TaxTMI 
TaxTMI 
2009 (5) TMI 18
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....cluding various discrepancies pointed out by him in his order. 3. In order to adjudicate upon this appeal the following facts require to be noticed:- 4. The assessee is a builder engaged in the business of construction of properties on a collaboration basis with the owners of the properties. The assessee filed a return dated 31.10.2002 in respect of assessment year 2002-03 declaring a total income of Rs 2,69,210/- The assessees case was picked up for compulsory scrutiny under Instruction No. 11/2003 of Central Board of Direct Taxes (C.B.D.T.). Accordingly, a notice under Section 143(2) of the Act was issued to the assessee. During the course of scrutiny it transpires that several queries were raised by the Assessing Officer. In response thereto, the assessee sent communications dated 27.12.2004, 22.02.2005, 28.02.2005 and 18.03.2005. 5. A perusal of the assessment order dated 24.03.2005 would show that the Assessing Officer made specific enquiries with respect to a collaboration project situated at E-5/1, Malviya Nagar, New Delhi-110017 (hereinafter referred to as the Malviya Nagar property). The assessment order also indicates that the assessee had furnished copies of var....
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....rty was furnished by the assessee in a letter dated 28.02.2005. Despite, the disclosure by the assessee of details with respect to all three projects i.e., the Malviya Nagar property as also properties located at Gitanjali Enclave and Defence Colony - a fact which was ascertained by the Tribunal and finds mention in the impugned judgment: the Commissioner issued a notice dated 11.05.2006 to the assessee on the ground that he was of the view that the assessment made in the case of the assessee was both erroneous and prejudicial to the interest of the Revenue. The reasons which found favour with the Commissioner were as follows:- "(i) No examination of books of account was made; (ii) No verification were made from the persons to whom summons under Section 131 were issued and no statements were recorded on oath; (iii) The surrender of Rs 8 lacs was made on agreed basis, on the sale of project of Malviya Nagar, other projects, which were also in posh colonies of South Delhi, remain untouched and unverified. (iv) No proper recordings were made on the order sheet." 8. At this stage it would be important to note that we had called for record, in particular, the order ....
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....thing on the assessment record which would reveal the basis on which the Assessing Officer accepted the correctness of the income declared with respect to other two properties located at Gitanjali Enclave and Defence Colony; (v) the Commissioners refrain was the same as in the case of Malviya Nagar property that the books of accounts and vouchers had not been examined by the Assessing Officer with respect to the Gitanjali Enclave and Defence Colony properties and that the Assessing Officer had simply accepted the assessees claim of expenditure in respect of construction of the said properties amounting to Rs 52.77 lacs; (vi) the Commissioner also referred to expenses payable by the assessee to the tune of Rs 11,00,734/- which the assessee claimed were payable as on 31.03.2002. It was pointed out that there was no query raised and the books were not examined with reference to the said issue; (vii) a reference was also made to a Bank Reconciliation Statement found on the record and the fact that queries with respect to issues emanating therefrom had not been raised; (viii) there was also an issue about sale of Shop No 5 in Malviya Nagar, the consideration for which found ....
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....econciliation Statement in respect of the savings account with Canara Bank, Malviya Nagar Branch; details regarding the names and addresses of persons from whom total construction and consultancy receipts of Rs 75.61 lacs were received; and the explanation as to why no work-in-progress at the end of the year had been shown ; (ii) reference to a letter dated 14.02.2005 wherein details with respect to Malviya Nagar property were given, in particular, cost and expenses incurred on the Malviya Nagar property, as also copies of sale deeds of two properties in the same locality were filed; (iii) referred to letter dated 28.02.2005 which gave details with respect to property located at Gitanjali Enclave. Details with respect to Shop No 5 and 6 in the Malviya Nagar property and copies of relevant agreements as also sale deeds in respect of portions of said property which the assessee had been asked to submit. Details of salary expenses, accounting charges, vehicle maintenance account, entertainment expenses, telephone expenses etc. were also given; (iv) the confirmation of unsecured loan in the earlier years taken from one Shri Jagdish Chander; (v) in the very same letter dated....
