TMI Blog2005 (8) TMI 280X X X X Extracts X X X X X X X X Extracts X X X X ..... rticularly when assessee made the retraction and entire business affairs of the assessee were subjected to thorough investigation under the scrutiny assessment to be framed under the provisions of section 143(3) of the Act. Thus the assessment order passed by Assessing Officer under the provisions of section 143(3) cannot be said to be 'erroneous' within the meaning of section 263 of the Act as there was no incorrect assumption of facts, or incorrect application of law. Thus the first condition for invoking section 263 cannot be said to have been fulfilled. Similarly, to qualify an assessment order as an order being 'prejudicial to the interest of revenue', the order should cause lawful loss of tax to the revenue. That condition is also not fulfilled. In the present case, section 263 has been invoked on the ground that the income of Rs. 40 lakhs and Rs. 20 lakhs was assessable in the hands of assessee for assessment years 1993-94 and 1994-95 respectively on the basis of statement made by assessee during the course of survey u/s 133A of the Act. It has already been pointed out that there is no material on record till date to show that assessee was engaged in any of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iren Shah, Adv. For the Respondent : Sushil Chandra, Adv. ORDER I.P. Bansal, Judicial Member. 1. These are the appeals filed by the assessee and are directed against two separate orders of CIT dated 24-3-1998 and 25-3-1998 passed under the provisions of section 263 of Income-tax Act, 1961 for assessment years 1993-94 and 1994-95 respectively. 2. The assessee is holding the card of Ahmedabad Stock Exchange and carrying on the activity of Stock Broker, underwriting of public issue and dealing in the shares and securities under the name and style of 'Ashok Manilal Thakkar'. A survey was conducted at the business premises of assessee on 5-1-1994 wherein the assessee had disclosed additional income of Rs. 40 lakhs and Rs. 20 lakhs for assessment years 1993-94 and 1994-95 respectively on account of income earned by him through following four activities (for short 'four activities')- (i) Making multiple applications in public issues of companies in the name of various family members, (ii) Selling shares at premium prior to allotment (premium market operations), (iii) Preparing sale bills at lower rate than actual sale price and thus, partly suppressing sale receipts, and ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e statements under one or other pretext with the reasons best known to him till the end of April, 1994. 3.5 Thereafter, Shri Dhiren Shah, Chartered Accountant of M/s. C.F. Patel Shah, was consulted and he was given the authorisation as an authorised representative who thereafter approached the Asstt. Commissioner of Income-tax, Circle 2(4), Ahmedabad, with a letter of authority and once again a request was made for granting Xerox copies of the statement. The authorised officer thereafter granted Xerox copies on 5th May, 1994 and for the acknowledgment of the receipt of the said Xerox, a letter from M/s. C.F. Patel Shah, CAs dated 5-5-1994 was also placed on record of the Asstt. Commissioner of Income-tax, Circle 2(4), Ahmedabad and the signature of Shri Amit Patel from M/s. C.F. Patel Shah, CAs was also taken on the said letter for the receipt of the xerox copies of the statement by the A.C.I.T. Thus the assessee has filed a retraction letter with various Income-tax Authorities as mentioned above. 5. Assessment proceedings with respect to assessment year 1993-94 were started on 14th December, 1994 and for assessment year 1994-95 these were started on 17th January, 1996. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d note is as under:- 1. The survey proceedings under section 133A of the Income-tax Act, 1961, was carried out on 5-1-1994 at my business premises situated at 2235, Muharat Pole, Manek Chowk, Ahmedabad. The authorised officer recorded my statement and the statements of disclosure of Rs. 60 lakhs was recorded for the assessment year 1993-94 and assessment year 1994-95. The Xerox copies of the statement recorded was made available to me only in this month of May, 1994 and on scrutiny and verification of said statements the facts come to surface that it was been manipulated and fabricated by the authorised officer irrespective of real factual aspects of the case and accordingly the retraction petition dated May 27, 1994 for the retraction of the statement has been filed with the various IT Authorities namely, Commissioner of Income-lax, Guj. II, Dy. Commissioner of Income-tax, Range-2, Ahmedabad and Assistant Commissioner of Income-tax, Circle 2(4), Ahmedabad, as well as to other higher authorities under the Income-tax Act, 1961. In pursuance of the contention taken in the retraction statement as stated hereinbefore no effects of disclosure has been given in the statement of total inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n any finding of fact that assessee is in reality found to be involved in any of the above-mentioned four activities. For holding that such addition was to be made lie has relied on following two decisions:- (i) V. Kunhambu Sons v. CIT [1996] 219 ITR 235 (Ker.) (ii) Rameshchandra Co. v. CIT [1987] 168 ITR 375 (Bom.) 10. The concluding portion of CIT's order for assessment year 1993-94 is reproduced hereinbelow for the sake of convenience:- 6. I have carefully considered the arguments put forth on behalf of the assessee in this regard. It is observed that the thrust of the assessee's argument is that the statement recorded during the survey disclosing additional income of Rs. 40 lakhs during the year cannot be relied upon merely because it has been subsequently retracted by the assessee and the authorities concerned have not controverted the retraction petition. It is also stated that the statement recorded contained fabricated and manipulated allegations against the assessee. It is, however, observed that the assessee has not clarified as to how the facts mentioned in the statement duly recorded under section 133A(3) of the Act were fabricated and manipulated when the state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. Since no case had been made that the statement was made under a mistaken belief of fact or law and the statement being a voluntary one there was no scope for the assessee to challenge the correctness of the assessment.' 