TaxTMI 
TaxTMI 
2002 (2) TMI 300
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.... dated 5-1-2001. The assessee has challenged the order of the CIT(C) dated 5-1-2001 in the three appeals before us. Since the impugned order dated 5-1-2001 is common order, all the appeals relate to the same assessee and we have heard them together, therefore, all the appeals are decided by this consolidated order in all the three appeals. The assessee has filed these appeals on many common grounds and for the sake of convenience grounds of appeal for the assessment year 1987-88 are reproduced as under: "1. Because the revised income of the appellant has been accepted by the Assessing Officer on agreed basis and in pursuance of the directions and instructions of the then Commissioner of Income-tax, Central, Kanpur, the respondent is legally stopped to take action under section 263 of the Act on the basis of same material. 2. Because section 263 does not envisage the revision or review of an order passed on the directions of the Commissioner of Income-tax, Central, Kanpur himself and the notice dated 2-1-1992 is wholly without jurisdiction. 3. Because the word Assessing Officer used in the section refers to subordinate officer and an order of assessment framed on the direction an....
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....erly examined by the Assessing Officer and as such the action under section 263 is called for. 12. Because, the Commissioner of Income-tax (Central), Kanpur before initiating the impugned action has not looked into the records of the case consisting of various reports and Office Note made by respective authorities involved in the quantification of income, to be disclosed by the assessee in the revised Return. In the premises, the impugned action is uncalled for and is against the provisions of law. 13. Because, the impugned action has been initiated by the respondent on the basis of change of opinion, surmises and conjectures and just to make a fishing and roving enquiry. 14. Because the entire seized material having considered and duly examined by the then Commissioner of Income-tax (Central), Kanpur, the action of the respondent in initiating the impugned proceeding would tantamount to review the directions/instructions of the then Commissioner of Income-tax (Central), Kanpur. 15. Because, the Commissioner of Income-tax (Central), Kanpur cannot legally reopen a proceeding which has already been concluded between the parties and became final by his predecessor. 16. Because Co....
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....contested in appeal is contrary to facts, law and principles of natural justice." 3. For assessment year 1988-89, separate grounds are as under: 16. Because Commissioner of Income-tax (Central), Kanpur has erred in law and on facts as ground mentioned in the notice is not a valid ground to hold that the order passed under section 143(3) was prejudicial to the interests of revenue." "21. Because Commissioner of Income-tax (Central), Kanpur has erred in law and on facts in setting aside the order passed under section 263 as under: '3. The assessee has been allowed deduction under sections 80HH and 80HHA of the Income-tax Act, 1961 amounting to Rs. 38,371 and Rs. 7,417 which is not allowable to it."' 4. For assessment year 1989-90, the different grounds of appeal arc as under: 16. Because Commissioner of Income-tax (Central), Kanpur has erred in law and on facts as ground mentioned in the notice is not a valid ground to hold that the order passed under section 143(3) was prejudicial to the interest of revenue. 21. Because it is not legally permissible to give direction under section 263 to initiate penalty proceedings under section 271(1)(c). 22. Because Commissioner of Income....
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....; year 1988-89. 19-7-1989 to Hearing continued before the Assessing Officer. 30-3-1989 Notices under sections 142(1) and 143(2) were issued and replied for the assessment year 1987-88. 9-11-1989 to Hearing continued before Assessing Officer for assessment year 1988-89. 30-3-1990 31-12-1989 Return of income filed for assessment year 1989-90. 31-1-1990 Notice under sections 143(2) and 142(1) issued for assessment year 1989-90. 15-2-1990 to Hearing for all the assessment years continued before the Assessing Officer. 30-3-1990 5-3-1990 Order under section 132(12) passed by the CIT (Central) on the order under section 132(5) directing the Assessing Officer to examine the seized material &....
