TMI Blog1987 (12) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... the same were sold on 9th Jan., 1980 for a sum of Rs. 5,72,100. According to the Commissioner, the first transaction did not appear to be correct because the official quotation as on that date as listed by the Bombay Stock Exchange was Rs. 1,450 per ten grams. The Commissioner considered the objections of the assessee and on due consideration of the entire facts he came to the following conclusion: "(i) Shri V.D. Valia purchased the gold bonds for 3814 gms. Of gold sometime around 21st Jan., 1980 from a source other than M/s S.D. Jhaveri and Co. Because M/s S.D. Jhaveri could not have made a delivery of this quantity to him as per their stock position as certified by the Bank of Karad Ltd. (ii) However, even that is not material. What is material is that Shri Valia could not have purchased these bonds at a price lower than Rs. 1400 for 10 gms. He could never have purchased the same on 4th Jan., 1980 at less than Rs. 1450 per 10 gms. A certificate from the Secretary to the Bombay Stock Exchange is the final proof of the quotations. (iii) The existence of the gold bonds cannot be denied because copies of the same with Shri Valia's name endorsed on them have been filed. Simil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made on 4th Jan., 1980, the contract price entered into by the assessee in June, 1979 was the correct price on the basis of which the transaction was concluded. The assessee in this case sold these gold bonds on 9th Jan., 1980 for a sum of Rs. 5,72,100 and declared a net capital gains of Rs. 2,86,050 which was claimed exempt. The ITO fully considered the details of the purchase and after due consideration allowed the claim of exemption. It is, therefore, submitted that there is no basis for treating the order of the ITO as erroneous. 4. Elucidating further Shri S.E. Dastur submitted that the Commissioner has not properly assumed the jurisdiction. According to him, the basis on which the Commissioner relied for issue of the notice under s. 263 was the quotation of the Bombay Stock Exchange. This quotation of 4th Jan., 1980 of the Bombay Stock Exchange, which listed deferred gold bonds 1980 at the rate of Rs. 1,450 per ten grams was not part of the assessment record. Secondly, the learned Commissioner relied on the statement of Shri Pradeep Jhaveri, partner of M/s S.E. Jhaveri Co. which was made at the time of the survey under s. 133A of the IT Act on 27th Feb., 1985. This stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the price paid by the assessee at the rate of Rs. 750 per 10 grams was not unreasonable as the contract for purchase was made in June, 1979. Due to frequent shifting of the offices, the copies of the agreement were not traceable. However, keeping in view the rate of fluctuation as evidenced from the extract given at page 35 of the Paper Book, it is submitted that the price paid by the assessee at Rs. 750 is reasonable as the market price in 1979 was around Rs. 800 only. Further, Shri S.E. Dastur, learned counsel submitted that if the capital gains is to be treated as undisclosed income under s. 69B, then the year of assessment would be the asst. yr. 1980-81 relevant for the financial year ending 31st March, 1980 and, therefore, the amount cannot be assessed in the asst. yr. 1981-82. 7. On the other hand, the learned Departmental Representative Shri M. Subramanian vehemently supported the order of the Commissioner. According to him, from the facts brought on record by the Commissioner at para 2 of his order, it is apparent that the ITO in this case failed to make even the preliminary enquiry necessary for completing the assessment. The assessee stated to have purchased 3,814 g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be upheld. In so far as the year of assessment is concerned, it is submitted that there was no such claim before the ITO and in fact the assessee declared the income from the transaction during 1981-82. In that view of the matter, the claim of the assessee to assess the amount in any other assessment year is to be rejected. 8. We have carefully considered the rival submissions in the light of the material placed on our record. The assessee in this case filed a return of income for the asst. yr. 1981-82. The order of the ITO is completely silent about the nature of exemption claimed by the assessee in regard to the transaction of the National Defence Gold Bonds 1980. The ITO made certain remarks about share of short term capital gains and long term capital gains and assessed these items. The CIT perused the record and found that the assessee in this case claimed to have purchased 3,814 grams worth of National Defence Gold Bonds 1980 at the rate of Rs. 750 per 10 grams on 4th Jan., 1980. These Bonds were later sold on 9th Jan., 1980 for a sum of Rs. 5,72,100, which is double the price. The Commissioner, therefore, in exercise of his power under s. 263 took upon himself to make fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... risdiction under s. 263 as there had been no inquiry regarding the source of funds for the business introduced by the assessee. Similar is the view of the Madras High Court in the case of Indian Textiles vs. CIT The Delhi High Court went slightly further in the case of Gee Vee Enterprises vs. Addl. CIT (1975 CTR (Del) 61 : (1975) 99 ITR 375 (Del) and it has further elaborated by holdings as follows: "The position and function of the ITO is very different from that of a Civil Court. The Civil Court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The ITO is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. It is because it is incumbent on the ITO to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in s. 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inqui ..... X X X X Extracts X X X X X X X X Extracts X X X X
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