TaxTMI 
TaxTMI 
2007 (10) TMI 355
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....totalling to Rs. 5,62,621. The CIT(A) vide order dated 26-3-1998 set aside the assessment order with following observations:- (i) The Assessing Officer had failed to conduct investigation in respect of the claim of the assessee that she was carrying on business; (ii) The Assessing Officer should conduct further enquiries in respect of names and addresses of customers to find out whether or not the business was carried on; (iii) The claim of loss from business should be further gone into; (iv) The Assessing Officer should examine the confirmation of the lease transactions concerned. In pursuance to the above directions the Assessing Officer completed the assessment on 20-3-2000 and determined the income at Rs. 28,86,030. This assessment order was a giving effect order in pursuance to CIT(A)'s order dated 26-3-1998. Incidentally this assessment order was also passed under section 144 of the Income-tax Act. The CIT considered this order as erroneous and prejudicial to the interests of the revenue and accordingly he issued notice under section 263 on 18-1-2002 on the following reasons : (i) Assets totalling Rs. 3,49,683 referred to in that report were not reflected in....
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....e was a mistake, it was in the order dated 27-3-1997 which cannot be rectified after 27-3-1999. He further submitted that without prejudice to the above,- (i) the copy of the report of the DVAC is a mere statement of allegations by a police officer, tire correctness of which, till date had not been established; (ii) the CIT had no material, except the vague allegations contained therein lobe satisfied that the order was erroneous or prejudicial to the revenue; (iii) the CIT had not even applied his mind to satisfy himself whether allegations therein were correct; (iv) his order itself is vague; (v) The charge-sheet filed by DVAC cannot be considered as record relating to the proceedings under this Act; (vi) Power cannot be exercised for starting fishing and roving enquiries-CIT v. Gabriel India Ltd. [1993] 203 ITR 108 (Bom). It was further submitted on behalf of the assessee that the Assessing Officer could not have travelled beyond the directions of the CIT(A) in view of the judgment in the cases of :- (a) CIT v. Jawoharlal Nagpal [1988] 171 ITR 136 (Bom.) wherein it is held that in the fresh assessment proceedings after the original assessment had been ....
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.... (d) K.N. Agarwal's case; (e) Garden Silk Mills Ltd.'s case. He submitted that power is not arbitrary or unchartered and cannot be used for starting fishing enquiry Gabriel India Ltd.'s. He further submitted that on facts additions suggested by him have been considered and accepted by same officer in the hands of the respective owners, all of whom are assessees on the file of the same Assessing Officer and same CIT. He submitted that the entire property had been let out for 12 months and therefore there could not have been any reconstruction. He further submitted that during the course of the last hearing the learned Departmental Representative had referred to a number of decisions to which the assessee responds as follows :- (i) In the cases reported in (i) K.A. Ramaswamy Chettiar v. CIT [1996] 220 ITR 657 (Mad.) (ii). CIT v. M.N. Sulaiman [1999] 238 ITR 139 (Mad.) and (iii) CIT v. Lakshmi Machine Works Ltd. [2000] 241 ITR 53 (Mad.) deal with materials found during the course of search under the Income-tax Act or the valuer's report which the Assessing Officer had asked for but not received at the time of assessment and it was held that these were 'records relating to ....
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....conduct further enquiries in respect of names and addresses of customers, programme organizers, technical persons and other such staff members and examine them to find out whether or not the business was in fact carried out. The appellant should be given fresh opportunity to produce relevant books of account, documents and employees for examination and other such evidence. 'The ownership and use of vehicles as also the claim that the actual expenses on running and maintenance were reimbursed by the customers concerned should also be examined. It should also be found out whether any evidence in the form of documents, books of account, etc., were found during the course of search of the appellant's or some connected persons premises by the State agencies. The material so found, if any, should be taken into consideration. Similarly statements given to the State authorities for explaining the deposits, investments, etc. should also be taken into consideration while deciding the issue." Further he submitted that the report from the Directorate of Vigilance and Anti Corruption, Government of Tamil Nadu (DVAC) which carried out the search in the case of Miss J. Jayalalitha on 7-12-1996....
