TMI Blog1995 (9) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... claiming exemption under section 54E. Return for the assessment year 1989-90 was filed declaring an income of Rs. 3,14,840. In the return assessee declared a capital gain at Rs. 1,81,19,585 and simultaneously claimed exemption for the same amount under section 54E on the basis of investment made by it in IDBI bonds. Hence, income under the head 'capital gain' was nil. However, the Assessing Officer after scrutinising the return and considering all the relevant facts, determined the capital gain at Rs. 2,18,125 and the total income was assessed at Rs. 5,32,970. 3. The CIT on the basis of the report received from the Dy. CIT, Range-13, Bombay, dated 23-8-1991 issued notice under section 263 dated 30-9-1991 to the assessee which was duly served upon it. The notice contended the following ground for assuming the jurisdiction : "the profit on the sale of the land during the year was wrongly treated as income from capital gain and deduction under section 48(2) and section 54 was allowed instead of taxing the income under the head business." However, nobody appeared on behalf of the assessee on the appointed date. The CIT, therefore, passed the order under section 263 on 31-10-1991 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Indian Aluminium Co. Ltd v. CIT [1994] 50 TTJ (Cal.) 281, Mittal Cotton Factory v. ITO [1983] 15 TTJ (Chd.) 64, Mewar Chemical Products Ltd. v. Asstt. CIT[1994] 50 TTJ (Jap.) 80, and Bajaj Auto Employees' Welfare Fund v. ITO [1987] 27 TTJ (All.) 64, Nirfabrics Ltd. v. Dy. CIT 1994] 50 ITD 336 (Bom.), Dilshad Trading Co. (P.) Ltd. v. ITO [1994] 49 ITD 348 (Bom.) and 41 ITD 539. His further submission was that before passing any order under section 263, the CIT must show errors either factually or legally and further must show that on account of such errors the order of the Assessing Officer is prejudicial to the interest of the revenue. According to him no order can be passed in the name of enquiry unless it points out in what respect Assessing Officer had failed to make an enquiry. He further submitted that the High Court judgments relied upon by the CIT are distinguishable. 5. On the other hand, the learned Sr. Departmental Representative Mr. Tilakchand strongly opposed the argument of Mr. Trivedi and supported the order of the CIT. He submitted that the order of revision should not be considered in isolation but should be considered along with the report of the Dy. CIT on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting aside the order on the ground that necessary enquiries had not been made by the Assessing Officer. He again submitted that powers of revision cannot be invoked merely for substituting an opinion of the CIT. For this purpose, he again drew our attention to the judgment of the Bombay High Court in the case of Gabriel India Ltd's. He further submitted that even the fact that Assessing Officer has reframed the assessment by substituting the view of the CIT without bringing any fresh facts itself show that no enquiry was required in this case. Even on merits, he submitted that the assessee was never a dealer in purchase and sale of development rights in land and, therefore, it was never a stock-in-trade of the assessee. He referred to the various statements of account to show that the assessee had never shown this asset as a stock-in-trade. His submission was that development right was only a capital asset in the hands of the assessee which could not be exploited by it. Hence, the Assessing Officer was right in assessing profit under the head 'capital gain'. He also drew our attention to the decision of the Bombay High Court in the case of CIT v. Laxmi Surgical Pvt. Ltd. [1993] 202 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer is also a possible view. He cannot also get aside the order of the Assessing Officer in the guise of an enquiry where all the facts are already on record. The CIT cannot be allowed to set aside the order of Assessing Officer for making roving and fishing enquiries. The CIT certainly has powers to set aside an assessment and direct the Assessing Officer to make an enquiry only in those cases where the Assessing officer had failed to ascertain the facts and in such case the CIT must indicate in his order in what respect the enquiry has to be made. The view which we have taken is fortified by the judgment of the Bombay High Court in the case of Gabriel India Ltd. 8. Now let us examine the impugned order in the light of the above discussion. In the present case the CIT held the order of Assessing Officer as erroneous inasmuch as the assessee has been assessed in respect of profit on the sale of land under the head 'capital gain' instead of 'business' and the basis of such conclusion was that he neither made enquiries nor applied his mind. Hence, he set aside the order of assessment and directed the Assessing Officer to reframe the assessment in accordance with law. We have g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... points to emphasis that the view taken by the Assessing Officer can also be a possible view and cannot be held erroneous merely because the CIT holds a different view. Hence, we are of the view that the CIT wrongly invoked the jurisdiction under section 263 inasmuch as no enquiries were required and in fact no enquiries were made and no fresh material was brought on record in fresh assessment proceedings. Even he himself was not sure whether the profit on the sale of development right in the land could be assessed as business income inasmuch as he himself had not come to a definite finding. The revisionary jurisdiction, therefore, cannot be allowed to be exercised either for substituting his opinion or for making fishing and roving enquiry. 9. The view which we have taken is fully supported by the ratio laid down by the Hon'ble Bombay High Court in the case of Gabriel India Ltd. case. The following observations were made by their Lordships at page 160 : "It is well-settled that when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on record to satisfy it in that regard. If the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stereotyped order without making any enquiry in respect to the genuineness of the initial capital introduced by the assessee and the gifts received by her at the time of her marriage. In that case, the return had been filed for the first time. In view of these facts, it was the duty of the ITO to make an enquiry to ascertain the genuiness of the initial capital as well as the gifts received by her. Since the ITO had failed to make the enquiry, the order of the Assessing Officer was held to be erroneous. But in the present case the CIT has not pointed out anything in respect of what enquiry was required to be made. Hence this judgment of the Supreme Court cannot be applied to the facts of the present case. The judgment of the Rajasthan High Court in the case of Emery Stone Mfg. Co. also does not help the case of the revenue. In that case the Assessing Officer has framed the assessment without applying his mind to the applicability of the provisions of Explanation 3 to section 43(1). This case is also distinguishable since in the present case it is not the case of the revenue that Assessing Officer had failed to apply his mind to any of the relevant provisions of the IT Act. The lea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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