TMI Blog1986 (6) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... nuary 1, 1973, and the income as declared or as assessed did not exceed Rs. 15,000. An order under section 119(2)(a) of the Act had been issued by the Board authorising the Income-tax Officer not to initiate penalty proceedings under section 271 or section 273 of the Act. In terms of this scheme, the Income-tax Officers were required to visit specially selected areas to assist new taxpayers to fill in the returns of income and, is far as possible, to complete the assessments on the spot. The areas were to be selected by the Commissioner of Income-tax. Two Income-tax Officers were to be deputed for the purpose for one area. Full complement of the staff was to accompany the Incometax Officers so that all formalities relating to assessment may be completed on the spot. Crossed cheques were acceptable towards the payment of the tax liability. Paragraph 4 of the Scheme read as follows: " 4. New cases where the returned income does not exceed Rs. 15,000 and the capital invested including the borrowed capital does not exceed Rs. 25,000 should ordinarily be completed under section 143(1). Returns of income filed in the names of minors and ladies should not, however, be accepted without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the lady she immediately called a few gentlemen of Raxaul Bazar, who supported the fact of taking advance from her as loan on pledging of ornaments. They also supported the fact of casual business done by the lady. She has no money-lending licence. I estimate her annual income approximately at Rs. 5,000. Submitted." The Income-tax Officer assessed the assessee at Rs. 4,100 for each of the years in an one-line order which reads as follows : "Assessment is made on a total income of Rs. 4,100 as per section 143(1)/147." The enquiry and the assessment were completed at the spot on December 14, 1972 itself. For the years 1971-72 to 1973-74 (A.Y.), she was assessed on an annual income of Rs. 5,100 as returned by her. The assessment of the assessee having come to the notice of the Commissioner of Income-tax and the latter having considered it to be erroneous, he issued notice to the assessee in terms of section 263(1) to show cause why the order of assessment be not modified or cancelled. Accordingly, the Commissioner being of the view that the assessments were prejudicial to the Revenue and since they were erroneous, set aside the assessments and remanded the case to the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y cancelled the consolidated order passed by the Commissioner of Income-tax under section 263(1) of the Income-tax Act, 1961, for the assessment years 1968-69 to 1973-74 ? " It appears that the Commissioner set aside the orders of assessment and ordered reassessments in the cases of several assessees like the one before us. One such was the case of Rambha Devi. That case was the subject-matter of appeals before the Appellate Tribunal. That related to the assessment years 1970-71, 1971-72 and 1972-73. The members of the Tribunal having divergent views in those appeals in regard to the correctness of the order of the Commissioner, the matter was referred to Mr. P. D. Mathur, Vice-President of the Appellate Tribunal, as a third Member, who, agreeing with the views of Mr. Sukh Dev Bahl, set aside the order of the Commissioner on various counts. The appeals of Rambha Devi were thus disposed of by the Tribunal in accordance with the views of Mr. Mathur by order dated October 27, 1976. The appeals of the present assessee were heard by the sole judicial Member, Mr. M. R. Sikka, and were disposed of on April 27, 1977. The decision of the Tribunal in the case of Rambha Devi was followed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... many years and that she had been married to him about 20 years back. To put it in her own words, it was further stated as follows: " That the petitioner has got about Rs. 22,500 by way of cash gifts from parent's side as well as from father-in-law side including gift from family friends and relatives at the time of marriage and thereafter up to 1-4-1967." The assessee also stated that her assessments had been effected after proper enquiry regarding the nature of income and the capital employed by the assessee. On this count, it was claimed that the proceeding under section 263 of the Act should be dropped. The Commissioner, after hearing the parties, observed that the order of the Income-tax Officer did not give the dates of investments or transactions and that there was no evidence to prove the same. The affidavits also did not impress the Commissioner. In regard to the claim of the assessee of having received gifts which formed the basis of her investments, the Commissioner observed that even if it were accepted that she had received such amounts, they could not have been kept idle for twenty years. The assessee could not have waited for investing the sums till 1968-69. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the Commissioner under section 263(1) of the Act was liable to be set aside. We have heard counsel for the parties with all the patience that the case required although, in our view, the issues falling for consideration are short and simple. I shall consider the reasons advanced by the Tribunal seriatim. The Tribunal observed that due enquiry had been held and that the view of the Commissioner that the assessments had been completed without making proper enquiry was unsound. With respect, I must observe that the Tribunal failed to appreciate the main thrust of the order of the Commissioner. I shall, therefore, quote the observation of the Commissioner at paragraph 7 so far as it is relevant which reads as follows : " As the assessments have been completed by the Income-tax Officer without making Proper enquiry regarding the initial capital, the nature and real extent of the income and its true ownership, the assessments made for all these years are considered erroneous and prejudicial to the interests of the Revenue." The Commissioner was emphasising upon the source of the initial capital and that in his view there should have been, proper enquiry as regards the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Commissioner was that it was in contravention of the principles of natural justice. Let us examine this aspect of the matter. It cannot be disputed for a moment that any quasi-judicial authority which I shall assume an Income-tax Commissioner to be must decide with an unbiased mind and impartially and that a judicial authority which includes a quasi-judicial authority cannot permit its judgment to be influenced by matters not disclosed to the assessee. In elaboration of this proposition, the Tribunal observed that there was no good reason to reject the affidavits which stood corroborated by the report of the Inspector. Let us examine this matter. The affidavits leave us high and dry in regard to the source of the initial capital investments. The affidavit of Manu Lal Prasad only shows that he had some dealing in linseed with Pushpa Devi the assessee in the years 1968, 1970 and 1972. He does not claim to have any connection with the assessee for the years 1967, 1969 and 1971. The affidavit of Dewraj Agrawal is much worse. He did not state in which accounting year he had pledged cloth and taken loan. Neither of these two affidavits showed from where Pushpa Devi got the capital to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the