Allahabad H.C : Whether there was material on record in support of the, Tribunal’s finding that the CIT had not given his reasons for his satisfaction that the order passed by the ITO was prejudicial to the interests of the Revenue ?

High Court Of Allahabad

CIT vs. Kashi Nath & Co.

Section 263

Asst. Year 1975-76

K.J. Shetty, C.J. & V.K. Khanna, J.

IT Ref. No. 7 of 1979

9th April, 1987

K.J. SHETTY, C.J.:

The Tribunal, Delhi Bench ” B “, has referred the following question for the opinion of this Court : ” Whether there was material on record in support of the, Tribunal’s finding that the CIT had not given his reasons for his satisfaction that the order passed by the ITO was prejudicial to the interests of the Revenue ? “

The assessee, Kashi Nath & Co., is a partnership firm. The firm was doing sarafa and pawning business. For the asst. yr. 1975-76, the ITO determined its income at Rs. 77,599. There was no appeal to the AAC but the CIT in exercise of his power under s. 263 of the IT Act set aside the assessment order and directed the ITO to redo the assessment. But the appeal against the said order of the CIT has been allowed by the Tribunal. The Tribunal has observed that the CIT has not given his reasons for his conclusion that the order of assessment was prejudicial to the interests of the Revenue. In our opinion, the conclusion of the Tribunal is unassailable.

We may first refer to the order of the CIT. The preamble of the order states that the assessment order passed was erroneous and prejudicial to the interests of the Revenue inasmuch as the ITO while completing the assessment for 1975-76 did not make detailed enquiries in respect of various cash credits appearing in the names of different ladies. He further did not obtain necessary details about the interest income from pawning. Para. 2 of the order refers to the notice issued by the CIT to the assessee and also the reply filed thereto. Para. 3 refers to the conclusion of the CIT’s order and it reads : ” After considering the reply of the assessee, I am satisfied that the ITO had framed the assessment without examining the details of the deposits appearing in various names. The assessee’s argument that the provisions of s. 263(1) of the IT Act, 1961, are not applicable is not correct. The order passed by the ITO on July 22, 1975, for the asst. yr. 1975-76 is, therefore, set aside for being framed afresh according to law and after careful consideration of abovenoted matters. Dated : 25-3-1977 Sd./-S. K. Lall, CIT, Lucknow.”

It will be seen from the above order that the CIT did not examine the various cash credits said to be appearing in the names of different ladies which were said to have escaped the attention of, the ITO. He only complained of the order of the ITO for not examining the details of the credits appearing in various names. What those details required to be examined were have not been set out. There is thus absolutely no reason in support of the conclusion of the CIT that the assessment order was erroneous and prejudicial to the interests of the Revenue.

The power of the CIT under s. 263 is quasi-judicial in character. He must give reasons in support of his conclusion that the assessment order is erroneous in so far as it is prejudicial to the interests of the Revenue. If he does not give reasons, the order would be vitiated. This was the view taken by this Court in the case of J. P. Srivastava & Sons Ltd. vs. CIT (1978) 111 ITR 326 (All) and CIT vs. Sunder Lal (1974) 96 ITR 310 (All).

In the instant case, since the CIT has not applied his mind to the relevant material on record and has not given reasons for his conclusions that the assessment order was prejudicial to the interest of the Revenue, the Tribunal was justified in reversing that order.

In the result, we answer the question in the affirmative and against the Revenue. In the circumstances, we make no order as to costs.

[Citation : 170 ITR 28]

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