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....ding undisclosed incomes determined in the order under sections 132(5) and 143(3) submitted by the Assessing Officer to DC (Central), Varanasi. 2-1-1992 Show cause notice under section 263 issued by Shri W. Hasan, CIT (C) to the assessee for all the three years. 28-1-1992 Hearing against show cause notice under section 263 took place and written submissions filed before CIT(C). 26-2-1992 Hon'ble Allahabad High Court stayed the proceed ings before the CIT(C) under section 263 on the writ petition filed by the assessee against the show cause &nbs....
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....ciliation statement regarding the undisclosed income determined in the order under sections 132(5) and 143(3) of the Act, copy of the order sheets for the assessment year 1987-88 from 19-6-1987 to 30-3-1990, for the assessment year 1988-89 from 25-4-1989 to 30-3-1990 and for the assessment year 1989-90 from 31-1-1990 to 30-3-1990, copy of the order dated 27-9-1999 passed by the Income-tax Appellate Tribunal deleting the penalty under section 271(1)(c) of the same assessee for the assessment years 1987-88 and 1988-89. In the second Paper Book all the records of the writ petition filed before the Hon'ble High Court, Counteraffidavit by Shri B.P. Gupta, the then CIT(C), copy of the counter-affidavit filed by Shri Mahesh Chandra, ACIT, Rejoinder Affidavit and final order are filed. He has also filed copies of the Audited Balance Sheet and Written Arguments in support of his contentions. 7. On the other hand, the ld. D.R. filed the Paper Book containing 19 pages which were the compilation of the assessee and second Paper Book also containing documents of the assessee in support of the contention of the Revenue as well as copy of the affidavit of Shri B.P. Gupta, the then CIT(C), which ....
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....person who was monitoring the investigation by the Assessing Officer and as such he should not have passed the impugned order under section 263. He has further argued that the CIT(C) did not refer to all the papers submitted by the department in search and survey. The CIT(C) had not gone into whole record. He has further argued that the CIT(C) supervised whole assessment proceedings and also filed affidavit in the High Court confirming the joining and guiding the Assessing Officer in assessment after going through the three reports. He further argued that order dated 5-3-1990 of CIT(C) under section 132(12) merged with the order of the Assessing Officer passed under section 132(5) directing the Assessing Officer to consider the case and evidence of assessee. The ld. Counsel for the assessee also filed Written Submissions having all the details. The ld. Counsel for the assessee further argued that the case law relied upon by the ld. CIT(C) in impugned order are not applicable. He has further argued that page 7 of the order of the CIT(C) clearly shows that everything was done by the Assessing Officer. He has referred to pages 143, 146 and 149 of the Paper Book which arc the assessmen....
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....e order under section 143(3) and as such, it is liable to be set aside. He has taken us to page 8 of the CIT(C)'s order to show that the order is passed by the CIT(C) without application of mind. He has relied on the decision of the Hon'ble Madras High Court in the case of CIT v. Smt. D. Valliammal [1998] 230 ITR 695, and the decision of the Hon'ble Madhya Pradesh High Court, Indore Bench in the case of CIT v. Ratlam Coal Ash Co. [1988] 171 ITR 141 (M.P.). He has further argued that deduction under sections 80HH and 80HHA is mentioned in the Paper Book giving all the details of computation and all the conditions are satisfied for claiming the deduction and the assessee has complied with the same and the same has not been disputed by the Department. 10. On the other hand, the Ld. DR. did not dispute the dates as mentioned above in this order, which were supplied in the Dates Schedule by the counsel for the assessee. The Ld. D.R. argued that some irregularities and loopholes were found in the assessment orders and, therefore, the CIT(C) was right in exercising power under section 263 and as such the Assessing Officer is bound by that order. The Ld. D.R. further argued that the asses....