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....nd mention in the assessment order would not render the assessment order liable for a revision by the Commissioner in exercise of power under Section 263 of the Act. 11.2 The Tribunal was also of the view that the order of the Commissioner deserved to be set aside in view of the fact that the final order dated 18/19.01.2007 proceeded to set aside the assessment based on certain grounds which did not find mention in the initial notice dated 11.05.2006. The Tribunal observed that the Commissioner has mentioned as many as nine grounds in his order dated 18/19.01.2007 justifying the cancellation of the assessment order some of which had not been addressed in the initial notice. It was, thus, of the view that since several reasons have been adverted to in Paragraph 2 of the order of the Commissioner dated 18/19.01.2007 some of which did not find place in the initial notice dated 11.05.2006, it would be difficult to determine as to what role they played in the decision arrived at by the Commissioner. It observed that when an authority passes an order for reasons, some of which are valid and some invalid, it would be difficult to sustain the same, as the Court has no means to find out ....
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....hat the impugned judgment deserves to be sustained for the reasons that the assessee had submitted the books of accounts for examination; he had filed each and every detail sought for by the Assessing Officer with respect to the queries raised in particular with respect to three property projects in issue i.e., the Malviya Nagar property and the properties located at Gitanjali Enclave and Defence Colony. He further submitted that the fact that the assessment order made no reference to the properties located at Gitanjali Enclave and Defence Colony or in respect of other issues which find reference in the Commissioners order could not lead to the conclusion that no enquiry/investigation had been made by the Assessing Officer merely by virtue of the fact that there is no discussion in the assessment order. He contended that the record would show that there was application of mind by the Assessing Officer. He further contended that it is a general practice adopted by Assessing Officers that when they accept an explanation in respect of a query raised during the course of scrutiny the same generally does not find a mention in the assessment order. He further submitted that as a matter o....
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....the Commissioner does not agree with the view taken by the Assessing Officer which has resulted in a loss. [See CIT vs Max India Ltd. (2007) 295 ITR 282 (SC)] (vi) There is no requirement of issuance of a notice before commencing proceedings under Section 263 of the Act. What is required is adherence to the principles of natural justice by granting to the assessee an opportunity of being heard before passing an order under Section 263. [See Electro House (supra)]. (vii) If the Assessing Officer acts in accordance with law his order cannot be termed as erroneous by the Commissioner, simply because according to him, the order should have been written more elaborately. Recourse cannot be taken to Section 263 to substitute the view of the Assessing Officer with that of the Commissioner. [See CIT vs Gabriel India Ltd (1993) 203 ITR 108(Bom)] (viii) The exercise of statutory power under Section 263 of the Act is dependent on existence of objective facts ascertained from prima facie material on record. The evaluation of such material should show that tax which was lawfully exigible was not imposed. [See Gabriel India Ltd (supra)] 15. Lets examine the facts of the present case ....
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....l, according to us, deserves due weight, as in its vast experience it would have come across several such orders. In almost similar situation the Division Bench of the Bombay High Court in Gabriel India Ltd (supra) made the following observation:- "From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order, unless the decision is held to be erroneous. Cases may be visualised where the Income-tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned ....
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....n though the notice dated 11.05.2006 issued by the Commissioner before commencing the proceedings under Section 263 of the Act referred to four issues, the final order dated 18/19.01.2007 passed referred to nine issues, some of which obviously did not find mention in the earlier notice and hence resulted in the proceedings being vitiated as a result of the breach of the principles of natural justice. 17.1 As observed by us above, there is no requirement under Section 263 of the Act to issue a notice before embarking upon a revisionary proceedings. To that extent the submission of the learned counsel for the Revenue Mr Sanjeev Sabharwal has to be accepted. What is mandated under Section 263 of the Act is that once the Commissioner calls for and examines the record, pertaining to the assessee, and forms a prima facie view that the order passed by the Assessing Officer is both erroneous and prejudicial to the interest of the Revenue, he is obliged to afford an opportunity to the assessee before passing an order, to the prejudice of the assessee. In the instant case, the Commissioner sought to accord such an opportunity to the assessee by putting him to notice as regards aspects whi....
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....e were to permit correction of such a grievous error in the manner suggested it would tantamount to, in a manner of speaking, closing the stable doors after the horse has bolted. The assessments, unless reopened by paying faithful obeisance to statutory provisions and conditionalities provided therein, attain finality on their conclusion. The provisions of Section 263 mandate that an order for enhancing, or modifying the assessment, or cancelling the assessment and directing a fresh assessment can only be passed after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as is deemed necessary. The threshold condition for reopening the assessment is that before passing an order an opportunity has to be granted to the assessee and, such an opportunity granted to the assessee is a necessary concomitant of the enquiry the Commissioner is required to conduct to come to a conclusion that an order for either an enhancement or modification of the assessment or, as in the present case, an order for cancellation of the assessment is called for, with a direction to Assessing Officer to make a fresh assessment. This defect cannot be cured by fir....