High Court Of Allahabad
CIT vs. Mahendra Kumar Bansal
Section 263
Asst. Year 1983-84 to 1985-86
R.K. Agrawal & Vikram Nath, JJ.
IT Ref. No. 56 of 1994
20th July, 2007
Counsel Appeared :
A.N. Mahajan, for the Revenue : Krishna Agarwal, for the Assessee
JUDGMENT
R.K. Agrawal, J. :
The Tribunal, Delhi has referred the following questions of law under s. 256(2) of the IT Act, 1961 (hereinafter referred to as the Act) for opinion of this Court :
“(1) Whether, on the facts and circumstances of the case the Tribunal is correct in law to set aside the order of CIT passed under s. 263, holding that it was based on mere suspicion and surmises ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal is legally correct to hold that the order of the ITO was not erroneous and prejudicial to the interest of Revenue ?
(3) Whether, on the facts and in the circumstances of the case, the Tribunal is legally correct to draw a conclusion that the CIT has failed to establish nexus between the stock found at the time of search with the assessment under appeal ?”
2. The reference relates to the asst. yrs. 1983-84 to 1985-86. Briefly stated the facts giving rise to the present reference are as follows : The respondent assessee filed his return of income for the three assessment years in question on 14th March, 1986. As the return for the asst. yr. 1983-84 was out of time, the same was regularized by the ITO by issuing notice under s. 148 r/w s. 147 of the Act. A search was conducted in the premises of the assessee’s father on 12th June, 1986. The CIT assigned the search cases of the group to the then IAC Range-II, Muzaffarnagar to make assessments of the group at one place. Other officers at Muzaffarnagar were requested to forward the group cases to the IAC Range-II, Muzaffarnagar. However, for the asst. yr. 1983-84 the ITO completed the assessment on 18th July, 1986 under s. 143(3)/148 of the Act. For the asst. yrs. 1984-85 and 1985-86 the assessments were completed on 14th July, 1986 under s. 143(1) of the Act. It appears that for the asst. yr.1983-84 the ITO had fixed a date of hearing on 18th July, 1986 and on that date after discussing the case with the counsel for the assessee the assessment was made. Proceedings under s. 263 of the Act were initiated by the CIT who vide order dt. 29th March, 1989 after coming to the conclusion that the assessments were erroneous and prejudicial to the interest of the Revenue had set aside all the three assessments and remanded for framing de novo assessment after making minimum and proper enquiries. The main ground in the order taken was that the ITO had made the three assessments without making minimum and proper enquiries and further the ITO had not transferred the case to the IAC Range-II, Muzaffarnagar and did not consider the significance of the return which was filed in the month of the raid. The assessment was completed in due haste. Feeling aggrieved, the respondent assessee preferred separate appeals before the Tribunal which vide order dt. 11th Dec., 1990 had allowed the appeals and had set aside the order passed by the CIT under s. 263 of the Act. The Tribunal while allowing the appeals has held as follows : “6. I have given my very careful consideration to the facts of the case and the rival submissions. I have stated in earlier part of this order the reasons given by the CIT in holding the orders passed by the ITO to be erroneous and prejudicial to the interest of the Revenue. The only observation made by him is that there was a search in the case of the father of the assessee on 12th June, 1986 when stock to the extent of Rs. 1,95,015 was found. Beyond mentioning this figure he has not referred to the adverse effect of this stock on the three assessments in the case of the assessee for the asst. yrs. 1983-84, 1984-85 and 1985-86. He has referred to the fact that the ITO has failed to make enquiries regarding the sources of meeting the expenses of the assessee on his education and that how he was carrying on the business while prosecuting studies at Bangalore. Then he has made reference to the enquiry to be made in the case of M/s Surinder Kumar & Sons for the asst. yr. 1986-87. So far as the sources of meeting the expenses of education of the assessee are concerned, the material on record of the ITO does not suggest that there were withdrawals from the capital account of the assessee for meeting such expenses. In addition, he has some income from tuition work. The CIT has not recorded any finding on the inadequacy of such expenses.