explanation mentioned in paragraph 2(d) of the written statement saw the light of the day only on December 11, 1974. Neither the affidavits nor the written statements were before the Income-tax Officer. The Income-tax Officer had before him merely the ipse dixit of the assessee and the report of the Inspector. The Commissioner was thus amply justified in remanding the matter for examining the case of the assessee. He did not pass a final order, but directed the Income-tax Officer to make " a close scrutiny as to the extent of initial capital ". In my view, therefore, the second reason of the Tribunal for cancelling the order of the Commissioner was fallacious and untenable. The third reason for the Tribunal to have cancelled the order of the Commissioner was that the order was based upon surmises and conjectures, as there was nothing on record to show that the sums belonged to the husband of the assessee and that she was merely a benamidar. I regret, I am unable to endorse the view of the Tribunal. What is sometimes dubbed as surmise and conjecture is nothing but application of common sense. A judicial authority or the Tribunal is not precluded from applying a little of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y were prejudicial to the interests of the Revenue ? (4) Whether the Commissioner of Income-tax could revise the assessment orders passed under section 143(1) if those orders were passed in pursuance of the scheme launched by the Board? " The first question does not arise in the instant case, as it is amply clear that notice had been issued to the assessee and in response thereto written statement and affidavits were filed. After the parties were heard, the Commissioner passed the impugned order. The second issue in Rambha Devi's case was the same as ground No. 1 in the instant case, namely, whether the assessment orders had been passed with or without enquiry, as required under the instructions. I have already discussed that matter earlier and I am of the view that the Tribunal was not correct in the instant case in holding that it was not correct that the assessment orders had been passed without enquiry regarding the initial capital, the nature and real extent of the income and its true ownership. The decision of the Tribunal in Rambha Devi's case in this behalf was not correct. Mr. P. D. Mathur, Vice-President, Appellate Tribunal, observed in paragraph 18 of his order tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a higher rate of tax. Was that done ? Certainly not. Having missed the central point, the Tribunal fell into a grevious error in holding that the assessment had to be completed within the period of grace. Not to complete it within that period would be denying to a lady or a minor assessee the benefit of the scheme. I regret, the majority conclusion of the Tribunal is fallacious. The law in regard to assessment was not modified so far as ladies and minors were concerned. In the course of mass communication, whenever a return was filed by a lady or a minor, it could have been accepted, but could not have been disposed of in terms of the Scheme. It should have been treated as an original assessment proceeding with all the rigours in regard to initial capital investment. No concession or amelioration of the procedure in their case was envisaged. These assessments had to be completed in terms of section 143(3) and where it was prejudicial to the Revenue, the Commissioner would be fully justified in setting aside such assessments. In fact, in the course of mass communication, if a return was filed on behalf of a lady or a minor, the Income-tax Officer would have been fully justified in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding that she was a benamidar. But, if he had done so, he would have laid himself open to the charge that the dice had been loaded against the assessee. The Commissioner, therefore, rightly only ordered further investigation into the claim of the assessee. Upon this finding, if the funds had been provided by the assessee's husband, the income would be taxable in his hands over which a higher rate of tax may have been applicable. In that situation, the order of assessment of the wife would be per se prejudicial to the Revenue. It does not need much argument to convince that if the procedure adopted by an Income-tax Officer brings in lesser revenue than some other procedure, the order would obviously be prejudicial to the Revenue. If that is so, the order of assessment is prejudicial to the Revenue. It cannot be doubted that the Commissioner would then have the jurisdiction to act in terms of section 263 and order cancellation of the previous assessment and direct fresh assessment. Reliance placed by learned senior standing counsel in this regard on Tara Devi Aggarwal v. CIT [1973] 88 ITR 323, is well placed. The Supreme Court in that case observed that (at page 328): "Even where a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent without enquiry would be clearly erroneous. Being erroneous, the Commissioner obviously would have jurisdiction to act in terms of section 263 of the Act. The reply of the assessee is that the situation in the instant case is different because of the existence of the scheme. We have, therefore, to look to the contents of the scheme. I have elaborated earlier my views that the scheme did not cover ladies and minors. The Vice-President does not seem to dispute this position as may be seen from his observations at the end of paragraph 16 of the order. The scheme not being available to the assessee, a regular enquiry and investigation was a must. The assessments in the case of the assessee had to be done by the ordinary process. That being so, the Commissioner cannot be denied the jurisdiction to act in terms of section 263 of the Act. In fact, it is obligatory upon him to exercise the jurisdiction where the order of assessment is erroneous and prejudicial to the interests of the Revenue. Not being covered by the scheme, the assessee had to be assessed in terms of section 143(3) and not in terms of section 143(1) of the Act. It is somewhat intriguing that the learned Vice-Presid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Revenue and, therefore, even in those cases, the Commissioner would have the jurisdiction to cancel the assessment and order reassessment. It is not necessary for us to go into that larger question in regard to the jurisdiction of the Commissioner where there is scheme. The instant case is an exception carved out by the scheme itself and, therefore, the larger question advanced by learned senior standing counsel for the Revenue need not be answered. The assessment for the assessment year 1973-74 and the order of the Commissioner in that behalf is another chapter. Obviously, this was not within the scheme period. I have held earlier that the scheme did not apply to ladies and minors. This assessment year was outside the period of the scheme. The assessment for this year had, therefore, to be conducted in terms of section 143(3) of the Act. The order of the Commissioner having been upheld in regard to the earlier assessment years, the order in regard to the assessment year 1973-74 also was perfectly valid. The Income-tax Officer had no jurisdiction to complete the assessment for 1973-74 (A.Y.) as if the scheme applied in terms of section 143(1) of the Act. In my view, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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