Allahabad H.C : Whether, on the facts and in view of the legal position as mentioned in the statement of facts, the Tribunal could be said to be legally correct in setting aside the order passed under s. 263 by the CIT ?

High Court Of Allahabad

CIT vs. Goyal Private Family Specific Trust

Sections 256(2), 263

Asst. Year 1979-80, 1980-81

R.M. Sahai & Om Prakash, JJ.

IT Appln. No. 101 of 1987

30th October, 1987

Counsel Appeared

V.K. Rastogi, for the Revenue : C.S. Agarwal, R.K. Agarwal & Vikram Gulati, for the Assessee

OM PRAKASH, J.:

These are two applications made under s. 256(2) of the IT Act, 1961, relating to the asst. yrs. 1979-80 and 1980-81 by the CIT, Agra, by which the Tribunal is directed to state the case on the following questions for the opinion of this Court :

” (1) Whether, on the facts and in view of the legal position as mentioned in the statement of facts, the Tribunal could be said to be legally correct in setting aside the order passed under s. 263 by the CIT ?

(2) Whether there is any legal basis for the hon’ble Tribunal to come to the conclusion that notice under s. 263 was issued by the CIT merely on suspicion and he had no cogent material before him for initiating the proceedings under s. 263 of the IT Act, 1961?

(3) Whether, on the facts and circumstances of the case, the decision of the Allahabad High Court reported in Srivastava (J.P.) & Sons (Kanpur) Ltd. vs. CIT (1978) 111 ITR 326 has been correctly applied by the Tribunal ?

(4) Whether the Tribunal is legally correct in not accepting the Department’s contention that the order under s. 263 is valid in view of the Supreme Court’s decision in the case of Rampyari Devi Saraogi 1973 CTR (SC) 107 : (1968) 67 ITR 84 and Smt. Tara Devi Aggarwal vs. CIT (1973) 88 ITR 323 ?

(5) Whether, on the facts and circumstances of the case, failure on the part of the ITO to make proper and adequate enquiries is by itself not sufficient to meet the requirement of s. 263 which confers jurisdiction in respect of an order which is erroneous and prejudicial to the interests of the Revenue ?

(6) Whether the Tribunal, on the facts and in the circumstances of the case, is legally correct in not giving a finding as to how the decision given in the following cases by the High Courts and relied upon by the CIT in his order under s. 263 are not applicable to the facts of the assessee’s case ?

The cases are Gee Vee Enterprises vs. Addl. CIT 1975 CTR (Del) 61 : (1975) 99 ITR 375 (Delhi); Kanhaiyalal vs. CIT (1982) 20 CTR (Raj) 106 : (1981) 136 ITR 243 (Raj) ; and Thalibai F, Jain vs. ITO 1975 CTR (Kar) 66 : (1975) 101 ITR 1 (Kar) ? “

2. The assessee, Goyal Private Family Specific Trust, Agra, a specific trust, was created on January 24, 1973, under a trust deed by Smt. Sudha Agrawal with a corpus of Rs. 500 for the benefit of the beneficiaries. The assessee filed returns for the first time for the asst. yrs. 1979-80 and 1980-81 on February 20, 1982, showing incomes of Rs. 39,540 and of Rs. 38,420, respectively, in the status of a private specific trust. The ITO completed the assessments for both the years on a single day, viz., November 25, 1982. Both the orders are couched in identical language. Therefore, it will suffice if only one order is reproduced for appreciation of the case. The assessment order for the asst. yr. 1979-80 runs as follows : ” Return filed declaring an income of Rs. 39,540. In response to a notice under s. 143(2), Shri D. K. Agarwal, CA, attended. Case discussed. This is a case of Private Family Specific Trust, in which shares of beneficiaries are specified. Therefore, income in the hands of the trust is exempt and taxable in the hands of beneficiaries. The trust has been created, vide trust deed dated January 24, 1973, a copy of which has been filed and placed on record, for the benefit of beneficiaries, Km. Mira Agarwal, Km. Usha Agarwal, Km. Rekha Agarwal and Master Kapil Agarwal. After discussion and scrutiny, income returned is accepted. Share of each beneficiary comes to Rs. 9,890. Assessed. Issue N. D.”

