proper examination of seized material without pointing out as to which document was not at all examined by the AO. d) Considering the transactions pertaining to other assessment years during this year. e) Non-examination of the loan transactions without referring to any particular transaction which was not at all examined. f) No proper examination of cash found during search. 3. Ground nos. 1 to 3 of these appeals relate to t .....

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e filed the return for aforesaid assessment year on 21.08.2008 declaring taxable income of ₹ 2,90,440/- from salary and agricultural income. Assessment u/s 153A /153B r.w.s. 143(3) were completed on 31.12.2008 by the assessing officer, Central Circle-III, New Delhi at the returned income. On examination of the record the CIT invoked the jurisdiction u/s 263 and issued show cause notice to the assessee on 09.07.2010 as per the provision of section 263. The said show cause notice read as und .....

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e derived from land which is situated in India and is used for agricultural purposes;] (b) any income derived from such land by _ (i) agriculture; or (ii) the performance by a cultivator or receiver of rent-in kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market; or (iii)the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no proce .....

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uch income. Further no expenses have been claimed by you as incurred to earn the said income. During the course of assessment proceedings, documentary evidence to substantiate the said agriculture income, like khasara/ Girdawari document, etc. were neither called for by the A.O. nor were filed by you, either along with the return of income, or during the course of assessment proceedings. As such, accepting the agriculture income as declared by you in the return of income, by the Assessing Office .....

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you have made small amounts of withdrawals from your bank account, as and when required for your day to day expenditure. The A.O failed to enquire the purpose of making small withdrawals, if their was such huge cash in hand lying in your possession. The A. also failed to confront you about the source of said claim and genuineness of the said contention. As such, accepting the cash in hand as on 01/04/2000, without any verification, enquiry and application of mind is erroneous and prejudicial to .....

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dated 22/10/2008, you have furnished the copies of your bank statements. However, the bank statement of ICICI Bank, S.B. A/c No. 05601502207, 47 Mission Street, Pondichery had not been filed by you, though it is mentioned in the covering letter. The A.O did not pointed out this discrepancy, which also shows that the details filed by you were not examined properly. Thus it is apparent that the issue under consideration, was not properly investigated and examined by the Assessing officer. Hence, t .....

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etails of monies received, amounting to ₹ 6,39,000/- and also expenditure details regarding purchase of building for ₹ 6,66,000/-. It is observed that the Assessing Officer during the course of assessment proceedings had not examined the various properties held by you; evidence regarding the date of their purchase; source of said investments, if purchased during the block period and the purpose for which the same were put to use. A letter was written to Govt. of Mizoram by the Invest .....

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xamination of the seized material : During the course of search proceedings, a diary market as Annexure A/RK/211/2, Laptop and other incriminating documents were found and the same were seized by the Investigation Wing. It is seen that the said documents were not properly examined by the A.O during the course of assessment proceedings. Regarding the Laptop, the A.O only observed that nothing incriminating regarding any land deal has been found. However, the A.O failed to examine the other files, .....

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ot be considered as erroneous and prejudicial to the interest of the revenue on the above issues and the same may be accordingly revised as per the provisions of section 263 of the Act. You are hereby given an opportunity to file submissions on the issues raised, as mentioned above, on or before 30.07.2010. 4. Similar type of notices were issued of the even date in each of the assessment years. In reply to the show cause notice the assessee submitted vide his letter dated 03.12.2010 that initiat .....

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aised by the CIT and it was submitted that it is not a case of non-examination. It is totally incorrect and unfair to content that the assessing officer had not undertaken any inquiry/ verification with respect to seized material. In these submissions the assessee also relied on the following case laws :- 1) Malabar Industrial Co. Ltd Vs CIT, 243 ITR 83 (SC). 2) CIT Vs Dhanpat Rai in ITA No. 837/2010 dated 13.07.2010.(Del.) 3) CIT Vs Gabriel India Ltd, 203 ITR 108 (Mum). 4) CIT Vs Ganpat Ram Bis .....