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....claimed both the deductions together. He has also argued that no depreciation was claimed on machinery and in earlier year no machinery was used and then it is irregularity to claim deduction under, sections 80HH and 80HHA. No number of employees was mentioned and no separate balance sheet was prepared. He has further argued that page 122 of the Paper Book of the assessee shows that for 1987-88 the accounting year closed on 31-12-1986, but area of Jangi was declared backward on 19-12-1986 and then how in 12 days production was raised to and submitted that it needs examination which the Assessing Officer did not do. He has further referred to page 124 of the Paper Book of the assessee and submitted that the assessee has taken factory on lease, which means existing factory was taken which was not qualified for deduction under sections 80HH and 80HHA. He has further submitted that given up claims under sections 80HH and 80HHA have not been surrendered to income in revised return. The Ld. D.R. further argued from his Paper Book-I that figure of Rs. 14 lakhs is shown but with the department it is Rs. 15 lakhs. The Ld. D.R. further referred to page 116 of the Paper Book of the assessee w....
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....tion, which was already, shown in the Profit and Loss Account. Copy of the Audited Balance Sheet was also filed to explain this position and argued that there was no discrepancy in the undisclosed income. The Ld. Counsel for the assessee further argued that for deduction under sections 80HH and 80HHA, the claim was reduced only to factory in backward area in revised return. In the original return claim was made on entire production of all the factories. According to him, the assessee has now claimed deduction as per law. He has further argued that there is no requirement to use machinery under sections 80HH and 80HHA. Only Bhatti i.e., 'Heat Ghar' is plant and machinery. The Ld. Counsel further argued that no notice under section 263 was issued on this point. On quantification, other remedies were available with the department, but on allowability no details were furnished to the assessee in the show-cause notice. He has argued that all seized record was with the department. Details of the loans have been mentioned and these details are also mentioned in order under section 132(5) which was objected to by the assessee. The Ld. Counsel for the assessee referred to page 92, which is ....
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....n case of search, which is mandatory in nature and as such, the penalty should be initiated by the Assessing Officer. 13. The ld. Counsel for the assessee in rejoinder to the argument of the ld. D.R. further argued that the assessee had filed explanation which is at pages 120 and 121 of the Paper Book about the earlier reports. He has further referred to page 179 of the Paper Book, which is the order of I.T.A.T., Allahabad Bench deleting the penalty in the case of the same assessee for assessment years 1987-88 and 1988-89. He has further argued that the CIT(C) could not have given direction to the AO to initiate penalty under section 271(1)(c). He has further argued that there is no requirement to maintain separate books of account. The ld. Counsel for the assessee referred to object of sections 80HH and 80HHA and argued that each of these sections is to rehabilitate industry in backward area. All the requirements are complied in the case of the assessee. According to him, even, otherwise in the search all the books of account were seized which are separately maintained for each unit as per Seizure Memo. He has further argued that Excise Register is separate and provident fund is ....
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.... made but came into existence afterwards cannot form part of the record of the proceeding of the income-tax Officer at the time when he passes the order and, accordingly it cannot be taken into consideration by the Commissioner for the purposes of invoking his jurisdiction under this section, for he is not an appellate authority under the section and exercises only revisional jurisdiction and hence he can take into consideration only the record as it stood before the Income-tax Officer and the materials in such record for the purpose of ascertaining whether the order in question was erroneous and prejudicial to the interests of the Revenue." 17. Hon'ble Calcutta High Court in the matter of Bagsu Devi Bafna has held:-- "It is well-settled that if an order was made relying upon materials collected behind the back of a party and without giving the party an opportunity of contesting the legality, or binding effect of such materials, the order must be treated as bad for having been made in violation of the principles of natural justice." 18. Hon'ble Calcutta High Court in the matter of Shakuntala Devi v. CIT [1971] 82 ITR 416 has held: "What is definitely enjoined by the rules of na....
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....or realisation of the tax due to the Revenue. However the assessee has been assigned the right to challenge the order passed by the AO under section 132(5) of the I.T. Act in the form of petition/appeal to the CIT under section 132(11) of the I.T. Act. The CIT on receipt of the appeal/petition of the assessee is required to give hearing to the assessee and pass appropriate order under section 132(12) of the I.T. Act. In this case also the AO has passed order under section 132(5) vide order dated 28-3-1989 and estimated the undisclosed income in a summary manner. The assessee filed objection/appeal under section 132(11) of the I.T. Act to the CIT(C) vide petition dated 23-4-1989. The CIT(C) has disposed of the objections under section 132(12) of the I.T Act vide order dated 5-3-1990. Therefore order passed under section 132(5) which was of summary nature merged with the order under section 132(12) of the Act. On the doctrine of merger the order passed under section 132(5), ceased to exist and stands merged with the order of the CIT under section 132(12) of the I.T. Act. The principle is that the order of the inferior authority merges with the order of the superior authority. 21. Th....