3. Thereafter, notices under s. 263 were issued to the assessee by the CIT for “both the years calling upon the assessee to show cause as to why assessment orders be not cancelled, as being erroneous and prejudicial to the interests of the Revenue. Not being satisfied with the explanation of the assessee, the CIT set aside the assessment orders for both the years directing the ITO to make the assessments de novo. The Commissioner was of the view that the orders for both the years were erroneous and prejudicial to the interests of the Revenue, inasmuch as they were passed by the ITO ” ……in haste/hurry without proper and adequate enquiry …… … The Commissioner also observed that the orders do not show ” How and in what manner and with what capital the trust conducted its business relating to handloom daris and it is not at all clear from the papers filed.” He also added that the record shows that the books of account of the trust were never produced before the ITO for scrutiny, that no tick marks were made on any papers filed by the trust along with the return and that the assessment was made in one hearing, without requiring the presence of the trustees. The Commissioner finally concluded : ” that an assessment made in haste/hurry without proper and adequate enquiry/investigation is erroneous and prejudicial to the interest of the Revenue…. “

4. On appeal, the Tribunal set aside the order of the CIT for both years by a combined order dated April 30, 1986. In paragraph 4 of the said order, the Tribunal observed that the assessee had filed the trading and profit and loss account, balance-sheet and copies of the accounts of the beneficiaries before the ITO. Having so observed, the Tribunal found that there was little reason to doubt the contention of the assessee that the books of account had been produced before the ITO. The finding that the books of account had been produced before the ITO and that he passe : the orders after having seen them is a finding of fact and no question of law arises therefrom.

5. In his orders, the ITO had clearly stated that he had discussed the case with the representative of the assessee and it was only after the discussion that the ITO held that the assessee was a private specific trust and the income thereof was exempt in the hands of the trust but that it was assessable in the hands of the beneficiaries. Having considered all these facts, the Tribunal observed in paragraph 4 : ” The reasons given by the CIT for coming to the conclusion that the assessments had been made in a hurried way without any checking or scrutiny are superficial. ” Such finding of the Tribunal is not without material and hence no question of law arises.

6. There is no finding by the CIT that the ITO reached an erroneous conclusion and that, on the facts and circumstances of the case, the conclusion would have been different. The orders of the ITO may be brief and cryptic, but that by itself is not sufficient reason to brand the assessment orders as erroneous and prejudicial to the interest of the Revenue. Writing an order in detail may be a legal requirement, but the order not fulfilling this requirement, cannot be said to be erroneous and prejudicial to the interest of the Revenue. It was for the CIT to point out as to what error was committed by the ITO in having reached the conclusion that the income of the trust was exempt in its hands and was assessable only in the hands of the beneficiaries. The Commissioner having failed to point out any error, no error can be inferred from the orders of the ITO for the simple reason that they are bereft of details. If the order is not erroneous, then it cannot be prejudicial to the interest of the Revenue. There is nothing to show in the order of the CIT that the ITO would have reached a different conclusion had he passed a detailed order. So, the conclusion of the CIT that the orders of the ITO are erroneous and prejudicial to the interest of the Revenue are based merely on suspicion and surmises in the absence of any enquiry having been made by him.

In the income-tax assessments, all questions boil down to this, whether income has been properly determined and whether the correct rate of tax has been applied. The Commissioner does not say that the income was higher or that it was assessed on a wrong entity or at a low rate or that any exemption was wrongly allowed. In the absence of such a finding, the assessment orders cannot be said to be erroneous and prejudicial to the interest of the Revenue.

For the above reasons, we are not inclined to direct the Tribunal to state the case on any question proposed by the Revenue. The applications are, therefore, dismissed, but there will be no order as to costs.

[Citation : 171 ITR 698]

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