Shri Amratlal Natverlal Nanavati, Surat V. The ACIT., Circle-7, Surat

ITA 1390/AHD/2006

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9692 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 24-06-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 29-05-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHELLEY JINDAL
• Assessee Lawyers: J P SHAH
• Keywords: Unexplained cash credit; Charitable institution; Opportunity of being heard; Source of fund; Difference of opinion; Assessment record; Change of opinion
• Section: 142(1); 263; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' [BEFORE S/SHRI T K SHARMA,JM & A N PAHUJA,AM] ITA NO.1390/AHD/2006 (ASSESSMENT YEAR:-2001-02) SHRI HITENDRA A NANAVATI, L/H OF LATE SHRI AMRATLAL NATVARLAL NANAVATI, PROP. OF M/S SURAT TYRE & OIL CENTRE, SURAT [PAN :ABBPN 3384 N] V/S COMMISSIONER OF INCOME- TAX-III, SURAT [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI J P SHAH, AR REVENUE BY:- SHRI SHELLEY JINDAL, DR O R D E R A N PAHUJA: THIS APPEAL BY THE ASSESSEE AGAINST AN ORDER DAT ED 17-03-2006 OF THE LD. CIT-III, SURAT, RAISES THE FO LLOWING GROUNDS:- 1) THE LEARNED COMMISSIONER OF INCOME TAX HAS ERRED IN LAW AND ON FACTS IN ASSUMING JURISDICTION U/S. 263 OF THE ACT. 2) THE LEARNED COMMISSIONER OF INCOME TAX HAS ERRED IN LAW AND ON FACTS IN MAKING THE ADDITION OF LOAN RECEIVED FROM DEEPAKBHAI A. NANAVATI-H.U.F. OF RS.3,00,000/- ON ACCOUNT OF THE ALLEGED UNEXPLAINED CASH CREDIT. 3) THE LEARNED COMMISSIONER OF INCOME TAX HAS ERRED IN LAW AND ON FACTS IN MAKING THE ADDITION OF LOAN RECEIVED FROM AMRATLAL N. NANAVATI-H.U.F. OF RS.3,10,000/- ON ACCOUNT OF THE ALLEGED UNEXPLAINED CASH CREDIT. 4) THE LEARNED COMMISSIONER OF INCOME TAX HAS ERRED IN LAW AND ON FACTS IN SETTING ASIDE THE ORIGINAL ASSESSMENT MADE BY THE A.O. AND DIRECTING HIM TO FRAME ASSESSMENT DE NOVA BY MAKING THE ADDITION OF THE ADVANCE RECEIVED FROM M/S. JAY BUILDERS FOR SALE OF PROPERTY TO THE TUNE OF RS.3,00,000/- ON ACCOUNT OF ALLEGED UNEXPLAINED CASH CREDITS. 5) IT IS, THEREFORE, PRAYED THAT: (A) THE ORDER PASSED U/S. 263 OF THE ACT BY THE LEA RNED COMMISSIONER OF INCOME TAX WITHOUT JURISDICTION BE QUASHED AS VOID AB-INITIO AND ITA NO.1390/AHD/2006 2 (B) THE ABOVE ADDITIONS MADE BY THE LEARNED COMMISS IONER OF INCOME TAX BE DELETED. 6) THE APPELLANT PRAYS FOR GRANTING SUCH OTHER RELI EF AS MAY BE DEEMED JUST AND PROPER BY YOUR HONOURS CONSIDERING THE FACTUAL AND LEGAL ASPECTS OF THE CASE OF THE APPELLANT. 7) THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, SUBSTITUTE, CHANGE, MODIFY, OR DELETE ALL OR ANY OF THE GROUNDS OR GROUND OF APPEAL. 2 FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF RS.9,43,370/- FILED ON 31-10-2001 BY THE ASSESSEE, TRADING IN TUBES AND TYRES , WAS SELECTED FOR SCRUT INY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE INCOME-TAX ACT,1961[HE REINAFTER REFERRED TO AS THE ACT]. THE ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER[AO IN SHORT]VIDE ORDER DATED 25.2.2004 ON A N INCOME OF RS. 18,93,370/-, WITH THE ADDITION OF RS. 9,50,000/- U/ S 68 OF THE ACT. SUBSEQUENTLY, THE LEARNED CIT-III, SURAT, ON EXAMIN ATION OF ASSESSMENT RECORDS FOUND THAT THE ASSESSMENT ORDE R DATED 25.2.2004 WAS PRIMA FACIE ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE ON THE GROUND THAT THE ASSESSMENT HAD BEEN COMPLETED WITHOUT CALLING FOR ALL RELEVANT DETAILS, WITHOUT UNDERSTANDING AND PROPERLY EVALUATING THE DETAILS B ROUGHT ON RECORD, AND WITHOUT DUE CARE AND RESPONSIBILITY. THE LD. CI T FOUND THAT THE AO HAD ACCEPTED THE LOANS FROM DEEPAKBHAI NANAVTI HUF-RS. 3LACS,AMRATLAL NANAVATI HUF-RS. 3.10 LACS AND M/S J AY BUILDERS-RS. 3 LACS EVEN WHEN THE SOURCE AND GENUINENESS OF THES E AMOUNTS WAS NOT KNOWN AND THE EVIDENCE ADDUCED BEFORE THE AO WAS CONFUSING ,CONTRADICTORY AND SUSPECT AND THEREFORE, NOT SUFFI CIENT TO ESTABLISH THE GENUINENESS AND SOURCE OF FUNDS . ACCORDINGLY, THE LD. CIT ISSUED A SHOWCAUSE NOTICE U/S 263 OF THE ACT ON 15-02-2006 .IN RESPONSE, THE ASSESSEE REPLIED VIDE LETTER DATED 28.2.2006 T HAT THE ASSESSEE HAD RECEIVED LOANS FROM M/S DEEPAKBHAI NANAVATI HUF-RS. 3LACS & M/S AMRATLAL NANAVATI HUF-RS. 3.10 LACS WHILE AN AMOUN T OF RS. 3 LACS WAS RECEIVED FROM M/S JAY BUILDERS FOR THE PROPOSED SA LE OF FSI IN SURVEY NO. 84/2 ITA NO.1390/AHD/2006 3 T.P. SCHEME NO. 6, FINAL PLOT NO. 125 PAIKI PLOT NO . 