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(1A) of the Income Tax Act, Agriculture income includes (a) any rent or revenue derived from land which is situated in India and is used for agricultural purposes;] (b) any income derived from such land by _ (i) agriculture ; or (ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market; or (iii) the sale by a cultivator or receiver of ren .....

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ried on : However in the case of the assessee, he is clearly not owning any such land or earning any such income. Further no expenses have been claimed by the assessee, purported to have been incurred to earn the said agriculture income. It is also seen that during the course of assessment proceedings, documentary evidence to substantiate the said agriculture income, like Khasara / Girdawari document, etc. were neither called for by the Assessing Officer, nor were filed by the assessee, either a .....

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ubmitted that he has during the course of assessment proceedings, vide his reply dated 24/11/2008, explained the A.O that he had on several occasions received the share of agricultural income from his father, who is an agriculturist. The assessee mentioned that his father in his statement recorded on 15.11.2006 has deposed that he owns about 15 acres of agricultural land and that the assessee s younger brother does the agricultural work, and this fact which was also confirmed by the younger brot .....

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were submitted before the AO vide letter dated 24.11.2008. The assessee thus concluded that the A.O had undertaken enquiry and verification of the agriculture income as declared by him in his return of income. The above contentions of the assessee were considered and examined and it was found that the same are neither factually correct nor legally tenable. Firstly, perusal of assessment record of the assessee shows that the issue of agriculture income was never raised by the assessing officer d .....

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counsel have not signed this statement. Since the statement was unsigned, it had no legal value. Even otherwise, the payment received by the assessee from his father or brother, under no provisions of the Income Tax Act, can be considered as agriculture income of the assessee. As the assessee is neither owning any agriculture land, nor is himself a cultivator, none of the receipts of the assessee can be regarded as his agriculture income. As mentioned in the earlier paras, the Hon ble Apex Cour .....

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le Karnataka High Court in the case of Thalibai F. Jain Vs ITO [1975] 101 ITR 1 (Kar.). had held that assessments made in undue haste and without an enquiry whether the income offered was that of the assessee or someone, else, are prejudicial to the interests of the revenue. Further, as alleged by the assessee, his father and brother in their statement recorded on 15/11/2006 had never confirmed giving any such share of their agriculture income to the assessee. The father of the assessee has only .....

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assed by the Assessing Officer, on this issue, is erroneous and prejudicial to the interest of the revenue. 2. Cash in hand as on 01/04/2010 : It is seen that the assessee in the details filed by him during the course of assessment proceedings, has alleged that he was having cash in hand of ₹ 2,92,192/- as on 01/04/2000. It is seen that during the course of assessment proceedings, the source and genuineness of the said cash at the beginning of the block period was never enquired by the A.O .....

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contention. Accordingly in the notice dated 09.07.2010, the assessee was asked to show cause as to why the order passed by the A.O on this issue may not be taken as erroneous as the same is prejudicial to the interest of the revenue. The A.R of the assessee in the reply filed on 03/12/2010 submitted that during the course of assessment proceedings, the assessee vide his submission dated 24/11/2008, has submitted the balance sheet dated 31/03/2000, which has been carried forward as opening cash .....

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as found that the same are not factually correct. There is nothing in the Statement of Affairs for the year ending 31/03/2000, which can justify the cash in hand of ₹ 2,92,192/-. Moreover, the assessee has not filed any statement of affairs with his regular return of income. During the search at the office and residential premises of the assessee, no such books of accounts or statement of affairs were found. Hence, it is apparent, that the statement of affairs was an after thought, prepare .....

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cial for any assessment and if that is not done, then the assessment is clearly erroneous and prejudicial to the interest of revenue. Hon ble Patna High Court in the case of CIT Vs. Pushpa Devi [1987] 164 ITR 639 (Pat.) has held that enquiry into the source of the initial capital is crucial for the Assessing Officer. If that is not done, the assessment is bound to be erroneous and hence prejudicial to the revenue. Since, the Assessing Officer has failed to enquire into the source of initial capi .....

