TMI Blog2009 (5) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act) against the judgment of the Income Tax Appellate Tribunal (hereinafter referred to as the Tribunal) dated 16.11.2007 passed in ITA No. 759/Del/2007. 2. The Revenue is aggrieved by the impugned judgment of the Tribunal by which it has set aside the order of the Commissioner of Income Tax (hereinafter referred to as the Commissioner) dated 18/19.01.2007 whereby he in turn cancelled the assessment order dated 24.03.2005 and directed the Assessing Officer to make a fresh assessment after considering all the aspects of the case including various discrepancies pointed out by him in his order. 3. In order to adjudicate upon this appeal the following facts require to be noticed:- 4. The assessee is a builder engaged in the business of construction of properties on a collaboration basis with the owners of the properties. The assessee filed a return dated 31.10.2002 in respect of assessment year 2002-03 declaring a total income of Rs 2,69,210/- The assessees case was picked up for compulsory scrutiny under Instruction No. 11/2003 of Central Board of Direct Taxes (C.B.D.T.). Accordingly, a noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions in issue. It would also be pertinent to take note of the fact that in the communications dated 27.12.2004 and 28.02.2005 the assessee gave details with respect to other projects i.e., the properties located at Gitanjali Enclave and Defence Colony. Copies of the collaboration agreements, important details with respect to the agreements, area of construction and sale price as also details of receipt of Rs 26 lacs with respect to the property located at Gitanjali Enclave were supplied by the assessee through communication dated 27.12.2004 and 28.02.2005. Similarly, relevant details with regard to the Defence Colony property was furnished by the assessee in a letter dated 28.02.2005. Despite, the disclosure by the assessee of details with respect to all three projects i.e., the Malviya Nagar property as also properties located at Gitanjali Enclave and Defence Colony - a fact which was ascertained by the Tribunal and finds mention in the impugned judgment: the Commissioner issued a notice dated 11.05.2006 to the assessee on the ground that he was of the view that the assessment made in the case of the assessee was both erroneous and prejudicial to the interest of the Revenue. The r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect to the failure on the part of the assessee to examine parties who had been summoned under Section 131 of the Act; (iii) the fact that the assessee had voluntarily offered an additional sum of Rs 8 lacs as income derived from the Malviya Nagar property ought to have made the Assessing Officer mindful of the fact that the matter required further enquiry. The Commissioner was of the view that the Assessing Officer should have called upon the assessee to disclose the basis for arriving at the figure of Rs 8 lacs as the additional income with respect to sale of the Malviya Nagar property; (iv) there is nothing on the assessment record which would reveal the basis on which the Assessing Officer accepted the correctness of the income declared with respect to other two properties located at Gitanjali Enclave and Defence Colony; (v) the Commissioners refrain was the same as in the case of Malviya Nagar property that the books of accounts and vouchers had not been examined by the Assessing Officer with respect to the Gitanjali Enclave and Defence Colony properties and that the Assessing Officer had simply accepted the assessees claim of expenditure in respect of construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal by the impugned judgment set aside the order of the Commissioner under Section 263 of the Act. While doing so, the Tribunal made the following observations and findings of fact:- (i) that they had examined the assessment record on their own. From the record, it was revealed that the assessee had filed copious details covering various aspects of the matter. It noted that by a letter dated 27.12.2004 the assessee had given details regarding unsecured loans, taken by him; justification for claiming depreciation on car; investment in fixed deposit with Canara Bank; details of loan given to one Pradeep Arora; Reconciliation Statement in respect of the savings account with Canara Bank, Malviya Nagar Branch; details regarding the names and addresses of persons from whom total construction and consultancy receipts of Rs 75.61 lacs were received; and the explanation as to why no work-in-progress at the end of the year had been shown ; (ii) reference to a letter dated 14.02.2005 wherein details with respect to Malviya Nagar property were given, in particular, cost and expenses incurred on the Malviya Nagar property, as also copies of sale deeds of two properties in the same loc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnished details with regard to properties located at Gitanjali Enclave as well as Defence Colony. In this regard, the Tribunal noted the contents of the assessees letter dated 27.12.2004 and 28.02.2005 filed with the Assessing Officer. The Tribunal was, thus, of the view that the Assessing Officer had taken care to collect details and facts, and put them on the record; and hence it could not be said that the Assessing Officers order was without basis. The Tribunal was of the view that having found the details satisfactory, the mere fact that what had been accepted by the Assessing Officer as satisfactory did not find mention in the assessment order would not render the assessment order liable for a revision by the Commissioner in exercise of power under Section 263 of the Act. 11.2 The Tribunal was also of the view that the order of the Commissioner deserved to be set aside in view of the fact that the final order dated 18/19.01.2007 proceeded to set aside the assessment based on certain grounds which did not find mention in the initial notice dated 11.05.2006. The Tribunal observed that the Commissioner has mentioned as many as nine grounds in his order dated 18/19.01.2007 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Commissioner in order to initiate proceeding under Section 263 of the Act. All that an assessee can demand in terms of the said provision is an opportunity of being heard in consonance with the principles of natural justice with respect to these issues with which assessee was not confronted. He contended that even if such an opportunity was not granted to the assessee while the order-in-Revision was passed the same could be accorded to the assessee even at this stage i.e., by the Assessing Officer when he proceeds to make a fresh assessment. 