Calcutta H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in setting aside the order of the CIT under s. 263 of the IT Act, 1961, and restoring the original assessment order ?

Counsel Appeared

J.P. Khaitan & C.S. Das, for the Assessee : P.K. Mallick & D. Dev, for the Revenue

JUDGMENT

Y.R. MEENA, J. :

On an application under s. 256(2) of the IT Act, 1961 (‘the Act’) this Court has directed the Tribunal to refer the following questions for the opinion of this Court. Question referred at the instance of the Revenue reads as under :

“Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in setting aside the order of the CIT under s. 263 of the IT Act, 1961, and restoring the original assessment order ?”

2. The questions referred at the instance of the assessee reads as under :

“1. Whether, on the facts and in the circumstances of the case and in view of the order dt. 29th Aug., 1994, passed by the learned CIT, the Tribunal was justified in holding that the principles of promissory estoppel was not applicable to the said order and as such the same was not binding on the CIT who sub-sequently passed order under s. 263 of the IT Act, 1961 ?

Whether, on the facts and in the circumstances of the case, the order passed under s. 263 of the IT Act, 1961, cancelling the assessment with a direction to make a fresh assessment by holding the said assessment to be erroneous in so far it was prejudicial to the interests of the Revenue was legal and valid as the said assessment was completed under the order of the earlier CIT himself ?

Whether, on the facts and in the circumstances of the case, it was legal and valid for the learned CIT under s. 263 of the Act to hold the earlier order of the CIT as illegal and without jurisdiction on the basis of which the assessment in question was completed and the said assessment to be erroneous and prejudicial to the interests of the Revenue ?”

On a scrutiny of the assessment for the asst. yr. 1981-82, the CIT was of the view that the assessment order for the asst. yr. 1981-82 is erroneous and prejudicial to the interest of the Revenue. Therefore, he issued the show-cause notice to the assessee under s. 263 of the Act. On receipt of reply to that show-cause notice, the CIT has considered the reply and in his opinion the assessment order of the ITO under s. 143(3) of the Act for the asst. yr. 1981-82 is erroneous and prejudicial to the interests of the Revenue. He cancelled that order with the direction to make a fresh assessment order in the light of the discussion made in his order, that is, order of the CIT. That order has been challenged by the assessee before the Tribunal, after considering the various submissions of both the sides, the Tribunal has restored the order of the ITO.

In appeal before us the learned counsel for the Revenue, Mr. Mallick submits that the Tribunal has not properly appreciated the facts and when no inquiry was made by the ITO, the CIT has rightly set aside the assessment order for the asst. yr. 1981-82. Not only that, the assessee has also changed his stand, which he has taken at the time of raid, on cash of Rs. 5,09,000 found at the time of raid.

The learned counsel for the assessee, Mr. Khaitan submits that the material found at the time of raid has been properly explained and the Tribunal has considered all the items in detail with supporting evidence and then only came to the conclusion that there is nothing wrong in the order of the ITO. He has thoroughly investigated the case and he has also complied the direction of the then CIT for investigation and in compliance of his direction the assessment was made. So far cash of Rs. 5,09,000 is concerned there was some misunderstanding. The cash was for payment to one Bishan Dayal Goel and from where the cash was received its source has been explained, the creditors have been examined and they have confirmed the loan to Goel Industries, wherein the assessee HUF is one of the partners.

The assessee filed its return of income for the assessment year under appeal disclosing a total income of Rs. 42,170. This was, however, revised by return filed on 2nd March, 1984 to Rs. 42,160. The return was further revised and income disclosed was Rs. 1,20,400. The income was assessed at Rs. 1,21,550.

On scrutiny of the assessment proceedings for the asst. yr. 1981-82 in the case of this assessee, the CIT noticed that there was a search under s. 132 of the IT Act, 1961 at the premises of the assessee and during search, the search party seized cash of Rs. 5,09,000. Primary gold of Rs. 1,23,178, silver bars Rs. 23,976, six pieces guineas worth of Rs. 6,500 jewellery and ornaments valued at Rs. 82,736. According to the CIT, the AO has not properly verified the facts, therefore, the order of the ITO was erroneous and prejudicial to the interests of the Revenue.

Before the Tribunal, the argument put forth was that when the assessment under s. 143(3) was made as per directions of the CIT which was given in letter dt. 29th Aug., 1984, the successor CIT cannot question that assessment under s. 263 of the Act. The counsel for the assessee also advanced the argument before the Tribunal that doctrine of promissory estoppel should be invoked. Argument was also advanced that in view of the provisions of the s. 119(3) of the Act when the AO has made the assessment as per instructions of the CIT in writing, the order cannot be said erroneous. Both the arguments were negatived by the Tribunal and the Tribunal has taken the view that in spite of the direction of the CIT, if the assessment made under s. 143(3) that can be revised under s. 263 of the Act by the successor of the then CIT.