1 TO 12, PIPLOD, SURAT. IT WAS POINTED OUT THAT CONFIRMATIONS OF DIPAKBHAI NANAVAT I (HUF) AND AMRUTLAL NANAVATI (HUF) DESIRED BY THE AO ALONG WITH OTHER R ELEVANT DETAILS WERE SUBMITTED . THE ASSESSEE WHILE ENCLOSING COPIES OF THE CONFIRMATION AND THE BANK STATEMENTS TOGETHER WITH THE DETAILS OF THE PE RMANENT ACCOUNT NUMBERS OF THE ABOVE TWO PERSONS CONTENDED THAT THE AO HAD FOUND THE LOANS TO BE GENUINE ON THE BASIS OF THESE DETAILS. LIKWEWISE , IN RESPECT OF THE ADVANCE RECEIVED OF RS.3 LACS FROM M/S. JAY BUILDERS, THE A SSESSEE POINTED OUT THAT THE FOLLOWING DETAILS WERE PLACED BEFORE THE AO: I) CONFIRMATION OF M/S. JAY BUILDERS, II) COPY OF ACCOUNT PAYEE CHEQUE THROUGH WHICH THE DEPOSIT WAS RECEIVED III) DETAILS OF TOTAL PAYMENT RECEIVED FROM M/S. JA Y BUILDERS. IV) COPIES OF RECEIPTS ISSUED BY THE SUB-REGISTRAR, SURAT INDICATING SALE OF FSI TO M/S. JAY BUILDERS. V) COPY OF COMPUTATION FOR THE A. Y. 2002-03 SHOWIN G CALCULATION OF CAPITAL GAIN MADE IN RESPECT OF THE FSI SOLD TO M/S . JAY BUILDERS BY ME. 2.1 IT WAS FURTHER POINTED OUT THAT FOR THE SAI D ADVANCE FROM M/S. JAY BUILDERS, THE ADDL. CIT, ISSUED NECESSARY DIRECTIONS VIDE LET TER DATED 17-02-2004 AND THE ACCORDINGLY, THE AO ACCEPTED THE GENUINENESS OF THE DEPOSIT AFTER PROPER APPLICATION OF MIND. IN THE LIGHT OF THESE FACTS, W HILE RELYING UPON DECISIONS IN CIT V/S GABRIAL INDIA LIMITED (1993) 203 ITR 108 ( BOM), NABHA INVESTMENTS PRIVATE LIMITED V/S UNION OF INDIA & ORS (2000) 246 ITR 41 (DEL),BHARAT DAIRY FARM V/S DEPUTY CIT (1997) 60 ITD 321 (PN), SRF LIMITED V/S DEPUTY CIT (2002) 74 TTJ (DEL) 648,MODI XEROX L IMITED V/S DEPUTY CIT (1999) 63 TTJ (DEL) 278, FATEHCHAND RAJMAL JAIN V/S . INSPECTING ASSISTANT COMMISSIONER (1997) 57 TTJ (PN) 341, SANDVIK A.B. S WEEDEN V/S INSPECTING ASSISTANT COMMISSIONER (1996) 55 TTJ (PUNE) 144, SU PER CASSETTES INDUSTRIES (P) LTD V/S CTT(1992) 41 ITD (DEL) 530, A.C. MANNES MANN DEMAG V/S DEPUTY CIT (1995) 53 ITD (DEL) 533,NATIONAL PLASTIC & ALLI ED INDUSTRIES V/S DEPUTY CIT ITA NO.1390/AHD/2006 4 (2000) 67 TTJ (MUMBAI) 824,D & H SECHERON ELECTRODE S LIMITED V/S DEPUTY CIT (1999) 70 ITD 214(INDORE), BLUE DART EXPRESS LIMITE D V/S JT. CIT (2000) 75 ITD 414 (MUMBAI),ASHOK KUMAR PARASRAMKA V/S ACIT (1998) 61 TTJ (CAL.) 156,VINOD KUMAR GUPTA V/S ITO (1990) 32 ITD (CHD.) 254,JHULELAL LAND DEVELOPMENT CORPORATION V/S. DOT (1996) 56 ITD (BO M) 345,INDEXCO INTERNATIONAL V/S DOT (2004) 88 ITD 293 (MUMBAI) , BALJEES V/S ACTT (2004) 85 TTJ (CHD.) 543,PLASTIC CONCERN V/S ACTT (1998) 6 1 TTJ (CAT) 87,J.P. SETHI V/S JTO (1989) 33 TTJ (PUNE) 576,JAGDISH CHAND GUPT A V/S ACIT (1996) 56 TTJ (CHD.) 337 AND TRIVENI ENGINEERING WORKS LTD. V/S DOT (2004) 87 TTJ (DEL) 93, CIT V/S KANDA RICE MILLS (1989) 178ITR446(P& H) , CIT VS.R.K. METAL WORKS (1978) 112 ITR 445 (P&H),GIRDHARI LAL B. ROHR A V/S CTT (2004) 86 TTJ (MUMBAI) 177, MOOL RAJ SINGH & ORS.V/SITO(1999) 63 TTJ (DEL.)211 AND CIT V/S TRUSTEES ANUPAM CHARITABLE TRUST (1987) 167 TTR 129 (RAJ.) IT WAS CONTENDED THAT UNTIL THE CIT FORMS FIRM BELIEF THAT THE ORDER IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, THE RESORT TO THE PROVISIO NS OF SEC. 263 OF THE ACT CAN NOT BE HAD. HOWEVER, THE LD. CIT REJECTED THE CONTENTIO NS OF THE ASSESSEE ,OBSERVING AS UNDER: IT IS A SAD STATE THAT THE ASSESSEE HAS TRIED TO O VERSIMPLIFY THE ENTIRE ISSUE. INSTEAD OF LOOKING INTO THE DETAILS FILED DU RING THE ASSESSMENT PROCEEDINGS, WHICH WERE ALSO SPECIFICALLY BROUGHT T O THE ASSESSEE'S NOTICE DURING THE COURSE OF HEARING BEFORE ME, THE ASSESSE E HAS SUBMITTED THE ARGUMENTS WHICH HAVE LITTLE TO DO WITH THE FACTS/ D ETAILS ON RECORD. THE DETAILS ARE DISCUSSED BELOW. I. (I) THE FIRST AMOUNT MENTIONED IN PARA 3 OF SHOW CAUSE NOTICE OF RS.3,00,000/-IS CLAIMED TO HAVE BEEN RECEIVED BY TH E ASSESSEE'S CREDITOR, ITS OWN GROUP HUF AS A RESULT OF SALE OF ITS AGRICU LTURE PRODUCE. IN SUPPORT OF THIS CLAIM, THE ASSESSEE HAS FILED BEFORE THE AS SESSING OFFICER TWO BILLS CLAIMED TO HAVE BEEN M/S ATUL CORPORATION, WHOLESAL E GRAIN MERCHANT AND COMMISSION AGENT, KIM. AS PER THESE BILLS THE ASSES SEE HAS SOLD TOOR DAR, IN ALL WEIGHING 11.250. ONE BILL DATED 13-02-2001 I S FOR 100 BAGS, WEIGHING 10.000 AND ANOTHER BILL DATED 17-02-2001, IS 13 BAG S, WEIGHING 12.50. IT IS NOT CLEAR FROM EITHER OF THE BILLS AS TO WHETHER 10 .000 & 