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....ceases to exist and the ITO starts the assessment proceedings afresh." 27. Keeping in view the above discussion and the authorities, it would be clear that the order of the AO under section 132(5) merged with the order of the CIT(C) passed under section 132(12) of the Act. It would be worthwhile to mention here that the CIT(C) in the order under section 132(12) has held:-- "I direct the Assessing Officer to weigh the evidences given by the assessee and the evidences seized in search and seizure operations and then arrive at a correct and judicious conclusion in the regular assessment proceedings and then determine properly in a reasonable way whether the amount of undisclosed assets and effect of purchase, diaries seized in search, is fully covered by the disclosure made under section 132(4) or it is not sufficient to cover the same." With these directions, petition was disposed of. The AO proceeded with the assessment proceedings in view of the directions under section 132(12) of the Act as passed by the CIT(C). He again scrutinized the seized material and passed the assessment order in all the years. Therefore, the CIT(C) was wrong in relying upon the order under section 132(5....
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....insofar as it is prejudicial to the interests of Revenue, we would like to deal with the objections raised by the Ld. D.R. on the strength of the authority of Allahabad High Court in Dhampur Sugar Mills Ltd.'s case The Ld. D.R. argued that the revised return was filed on 30-3-1990, assessment order was also passed on the same day, therefore, earlier proceedings are no proceedings under the Act. The ld. D.R. further argued that the CIT(C) has only monitored the earlier proceedings. The Ld. D.R, further argued that no enquiries were held and the Assessing Officer passed the assessment without application of mind. On the other hand, the Ld. Counsel for the assessee argued that this authority is not applicable as in the old Act when this judgment was passed section 132(12) was not inserted. In this case, return was filed under the amended Income-tax Act, 1961 when sections 132(5), (11) and (12) were incorporated which were not incorporated in old Act when this decision was rendered by Allahabad High Court. It is a special procedure incorporated in the amended Act by amendment in 1975/1984. It is a complete Code in itself. In this case also proceedings started after search and culminat....
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....cause notice under section 263 of the Act on the ground "no scrutiny of the revised return was made by the Assessing Officer as no notice under section 143(2)/143(1) was issued on the revised return. The CIT(C) himself dropped notice on this ground in the impugned order and specifically held that notice was waived by the assessee and that the assessment order does not suffer from the infirmity of issue of notice which could be prejudicial to the interests of Revenue. Therefore, notice was cancelled on this ground. The assessee has not challenged this view. Even otherwise we have decided above that the assessment proceedings were part of search and seizure operation as the estimation of income under section 132 ultimately culminated in regular assessment order under section 143(3). Therefore, the first issue is disposed of accordingly. 31. The second issue in the assessment years 1987-88, 1988-89 and 1989-90 upon which show cause notices under section 263 of the Act were issued, is as under: Assessment year 1987-88: "While determining the income under section 143(3) at Rs. 10,46,370 the Assessing Officer has failed to consider the expenditure of Rs. 1,82,01,000 on which income o....
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....1989-90 at Rs. 2,47,59,180 I have gone through the petition of the assessee on this point. The points mention relate to evaluate of seized evidence from the point of view of determination of concealed income. The Assessing Officer will give opportunity of hearing to the assessee and take a judicial decision on these matters in regular assessment proceedings." 35. These expenditures and estimates of income have been discussed and scrutinised by the Assessing Officer in his reports, dated 7-3-1990, 19-3-1990 and 29-3-1990. The assessment order was passed on the basis of scrutiny made by the Assessing Officer and these three reports were sent to CIT(C). The Assessing Officer in paragraph 6 of the office note attached with the assessment order for 1989-90 has specifically mentioned that:-- "6. All the seized documents/account books have been scrutinised by me and almost all immovable properties belong to the firm/company, but at Satna, have been got valued by the Valuation Cell. The effect of each paper seized and valuation reports has been taken into before arriving at the figures of the concealment as mentioned para 2 (Annexure 'A'). The principles of asset formations out of income....