9. In the case of Rameshchandra Co. v. CIT [1987] 168 ITR 375, the Bombay High Court observed that where the assessee made a statement of facts, he can have no grievance if the taxing authority taxes him in accordance with that statement. It is, thus, clear from the above that the statement recorded by the Assessing Officer during the course of survey should have been utilized by the Assessing Officer while making the assessment and the income disclosed therein should have been brought to tax as there is nothing to show that the statement was not a voluntary one. The assessment order passed by him not including the disclosed amount of Rs. 40 lakhs is, therefore, erroneous and prejudicial to the interest of revenue. The Assessing Officer is, therefore, directed to pass a fresh assessment order and bring to tax the disclosed amount of Rs. 40 lakhs along with the other income already assessed after giving the assessee an opportunity of being heard. (For assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an evidence but at the most it can be useful or relevant to any of the proceedings under the Income-tax Act. He contended that immediately after receiving the copy of statement the assessee has filed letters of retraction and brought it to the notice of Assessing Officer as well as higher Income-tax Authorities that such disclosure was not proper and was made under mistaken belief. Thus statement given by the assessee under the provisions of section 133A(3)(iii) could not be used as an 'evidence' as envisaged under section 132(4) of the Act. He, therefore, contended that CIT is patently wrong to use the retracted statement of assessee as an evidence. He contended that by bringing retraction petition the assessee had expressly made it clear that there was no substance in the disclosure made by him and thus the onus was shifted on revenue to show by bringing positive material on record that the assessee was engaged in any of the above four activities on the basis of which such disclosure was made. To bring out the difference between the statement recorded during the course of search and that recorded in survey proceedings, he placed reliance on the decision in the case of Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83. 14. He further pleaded that Assessing Officer had made enquiries in regard to the disclosure made by the assessee and assessee had given a detailed explanation in that regard and all these correspondences are part of the record (he in this regard referred to the minutes of the proceedings carried by Assessing Officer and also has been reproduced in the above part of this order). Thus it is evident that after considering those submissions the Assessing Officer did not add the said sum to the income of assessee on being satisfied with the explanation of the assessee and thus the assessment order passed cannot be held to be 'erroneous' simply because the Assessing Officer in his order did not make an elaborate discussion in that regard. Having not found any material to prove the existence of any of the above four activities by the assessee on the basis of which disclosure was made, the order of Assessing Officer cannot be said to be erroneous within the meaning of section 263 of the Act. He in this regard placed reliance on the decision of Hon'ble Bombay High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee was made after considerable gap of about five months and thus it was after thought. The assessee could not prove that the statement was obtained under pressure or coercion. Thus he pleaded that ld. CIT was right in invoking the provisions of section 263 of the Act as the original assessment orders passed by the Assessing Officer were erroneous as well as prejudicial to the interest of revenue. The Assessing Officer did not make any addition according to the disclosure made by the assessee in the assessment order. Thus the order of Assessing Officer was erroneous within the meaning of section 263 and once it was erroneous, the lawful revenue of state had, therefore, been lost and thus the provisions of section 263 were rightly invoked by CIT. He, therefore, pleaded that order of CIT should be confirmed. 18. We have carefully considered the rival submissions in the light of material placed before us. The law regarding applicability or otherwise of section 263 is well-settled. In order to invoke the provisions of section 263 the order passed by Assessing Officer should not only be erroneous but should also be prejudicial to the interest of revenue. Thus both the conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te or did not furnish any information/detail/evidence at any level. As against this, the case of assessee is that all the books of account, details, evidences and explanations were made available to the department for thorough scrutiny and department remains unable to find out therefrom any iota of evidence/instance to prove that the assessee was actually engaged in any of the above-mentioned four activities on the basis of which the disclosure was made. It is seen that in the order passed under section 263 or assessment order passed under section 143(3) read with section 263 no reference whatsoever is made to the material, if any, on the basis of which it can be said that the assessee was involved in any of the four activities on the basis of which the said disclosure was made. As against this, in the assessment order passed under section 143(3) the returned income has been accepted and in the order passed under section 143(3) read with section 263 the addition is made only with regard to disclosure made by the assessee as per direction of CIT. Thus there is an apparent absence of any material to say that assessee had any business activity which was not recorded in the books of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the circumstances when there is a material on record to prove the existence of any of the lour activities on the basis of which the disclosure is stated to be made. It has been explained in the aforecited decision of Kerala High Court that statement recorded under section 133A cannot be given evidentiary value as such evidentiary value is not attached with by the provisions of section 133A of the Act. Thus it cannot be said that only on the basis of statement given by the assessee the disclosed income was assessable as lawful income of the assessee. There being no evidence/material available on record to prove the existence of such disclosed income or earning of such income in the hands of assessee it cannot be said that the tax was lawfully payable by assessee in his hand on the disclosed income. Thus it cannot be said that revenue has lost lawful tax payable by the assessee. Thus the second condition that assessment order should be prejudicial to the interests of revenue also cannot be said to be in existence to bring the present case within the parameter of section 263 of the Act. 20. In the case of Gabriel India Ltd. it has been held by Hon'ble Bombay High Court that whe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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