He has also referred to the enquiries to be made in the case of Surinder Kumar & Sons for the asst. yr. 1986-87. The period for this assessment year falls beyond the three assessment years i.e. 1983-84, 1984-85 and 1985-86. Even, in the case of that firm, the stock found as a result of search was on 12th June, 1986 which will be relevant for the asst. yr. 1987-88 and not for the asst. yr. 1986-87. The CIT has not given any reasons in his order as to how there was a nucleus between the availability of stocks on 12th June, 1986 with the assessments for the assessee for the asst. yrs. 1983-84, 1984-85 and 1985-86 and for that matter even with the case of M/s Surinder Kumar & Sons for the asst. yr. 1986-87. As a matter of fact, the CIT has made no comments on the stock except referring to the figure. Even the assessments may have been made in haste but the mere fact that the assessments were made in haste and the orders were cryptic would not render such assessments erroneous and prejudicial to the interest of the Revenue unless some material is brought on record by the CIT to show that the ITO did not consider such material or did not appreciate the material while making the assessments. The order passed by the CIT, in my opinion, is therefore, passed on mere suspicion and surmises. For this proposition, I rely upon the judgment of the Hon’ble High Court of jurisdiction in the case of CIT vs. Goyal Private Family Specific Trust (1988) 67 CTR (All) 206 : (1988) 171 ITR 698 (All). In the case before the Allahabad High Court, the CIT in his order under s. 263 had observed as under : ‘The assessment made in haste/hurry without proper and adequate enquiry/investment is erroneous and prejudicial to the interest of Revenue….’
The Hon’ble High Court held that the order of the ITO could not be held to be erroneous and prejudicial to the interest of the Revenue, which was passed merely on suspicion and surmises. In the absence of any enquiries having been made by him, this judgment of jurisdictional High Court applies on all fours to the facts of the case before me. The judgments of the Hon’ble Supreme Court in the cases of Rampyari Devi Saraogi vs. CIT (1968) 67 ITR 84 (SC) and Smt. Tara Devi Aggarwal vs. CIT 1973 CTR (SC) 107 : (1973) 88 ITR 323 (SC) were duly referred to before the Hon’ble Allahabad High Court in the case of Goyal Private Family Trust (supra). In view of the various judicial authorities relied upon by the learned counsel for the assessee and the CIT having not brought on record the material, non-consideration of which caused prejudice to the interest of the Revenue and not even the learned Departmental Representative having brought any such material before me at the time of hearing of the appeal I am inclined to hold that the order passed by the CIT is based on mere suspicion and surmises. I have already discussed in the earlier part of this order that the CIT has failed to establish nexus between the stock found at the time of search with the assessments under appeal and even with the firm M/s Surinder Kumar & Sons for the asst. yr. 1986-87. He has even not given any finding about the inadequacy of the withdrawal for meeting the expenses on the technical education of the assessee at Bangalore.