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....have been pointed out on these counts. We would like to mention here that search took place on 29-11-1988 at the registered office and other branches and factories of the assessee and residential premises of the directors. The revenue has seized certain incriminating evidences and as noted earlier the discussions with the revenue authorities were continuing to arrive at correct concealed income in consequence of the search. As per the date of schedule filed by the learned Counsel for the assessee, the discussion took place on 20-3-1989 & 21-3-1989 with CIT(C), DDI, DC(C), Varanasi at Allahabad. The scrutiny of the seized material was made by the Assessing Officer while issuing notice under section 132(5), which were replied by the assessee. Thereafter notices under section 143(2)/142(2) were issued from time to time and hearing took place on various dates which is mentioned in the date Schedule. The copies of order sheet entries have been filed in the Paper Book at Sl. No. 10 which show that the discussion was going for assessment year 1987-88 from 19-6-1987 to 30-3-1990 for assessment year 1988-89 from 24-4-1989 to 30-3-1990 and for assessment year 1989-90 from 31-1-1990 to 31-3-1....
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....ation so that the assessment proceedings may be finalised by the Assessing Officer. 38. These counter affidavits clearly established that the Assessing Officer has properly scrutinised all the seized material in accordance with law on the guidance of the Senior Officers including the CIT(C) who has issued show-cause notice under section 263 of the Income-tax Act. The assessments were made on 30-3-1990 and the affidavit was filed by the then CIT(C) in Allahabad High Court in January, 1993. However, the show-cause notices under section 263 of the Act were issued on 2-1-1992 and that too by Sh. W. Hasan, CIT(C), Kanpur. It is interesting to note that the impugned order was passed on 5-1-2001. We fail to understand why Department was taking contradictory stand at different stages. The then CIT(C), Sh. B.P. Gupta in his affidavit made to believe the Hon'ble High Court that the assessments were made after examining seized books etc. by the Assessing Officer and that he himself DDI (Investigation) and Dy. CIT(C) were guiding and helping the Assessing Officer during the course of finalisation of the assessment proceedings. It is surprising even after filing this affidavit in High Court in....
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....sp; Additional income Additional income as per Year per return appraisal reports [Note 2 of Ann.(A)]. ---------------------------------------------------------------------------------- 1989-90 76,60,000.00 76,49,065.00 1988-89 ....
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....nbsp; - 12,807.00 ---------------------------------------------------------------------------------- Total 96,83,845.00 96,31,310.00 ---------------------------------------------------------------------------------- From the above chart, it is evident that additional income disclosed by the assessee covers the concealed income, hence the Asstt. has been completed on the returned figures. Since the assessment year 1989-90 is the only year where the benefit of section 132(4) read with section 271(1)(c) Explanation 5 be given, hence no penalty proceedings are initiated in this year only. As the revision of returns in earlier years is attributable to search & seizure operation, the penalty proceedings for earlier ....
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....ion and completing the investigation on the lines suggested by DIT/DDIT-1 Audit/CIT(C)/DC(C). The Assessing Officer has mentioned all the figures in Annexure A and has also given method on which concealed income was calculated. This office note is part of the assessment record along with Annexure A. Therefore, CIT(C) was wrong in stating that no scrutiny of the seized material has been done in the matter. The ld. Counsel for the assessee also filed copy of the audited Balance Sheet which was filed before authorities below in which entire clarification has been made with regard to the alleged differences as stated by CIT(C) in the impugned order. 41. Now we deal with the observation of the CIT C) in the impugned order under section 263 of the Income-tax Act. The CIT(C) observed that 'I also do not agree with the assessee's arguments given in para 4.4 of the paper book that the amount disclosed broadly tallied with additional income estimated in the appraisal report and, therefore, there was no error in the asstt. order. An appraisal report is only an indicator prepared in a summary fashion just as order under section 132(5) is framed and does not, in any way, exempt the Assessing O....
