1986 (1) TMI 163

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....an order dt.5th May 1980. It was again rectified under s. 154 of IT Act by order dt.5th Aug., 1980. The assessee had claimed deductions under s. 35 of the said Act, being 30 per cent of the expenses incurred pertaining to construction of the research and development centre. The deductions claimed were allowed by the ITO. Deductions under s. 35 of the Act were also claimed by the assessee during the asst. yr. 1978-79 while proceedings for the asst. yr. 1978-79 were in progress to ITO and the IAC had inspected the assessee's Gurgain farm where according to the assessee the research and development enter was situated. In their inspection report, they had mentioned that the so called research and development centre had not been set up by the ti....

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....rted the order of the CIT. He has argued that the CIT had called for the record of the case on the information provided to it by the said report and the said report does not form the basis of the order passed under s. 263. We have given our anxious consideration to the submission advanced before us. While exercising power under s. 263, the CIT may call for and examine the record of the proceedings in order to consider as to whether the order passed by the ITO is erroneous. As such he can call for only that record which was before the ITO and we find ourselves in agreement with the contention advanced on behalf of the assessee that it is not open to him to consider any material which was not before the ITO. We are fortified in this view from....

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....7-78 had not been examined by the ITO with due care and diligence and had been partly allowed on a perfunctory consideration of the same. For these reasons the assessment order dt.17th April, 1980read with the subsequent rectificatory orders dt.5th May 1980appears to be prejudicial to revenue. It has accordingly to be set aside." 5. The above observations of the CIT make it clear that the impugned order is by and large base on the inspection report made by the ITO and the IAC. Since he had considered the material which was not before the ITO, we are constrained to hold that the impugned order is not sustainable and has to be quashed. 6. Learned counsel for the assessee has also argued that while setting aside the assessment order, it ....