1.250 ARE KGS, QUINTALS OR TONES. THE QUANTITY OF 10.000 MULTIPLIE D TO THE GIVEN RATE OF 1556 GIVES AS A FIGURE OF RS.15,560/- AND NOT RS.1, 55,600/- AS IS MENTIONED IN THE BILL. IF WE TAKE THESE 10,000 KGS , IT GIVES US A FIGURE OF RS.L,55,60,000/- ( 1556 X 10,000). IT IS THE SAME S TATE WITH THE OTHER BILL DATED 17.02.2001. THERE IS ANOTHER MISTAKE/CONFUSIO N IN THIS BILL TOO: THE WEIGHT OF 13 BAGS OF 100.00 PACKING WOULD WORK OUT TO 1.300 & NOT 1.250, ITA NO.1390/AHD/2006 5 AS HAS BEEN WORKED OUT IN THE BILL. AND FINAL AMOUN T FIGURE IS WORKED OUT ON THE BASIS OF 1.250 & NOT 1.300. OTHER FEATURES OF THE COPIES OF BILLS ON RECORD TOO SUGGEST THAT THESE ARE NOT THE GENUINE BILLS, FROM A GENUINE TRADER. NONE OF THE BILLS IS ON A REGULAR LETTER PAD, WHICH IS USUALLY THE CASE WITH REGARD TO THE BILLS ISSUED BY COMMISSION AGENTS ; NEITHER MENTIONS ABOUT ANY R EGISTRATION NUMBER, LOCAL SALES TAX NUMBER, CENTRAL SALES TAX NUMBER WH ICH IS USUALLY THE CASE WITH SUCH BILLS. THERE ARE NO PERMANENT/PRINTED SER IAL NUMBERS ON THE BILLS ISSUED. THE BILL DATED 13.02.2001 IS NUMBERED AS 00 2, WHILE THE BILL DATED 17.02.2001 IS NUMBERED 003, SUGGESTING THAT THIS CO MMISSION AGENT IS WORKING ONLY FOR THIS HUF, AND MAKING PURCHASES FRO M IT ONLY, AND FROM NOBODY ELSE. IN VIEW OF THE ABOVE, THE BILLS ARE NO T GENUINE, THE AGRICULTURE PRODUCE HAS APPARENTLY NOT BEEN SOLD AND THE BILLS HAVE BEEN MANIPULATED/FABRICATED, JUST TO PROVE THE GENUINENE SS OF THE CREDIT BUT EVEN GOING BY THE FINAL AMOUNTS WORKED OUT IN T HE TWO BILLS, THE TOTAL WORKS OUT TO RS.1,75,000/- WHILE THE AMOUNT CREDITE D TO THE CREDITOR'S BANK ACCOUNT IN INDIAN BANK ( A COPY OF WHICH HAS BEEN F ILED BY THE ASSESSEE BEFORE THE AO) IS RS.3,00,000/-. EVEN THIS AMOUNT, AS PER THE HAND WRITTEN NARRATION IN THE TWO BILLS, WAS RECEIVED VIDE CHEQU E NO.528814, DATED 29.03.2001 DRAWN ON SANGLI BANK. AS PER THE COPY OF ACCOUNT OF INDIAN BANK, HOWEVER, THE AMOUNT OF RS.3,00,000-/- HAS BEE N CREDITED TO THIS HUF ACCOUNT ON 22.03.2001. THE SOURCES AND GENUINEN ESS OF RS.3,00,000/- IS THEREFORE, NOT PROVED. THAT THE WHOLE TRANSACTION IS MANIPULATED IS FURTHE R CLEAR FROM THE COPIES OF ACCOUNT OF THE ASSESSEE GIVEN BY THE CREDITOR, DEEPAKBHAI NANAVATI, HUF. IN IT THE ASSESSEE'S ACCOUNT IS DEBI TED ON 20.03.2001, TWO DAYS BEFORE THE BANK ACCOUNT OF THE CREDITOR WAS CR EDITED WITH RS.3,00,000/- ? MORE MANIPULATION IS VISIBLE FROM T HE COPY OF ACCOUNT OF THIS CREDITOR GIVEN BY THE ASSESSEE FROM HIS OWN BO OKS: HERE THE AMOUNT OF RS.3,00,000/- IS CREDITED ON 15.03.2001 ITSELF, FIVE DAYS BEFORE THE CREDITOR HAS CLAIMED TO HAVE GIVEN THIS AMOUNT TO T HE ASSESSEE ? (II) AS REGARD THE SECOND AMOUNT, CLAIMED TO HAVE B EEN RECEIVED FROM AMRATLAL NANAVATI, HUF (ANOTHER HUF OF THE GROUP) I T IS A SIMILAR STORY. IT IS ALSO CLAIMED TO HAVE BEEN RECEIVED BY THE CREDITOR HUF AS A RESULT OF SALE OF ITS AGRICULTURE PRODUCE. IN SUPPORT OF THIS CLAI M, THE ASSESSEE HAS FILED BEFORE THE AO TWO BILLS, CLAIMED TO HAVE BEEN ISSUE D BY M/S MANCHAND JAVERCHAND, WHOLESALE GRAIN MERCHANT AND COMMISSION AGENT, KIM. AS PER THESE BILLS, THE ASSESSEE HAS SOLD TOOR DAL, WEIGHI NG 20.000 ONE BILL DATED 21.02.2001 IS FOR 100 BAGS, WEIGHING 10.000 AND ANO THER BILL DATED 23.02.2001 TOO IS FOR 100 BAGS, WEIGHING 10.000. IT IS NOT CLEAR FROM EITHER OF THE BILLS AS TO WHETHER 10.000 AND 10.000 ARE KG S, QUINTALS OR TONES. THE QUANTITY OF 10.000 MULTIPLIED TO THE GIVEN RATE OF 1538 GIVES US A FIGURE OF RS.15,380/- AND NOT RS.1,53,800/- AS IS MENTIONED I N THE BILL. IF WE TAKE THESE 10.000 AS KGS, IT GIVES US A FIGURE OF RS.1,5 3,80,000/- ( 1538 X ITA NO.1390/AHD/2006 6 10,000). IT IS THE SAME STATE WITH THE OTHER BILL D ATED 23.02.2001. IN VIEW OF SUCH FACTS, THE BILLS SEEM TO BE OF LITTLE EVIDENTI AL VALUE. OTHER FEATURES OF THE COPIES OF BILLS ON RECORD TOO SUGGEST THAT THESE ARE NOT THE GENUINE BILLS, FROM A GENUINE TRADER. NONE OF THE BILLS IS ON A REGULAR LETTER PAD, WHICH IS USUALLY THE CASE WITH REGARD TO THE BILLS ISSUED BY COMMISSION AGENTS, NEITHER MENTIONS ABOUT ANY RE GISTRATION NUMBER, LOCAL SALES TAX NUMBER, CENTRAL SALES TAX NUMBER ET C. WHICH IS USUALLY THE CASE WITH SUCH BILLS. THERE ARE NO PERMANENT /PRINT ED SERIAL NUMBERS ON THE BILLS ISSUED. THE BILL DATED 21.02.2001 IS NUMB ERED 009 WHILE THE BILL DATED 23.02.2001 IS NUMBERED 