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....ation of the CIT(C) is unfounded and is liable to be rejected. 43. The CIT(C) further had objected in the impugned order with regard to the declared income of Rs. 82 lakhs to cover all the loose papers etc. He has further observed that the fact that it was brought into the books much later and noted in the closing stock shows that there was an attempt to adjust the declaration with the stock of Tendu leaves found in order to reduce the tax liability. He has further stated that this position would have been clarified only if the Assessing Officer had carried on scrutiny of the books of' account and gave specific finding. 44. On the No. 2 Book and Diary of Sh. Shyama Charan Gupta were found during the course of search, we have already observed that the Assessing Officer has scrutinised all the records and the seized material in three reports. Books of account were with the Department with the seized material. This fact is also discussed by the Assessing Officer in his report dated 7-3-1990 which is incorporated in the Paper Book at page 108. We have also gone through the order of the ITAT, Allahabad Bench 'A' in ITA Nos. 2322 and 2657 of 1991 in the cast, of the same assessee for t....
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....ioned at page 92 of the paper book. This point was not raised by the CIT(C) in the show-cause notice and no explanation of the assessee was sought. Therefore, even otherwise also, the CIT(C) should not have made this ground for setting aside the assessment order which was never put to the assessee. The CIT(C) further objected the impugned order that it is possible that the assessee had introduced fresh stock valued at Rs. 47,20,559 and further observed that the Assessing Officer has not examined any of these issues. We have already clarified this position above that these facts are specifically mentioned in the audit reports filed by the assessee and the assessee has clarified the same position and this explanation was also mentioned in the assessment order for the assessment year 1988-89. All these details are also considered by the Assessing Officer in all the three reports submitted by him to the CIT(C) under the supervision of DDIT and Dy. CIT(C). Again the CIT(C) is not sure about this addition. He has only stated that "It is possible". It was only the guess work of the CIT(C) to raise this ground for setting aside the assessment order. Further this ground was not raised in th....
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.... Trust [1987] 167 ITR 129 held:-- "The error envisaged by section 263 was not one which depended on possibility or guess work, but it should be actually an error either of fact or of law." (iii) Hon'ble Punjab & Haryana High Court in the matter of CIT v. Kanda Rice Mills [1989] 178 ITR 446 has held: "That a reading of the entire order of the Commissioner clearly showed that he did not furnish his opinion or consider the cited cases or the argument raised and merely observed that these were the points which deserved consideration and after setting aside the order of the Income-tax Officer, issued a direction for making assessment afresh, which was not permissible under the provisions contained in section 263 of the Act. The Commissioner had to come to a firm decision that the order of the Income-tax Officer was erroneous and was prejudicial to the interests of the Revenue. Since no decision about the erroneous nature of the order was firmly taken, the Tribunal was right in vacating the order of the Commissioner under section 263." (iv) Hon'ble Madhya Pradesh High Court in the matter of CIT v. Shri Govindram Seksariya Charity Trust [1987] 166 ITR 580 held: "Tribunal finding that....
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....nt framed is erroneous and has been passed without proper scrutiny of the seized record, is wrong and contrary to record. The writ petition was dismissed by the Allahabad High Court on 7-12-2000 and the assessee himself appeared before the CIT(C) on 4-1-2001 even without notice. Earlier proceedings were stayed by the Hon'ble High Court. The impugned order was passed on 5-1-2001 The ld. DR even during the course of the proceedings before us argued that the three reports dated 7-3-1990, 19-3-1990 and 29-3-1990 are not used by the CIT(C) in section 263 proceedings and the assessee also did not claim relief on these grounds. We do not agree with the ld. DR that the assessee did not rely on these reports. The assessee since the beginning had been asserting that all the seized material was scrutinized by the Assessing Officer with the help of senior officers and proceedings were guided and monitored by the CIT(C). This fact is also mentioned by the Assessing Officer in the office note attached to the regular assessments. He had placed reliance on all the reports, but the circumstances show that after appearance of the assessee before the CIT(C) on 4-1-2001, the CIT(C) passed the order on....