On the merits the Tribunal has considered elaborately all the arguments and details explaining the assets seized during search. The Tribunal noticed that the CIT has considered the cash found during the course of search and also referred the decisions of the ITO on the primary gold but has not made any comment on guineas and silver bars. The Tribunal, therefore, took the view that the CIT did not want to say that the assessment order was erroneous on account of these two items. The Tribunal also noticed that the inclusion of amount in the bank account of some other persons has not been referred in the show-cause notice issued on 20th May, 1985 and 1st July, 1986. Therefore, there was no opportunity to the assessee to explain about the amounts in the bank accounts of some other persons, regarding silver bars and guineas, reply was filed.

In the reply to show-cause notice under s. 263 it is explained that silver bars are assessed by the AO in the hands of the wife of Karta of the assessee-HUF for the asst. yr. 1981-82, though the assessee claimed before the AO that the source of the silver bars or guineas has been explained. That was not accepted by the AO and the value of those silver bars treated the income of the assessee’s wife and assessed in the hands of the assessee’s wife.

The amount in the accounts of bank were not standing in the name of the assessee but were in the name of some other persons. The case of the CIT was that these are the benami accounts of the assessee. The Tribunal found that when no material was brought on record how it can be said that these are the benami accounts of the assessee. Therefore, the Tribunal found that on that account it cannot be said that the assessment for the year 1981-82, under s. 143(3) was erroneous.

In the last the Tribunal has considered the two big items that are in cash of Rs. 5,09,000 found at the time of search and primary gold weighing 784.500 grams valued at Rs. 1,23,178.

The assessee has submitted before the Tribunal that though before passing an order under s. 132(5), the assessee had explained the source of this amount but it was not accepted, again in appeal before the CIT under s. 132(11) the details of the cash and primary gold was explained but that was also not accepted.

In the regular assessment under s. 143(3) the required details furnished and source of the cash of Rs. 5,07,220 was explained that has been given at pp. 61-62 of the paper book in an order of the Tribunal. The Tribunal also found that this amount was for payment to Bishan Dayal Goel a proprietor of firm Steel Trading Company for supply of the steel.

The Tribunal has considered all these details and materials on record produced before it regarding the cash of Rs. 5,07,220 and primary gold worth Rs. 1,23,178 and finally held that the conclusion on the basis of the material on record, it cannot be said that the order of the ITO was erroneous nor prejudicial to the interests of the Revenue.