010, SUGGESTING THAT T HIS COMMISSION AGENT IS WORKING ONLY FOR THIS HUF AND MAKING PURCHASES O NLY FROM IT, AND FROM NOBODY ELSE. OTHER DETAILS ON RECORD TOO SUGGEST THAT THE EVIDEN CE HAS BEEN MANIPULATED/FABRICATED TO MISLEAD THE AO. THE TOTAL OF THE TWO BILLS, FOR EXAMPLE, WORKS OUT TO RS.3,07,600/- AND THAT IS THE AMOUNT EVEN CREDITED TO THE BANK ACCOUNT NO.SB/407 OF CREDITOR HUF MAINT AINED IN INDIAN BANK ( A COPY OF WHICH HAS BEEN FILED BY THE ASSESSEE DU RING THE COURSE OF THE PROCEEDINGS BEFORE THE AO), BUT AS PER A HANDWRITTE N NARRATION ON THESE BILLS, THE AMOUNT ACTUALLY RECEIVED IS ONLY RS.1,53 ,800/-. AS PER THE NARRATION (& IT IS THE SAME NARRATION ON BOTH THE B ILLS MENTIONING THE SAME CHEQUE NO., AND DATE, AND BANK) ONLY AN AMOUNT OF R S.L,53,800/- WAS RECEIVED BY CHEQUE NO.31709 DATED 24.03.2001, DRAW N ON THE SANGLI BANK. THE INDIAN BANK ACCOUNT; HOWEVER, SHOWS A CRE DIT OF RS.3,07,800/- WHICH HAS BEEN RECEIVED BY THE CHEQUE NO. 24? WHAT IS THE SOURCE OF THIS AMOUNT AND THIS CHEQUE. ALL THESE FACTS CLEARLY SUG GEST THAT THE BILLS ARE NOT GENUINE, THE AGRICULTURE PRODUCE HAS NOT BEEN S OLD, AND THE BILLS HAVE BEEN MANIPULATED/FABRICATED, JUST TO PROVE THE GENU INENESS OF THE CREDIT. WHILE CALLED UPON TO CLARIFY DURING THE COURSE OF P ROCEEDINGS BEFORE ME, THE ASSESSEE OPTED TO BE SILENT ABOUT THE DETAILS, AND HAS ONLY SHOWN THE TRANSFER OF THIS AMOUNT TO THE ASSESSEE. (III) THUS, THE FACTS ARE TOO GLARING TO WARRANT FU RTHER COMMENTS. INSTEAD OF LOOKING INTO THEM AND GIVING CLARIFICATIONS, THE ASSESSEE HAS MADE SUBMISSIONS WHICH ARE FAR AWAY FROM GROUND REALITIE S. IT IS VERY CLEAR FROM THE FACTS DISCUSSED ABOVE THAT NEITHER THE AO FOUND THE LOANS GENUINE 'AFTER CONSIDERATION OF SUCH DETAILS AND CONFIRMATI ONS OF THE CASH CREDITORS', 'NOR PROPER ENQUIRIES WERE MADE BY THE LEARNED AO', NOR THERE HAS BEEN ' PROPER APPLICATION OF MIND', NOR THE ORD ER MADE IS 'LEGALLY & FACTUALLY' WITHOUT DEFECTS, NOR IN VIEW OF FACTS AN D CIRCUMSTANCES, THE CIT IS RECOMMENCING THE ENQUIRIES. IT IS SUBMITTED BY T HE ASSESSEE THAT' YOUR HONOUR IS NOT HUNDRED PERCENT SURE THAT THE IMPUNGE D ORDER OF ASSESSMENT IS PREJUDICIAL TO THE INTEREST OF REVENU E' AND ONLY AFTER MAKING FURTHER ENQUIRIES THE ISSUE WILL BE DECIDED. IT IS TOO CONFUSING AN ARGUMENT TO BE UNDERSTANDABLE. HAD I BEEN SURE OF REVISION A ND THERE WAS HARDLY ANY NECESSITY OF GIVING REPEATED OPPORTUNITIES OF B EING HEARD IN BRINGING TO THE ASSESSEE'S NOTICE THE FACTS AND DETAILS DISCUSS ED ABOVE, WHICH PRIMA FACIE CALLED FOR REVISION. HAVING HEARD THE ASSESSE E AND GOING THROUGH ITS ITA NO.1390/AHD/2006 7 WRITTEN SUBMISSIONS, NOW I HAVE NO DOUBT THAT THE A SSESSEE HAS NO ANSWERS/CLARIFICATIONS WITH REGARD TO THESE CONFUSI NG AND CONTRADICTORY FACTS AND DETAILS FURNISHED BY IT DURING ASSESSMENT PROCEEDINGS. AS THE FOREGOING DISCUSSION CLARIFIES, NO ENQUIRIES HAVE BEEN MADE BY ME FROM THIRD PARTIES, NOR ANY FRESH EVIDENCE HAS BEEN BROUGHT ON RECORD. THE FACTS AND DETAILS DISCUSSED ABOVE WERE FILED BY THE ASSESSEE ONLY DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS BEEN G IVEN OPPORTUNITY OF BEING HEARD CLARIFICATIONS AND FOR UNDERSTANDING AL L OF THEM IN PROPER PERSPECTIVE AS REQUIRED BY THE STATUTE TOO. EVEN AF TER RECEIPT OF ASSESSEE'S FIRST SUBMISSION DATED 28.02-2006, I DID NOT JUMP T O THE CONCLUSION. INSTEAD I BROUGHT IT TO THE NOTICE OF ASSESSEE'S RE PRESENTATIVE THAT THERE ARE GLARING FACTS/CONTRADICTIONS ON RECORD WHICH RE QUIRE REVISION EVEN AFTER CONSIDERATION OF ASSESSEE'S SUBMISSION DATED 28.02. 2006, AND THAT HE SHOULD LOOK INTO THEM AND RECONCILE THEM, IF POSSIB LE. MANY OF THESE WERE SPECIFICALLY POINTED OUT DURING THE COURSE OF DISCU SSION. AS A RESULT, ASSESSEE HAS MADE ANOTHER SUBMISSION DATED 04.03.20 06, THE RELEVANT PORTION OF WHICH IS REPRODUCED BELOW. 'DURING THE COURSE OF HEARING, YOUR HONOUR HAD DESI RED TO KNOW THE DETAILS OF UTILIZATION OF IMPUPGNED THREE SUMS. REQ UIRED DETAILS ARE ASUNDER. SR. NO. DATE OF RECEIPT OF AMOUNT AMOUNT RS DATE WHEN THE CHEQUE WAS ISSUED AGAINST THE RECEIPT OF AMOUNT DETAILS OF UTILIZATION 1 27-06-2000 3,00,000 28.06.2000 INTRODUCED AS CAPITAL IN M/S NANAVATI MOTORS. 