TMI Blog1988 (8) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... e year 1973-74, the income declared in the return was Rs. 5,520. The incomes in each of the assessment years were stated to have been derived from pawnbroking business carried on by the assessee with an initial capital of Rs. 16,500. An Inspector of the Income-tax Department deputed by the Incometax Officer to make an enquiry into the affairs of the assessee submitted his report on December 9, 1972, as follows : "Enquired into the business activity of the lady. It was learnt that she was married in a well-to-do family and she received cash gifts and also gifts in kind from her relatives. It was also learnt that she had been doing pawn-broking business and casual money-lending business since long. She could have sufficient amount of money as capital from the above business. The facts stated in her application dated December 19, 1972, seem to be correct." The Income-tax Officer made assessments for each of the assessment years under section 143(1) of the Income-tax Act, 1961, accepting the returns. Subsequently, the Commissioner of Income-tax issued a notice under section 263(1) of the Income-tax Act, 1961, where it was stated, inter alia, that on perusing the records, it a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the assessee was income of either the husband of the assessee or the firm in which the husband of the assessee was a partner. The Commissioner also found that even assuming that the assessee had received gifts out of which the initial capital was accumulated, the assessee would not have kept the same idle till March 31, 1970, specially when she had invested the other gifts received by her in the said firm. There was also no explanation as to where the said initial capital of Rs. 16,500 had been kept by the assessee till 1971-72. The Commissioner came to the conclusion that the affairs of the assessee had to be examined further as there was insufficient-proof of the initial capital acquired by the assessee and the income returned out of such capital was unreasonably high. He found further that the Income-tax Officer did not make proper enquiries in respect of the initial capital, the nature and extent of the incomes returned and the true ownership thereof before completing the assessments. The Commissioner set aside the assessments in each of the said assessment years and restored the proceedings to the file of the Income-tax Officer with a direction to make fresh assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said firm or that the assessee had declared her capital or income only with the object of accommodating her husband. On the other hand, the fact that the assessee had deposited Rs. 25,000 in the said firm in her own name established that the conclusion of the Commissioner as to the ownership of the initial capital was not correct. The mere fact that the husband of the assessee was a partner of the said firm would not make him the owner of the amount deposited by the assessee. As such, the finding of the Commissioner that the husband of the assessee and not the assessee was the real owner of the said initial capital and income was with out any basis. Following the earlier decision of the Income-tax Appellate Tribunal, Patna, in the case of Smt. Rambha Devi v. ITO, the Tribunal held that the Commissioner was not legally competent to reopen and revise the assessment made by the Income-tax Officer under the said scheme. The contention on behalf of the Revenue that for the assessment year 1973-74, the assessee could not claim the benefit of the said scheme as the same had been withdrawn by that time was also rejected by the Tribunal. The Tribunal held that the Commissioner did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Income-tax under section 263(1) of the Income-tax Act, 1961, for the assessment years 1971-72 to 1973-74 ? At the hearing before us, Mr. B. P. Rajgarhia, learned senior standing counsel for the Central Government, submitted that the controversy raised in the questions referred were covered by the decision of a Division Bench of this court in CIT v. Pushpa Devi [1987] 164 ITR 639, as also a subsequent decision of the same Division Bench in CIT v. Smt. Rambha Devi [1987] 164 ITR 658, where, on identical facts, similar questions had been answered in favour of the Revenue. He submitted that the decision of the Tribunal was based mainly on the earlier decision of the Tribunal in the case of Smt. Rambha Devi which had been set aside by this court on reference. Learned counsel for the Revenue also cited an unreported judgment dated April 5, 1983, in Taxation Cases Nos. 114 of 1979 and 115 of 1979 in the case of CIT v. Pushpa Devi (since reported in [1988] 173 ITR 446 (Patna)) where questions identical to those in the present reference before us and arising out of similar facts were all answered in favour of the Revenue. The learned advocate for the Revenue next cited a decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d specifically recorded in his report his findings. The report of the Inspector in the case of Pushpa Devi [1987] 164 ITR 639 (Pat) was silent as to the initial capital of the assessee. In the case of Smt. Rambha Devi [1987] 164 ITR 658 (Pat) also, the report of the Inspector did not deal with the initial capital of the assessee. The learned advocate for the assessee next contended that in the instant case, the assessee had produced further materials before the Commissioner to support the accumulation of her initial capital and had contended that even in 1971-72, the assessee had received gifts from her father-in-law on which gift-tax had been paid and the interest earned by the assessee on such gift had been assessed in the hands of the assessee in the said assessment year. The learned advocate for the assessee next contended that in the instant case, there was no material before the Commissioner to hold that the impugned assessments were prejudicial to the interests of the Revenue. In support of his contentions, the learned advocate for the assessee cited the following decisions: (A) Gouri Prasad Bagaria v. CIT [1961] 42 ITR 112 (SC). This decision was cited for the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Inspector of the Income-tax Department. It is clear from the assessment order that the Income-tax Officer did not make any enquiry on his own. It was not even recorded in the said orders that the Income-tax Officer had considered the report of the Inspector and accepted the same to be correct. The report of the Inspector, on the basis of which the Income-tax Officer apparently proceeded, is extremely vague and devoid of all material particulars. It was not ascertained by the Inspector as to when the assessee was married and when she received the cash gifts from her relatives and the amounts of such gifts. The names of the donors were not enquired into. Similarly, the Inspector did not ascertain since when the assessee started carrying on pawn-broking and money-lending business. The conclusion of the Inspector was that the assessee saved amounts received from her business and the same constituted her capital. No books of account were produced or examined during the assessments. In the further proceedings before the Commissioner under section 263(1) of the Act, further materials produced by the assessee appear to be the letters from five alleged borrowers to confirm that they had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t assessment for the year 1973-74, which suffered from the same vice, also could not be sustained on its own. The only other aspect to be discussed is whether the findings of the Commissioner could lead to the conclusion that the impugned assessments were prejudicial to the interests of the Revenue as the actual income was liable to be assessed in the hands of another person at a higher rate. The point appears to be covered by the decision of the Supreme Court in Tara Devi Aggarwal [1973] 88 ITR 323. Even otherwise, it appears to me that further enquiry into the affairs of the assessee might have led to the assessee being assessed on a larger income. In any event, if there were materials to support the conclusion that a wrong person has been assessed on particular income, the likely presumption would be that such assessment would be prejudicial to the interests of the Revenue, irrespective of the amount which would be brought to tax ultimately. Irregular assessments are not sustainable under the Income-tax Act. For the reasons as aforesaid, I answer questions Nos. 2 and 4 both in the negative and also in favour of the Revenue. For the reasons of my answer to questions Nos. 1, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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