Rajasthan H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the order passed by the AO on 1st Feb., 1989 was not erroneous and prejudicial to the interest of Revenue

Counsel Appeared

Sandeep Bhandawat, for the Revenue : Anjay Kothari for Vineet Kothari, for the Assessee

B.R. ARORA, J. :

The Revenue, by this application under s. 256(2) of the IT Act, has prayed that the Tribunal, Jaipur Bench, Jaipur may be directed to refer the following questions of law for the opinion of this Court :

“(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the order passed by the AO on 1st Feb., 1989 was not erroneous and prejudicial to the interest of Revenue;

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that the CIT was not justified in passing order under s. 263 of the IT Act, 1961?”

The brief facts, which led to the present controversy, are that the assessee, which is a registered firm, derived its income from the trade of silver ornaments. For the asst. yr. 1988-89, the assessment was completed by the assessing authority on 1st Feb., 1989 under s. 143 of the Act who assessed the income of Rs. 61,160 as against Rs.41,060 declared by the assessee. The CIT, Jodhpur, while exercising his powers under s. 263 of the Act, was of the opinion that the assessment made by the ITO was erroneous and prejudicial to the interest of the Revenue. While arriving at these findings, the CIT was of the view that proper enquiries were not conducted by the ITO and he, therefore, remanded the case for fresh assessment by the assessing authority.

An appeal was preferred against the order passed by the CIT before the Tribunal, Jaipur Bench, Jaipur and the Tribunal, while allowing the appeal filed by the assessee recorded the following findings : “The assessment order shows that it was after conducting enquiries that the ITO had chosen to make a lump sum addition of Rs. 15,000 to the declared results. He had discussed the result declared by the assessee in sufficient length in para 2 of his order. In doing that, the ITO appears to have kept in mind the past history of the case of the assessee. The CIT was, therefore, not, in my opinion, justified in holding that the ITO had not made enquiries into the trading results”. “In so far as the question of payment of salary to the brothers of the partners was concerned, the ITO had dealt with the point in para 3. He had not accepted the entire claim of the assessee in that behalf and had thought of making some additions in that respect. In para 4 of his order, the ITO had clearly mentioned that he was making a lump sum addition of Rs. 15,000 to cover up all possible leakage of income derived by the assessee and inadmissible items of expenditure debited in P&L a/c. It is, thus, clear that the ITO had conducted proper enquiry on this point also”. “In so far as the question of allowing interest payment of Rs. 72,827 to the relatives of the partners is concerned, I find that this issue had come-up before the same CIT, in assessee’s case for asst. yr. 1986-87 and the addition made was deleted by him. Therefore, the assessment as framed, by the ITO on the point does not appear to be erroneous and prejudicial to the interest of Revenue”. “To sum-up, I am of the opinion that the assessment as framed by the ITO in this case had been made by him after conducting proper enquiries and the learned CIT was not justified in setting-aside the said assessment on the ground of the same being erroneous and prejudicial to the interest of the Revenue”.

All these findings arrived at by the Tribunal, are purely the findings of facts and no question of law arises. The Tribunal was, therefore, justified in rejecting the application moved by the Revenue under s. 256(1) of the Act. Since no question of law arises out of the judgment passed by the Tribunal we therefore do not find any merit in this application. The application under s. 256(2) of the IT Act, filed by the Revenue, is, therefore, dismissed.

[Citation : 233 ITR 649]