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ide letter dated 22/10/2008, had furnished the copies of his bank statements. However, the bank statement of ICICI Bank, S.B. A/c No. 05601502207, 47 Mission Street, Pondichery had not been filed by him, though the same is mentioned in the covering letter. The A.O had not pointed out this discrepancy, which further shows that the details filed by the assessee were not examined properly. Thus it is apparent that the issue under consideration, was not properly investigated and examined by the Asse .....

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tly vide letter dated 18/08/2008 has raised specific query with regard to verification of deposits in bank account and discrepancies as identified by the A.O. The assessee submitted that in this notice, the A.O has also asked the assessee to file copies of all bank statement alongwith the explanation of the entries. The assessee further submitted that the aforesaid queries were duly replied by him vide letter dated 15/11/2008. The assessee also submitted that the bank statement of the ICICI Bank .....

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e said discrepancies were itself mostly inaccurate. Out of the 34 discrepancies pointed out by the assessing officer, it is seen that 16 discrepancies did not even exist in the accounts of the assessee. It is seen that the A.O asked the assessee to explain the cash deposits pertaining to the period, when the said bank account were not even opened by the assessee. For example the Assessing Officer has asked the assessee to explain the cash deposit in the Account No. 1190020852 made on 01/04/2000, .....

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see in compliance thereof had only furnished copies of bank statements, without any narration or explanation (inspite of the fact that the same were specifically requested by the assessing officer). In the absence of narration and explanation, it is clear, that the entries contained therein could not be examined by the assessing officer. It is seen that in the details filed vide letter dated 15/11/2008, the assessee has furnished copy of the following bank accounts, that too without any narratio .....

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learly without properly examining the bank accounts of the assessee. Since, the assessing officer has made the assessment without examining the various deposits made by the assessee in its bank account and enquiring into the source of the same, it is clear that assessment order passed by the assessing officer is erroneous and prejudicial to the interest of the revenue. 4. Investments in immovable assets: It is seen that in the Annual Property Return filed with the Government, the assessee has sh .....

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garding the date of their purchase; source of said investments, if purchased during the block period and the purpose for which the same were put to use. A letter was written to Govt. of Mizoram by the Investigation Wing, regarding the source of investment, as declared by the assessee in his IPR or otherwise. However, it is observed that the A.O did not make any further correspondence with Govt. of Mizoram or Investigation Wing of the Department in this regard. Accordingly in the notice dated 09. .....

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r dated 18/08/2008, has raised the query with respect to investment in properties with reference to seized material, which was duly replied by him vide letter dated 24/11/2008. The above contention of the assessee were considered and examined and it was found that the same is misleading and incorrect. In the covering letter dt. 24/11/2008(combined reply for A.Y. 2001-02 to 2006-07), it is mentioned that copies of the property statement furnished by the assessee to his employer alongwith sources .....

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n filed by the assessee, but the assessee has furnished copy of only one statement. Further the Property statement enclosed by the assessee is neither dated nor signed by the assessee. It also does not containing any acknowledgement of any government office, to establish that this was the same IPR which has been filed by the assessee with his employer. Above all, in the absence of any date and other particulars, it is not clear, the period to which this statement pertains. In the absence of any .....

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tion is also not mentioned. Like wise in the case of Bibi Nagar the size, location as well as value of the plot are all missing. The assessee alongwith this letter has also filed a statement containing details of member of Civil Services Officers Welfare Society, of which the assessee had also become member for acquiring residential plot at Greater Noida. This statement is signed by the President, Secretary and Treasurer of the Society, as well as of the Chartered Accountant, M/s Bhatia & Bh .....

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,000/- on purchase of building, the assessee did not furnished any reply and documentary evidence to substantiate the same, though there was specific query of this issue. However, inspite of the above mentioned discrepancies and inaccurate particulars, the assessing officer, did not made any further query / verification on this issue, and completed the assessment, without any adverse observations. Since, the assessing officer has completed the assessment without examining the issue under conside .....