2 22.03.2001 3,00,000 23.03.2001 -DO- 3 29.03.2001 3,10,000 29.03.2001 AMOUNT INVESTED IN M/SGANESH TYRES BY WAY OF EVIDENCE OF ABOVE FACTS, A PHOTOCOPY OF T HE BANK'S STATEMENT OF INDIAN BANK WHEREIN I AM HAVING MY SAV INGS BANK ACCOUNT IS ENCLOSED' THUS, EVEN AFTER SPECIFYING THE PROBLEMS AND AFTER SEEKING SPECIFIC RECONCILIATION/CLARIFICATIONS ABOUT THE ENTIRE EVID ENCE ON RECORD FILED WITH REFERENCE TO THE LOANS, THE ASSESSEE HAS MADE THE A BOVE MENTIONED SUBMISSION WHICH DOES NOT EVEN CLARIFY AS TO WHICH OF THE TWO AMOUNTS OF ITA NO.1390/AHD/2006 8 RS.3,00,000/- EACH RECEIVED DURING THE YEAR WAS REC EIVED FROM JAY BUILDERS AND WHICH FROM HIS HUF. ALL FACTS AND RESP ONSE OF THE ASSESSEE SUGGESTS TO ME THAT THE OBJECT IS TO AVOID GIVING C LARIFICATIONS. AND IT IS OBVIOUSLY BECAUSE THE ASSESSEE HAS NO CLARIFICATION S, AND INTENDS TO KEEP THE REPLY AS VAGUE AND SHORT AS POSSIBLE. (IV) COMING TO THE LEGAL ISSUES/JURISDICTION OF THE CIT TO MAKE 263 ORDER IN THE CASE, RAISED BY THE ASSESSEE IN HIS SUBMISSI ON, DATED 28.02.2006, BY CITING LOT OF THE CASE LAWS AND DISCUSSING THEM ONE BY ONE, THERE IS NO DOUBT THAT TWO CONSIDERATIONS MUST EXIST TO ENABLE THE COMMISSIONER TO EXERCISE THE POWERS UNDER THIS SECTION THAT (I) THE ORDER IS ERRONEOUS, AND (II) BY VIRTUE OF ORDER BEING ERRONEOUS, PREJUDICE HAS BEEN CAUSED TO THE INTEREST OF REVENUE ( CIT VS. GABRIAL INDIA LTD., B OMBAY). BOTH THESE CONDITIONS ARE FOUND TO BE SATISFIED IN THIS CASE. IT IS NOT A CASE WHERE THE ESTIMATION WAS ON LOWER SIDE AND THE CIT INTENDS TO ESTIMATE THE INCOME AT A HIGHER FIGURE, AS WAS THERE IN THE CASE OF GAB RIAL INDIA. NEITHER THERE IS ANY CHANGE OF OPINION FROM THE ONE FORMED BY THE AO. IN VIEW OF FACTS ON RECORD, THE AO HAS NOT BROUGHT ALL RELEVANT EVID ENCE ON RECORD, HAS NOT PROPERLY EXAMINED ALL THE EVIDENCE / DOCUMENTS ON R ECORD, AND HAS NOT MADE ALL RELEVANT AND APPROPRIATE ENQUIRIES WITH RE GARD TO THE ISSUES RAISED IN PARA-3 OF THE SHOW CAUSE NOTICE. THE AO H AS NOT EVEN GIVEN ANY POSITIVE FINDING ABOUT THE ISSUES, EITHER IN THE OR DER OR IN ANY OFFICE RECORD. ALSO, IT IS NOT A CASE WHERE TWO COURSES WERE PERMI SSIBLE UNDER LAW AND AO HAS ADOPTED ONE OF THEM, AND THE CIT INTENDS TO ADOPT ANOTHER: THE SOURCES AND GENUINENESS OF THE LOANS CLAIMED TO HAV E BEEN RECEIVED DURING THE YEAR WERE REQUIRED TO BE APPROPRIATELY V ERIFIED BY THE AO BY BRINGING ALL RELEVANT AND REQUISITE DETAILS ON RECO RD AND MAKE PROPER ENQUIRIES, WHICH HAS NOT BEEN DONE. LOT OF EVIDENCE DID COME ON RECORD DURING THE COURSE OF ASSESSMENT PROCEEDINGS, BUT TH AT, AS POINTED OUT TO THE AR OF THE ASSESSEE DURING THE COURSE OF HEARING BEFORE ME, GAVE RISE TO MORE QUERIES THAN IT ANSWERED. THE ASSESSEE WAS EXPECTED TO ANSWER THOSE QUERIES DURING THE COURSE OF HEARING BEFORE M E BY BRINGING SOME MORE EVIDENCE TO EXPLAIN THE EXISTING EVIDENCE ON R ECORD, IF NECESSARY, SO THAT THE CIT COULD BE SATISFIED THAT THE LOANS WERE GENUINE AND THEIR SOURCES WERE EXPLAINABLE, AND DROP THE PROCEEDINGS U/S 263. THE ASSESSEE HAS NOT CHOSEN THAT OPTION APPARENTLY BECA USE HE HAS NO EXPLANATION / RECONCILIATION ABOUT THE FACTS AND DE TAILS ON RECORD AND NO EVIDENCE TO EXPLAIN THE SOURCE AND GENUINENESS OF T HE CREDITS. REPLIES GIVEN BY THE ASSESSEE C QUOTED ABOVE) LEAVE NO DOUB T IN MY MIND THAT THE ASSESSEE IS CONVINCED THAT IT HAS NO CASE ON FACTS, AND, THEREFORE, SHE SHOULD FIGHT HIS CASE ON TECHNICAL GROUNDS BY CHALL ENGING THE JURISDICTION OF THE COMMISSIONER OF INCOME TAX WITH REGARD TO SEC.2 63. NO DOUBT THE CIT SHOULD ORDINARILY NOT INTERFERE U/ S 263 (AS LAID DOWN IN NATIONAL PLASTIC & ALLIED INDUSTRIES CITED ABOVE) U NTIL THERE IS PERVERSITY IN THE ORDER, THERE CANNOT BE A BETTER EXAMPLE OF PERV ERSITY THAN THE ORDER SUBJECT MATTER OF THIS REVISION: NOT ONLY ALL RELEV ANT EVIDENCE HAS NOT BEEN ITA NO.1390/AHD/2006 9 BROUGHT ON RECORD, BUT EVEN THE EVIDENCE BROUGHT ON RECORD HAS NOT BEEN PROPERTY EXAMINED, AND APPROPRIATE CONCLUSIONS DRAW N AFTER DUE APPLICATION OF MIND. IT HAS BEEN REPEATEDLY HELD BY VARIOUS DECISIONS AND JUDGEMENTS, INCLUDING SOME OF THOSE CITED BY THE AS SESSEE IN THIS CASE( FOR EXAMPLE, D&H SECHERON ELECTRODES LTD. ITAT, IND ORE BENCH), THAT, 'FAILURE TO MAKE ENQUIRIES WHERE SUCH ENQUIRY WARRA NTED MAKES THE ASSESSMENT ORDER ERRONEOUS AS ALSO PREJUDICIAL TO T HE INTEREST OF REVENUE'. ALSO, IT IS LAID DOWN IN BLUE DART EXPRES S LTD., ITAT, MUMBAI, CITED ABOVE THAT WHERE THE CONCLUSION IS DRAWN BY T HE ITO ' WITHOUT APPLICATION OF MIND THE CIT CAN INVOKE THE