The relevant portion of the order of the Tribunal reads as under : “The explanation for possession of the primary gold was that the Karta of the assessee had got his wife’s jewellery given at the time of marriage, melted at Delhi through his father-in-law and had kept the primary gold thus obtained with him for the purpose of making new jewellery at Calcutta. In the summary order passed under s. 132(5) these explanations were not accepted. An appeal was filed under s. 132(11) to the CIT. In the appeal proceedings also the assessee furnished a detailed explanation both for the cash and primary gold. It was explained before the CIT in proceedings under s. 132(11) that the cash was drawn from M/s Goel Industries, a firm in which the assessee-HUF was a partner, on 5th Sept., 1980, for payment to Bishan Dayal Goel of M/s Steel Trading Company for supply. The amount was received by M/s Goel Industries from various persons as stated earlier (p. 77 of the paper book). In support of these receipts, cash book extracts of M/s Goel Industries for the period 14th Aug., 1980 to 14th Nov., 1980, were also filed. Letters of confirmation from the persons who gave the monies were also furnished. These are to be found at pp. 154 to 158 of the paper book. Statements were taken from the employees/partners/proprietors of the concerns which gave monies to M/s Goel Industries. Their statements are found at pp. 144 to 152 of the paper book. All the persons have affirmed having given monies to M/s Goel Industries. These statements were taken in the months of February and December, 1983, earlier to the issue of the instruction by the CIT on 29th April, 1984. The order- sheet entries in the case of M/s Goel Industries, a certified copy of which was filed before us as part of the paper book at pp. 140 to 148, for the asst. yr. 1981-82, clearly show the detailed enquiry undertaken by the ITO to ascertain the truth of the assessee’s version regarding the receipt of monies by the firm M/s Goel Industries from various persons for paying Steel Trading Corporation. At the time the statements from these persons were taken, the assessee had not approached the CIT and the latter was nowhere in the picture. Regarding the primary gold the assessee’s version was considered by the AO in the proceedings under s. 132(5) as well as by the CIT in appeal under s. 132(11). Both of them did not accept the assessee’s explanation for the acquisition of the primary gold. Even the CIT who issued instructions vide letter dt. 29th Aug., 1984 did not accept the assessee’s explanation, but held that the assessee is assessable in receipt of the same. He, however, directed that the entire value of Rs. 1,23,178 be spread over and assessed in two asst. yrs. 1980-81 and 1981-82. Though this part of his instructions is seemingly in favour of the assessee, in fact it is seen from the returns for the asst. yrs. 1980-81 and 1981-82 (pp. 30 and 31 of the paper book) that in respect of both the years the income declared was more than Rs. 1 lac, and it may not really matter whether the entire primary gold is assessed in one year or more than one year. At any rate, the AO by spreading the value of the primary gold over two assessment years for the purpose of assessment cannot be said to have committed an error, nor can he be stated to have acted to the prejudice of the Revenue. It is not as if the value of the primary gold has not been brought to tax in the assessee’s hands at all. Reverting to the cash seized by the Department, the way in which the case has proceeded from the date of search. As narrated above with reference to the relevant portions of the paper book clearly shows that a detailed enquiry had been held by the AO of his own accord, even before the assessee moved a petition to the CIT on 20th April, 1984. It may be that another AO might have come to a different conclusion regarding the genuineness of the amounts stated to have been received by M/s Goel Industries from various persons or regarding the year of assessability of the primary gold in the hands of the assessee. But that is far different from saying that the AO had not hold any enquiry before completing the assessment in the manner in which he did. The successor CIT, in the order under s. 263 has himself held that notwithstanding the instructions issued by the predecessor, CIT, the assessment order is one passed by the AO only for which he alone should take responsibility. In fact we find from the extracts of the order sheet in the case of M/s Goel Industries for the asst. yr. 1981-82 that even after the predecessor CIT issued instructions on 29th Aug., 1984, the AO had carried out detailed enquiries and verification of the assessee’s contentions and this is borne out by the entries made therein on 29th Oct., 1984, 12th Nov., 1984, 12th Dec., 1984, 4th Feb., 1985, 11th Feb., 1985, 20th Feb., 1985, 22nd Feb., 1985, 25th Feb., 1985 and 28th Feb., 1985. A perusal of these entries further shows that the AO continued the scrutiny of the seized books of account even after the issue of instructions by the CIT on 29th Aug., 1984. It cannot, therefore, be stated that the AO had blindly followed the instructions of the CIT vide letter dt. 29th Aug., 1984. Even ignoring, as held by the CIT in his order under s. 263, the instructions issued by the predecessor CIT on 29th Aug., 1984, we are still left with the impression that the criticism that the assessment has been completed without enquiry or verification is unjustified and if we may say so, with respect, uncharitable. The material produced before us does not bear out the criticism and is positively against such a conclusion”.

It is true that the explanation of the assessee was not accepted before passing orders under s. 132(5) and the order under s. 132(11) of the Act of 1961, but that does not bar the assessee to produce the relevant material before the AO in a regular assessment under s. 143(3) of the Act. When these details are furnished, the enquiries were made in detail as referred by the Tribunal referring various pages of the paper book submitted before the Tribunal and ultimately the Tribunal came to the conclusion that the order of the ITO was not erroneous. Detailed enquiry was made not only by the AO on his own but detailed enquiry was made also as per direction of the then CIT vide his letter dt. 29th Aug., 1984, addressed to the AO. Whether the proper inquiry was made by the AO, whether the assessee has explained the income found on the basis of seized material is a basic question of fact and if a possible view has been taken for finding of the fact, though the other view is possible, it cannot be said the finding of the Tribunal is perverse. In our opinion the Tribunal has not taken the impossible view on finding of facts, on the material available, that the assessee has explained the income based on the seized material and there was a detailed inquiry by the AO before completing the assessment for the asst. yr. 1981-82. Considering these facts we answer the question referred, at the instance of the Revenue, in affirmative, that is, in favour of the assessee and against the Revenue.

The learned counsel for the assessee submits in case the question referred at the instance of the Revenue answered in affirmative, the questions referred at the instance of the assessee need not be answered as we have answered the question referred at the instance of the Revenue in the affirmative that is, in favour of the assessee and against the Revenue, we decline to answer the questions referred at the instance of the assessee.

The reference application is disposed of as aforesaid.

[Citation : 247 ITR 555]