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and various other incriminating documents were found and seized from room no.311 of the Hotel Manohar (marked as A/RK/311/1 to 6) by the Investigation Wing. It is observed that the said documents were not at all examined by the assessing officer during the course of assessment proceedings. Regarding the laptop, the A.O only observed that nothing incriminating regarding any land deal has been found therein. However, the A.O failed to examine the other filed, contained in the said laptop and their .....

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he interest of the revenue. The A.R of the assessee in the reply filed on 03/12/2010 submitted that the assessing officer vide his letter dated 18/08/2008 had specifically enquired with respect to the contents of diary seized. The assessee further submitted that the laptop of the assessee was sent for forensic examination and on the said basis, assessing officer has sought clarification from the assessee vide para (ix) of its letter dated 18.08.2008 to the assessee. The assessee submitted that t .....

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for which the necessary evidence dated 24.11.2008. The assessee also submitted that the A.O has categorically confirmed in para2 of his assessment order that the return of income along with all the details were examined with reference to the seized / impounded materials. The above contentions of the assessee were considered and examined and it was found that the same are not factually correct. The assessing officer during the course of assessment proceedings has asked the assessee to explain the .....

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ores / assignments / contacts / information which are devoid of any financial transactions having implications of any nature whatsoever. As per the normal practice in assessment proceedings after the query raised the assessing officer, it is the duty of the assessee to explain the contents of the seized material, and there after it is the bounden duty of the assessing officer to analyze and examine the same, and decide if there is any financial implication or not. However, it is seen that the as .....

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arch shows certain land transaction entered in to by Dr. Ramesh Kapor in Orissa with M/s Tejeswani Consultancy. Explain your role in aforesaid deals. The facts and circumstances suggest that you had brokered the aforesaid land deals. Explain why brokerage income should not be estimated as attributable to the aforesaid land deals. Likewise the MS Word Document shows dealing with Sundered and L.R.B Reddy: during the course of search at your Delhi residence Ann. A-1 and A-2 were found and seized. Y .....

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aken. As clear from the above reply, it is very vague and general and the assessee has chosen to remain silent on various documents contained in the said laptop and various entries in the diary and no explanation was submitted. It is also clear from the facts of the case that the questionnaire was issued by the assessing officer on 18/08/2008. However, subsequent to the operation of the laptop on 25/11/2008 (as mentioned by the assessee), no query, on the issue was raised by the assessing office .....

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,80,000/- was incurred by the assessee out of the funds available and ₹ 3,41,600/- was incurred by his father. Perusal of the above submission of the assessee, shows that the assessee has given details of ₹ 5,21,600/- (1,80,000 + 3,41,600), whereas the amount invested as per the document was ₹ 6,66,000/-. Moreover, as per the document, the investment was made by the assessee out of receipts of ₹ 6.39 lakhs and not from internal accruals. Besides the assessee has neither f .....

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fers to altogether different transaction, which the A.O failed to examine during the course of assessment proceedings. Since, the assessing officer has completed the assessment without proper examining of the seized material, it is clear that assessment order passed by the assessing officer is erroneous and prejudicial to the interest of the revenue. I, thus, hold that the assessment order made by the assessing officer u/s 143(3)/153A was erroneous and prejudicial to the interest of revenue on t .....

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order passed u/s 263 is valid or not, it is essential to refer to the relevant provisions of Sec. 263. Section 263 lays down as under :- 263. (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquir .....

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Director or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the power 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 authorised by the Board in this behalf under section 120; (b) "record" shall include an .....

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ided 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. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, the High Court or the Suprem .....

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ome-tax. Firstly, the Commissioner may call for and examine the records of any proceedings under the Act and for this purpose he need not to show any reason or record any reason to believe. It is a part of his administrative power to call for the record and examine them relating to any assessee. Secondly, he may consider any order passed by the Assessing Officer as erroneous as well as prejudicial to the interest of the revenue. This is exercised by calling for and examining the record available .....