PROVISI ONS OF SECTION 263 FOR REVISION. GOING BY THIS PRINCIPLE, THERE CANNOT BE A BETTER CASE THAN THIS FOR INVOCATION OF PROVISIONS OF SEC.263. IT IS HELD IN THE CASE OF SHRI ASHOK KUMAR PARASRAMKA, ITAT, CALCUTTA CITED BY THE ASSES SEE THAT 'WHERE THE ASSESSEE'S STATEMENT MADE IN RETURN OF INCOME WAS M ERELY ACCEPTED BY THE ITO WITHOUT ANY ENQUIRY, THE ASSESSMENT ORDER W AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE'. IT IS ALSO LAID DOWN IN THIS CASE THAT IF THE CONCLUSIONS DRAWN BY THE AO ARE NOT WARRANTE D EITHER IN LAW OR ON FACTS, THE PROVISIONS OF SECTION 263 COULD BE INVOK ED. ALL THESE CONDITIONS ARE SATISFIED IN THIS CASE. THE CONCLUSIONS DRAWN B Y THE AO ARE NEITHER PRIMA FACIE PERMISSIBLE IN LAW, NOR IN VIEW OF THE FACTS ON RECORD. IT HAS BEEN FURTHER EMPHASIZED IN THE CASE OF JHULELAL LAN D DEVELOPMENT CORPORATION, ITAT, MUMBAI, THAT THE ORDER CAN BE SA ID TO BE ERRONEOUS M WHEN THE CONCLUSION DRAWN BY THE AO COULD NOT HAVE BEEN REACHED ON THE FACTS OF THE CASE' AND WHEN ' THE AO WAS REQUIRED T O ENQUIRE ABOUT AND ASCERTAIN THE FACTS BUT HAS FAILED TO DO SO'. BOTH THESE CONDITIONS ARE CLEARLY SATISFIED IN THE CASE UNDER CONSIDERATION. FURTHER IT HAS BEEN EMPHASIZED IN THE CASE OF TRIVENI ENGINEERING WORKS LTD. ITAT -DELHI THAT ' THE FAILURE OF THE AO TO MAKE ENQUIRIES INTO THE FACTS ON RECORD WHICH ARE GLARING, APPARENTLY UNUSUAL AND STARING IN THE FACE FROM THE RECORD WOULD CLEARLY MAKE THE ORDER OF THE AO ERRONEOUS AND PREJ UDICIAL TO THE INTEREST OF REVENUE'. GOING BY THIS PRINCIPLE, THERE CANNOT BE BETTER CASE OF REVISION THAN THE ORDER UNDER CONSIDERATION. THUS, ALL THE JUDGMENTS/DECISIONS CITED BY THE ASSESSEE MAKE IT V ERY CLEAR THAT IN VIEW OF FACTS AND LEGAL POSITION, IT IS A FIT CASE FOR 2 63. PRIMA FACIE, THE REPRESENTATIVE OF THE ASSESSEE HAS NOT THOROUGHLY G ONE THROUGH THEM AND SUBMITTED THEM FOR THE SAKE OF SUBMISSION. (V) IN VIEW OF THE ABOVE, I HAVE NO DOUBT THAT THE ASSESSEE FAILED TO EXPLAIN THE SOURCES AND GENUINENESS OF THE TWO LOAN S RECEIVED FROM THE TWO HUFS AND LISTED AT SR.NO.L & SR.NO.2 IN MY SHOW CAUSE NOTICE. THESE ARE, THEREFORE, STRAIGHTWAY ADDED TO THE ASSESSEE'S TAXABLE INCOME. II. AS REGARD THE THIRD AMOUNT OF RS.3,00,000/- CLA IMED TO HAVE BEEN RECEIVED FROM JAY BUILDERS, THE ASSESSEE HAS CREDIT ED HIS ACCOUNT BY THE AMOUNT ON 26.06.2000, WHILE A COPY OF ACCOUNT FROM M/S JAY BUILDERS SHOWS THAT THE AMOUNT WAS GIVEN BY CHEQUE NO. 10888 6 ONLY ON 28.06.2000. ITA NO.1390/AHD/2006 10 AS PER THE REPLY GIVEN BY THE ASSESSEE BEFORE ME, DATED 04.03.2006 (QUOTED ABOVE), THIS AMOUNT IS SAID TO HAVE BEEN RE CEIVED ON 27-06-2000 AND CHEQUE FOR ITS UTILIZATION WAS ISSUED ON 28-06- 2000. IT IS, HOWEVER, NOT CLEAR HOW THE ASSESSEE COULD GET IT ON 27-06-2000 W HEN THE BUILDER SAYS HE GAVE IT ONLY ON 28-06-2000. THESE DETAILS THEREF ORE, REQUIRE FURTHER CLARIFICATION / RECONCILIATION. THIS ISSUE IS, THER EFORE, REFERRED BACK TO THE AO TO MAKE APPROPRIATE ENQUIRIES AND TAKE A DECISIO N. TO CLARIFY, AS DISCUSSED IN PARA I, STRAIGHTWAY ADD ITION IS MADE WITH REGARD TO THE AMOUNTS OF RS.3,00,000/- RECEIVED FROM DEEPA K NANAVATI HUF AND RS.3,10,000/- RECEIVED FROM AMRATLAL NANAVATI HUF. REGARDING THE AMOUNT CLAIMED TO HAVE BEEN RECEIVED FROM JAY BUILD ERS, AS DISCUSSED IN PARA II ABOVE, THE ISSUE IS SET ASIDE TO THE FILE O F THE AO. THE AO IS DIRECTED TO EXAMINE AND EVALUATE EVIDENCE / DETAILS , ESPECIALLY IN THE LIGHT OF THE DISCUSSION IN FOREGOING PARAGRAPHS WITH REGA RD TO THIS AMOUNT AND THEN DETERMINE THE TAXABLE INCOME BY MAKING A FRESH ORDER. 3. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAIN ST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LEARNED AR ON BEHAL F OF THE ASSESSEE WHILE CARRYING US THROUGH THE IMPUGNED ORDER AS AL SO THEIR REPLY SUBMITTED BEFORE THE LD. CIT CONTENDED THAT ONCE TH E AO, AFTER APPLYING HIS MIND TO THE FACTS OF THE CASE, HAD ACC EPTED THE CASH CREDITS, THE LD. CIT COULD NOT ASSUME JURISDICTION U/S 263 OF THE ACT. WHILE REFERRING TO DECISION OF THE HONBLE RAJASTHA N HIGH COURT IN ARAVALI TRADING CO. VS. CIT, THE LD. AR CONTENDED T HAT ONCE THE EXISTENCE OF CREDITORS WAS PROVED AND SUCH PERSONS OWN CREDITS IN THE BOOKS OF THE ASSESSEE, THE LATTERS ONUS IS DI SCHARGED. RELYING UPO DECISIONS IN THE CASE OF MALABAR INDUSTRIAL CO. LTD.VS. CIT,243 ITR 83(SC), CIT VS MAX INDIA