13. In response, the learned counsel for the assessee Mr Amit Bhagat submitted that the impugned judgment deserves to be sustained for the reasons that the assessee had submitted the books of accounts for examination; he had filed each and every detail sought for by the Assessing Officer with respect to the queries raised in particular with respect to three property projects in issue i.e., the Malviya Nagar property and the properties located at Gitanjali Enclave and Defence Colony. He further submitted that the fact that the assessment order made no reference to the properties located at Gitanjali Enclave and Defence Colony or in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, that is, proceeds with undue haste. [See Gee Vee Enterprises vs ACIT, Delhi -I Ors. (1975) 99 ITR 375] (iv) The expression "prejudicial to the interest of the Revenue" while not to be confused with the loss of tax will certainly include an erroneous order which results in a person not paying tax which is lawfully payable to the Revenue. [See Malabar Industrial Co. Ltd. (supra)]. (v) Every loss of tax to the Revenue cannot be treated as being "prejudicial to the interest of the Revenue". For example, when the Assessing Officer takes recourse to one of the two courses possible in law or where there are two views possible and the Commissioner does not agree with the view taken by the Assessing Officer which has resulted in a loss. [See CIT vs Max India Ltd. (2007) 295 ITR 282 (SC)] (vi) There is no requirement of issuance of a notice before commencing proceedings under Section 263 of the Act. What is required is adherence to the principles of natural justice by granting to the assessee an opportunity of being heard before passing an order under Section 263. [See Electro House (supra)]. (vii) If the Assessing Officer acts in accordance with la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucted with undue haste surely we would be slow to hold otherwise. More so when, this conclusion, the Tribunal had arrived at after examining the record which the assessee filed with the Assessing Officer during the course of scrutiny. The point to be noted is that on a perusal of the record the Tribunal observed, by reference to a general practice in vogue, that merely because the assessment order did not refer to the queries raised during the course of the scrutiny and the response of the assessee thereto, it could not be said that there was no enquiry and hence the assessment was erroneous and prejudicial to the interest of the Revenue. This observation of the Tribunal, according to us, deserves due weight, as in its vast experience it would have come across several such orders. In almost similar situation the Division Bench of the Bombay High Court in Gabriel India Ltd (supra) made the following observation:- "From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d judgment, would show that there was no undue haste in examining the material prior to the passing of the assessment order dated 24.03.2005. At least four letters dated 27.04.2004, 22.02.2005, 28.02.2005 and 18.03.2005 were addressed by the assessee to the Assessing Officer giving details, documents and information pertaining to various queries raised by the Assessing Officer. These have been examined by the Tribunal. We have no reason to believe that examination was less than exacting. Therefore, the conclusion of the Commissioner that there was "lack of proper" verification is unsustainable. 17. This brings us to another aspect of the matter, which is that even though the notice dated 11.05.2006 issued by the Commissioner before commencing the proceedings under Section 263 of the Act referred to four issues, the final order dated 18/19.01.2007 passed referred to nine issues, some of which obviously did not find mention in the earlier notice and hence resulted in the proceedings being vitiated as a result of the breach of the principles of natural justice. 17.1 As observed by us above, there is no requirement under Section 263 of the Act to issue a notice before embarki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to respond to these discrepancies which formed part of the order-in-Revision dated 18/19.01.2007 but were not part of notice dated 11.05.2006. This was put to the learned counsel for the Revenue, who in response fairly conceded that there was nothing on record which would establish the contrary. It was, however, urged by the learned counsel for the Revenue Mr Sanjeev Sabharwal that the assessee would have his opportunity to give satisfactory replies to the discrepancies raised in the Revisional Order before the Assessing Officer and that such an opportunity would meet the requirements of the provision. We are afraid that that is not the position envisaged in law. If one were to permit correction of such a grievous error in the manner suggested it would tantamount to, in a manner of speaking, closing the stable doors after the horse has bolted. The assessments, unless reopened by paying faithful obeisance to statutory provisions and conditionalities provided therein, attain finality on their conclusion. The provisions of Section 263 mandate that an order for enhancing, or modifying the assessment, or cancelling the assessment and directing a fresh assessment can only be passed afte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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