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including an order enhancing or modifying the assessment or cancelling assessment and directing a fresh assessment. This empowers the CIT to cause or make such enquiries as he deems necessary. Fourthly, the CIT u/s 263 can enhance or modify the assessment as a result of enquiry conducted and hearing of the assessee. 8. For invoking the provisions of section 263, we do agree with the Ld. A.R both the conditions that the order passed by the A.O is erroneous and also that it is prejudicial to the .....

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cords taken one of the possible view, it cannot be said that the order passed by the A.O was erroneous. 9. We noted in the case of the assessee the CIT invoked the jurisdiction u/s 263 on the basis of the reasons as stipulated in the preceding paragraphs. 10. From these reasons it is apparent that it was noted by CIT from the assessment records so far as agricultural income is concerned that during the course of assessment proceedings document to substantiate the agricultural return like khasra .....

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any query has been raised by the assessing officer about the earning of the agricultural income or whether you have filed any reply in this regard which may prove that the issue regarding the earning of the agricultural income was examined by the assessing officer. The Ld. A.R was fair enough to concede that the assessing officer has not raised any query in this regard. This itself prove that this is a case of no inquiry. The similar situation has been accepted by the Ld. Counsel in each of the .....

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ock assessment in view of proviso to section 142(1) which lays down that the assessing officer can call for the production of any account relating to a period upto three years prior to previous year. The CIT relied in the case of CIT Vs Pushpa Devi, 164 ITR 639 (Pat.) in which it was held that inquiry into the source of initial capital is crucial for the assessing officer. When we inquired of during the course of the hearing, the Ld. A.R was fair enough to concede that neither any inquiry was ma .....

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ndichery had not been filed although the same was mentioned in the covering letter. The A.O did not point out the same which prove that this bank account was not at all examined. The Ld. A.R again before us relied on the decision of the Delhi High Court in the case of CIT Vs DG Housing Projects Ltd., 343 ITR 329 but expressed his inability to prove that any query has been raised by the assessing officer in this regard. 11.2 Similarly, in respect of investment in immovable assets the CIT noted th .....

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ritten to Govt. of Mizoram, but no further correspondence was made. Again when we inquired of from the Ld. A.R, he could not drawn our attention to any material which may prove that the assessing officer has inquired or examined this issue. 11.3 In respect of non-examination of the seized material the CIT observed that during search, a diary marked as annexure A/RK/311/3, laptop and various other incriminating documents were found and seized from Room No.311 of the Hotel Manohar (marked as A/RK/ .....

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y was raised by the assessing officer. In view of all these, we noted that the case of the revenue is that since the assessing officer had not considered / examined the issues taken in the show cause the order passed by the assessing officer was erroneous and prejudicial to the interest of the revenue. 12. The Ld. A.R. before us vehemently contended that the case of the assessee is duly covered by the decision of CIT Vs. DG Housing Projects Ltd, 343 ITR 329. He specially relied on para no.17 of .....

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uashed as the CIT has not made the inquiries on each of the issues taken by him. We have gone through para no.17 of this order which read as under :- 17. Thus, in cases of wrong opinion or finding on the merits, the Commissioner of Income-tax has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous becau .....

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is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in law. In some cases possibly though rarely, the Commissioner of Income-tax can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter can .....

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ssing Officer to decide the aspect/question. From this case of ITO Vs DG Housing Projects Ltd(supra) as relied by the Ld. A.R, we noted the Hon ble Delhi High Court took the view that the CIT while exercising the jurisdiction u/s 263 of the act and in the absence of the finding that the order is erroneous and prejudicial to the interest of revenue, exercise of jurisdiction under the said section is not sustainable. It was further held that in most cases of alleged inadequate investigation , it w .....

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sing officer to make further inquiry. On these facts the Hon‟ble High Court decided the question of law in favour of the assessee. This decision is not applicable in our opinion to a case where no inquiry has been conducted by the assessing officer as the case of the assessee is that of no inquiry being conducted by the assessing officer on most of the issues taken by the CIT as discussed by us in the preceding paragraph. This is undisputed fact that the assessing officer has not conducted .....