LTD. 295 ITR 282(SC), CIT VS. NIRMA CHEMICAL WORKS P LTD.309 ITR 67(GUJ) AND, CIT VS. G REENWORLD CORPORATION, 314 ITR 81(SC) THE LD. AR VEHEMENTLY A RGUED THAT, THE LD. CIT WRONGLY ASSUMED JURISDICTION IN THIS CASE. ON THE OTHER HAND, THE LD. DR SUPPORTED THE FINDINGS OF THE CIT WHILE RELYING UPON DECISION IN MARTIN BURN LTD. VS. CIT,199 ITR 606(S C).THE LD. DR ADDED THAT THE AO HAVING NOT APPLIED MIND TO THE FA CTS OF THE CASE, THE LD. CIT CORRECTLY ASSUMED JURISDICTION U/S 263 OF THE ACT. ITA NO.1390/AHD/2006 11 4. WE HAVE HEARD BOTH THE PARTIES AND GONE THOUGH THE FACTS OF THE CASE AS ALSO THE AFORECITED DECISIONS. SINCE THE ISSUE RELA TES TO ASSUMPTION OF JURISDICTION BY THE CIT U/S 263 OF THE ACT , WE MAY, AT THE OUT SET, HAVE A LOOK AT THE RELEVANT PROVISIONS , WHICH READ AS UNDER:- 263. (1) THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, HE MAY, AFTER GIVIN G THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAKING OR CAUS ING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THER EON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORD ER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLING THE ASSESSM ENT AND DIRECTING A FRESH ASSESSMENT. EXPLANATION.- FOR THE REMOVAL OF DOUBTS, IT IS HERE BY DECLARED THAT, FOR THE PURPOSES OF THIS SUB-SECTION, - (A) AN ORDER PASSED ON OR BEFORE OR AFTER THE 1 ST DAY OF JUNE, 1988 BY THE ASSESSING OFFICER SHALL INCLUDE - (I) AN ORDER OF A SSESSMENT MADE BY THE ASSISTANT COMMISSIONER OR DEPUTY COMMISSIONER OR TH E INCOME-TAX OFFICER ON THE BASIS OF THE DIRECTIONS ISSUED BY TH E JOINT COMMISSIONER UNDER SECTION 144A; (II) AN ORDER MADE BY THE JOINT COMMISSIONER IN EXERCISE OF THE POWERS OR IN THE PERFORMANCE OF THE FUNCTIONS OF AN ASSESSING OFFICER CONFERRED ON, OR ASSIGNED TO, HIM UNDER THE ORDERS OR DIRECTIONS ISSUED BY THE BOARD OR BY THE CHIEF COMM ISSIONER OR DIRECTOR GENERAL OR COMMISSIONER AUTHORIZED BY THE BOARD IN THIS BEHALF UNDER SECTION 120; (B) RECORD SHALL INCLUDE AND SHALL BE DEEMED ALWAYS TO HAVE INCLUDED ALL RECORDS RELATING TO ANY PROCEEDING UNDER THIS ACT A VAILABLE AT THE TIME OF EXAMINATION BY THE COMMISSIONER; (C) WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTION AND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT MATTER OF AN Y APPEAL FILED ON OR BEFORE OR AFTER THE 1 ST DAY OF JUNE, 1988, THE POWERS OF THE COMMISSIONER UNDER THIS SUB-SECTION SHALL EXTEND AND SHALL BE DE EMED ALWAYS TO HAVE EXTENDED TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL. (2) NO ORDER SHALL BE MADE UNDER SUB- SECTI ON (1) AFTER THE EXPIRY OF TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER SOUGHT TO BE REVISED WAS PASSED. .. 4.1. THE LEARNED AR ON BEHALF OF THE ASSESSEE P OINTED OUT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO HAD ENQUIR ED IN TO THE GENUINENESS ITA NO.1390/AHD/2006 12 OF THE LOANS RECEIVED FROM DIPAKBHAI NANAVATI,HUF A ND AMRUTLAL NANAVATI HUF. THEY HAD FILED CONFIRMATIONS OF THESE PERSONS AND T HEIR BANK STATEMENTS ALONG WITH THEIR PAN AND ACCORDINGLY, THE AO FOUND THE LO ANS GENUINE. SIMILARLY CONFIRMATION OF JAY BUILDERS ALONG WITH DETAILS OF PAYMENTS HAD ALSO BEEN FILED AND THE ADDL. CIT HAD ISSUED DIRECTIONS U/S 144A OF THE ACT ON THEIR APPLICATION. SINCE THE AO HAD AFTER PROPER ENQUIRIES ACCEPTED TH E LOANS, PROVISIONS OF SEC. 263 OF THE ACT COULD NOT BE INVOKED. THE LD. AR AD DED THAT THE LD. CIT NOW ANALYSED THE SAME DOCUMENTS AND ARRIVED AT THE CONC LUSION THAT THE ORDER OF THE AO WAS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE I NTEREST OF THE REVENUE. IN THIS CONTEXT ,HONBLE RAJASTHAN HIGH COURT IN ARAVALI TR ADING CO. VS. ITO (2010) 187 TAXMAN 338 (RAJ) HELD THAT ONCE THE EXI STENCE OF THE CREDITORS IS PROVED AND SUCH PERSONS OWN THE CREDIT S WHICH ARE FOUND IN THE BOOKS OF THE ASSESSEE, THE ASSESSEE'S ONUS STANDS D ISCHARGED AND THE LATTER IS NOT FURTHER REQUIRED TO PROVE THE SOURCE FROM WHICH THE CREDITORS COULD HAVE ACQUIRED THE MONEY DEPOSITED WITH HIM EITHER IN TER MS OF S. 68 OR ON GENERAL PRINCIPLE . AS IS APPARENT FROM THE AFORESAID PROV ISIONS OF SEC. 263 OF THE ACT, THE POWER OF SUO MOTO REVISION EXERCISABLE BY THE CIT IS UNDOUBTEDLY SUPERVISORY I N NATURE. THE OPENING WORDS OF SECTION 263 EMPOWER TH E CIT TO CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDINGS UNDER THE ACT . A BARE READING OF SECTION 263 ALSO MAKES IT CLEAR THAT THE COMMISSIONER HAS T O BE SATISFIED OF TWIN CONDITIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERE ST OF THE REVENUE. IF ONE OF THEM IS ABSENT I.E. IF THE ORDER OF THE AO IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IT IS PREJUDICIAL TO THE REVENUE RECOURSE CANNOT BE HAD TO PROVISIONS OF THE 263(1) OF THE ACT AS HELD IN MALABAR INDUSTRIAL CO. LTD. VS. CIT, 243 ITR 83 (SC). 