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....; 12,060.00 4.41 acres of dry land in S. No. 198 of Velagapuram (Doc No. 1580/93 dated 28-10-1993 of SRO, Uthukottai) 37,380.70 4.41 acres of dry land in S. No. 198 of Velagapuram Village (Doc No. 1581/93 dated 28-10-1993 of SRO, Uthukottai) 37,385.00 4.41 acres of dry land in S. No. 198 of Velagapuram Village (Doc. No. 1582/93 dated 28-10-1993 of SRO, Uthukottai) 37,385.00 4.41 acres of dry land in S. No. 198 of Velagapuram Village (Doc. No. 1583/93 dated 28-10-1993 of SRO, Uthukottai) 12.060.....
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....s revised the order of the Assessing Officer under section 263 on the ground that it is erroneous and prejudicial to the revenue. The CIT(A) did not give any specific order or direction to the Assessing Officer on remand but had clearly said that the entire assessment was set aside to be finalized afresh after carrying out enquiries and providing opportunity to the assessee. There is no direction regarding any aspect of income to be assessed or deductions to be granted etc. Thus, the entire assessment was open before the Assessing Officer who ought to have made proper enquiries and thereafter passed the assessment order. (b) The order of the Assessing Officer was erroneous insofar as he had not made any enquiries regarding source of investment of several movable and immovable properties acquired by the assessee, although it was common knowledge even at the time of passing the assessment order that huge assets in the name of the assessee, being a close associate of the then Chief Minister, were also found from the charge-sheets filed in the case of Miss J. Jayalalitha under the Prevention of Corruption Act. This erroneous order resulted in great prejudice to the revenue, inasmuch....
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....ted not on the basis of guesswork, but substantial evidence brought out in a proceeding under the Prevention of Corruption Act, as also the DVAC's report. The remand is not for the purpose of making a roving enquiry, but to look into facts available by way of DVAC's report, charge-sheet filed in a connected matter, etc., to come to the correct conclusion on facts. (e) The order of the Assessing Officer was clearly erroneous and prejudicial to the interest of the revenue inasmuch as he had not made proper enquiries regarding source of funds of the assessee for purchase of agricultural land, machinery, renovation and additional construction of house, purchase of farm house by firm in such assessee is a managing partner, payment of cash by firm in which assessee is a partner, etc., resulting in huge loss of revenue. (f) The CIT's order has only set aside the assessment order with a direction to enquire into the various aspects brought out in the DVAC report, and bring to tax unexplained investments. It is well within his powers under section 263 as explained in the case law cited supra. (g) The order of the CIT is not time-barred, as the order sought to be revised is dated 20....
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....ular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. The first requirement to exercise the power suo motu is that the order is erroneous. Secondly it should be prejudicial to the interests of Revenue. If the order is erroneous but not prejudicial, CIT cannot exercise the power under section 263. Every erroneous order cannot be the subject-matter of revision because second requirement must also be fulfilled. There must be prima facie material on record to show that tax which was lawfully eligible was not imposed or by application of relevant statute on an incorrect interpretation a lesser tax than was just has been imposed. Thus under section 263 the revisionary power can be exercised only if the order of the Assessing Officer is erroneous and prejudicial to the interests of revenue. In the absence of any one of the said conditions the revisionary power cannot be exercised by the CIT. The Supreme Court in the case of Malabar Industrial Co. Ltd. has observed as follows :- "A bare reading of Section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the....
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....ected from him because he is an adjudicator as well as investigator, he cannot remain passive. It is the duty of the Assessing Officer to invoke an enquiry. If the Assessing Officer has failed to make an enquiry to unearth the true facts the order is said to be erroneous. In the present case the Assessing Officer is not doing the original assessment. The Assessing Officer was to give effect to CIT(A)'s order dated 26-3-1998. The CIT(A) in para 16 of that order directed as follows :- "In the light of the foregoing the entire assessment is set aside with the direction to finalise the assessment afresh after carrying out enquiries providing proper opportunity to appellant considering her submissions and following due procedure laid down by the law." What is important is the direction given by the CIT(A) is in pursuance to the grounds of appeal before him. The CIT(A) considered the grounds relating to the following issues :- (i) depreciation on vehicles; (ii) disallowance from loss from M/s. Metal King, and (iii) disallowance of agricultural income. The CIT(A) set aside the issue to the file of the Assessing Officer to consider these three issues only. He has not give....