TaxTMI 
TaxTMI 
1985 (12) TMI 86
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....he association of B.C. Kochar. The interest, however, has not been earned during the assessment year 1978-79 from B.C. Cochar whereas interest was payable to Hazareemull Heeralal and, accordingly, a sum of Rs. 63,801.81 was claimed as interest paid or payable to Hazareemull Heeralal. It was stated in course of the argument that some flats were sold in the earlier years but no flat was sold during the year under appeal and the financial position of the association of B.C. Kochar was such that they did not pay interest to the lady. 2. It was also claimed that a partition took place between the widow Smt. Sudha Devi Rampuria and her mother-in-law Smt. Gulab Devi Rampuria and the liability pertaining to Hazareemull Heeralal was assigned to Smt. Sudha Devi Rampuria. 3. Smt. Sudha Devi Rampuria filed her return for the assessment year 1978-79 showing the following income :  ....
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....----------- BAV 91,438.97 Less : One-sixth for repair 19,016.00 6 per cent collection charges &nbs....
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.... 22,219.79 -------------------- Less : Expenses 1. One-fourth share of loss of Pradip Pratishthan, 4, Meredith St., Cal. (subject to completion of Firm's assessment) 4,255.37 2. Interest payable to Hazareemull Heeralal &nb....
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....p; ---------------- &n....
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....bsp; Rounded off to Rs. 4,220" The return was filed on 30-3-1981 and the assessment was completed by the ITO under section 143(1) of the Act on the total income of Rs. 4,220 on 2-9-1981. 4. The Commissioner took action on perusal of the record under section 263 on the ground that the assessee should not have been allowed interest of Rs. 63,801.81. The ITO did not properly investigate into the facts and as he completed the assessment under section 143(1), the order passed by him was erroneous and prejudicial to the interests of the revenue. He issued a show-cause notice to the assessee and the assessee from time to time appeared as well as submitted written submissions through her letters dated 4-4-1983 and 12-4-1983. The Commissioner did not accept the arguments of the assessee and he set aside the assessment by observing as follows : "I have carefully gone through the submission of the assessee and find myself unable to agree with the same. The circumstances under which the loan liability ....
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....ause notice issued by the Commissioner dated 25-1-1981 and urged that the Commissioner was not justified to set aside the assessment on other grounds than the grounds indicated in the show-cause notice. The assessment cannot be set aside simply because it was made under section 143(1). No other ground has been taken by the Commissioner and, therefore, he stated that in view of the Calcutta High Court decision in Luxmi Devi Chowkhani v. CWT 1983 Tax. LR 843 (Gauhati), the order of the Commissioner may be set aside. Dr. Pal further stated that on merits the case of the assessee is very strong. Once the amount has been borrowed for the joint venture and the assessee has been co-opted as a member of the association of B.C. Kochar, the interest paid by her was an allowable expenditure. He placed reliance in Madhav Prasad Jatia v. CIT [1979] 118 ITR 200 (SC). Dr. Pal even otherwise urged that the Commissioner was not justified in taking action under section 263 and, therefore, the order passed by him may be set aside. 6. Shri Chaliha, the senior departmental representative, on the other hand very strongly supported the order of the Commissioner and urged that the order passed by the ITO....
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....r book. This agreement has been concluded on 15-8-1982. On the basis of this agreement it has been claimed that the loan pertaining to Hazareemull Heeralal was assigned to the assessee. The surprising fact is that the return was filed in the present case on 30-3-1981. The assessment was completed on 2-9-1981. The assessee's counsel has made a statement that only profit and loss account, balance sheet and computation of income were filed along with the return. Therefore, the claim of the assignment which was made on the basis of the agreement of 1982 cannot be made in 1981 unless the memorandum of partition must have been prepared much earlier and it was only reduced in writing in 1982. This point was not very clear even though a specific query was put before the counsels. The summary assessment requires the satisfaction of the ITO on the production of all necessary papers and evidences. This is very clear in the CBDT's Circular No. 201 dated 5-7-1976 [see Taxmann's Direct Taxes Circulars, Vol. I, 1985 edn., p. 876]. The ITO could not have the satisfaction without the production of any paper for the allowance of interest of Rs. 63,801.81 to Hazareemull Heeralal. The assessee did not....