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CIT.The order passed by the assessing officer has to be regarded to be erroneous. In the case of ITO Vs. DG Housing Projects Ltd,(supra) as relied by the Ld. A.R the Hon‟ble High Court has hold that where there is no inquiry order becomes erroneous. The relevant finding of the Hon‟ble High Court are reproduced as under:- 11. The Revenue does not have any right to appeal to the first appellate authority against an order passed by the Assessing Officer. Section 263 has been enacted to .....

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ating from law. This expression postulates an error which makes an order unsustainable in law. 12. The Assessing Officer is both an investigator and an adjudicator. If the Assessing Officer as an adjudicator decides a question or aspect and makes a wrong assessment which is unsustainable in law, it can be corrected by the Commissioner in exercise of revisionary power. As an investigator, it is incumbent upon the Assessing Officer to investigate the facts required to be examined and verified to c .....

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t made inquiries on most of the issues as pointed out by us and even the Ld. A.R also agreed that no questionnaire issued or query was raised by the assessing officer during the course of assessment in respect of these issues. This is not a case of inadequacy of inquiry but a case of no inquiry being conducted by the assessing officer where it was incumbent upon the assessing officer to examine and verify the facts for determining the correct income of the assessee in each of the assessment year .....

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and case laws brought to our notice. The appellant does not dispute that he also is engaged in the business of trading of iron ore. The appellant in his return of income made claim of additional depreciation amounting to ₹ 4,42,46,711/- and declared income of Rs…………………… from the business of iron ore mining, processing and exporting as reproduced at page 1 of the Assessing Officer. The Assessing Officer simply accepted the aforesaid c .....

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e new machinery on which additional depreciation has been claimed is acquired or installed in the assessee s business of manufacture or production of any article or thing or that it was a machinery installed in the trading business or otherwise in a business which does not amount to manufacture or production of any article or thing as clarified in the Supreme Court judgment in Sesa Goa Ltd., supra. No findings of fact are shown to have been recorded by the Assessing Officer on these aspects. The .....

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the circumstances of the case, it was not necessary for the learned CIT to make further enquiries before setting aside the order and find out himself all such relevant facts in a manner as are required to be done by the assessing authority. The aspect of deduction of interest paid on income tax was neither enquired nor shown to have been verified by the Assessing Officer and thus the order of assessment is erroneous on that count as well. 13. Admittedly the Assessing Officer being a quasi-judic .....

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the Govt. functionaries goes to effect the reputation of Revenue Department adversely and cause prejudice to their interests, besides causing loss of revenue by his such decision. 14. The appellant s plea that similar issue was also a subject matter of assessment in assessment year 2008-09, not an year in appeal before us is of no consequence in case of exercise of jurisdiction u/s 263 for the different year. Under the peculiar facts, the case laws referred including those on possibility of two .....

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s of section 263 of the Act as are also enunciated by Apex Court in Malabar Industrial Co. Ltd. vs. CIT [2000] 243 ITR 83 (SC) stand duly satisfied. The learned CIT also directed the Assessing Officer to call for information on both the issues and examine it and take decision afresh on merits after providing opportunity of being heard to the assessee. This would cause no prejudice to the assessee. Having regard to the judgment rendered by Hon'ble Delhi High Court in the case of Gee Vee Enter .....

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g one of the possible views. It is also not a case of inadequate inquiry on all the issues but a case where no inquiry has been conducted by the A.O in three issues out of the five issues on which show cause notice was issued by the CIT u/s 263. 16. We have gone through the decision of CIT vs. Vodafone Essar South Ltd. 212, Taxmann 184 (Del.). We noted that this decision will also not assist the Assessee. In this decision the Hon‟ble High Court relied on the earlier decision of the High Co .....