7. In view of these facts it cannot be said that the orders passed by the ITO were prejudicial to the interest of the Revenue. I am therefore unable to sustain the order passed by the CIT under s. 263 of the IT Act, 1961, for all the three assessment years. The same are cancelled.” We have heard Sri A.N. Mahajan, learned standing counsel appearing for the Revenue and Sri Krishna Agarwal, learned counsel for the respondent assessee. Sri A.N. Mahajan, learned standing counsel submitted that the ITO had completed the assessments in due haste without considering the material on record and without making any further enquiries which has resulted in the order being erroneous and prejudicial to the interest of the Revenue. Thus, the Tribunal was not justified in setting aside the order of the CIT under s. 263 of the Act. In support of the aforesaid pleas, he has relied upon the following decisions : CIT vs. Goyal Private Family Specific Trust (1988) 67 CTR (All) 206 : (1988) 171 ITR 698 (All); CIT vs. Belal Nisa (1988) 69 CTR (Pat) 170 : (1988) 171 ITR 643 (Pat); CIT vs. Smt. Kaushalya Devi (1988) 171 ITR 686 (Pat). Sri Krishna Agarwal, on the other hand, submitted that the assessment for the asst. yr. 1983-84 which was made under s. 143(3)/148 of the Act the ITO had considered various documents and after considering the same and discussing with their counsel had framed the assessment which could not be said to have been made in due haste or without proper enquiry. So far as the assessments for the asst. yrs. 1984-85 and 1985-86 are concerned he submitted that the same have been passed under s. 143(1) of the Act and in view of the decision of this Court in the case of CIT vs. Smt. Brij Bala (2006) 156 Taxman 244 (All) and Circular No. 176, dt. 28th Aug., 1987 proceedings under s. 263 of the Act were not called for as the said circular was issued by the Board and is binding upon the Departmental authorities. He has also relied upon a decision of the Gujarat High Court in the case of CIT vs. Vikrant Crimpers (2006) 202 CTR (Guj) 393 : (2006) 282 ITR 503 (Guj). Having given our anxious consideration to the various pleas raised by the learned counsel for the parties, we find that in respect of two assessments for the asst. yrs. 1984-85 and 1985-86 the orders have been passed under s. 143(1) of the Act. The CBDT had issued Circular No. 176, dt. 28th Aug., 1987 in which instructions have been issued to all the CITs to the effect that no remedial action is necessary in summary assessment cases, as the revenue loss, if any, is consciously suffered by the Government to utilize resources for scrutiny and investigation of larger cases and action under s. 263 of the Act was not to be taken.
This Court in the case of Smt. Brij Bala (supra) has held that the circular issued by the Board is binding upon the authorities and, therefore, the CIT was not justified in initiating proceedings under s. 263 of the Act in respect of the assessments completed under s. 143(1) of the Act. In the case of Vikrant Crimpers (supra) the Gujarat High Court has held that the CIT being bound by the directions of the CBDT cannot exercise powers under s. 263 of the Act in the case of a summary assessment. Respectfully following the aforesaid decision we are of the considered opinion that the CIT was not justified in initiating the proceedings under s. 263 of the Act in respect of the asst. yrs. 1984-85 and 1985-86. So far as the assessment for the asst. yr. 1983-84 is concerned, we find that the assessment has been made under s. 143(3)/148 of the Act. The date fixed by the assessing authority was 18th July, 1986 and on that very date the assessee’s counsel had filed certain details and evidences and after discussion the assessment was framed. Even though in the assessment order there is no mention that the detailed enquiry has been made nor any evidence has been discussed yet we find that the returned income was accepted. The necessity for making assessment under s. 143(3)/148 of the Act was on account of the return having been filed beyond the prescribed period.
In the case of Goyal Private Family Specific Trust (supra) this Court has held that the order of the ITO may be brief and cryptic, but that by itself is not sufficient reason to brand the assessment order as erroneous and prejudicial to the interest of the Revenue and it was for the CIT to point out as to what error was committed by the ITO in having reached to its conclusion and in the absence of which proceedings under s. 263 of the Act are not warranted. In the case of Belal Nisa (supra) the Patna High Court has held that where the ITO had not carried out the necessary enquiry enjoined by s. 143(1) of the Act the CIT is within his power in taking action in terms of s. 263(1) of the Act. Similar view has been taken by the Patna High Court in the case of Smt. Kaushalya Devi (supra). The principles laid down by the Patna High Court in the aforesaid two cases are not applicable to the facts of the present case in view of the provisions of s. 143(1) of the Act and as the CBDT had already issued the circular referred to above that action under s. 263 of the Act is not warranted and this circular appears to have not been brought to the notice of the Patna High Court which is binding upon the Departmental authorities. As held by this Court in the case of Goyal Private Family Specific Trust (supra) we are of the considered opinion that merely because the ITO had not written lengthy order it would not establish that the assessment order passed under s. 143(3)/148 of the Act is erroneous and prejudicial to the interest of the Revenue without bringing on record specific instances, which in the present case, the CIT has failed to do. In view of the foregoing discussions we answer all the three questions referred to us in affirmative, i.e., in favour of the assessee and against the Revenue. There shall, however, be no order as to costs.
[Citation : 297 ITR 99]
