TaxTMI 
TaxTMI 
2001 (9) TMI 231
X X X X Extracts X X X X
X X X X Extracts X X X X
....ices, the assessees filed their returns of incomes disclosing the following: Name of the assessee Total income originally returned Undisclosed income (1) M/s Goyal Iron & Steel Works (I) 3,58,450 Nil (2) M/s Goyal Iron & Steel Works Nil Nil (3) M/s Kailash Nath Goyal & Sons 7,61,060 Nil 3. Proceedings for assessment under s. 158BC/BD started accordingly. Finally, while the AO dropped the proceedings under s. 158BC/158BD, in the case of M/s Goyal Iron & Steel Works (India) and M/s Kailash Nath Goyal & Sons, he determined the undisclosed income of M/s Goyal Iron & Steel Works at Rs. 7,72,870 for the block period 1st April, 1986, to 18th March,1997. These orders were passed after obtaining approval of Addl. CIT. 4. Prior to passing the order, the assessee has challenged the initiation of search and seizure operation before the Hon'ble Allahabad High Court. The Hon'ble High Court held that let the assessment be completed but the order may not be served on the assessees. 5. Subsequently, the CIT examined the records of all the three assessees and issued show-cause notices as to why the assessments made by AO may not be set aside as the same w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1) was conducted or the books of accounts/documents/assets are requisitioned under s. 132A. Sec. 158BD is applicable in those cases where the AO is satisfied that the undisclosed income belongs to any person other than the person in respect of whom search was made under s. 132. When the CIT issued show-cause notice, M/s Goyal Iron & Steel Works vide its letter, dt. 5th Oct., 1999, have furnished its detailed reply. It was stated that there was no undisclosed income which could be assessed to tax under Chapter XIV-B. In his order the CIT observed that the AO has failed to make proper enquiries on account of suppression of production and did not consider the information received from DIC. He also had held that the AO has not used the information from DIC in right perspective. The learned counsel argued that such observation by CIT is improper and unjustified. It is the sole discretion of the AO while framing the assessment to adopt such view as he considers proper and reasonable. When the assessees came to know that the AO has proposed certain arbitrary additions at the time of assessment they approached the Addl. CIT for giving direction to the AO for making a proper assessment. In ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (1998) 147 CTR (Mad) 426 : (1998) 234 ITR 541 (Mad). While relying on the decision of Hon'ble Allahabad High Court in the case CIT vs. Late Sunder Lal (1974) 96 ITR 310 (All), the learned counsel argued that it was mandatory on the part of CIT to give reasons for holding an assessment order to be erroneous. In the instant case, the CIT has only relied on the information furnished by DIC. He has no independent information except the information of the DIC. Thus, it is a case where the CIT has not given his reasonings for holding an order to be erroneous. While relying on the decision of Hon'ble Allahabad High Court in the case of J.P. Srivastava & Sons (Kanpur) Ltd. vs. CIT (1978) 111 ITR 327 (All), the learned counsel argued that it was mandatory for CIT to examine the material and then come to the conclusion that the order passed by the AO was erroneous. The CIT has not examined the material at all. While relying on the decisions CIT vs. Taj Printers (1989) 178 ITR 384 (All), CIT vs. G.K. Kabra (1995) 125 CTR (AP) 55 : (1995) 211 ITR 336 (AP) and CIT vs. Amalgamations Ltd. (1998) 150 CTR (Mad) 374 : (1999) 238 ITR 963 (Mad), the learned counsel argued that in case the CIT sets as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e order of the CIT. 12. We have considered the rival submissions. In all the cases, the assessment orders were made under s. 158BC/158BD of the Act. In two cases, the AO did not make any addition on account of undisclosed income whereas in one case, the addition on account of undisclosed income was made. However, the CIT set aside all these three orders by assuming jurisdiction under s. 263 of the Act. 13. Sec. 263 of the Act reads as under: "The CIT may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the AO is erroneous insofar as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment." 14. From a reading of s. 263(1), it is clear that power of suo motu revision can be exercised by the CIT only if on examination of any proceedings under the IT Act, he considers that any order passed th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d CIT vs. Smt. Milan Ben S. Parikh (1995) 127 CTR (Guj) 333 : (1995) 215 ITR 81 (Guj). 17. The phrase "prejudicial to the interests of Revenue" has to be read in conjunction with an erroneous order passed by the AO. As has been held in various cases reported in Rajpyari Devi Saraogi vs. CIT & Ors. (1968) 67 ITR 84 (SC) : Tara Devi Agarwal vs. CIT 1973 CTR (SC) 107 : (1973) 88 ITR 323 (SC) and (2000) 243 ITR 83 (SC), every loss of revenue as a consequence of an order of the AO, cannot be treated as prejudicial to the interests of Revenue. For example, when an AO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the AO has taken one view with whom the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the AO is unsustainable in law. 18. Keeping in view the above judicial pronouncements, we have considered the facts of the cases. We have to decide whether the orders passed by the AO were erroneous or not. Needless to say, the order was passed by AO under Chapter XIV-B. Proviso to s. 158BG provides that no order of assessment for....
X X X X Extracts X X X X
X X X X Extracts X X X X
....irector only less than one-fourth of the quantum applied for. This allotment was regularly accounted for in the books of account of the assessee. The AO reopened the assessments of the assessee for the previous years under s. 16 of the Tamil Nadu General Sales-tax Act, 1959, on the ground that the accounts did not reflect properly the production and also levied penalty. The Sales-tax Tribunal on appeal held that there was no suppression. On a revision by the State: Held, (1) that merely because the assessee conducted himself in a manner which was not conducive to ethics, the taxing authority could not invoke the provisions of reassessment and penalise him." 20. In view of above decision, it could not be said that the assessment order passed by the AO was erroneous. 21. Moreover, the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. has held as under: "The scheme of the Act is to levy and to tax in accordance with the provisions of the Act and this task is trusted to the Revenue. If due to an erroneous order of the ITO, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. The phrase "prej....