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....section 263(1) in the matter. Even on principle of merger, the order under section 132(5) which has merged with the order of the CIT(C) under section 132(12) should not have been relied upon by the CIT(C) while issuing show-cause notice to the assessee. Therefore, the entire order has been passed without going into the record of the case by the CIT(C). It appears from the above discussion that the assessee surrendered income in the revised return after scrutiny of the seized material. We fail to understand why the same CIT(C) who mentioned the proceedings, issued show-cause notice under section 263. 49. The learned Counsel for the assessee relied upon the following case laws in support of his contention:- I. Smt. Daljeet Kaur's case wherein the Hon'ble Court held:-- "Under section 263(1) of the Income-tax Act, 1961, two pre-requisites must be present before the Commissioner can exercise the revisional jurisdiction conferred on him. First is that the order passed by the Income-tax Officer must be erroneous. Second is that the error must be such that it is prejudicial to the interests of the revenue, if the order is erroneous but it is not prejudicial to the interests of the reven....
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....n Income-tax Appellate Tribunal, Hyderabad 'A' Bench held:-- "However, if an Assessing Officer has completed an assessment by one of the two permissible methods prescribed under the law it cannot be said to be erroneous or prejudicial to the interests of Revenue--Only ground on which assessment was set aside is that Assessing Officer had not made inquiries with respect to a particular loss claimed by assessee. Not erroneous or prejudicial to the interests of Revenue." V. Malabar Industrial Co. Ltd's case wherein it was held:-- "The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue, for example when an Income-tax Officer adopted one of the courses permissible in law and it was resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one with which the Commissioner does not agree it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer i....
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.... CIT(C) in the impugned order has relied on (1) Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC), (2) Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC) and (3) Swarup Vegetable Products Industries Ltd. No. 1 v. CIT [1991] 187 ITR 412 (All.). The first authority is with regard to the jurisdiction of the CIT in pursuance to the order passed on repeal by Income-tax Act. The second authority is with regard to the income which has not been earned and the assessee wants it to be assessed and last authority is with regard to the fact where the ITO has accepted the claim of the assessee erroneously without making proper enquiries and, therefore, it was held that the Commissioner was justified in taking action under section 263. But the appeals in hand show that the Assessing Officer has properly scrutinised all the seized material and considered the claim of the parties on merits when he was guided by the senior officers and also by the CIT(C). Therefore, the facts of the present case are clearly distinguishable from the cases cited by the ld. D.R. and CIT(C) in order and the same are not applicable to this case. 52. On ground Nos. 3 and 4 of the notices under section 263 for the as....
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....sessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section; (iii) it is not formed by the transfer of to a new business of machinery of plant previously used for any purpose; (iv) it employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power." 54. The Counsel for the assessee has argued that. the deductions have been correctly allowed as the assessee fulfilled all the conditions of these sections. He has further argued that the assessee is an industrial undertaking engaged in manufacture of hand made biris. The company came into existence for the first time in the previous year relevant to the assessment year 1987-88. Deductions have been claimed only with reference to units established by the company itself as against the factories taken on lease from others firm. The record shows that the production started after the relevant date as mentioned in sections 80HH and 80HHA and before 1-4-1990. Nothing was brought on record to show that there was any split....