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rely because he has a different opinion in the matter. It is only in cases of lack of inquiry , the Commissioner can pass order u/s 263. In this decision under para 11 Hon‟ble High Court clearly laid down that that was not a case of no inquiry. In the case of the Assessee we noted the A.O has not made any inquiry in respect of three issues out of the five issues. 17. In the case of DIT vs Jyoti Foundations, 357 ITR 388 (Del.), we noted in this case, the Hon‟ble High Court has observe .....

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Officer to conduct the inquiry. 18. In our opinion this decision will not also help the assessee as this case does not relate to a case of no inquiry, but a case where inquiries were conducted but were not sufficient in the opinion of CIT. 19. In the case of CIT vs. Gabriel India, 203 ITR 108 (Mum) the A.O had made the inquiries in regard to the nature of the expenditure incurred by the Assessee and Assessee had given detailed expenditure. The order passed by the A.O was held not to be erroneou .....

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nding that the Income Tax Officer failed to apply his mind to the case in all perspective and the order passed by him was erroneous. It appears that the resolution passed by the board of the appellant company was not placed before the Assessing Officer. Thus, there was no material to support the claim of the appellant that the said amount represented compensation for loss of agricultural income. He accepted the entry in the statement of the account filed by the appellant in the absence of any su .....

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s and prejudicial to the interest of the Revenue. Hon'ble Supreme Court in the case of Malabar Industrial Co. (Supra) while holding so has relied on the decision of Hon'ble Supreme Court in the case of Rampyari Devi Saraogi vs. Commissioner of Income-tax, 67 ITR 84 (SC). In this case the Income Tax Officer accepted the return of the assessee in respect of the initial capital, gift received and sale of jewellery, the income from business etc. without any enquiry or evidence whatsoever. Fo .....

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ced before it, an Assessing Officer is not only an adjudicator but is also an investigator. The Assessing Officer cannot remain passive on the face of a return which is apparently in order but calls for inquiry. It is the duty of the Assessing Officer to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke inquiry. If there is failure to make such inquiry, in our opinion, the order is erroneous and prejudicial to the interest of Revenue. .....

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that the order of Income Tax Officer is prejudicial to the interest of the Revenue. 23. Hon'ble Delhi High Court also in the case of Gee Vee Enterprises vs. Addl. CIT [1975] 99 ITR 375 (Del) has also taken the similar view that lack of proper inquiry tantamounts that the order is erroneous and prejudicial to the interest of revenue. 24. Similar issue has arisen before the Special Bench of I.T.A.T. Chennai B‟ Bench in the case of Rajalaksmi Mills Ltd. Vs. Income Tax Officer [2009] 121 .....

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st of revenue. The Special Bench of I.T.A.T. under these facts has held as under:- It is not necessary for the Commissioner to make further enquiries before cancelling the assessment order of the Assessing Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Assessing Officer should have made further inquiries before accepting the statements made by the assessee in the return. The reason is obvious. Unlike the civil court which is ne .....

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d 'erroneous' in that section includes cases where there has been failure to make the necessary inquiries. It is incumbent on the Assessing Officer to investigate the facts stated in the return when circumstances make such an inquiry prudent and the word 'erroneous' in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an enquiry has not been made and not because there is anything wrong with the order if all the facts stated therein .....

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lack of inquiry in this judgment while dealing the issue of lack of inquiry, the Tribunal, under para 14 has held as under :- 14. In the light of above propositions let us examine the facts of the present case. On page No. 5 of the paper book, Volume-I, the assessee has placed on record copy of the questionnaire dated 29/06/2006 issued by the Assessing Officer. In this questionnaire, Assessing Officer has called for information from the assessee under sec. 142(1) on fifteen counts. With the assi .....

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g Officer must have gone through all these details. However, Hon'ble Supreme Court in the case of Malabar Industries, Hon'ble Delhi High Court in the case of Gee Vee Enterprises as well as in the case of Ashok Logani and DLF Power Equipments, it has been held that if the Assessing Officer failed to go into the issues in proper perspective and his approach is perfentory then the order would be termed as erroneous which would ultimately caused a prejudice to the assessee on escapement of i .....

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