TaxTMI 
TaxTMI 
2006 (3) TMI 112
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....ct, as it then existed. The Commissioner of Income-tax issued a notice dated August 14/19, 1996, stating that on a perusal of the assessment records it has been revealed that the Assessing Officer had assessed the investment made by the petitioner in the house property at Rehabari, Guwahati on substantive basis without, however, making any enquiry as to whether the investment in the house property could be made from the known sources of income of the petitioner-assessee. In the notice issued, the Commissioner had also recorded that the Assessing Officer had accepted the investment made in the house property at Rs. 7.02 lakhs without holding any enquiry. It was further mentioned that from the report of the CBI, ACB, Guwahati, it appears that, according to the CBI, the investment in the aforesaid house property was made by one Sri Motilal Dutta, the son-in-law of the petitioner and that according to the CBI the cost of construction of the house was Rs. 16,16,500. On the aforesaid facts the Commissioner in the notice issued recorded his opinion that the assessment made for the assessment year in question being without necessary pre-assessment enquiries is erroneous and prejudicial to ....
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....l appearing for the Revenue. 5. Dr. Saraf learned counsel appearing for the petitioner-assessee, has submitted that the Commissioner having invoked his power under section 263 on the basis of the materials that had subsequently come to light, i.e., the report of the CBI had exceeded his jurisdiction under section 263 of the Act. According to learned counsel the power under section 263 would be available to set aside an assessment on the basis of the records and the proceedings as available before the Assessing Officer and in the circumstances stated in the section itself i.e., such assessment being erroneous and prejudicial to the interest of the Revenue. It has been emphatically contended by Dr. Saraf that the satisfaction of the Commissioner that an assessment order is erroneous and prejudicial to the interests of the Revenue can be reached only on the basis of the materials as available to the Assessing Officer and not on the basis of subsequent materials. In this regard, reliance has been placed on a judgment of the apex court in the case of State of Kerala v. K. M. Cheria Abdulla and Co. [1965] 16 STC 875. On the above basis, there is a further argument that has been made b....
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....documents brought forward by her. Such a course of action, according to learned counsel for the petitioner, is not permissible and discloses a fundamental jurisdictional error which would require correction at the hands of the court. Reliance in this regard has been placed on a decision of the Bombay High Court in the case of CIT v. Gabriel India Ltd. reported in [1993] 203 ITR 108 and of the Punjab and Haryana High Court in the case of CIT v. Kanda Rice Mills reported in [1989] 178 ITR 446. 7. The submissions advanced on behalf of the petitioner have been resisted by Sri Bhuyan, learned counsel appearing for the Revenue. According to Sri Bhuyan, the basis on which the Commissioner of Income-tax had initiated the proceeding under section 263 of the Act is evident from the notice dated August 14/19, 1996, itself. The Commissioner of Income-tax, on a perusal of the records of the assessment, noticed that the investments made by the petitioner in the house property were accepted by the Assessing Officer without holding any enquiry as to whether such investments could have been made by the petitioner from her known sources of income. The finalisation of the assessment without holdin....
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.... Saraf, learned counsel far the petitioner, to the effect that the satisfaction that an order of assessment is erroneous and prejudicial to the interests of the Revenue must be reached an the basis of the record of the proceeding as available to the Assessing Officer at the time of completion of assessment and that the Commissioner cannot travel beyond the said record is difficult to accept. Not only the above argument has been negated by this court in Shree Automobiles P. Ltd. [2003] 3 GL T 40, the decision of the apex court in the State of Kerala v. K. M. Cheria Abdulla and Co. [1965] 16 STC 875 does not countenance the above view. In State of Kerala v.K. M. Cheria Abdulla and Co. [1965] 16 STC 875, the apex court, in an appeal filed by the State of Kerala, was considering the correctness of the view recorded by the High Court that section 12 of the Madras General Sales Tax Act, 1939, limited the scrutiny of the revisional authority to the record of the proceedings as before the Assessing Officer. The High Court had taken the further view that as rule 14A of the Rules framed conferred a wider power of enquiry, the same was, therefore, ultra vires. The apex court disapproved the v....
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.... reserved by the Act or by the Rules to other authorities or to ignore the limitations inherent in the exercise of those powers. For instance, the power to reassess escaped turnover is primarily vested by rule 17 in the Assessing Officer and is to be exercised subject to certain limitations, and the revising authority will not be competent to make an enquiry for reassessing a taxpayer. Similarly, the power to make a best judgment assessment is vested by section 9(2) (b) in the assessing authority and has to be exercised in the manner provided. It would not be open to the revising authority to assume that power. The revisional power has to be exercised for ascertaining whether the order passed is illegal or improper or the proceeding recorded is irregular and it is in aid of that power that such orders may be passed as the authority may think fit. One of the inquiries in considering the legality or propriety of the orders passed by the subordinate officer which the revising or the appellate authority may make is about the correctness of the tax levied and if after perusing the record the authority is prima facie satisfied about the illegality or impropriety of the order or about the....
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.... a ground to reopen the assessment of the petitioner and that in exercising the powers under section 263 the Commissioner had trenched upon the power of another authority under the Act would stand self answered. 11. This would bring the court to the core issue in the case i.e. whether the impugned order dated November 1, 1996, setting aside the assessment and directing a fresh assessment has been made without recording any firm conclusion that the assessment order is erroneous and prejudicial to the interests of the Revenue. There can be no manner of doubt that the power conferred by section 263 of the Act to interfere with an assessment made can be exercised only if the Commissioner is of the opinion that such assessment order is erroneous and prejudicial to the interests of the Revenue. 12. Though much argument has been advanced as to what is the correct meaning of the two expressions i.e. "erroneous" and "prejudicial to the interests of the Revenue", the aforesaid aspect of the matter need hardly detain the court. The matter has been succinctly explained by the Bombay High Court in CIT v. Gabriel India Ltd. [1993] 203 ITR 108, wherein the view taken by a Division Bench of ....
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....udicial to the interests of the Revenue. That was the opinion recorded in the notice dated August 14/19, 1996, but the said opinion being recorded in a notice issued to the petitioner asking to show cause, the same must be understood to be a highly rebuttable view. Such view/opinion was required to be reiterated after hearing the petitioner and after holding the necessary enquiry. On receipt of the show-cause notice dated August 14/19, 1996 the petitioner submitted an elaborate reply laying materials before the Commissioner to show that sufficient proof of income of the assessee was laid before the Assessing Officer to enable the said authority to come to the conclusion that the investments in the house property were made from the known sources of income of the assessee. The said materials were in the form of balance-sheets and details of the funds available to the petitioner from time to time. In the above facts the petitioner-assessee had contended that the assessment order in question was not erroneous and prejudicial to the interests of the Revenue. The Commissioner of Income-tax on receipt of the reply of the petitioner could not have ignored the same. Rather, it was incumbent....