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....as claimed deduction under section 80HH in 1987-88 in respect of the industrial unit at Jangipur in West Bengal, He has not claimed any deduction under section 80HHA in that year. In the assessment year 1988-89 the assessee has claimed deduction under section 80HH in respect of industrial unit at Jangipur and Chamagram. However the assessee has claimed deduction under section 80HHA in respect of industrial unit of Uchahara and Budhara. For the assessment year 1989-90 the assessee has claimed deduction under section 80HH in respect of industrial unit at Jangipur and Chamagram. For deduction under section 80HHA the assessee has claimed deduction in respect of industrial units at Uchahara, Budhara, Pachpedi and Bachhiya. The explanation clearly ruled out the observation of the ld. CIT(C). It appears that the CIT(C) has passed the impugned order on this issue also without going into the record of the case and claim of the assessee. Therefore, the observation of CIT(C) on this issue are liable to be set aside. The ld. Counsel for the assessee relied on the following decisions: (i) Textile Machinery Corpn. Ltd v. CIT [1977] 107 ITR 195 wherein Hon'ble Supreme Court held: "Reversing th....
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....tuted a new industrial undertaking within the meaning of section 15C of the Indian I.T. Act, 1922. The Tribunal was therefore, right in holding that the assessee was entitled to the benefit of section 15C of Act." (v) CIT v. Jalna Seeds Processing & Refrigeration Co. Ltd [2000] 246 ITR 156 wherein Hon'ble Bombay High Court held: "Manufacture or processing of goods processing of raw seeds Tribunal finding that different commodity emerged after raw seeds underwent different stages justified as sets entitled to relief under section 80HH." (vi) Blue Dart Express Ltd v. Joint CIT [2000] 75 ITD 414 wherein Hon'ble Mumbai Bench of the ITAT held: "Whether Commissioner was justified in holding assessment order as erroneous and prejudicial to revenue simply because, according to him, order should have been written more elaborately held, no." All these authorities are squarely applicable to the facts of the case and in favour of the assessee. Therefore, we hold that the finding of CIT(C) that the assessee is not eligible to the deduction is wrong and is not in accordance with the facts of the case. During the course of arguments, it was brought to our notice that for assessment years 199....
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....wing decisions:-- (i) Addl CIT v. J.K. D'Costa, [1982] 133 ITR 7 (Delhi) wherein Hon'ble High Court held: "Failure by ITO to initiate penalty proceedings Commissioner not entitled to revise Assessment proceedings different from penalty proceedings." (ii) CIT v. J.K. D'Costa [SLP (Civil) Nos. 11391-11392 of 1981] wherein Hon'ble Supreme Court held: "The Commissioner...was not entitled to set aside the assessment order on the ground that there was no mention of initiation of penalty proceedings in the assessment order to direct the ITO to make fresh assessment and to initiate penalty proceedings." (iii) CIT v. Linotype & Machinery Ltd. [1991] 192 ITR 337 wherein Hon'ble Calcutta High Court held: "Failure of ITO to initiate penalty proceedings under section 273(a) Commissioner cannot direct ITO to make fresh assessment on ground that order passed was prejudicial to interests of Revenue." (iv) CIT v. Nihal Chand Rekyan [2000] 242 ITR 45 wherein Hon'ble Delhi High Court held: "Penalty--Commissioner directing Income-tax Officer to initiate penalty proceedings. Tribunal tight in quashing direction given by the Commissioner. All these authorities are clearly applicable to the fact....
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....-1986 then how in 12 days production was raised to Crores and argued that this point needs examination. We again do not agree with the learned D.R. on this issue. The show-cause notice was issued to the assessee under section 263 about allowability of deduction under sections 80HH and 80HHA. This point was never considered by the CIT(C) in the impugned order. Therefore, fresh material cannot be used at this stage which has never been considered by the CIT(C) himself. No quantum was ever discussed or considered by the CIT(C). Hence this point of learned D.R. is also rejected. 58. The learned DR. further argued from his Paper Book about difference of figure of Rs. 14 lakhs but the department claimed as Rs. 15 lakhs as well as about the rates for Tendu leaves at Rs. 4.67 per kg. mentioned at page 116 of the assessee's Paper Book. He has also taken us to page 108 about the rates of the Tendu leaves and adoption of lower rates stock and also about the cash recovered from the search. Though all these points have been scrutinised by the Assessing Officer in detail still we may note here that on these points CIT(C) himself has not set aside the assessment order. No show-cause notice issue....