4.2. AS REGARDS THE SCOPE AND AMBIT OF TH E EXPRESSION ERRONEOUS, HONBLE BOMBAY HIGH COURT IN CIT VS. GABRIEL INDIA LTD., (1 993) 203 ITR 108 (BOMBAY), WHILE REFERRING TO BLACKS LAW DICTIONARY THAT AN ERRONEOUS JUDGM ENT MEANS ONE RENDERED ACCORDING TO COURSE AND PRACTICE OF C OURT, BUT CONTRARY TO LAW, UPON MISTAKEN VIEW OF LAW; OR UPON ERRONEOUS APPLIC ATION OF LEGAL PRINCIPLES , OBSERVED THAT AN ORDER CANNOT BE TERMS AS ERRONEOU S UNLESS IT IS NOT IN ITA NO.1390/AHD/2006 13 ACCORDANCE WITH LAW. IF AN AO ACTING IN ACCORDANCE WITH LAW MAKES A CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDED AS ERRONEOU S BY THE CIT MERELY BECAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BE EN WRITTEN DIFFERENTLY OR MORE ELABORATELY. THE PROVISIONS OF SEC. 263 OF THE ACT DO NOT VISUALIZE THE SUBSTITUTION OF THE JUDGMENT OF THE COMMISSIONER FOR THAT OF THE AO UNLESS HIS ORDER IS NOT IN ACCORDANCE WITH LAW. THERE AGAIN EVERY ERRONEOUS O RDER CANNOT BE THE SUBJECT MATTER OF REVISION BECAUSE THE SECOND REQUIREMENT HAS ALSO TO BE FULFILLED. THERE MUST BE MATERIAL ON RECORD TO SHOW THAT TAX WHICH W AS LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSED AS HELD IN GABRIEL INDIA LTD. (SUPRA) . HOWEVER, THE EXPRESSION PREJUDICIAL TO THE INTEREST OF THE REVENUE, AS HE LD BY THE SUPREME COURT IN THE MALABAR INDUSTRIAL CO. LTD.,243 ITR 83(SC) CASE, IS NOT AN EXPRESSION OF ART AND IS NOT DEFINED IN THE ACT AND, THEREFORE, MUST BE U NDERSTOOD IN ITS ORDINARY MEANING. IT IS OF WIDE IMPORT AND IS NOT CONFINED T O ONLY THE LOSS OF REVENUE. THE WORDS PREJUDICIAL TO THE INTEREST OF THE REVENUE, AS OBSERVED IN DAWJEE DADABHOY AND CO. VS. S.P. JAIN, 31 ITR 872 (CALCUTT A ) , CAN ONLY MEAN THAT THE ORDERS OF ASSESSMENT CHALLENGED ARE SUCH AS ARE NOT IN ACCORDANCE WITH LAW, IN CONSEQUENCE WHEREOF THE LAWFUL REVENUE DUE TO THE S TATE HAS NOT BEEN REALIZED OR CANNOT BE REALIZED. THUS, THE EXERCISE OF REVI SIONAL JURISDICTION UNDER THE PROVISIONS OF SECTION 263 OF THE ACT IS LIMITED TO CASES WHERE THE COMMISSIONER ON EXAMINING THE RECORDS COMES TO THE CONCLUSION TH AT THE EARLIER FINDING OF THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND THAT FRESH DETERMINATION OF THE ASSESSMENT WAS NECESSARY. TH ERE MUST BE MATERIAL TO JUSTIFY THE COMMISSIONERS FINDING THAT THE ORDER O F THE ASSESSMENT WAS ERRONEOUS INSOFAR AS IT WAS PREJUDICIAL TO THE INTE REST OF THE REVENUE. 4.3. THOUGH THERE IS A FINE THOUGH SUBTLE DIST INCTION BETWEEN LACK OF INQUIRY AND INADEQUATE INQUIRY, IT IS ONLY IN CASES OF L ACK OF INQUIRY THAT THE CIT CAN EXERCISE HIS REVISIONAL JURISDICTION. AS HELD IN GA BRIEL INDIA LTD. (SUPRA), THE CIT CANNOT INITIATE PROCEEDINGS WITH A VIEW TO START FI SHING AND ROVING ENQUIRIES IN MATTERS OR ORDERS WHICH ARE ALREADY CONCLUDED. HON BLE BOMBAY HIGH COURT FURTHER OBSERVED IN THE SAID DECISION AS UNDER:- FROM THE AFORESAID DEFINITIONS AS IT IS CLEAR THAT AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW. IF AN INCOME-TAX OFFICER ACTING ITA NO.1390/AHD/2006 14 IN ACCORDANCE WITH LAW MAKES A CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BEC AUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY . THIS SECTION DOES NOT VISUALIZE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE COMMISSIONER FOR THAT OF THE INCOME-TAX OFFICER, WHO PASSED THE ORDER UNLESS THE DECISION IS HELD TO BE ERRONEOUS. CASES MAY BE VISUALIZED WHERE THE INCOME -TAX OFFICER WHILE MAKING AN ASSESSMENT EXAMINES THE ACCOUNTS, MAKES ENQUIRIE S, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOUNTS OR BY MAKING SOME ESTIMATE H IMSELF. THE COMMISSIONER, ON PERUSAL OF THE RECORDS, MAY BE OF THE OPINION TH AT THE ESTIMATE MADE BY THE OFFICER CONCERNED WAS ON THE LOWER SIDE AND LEFT TO THE COMMISSIONER HE WOULD HAVE ESTIMATED THE INCOME AT A FIGURE HIGHER THAN T HE ONE DETERMINED BY THE INCOME-TAX OFFICER. THAT WOULD NOT VEST THE COMMISS IONER WITH POWER TO RE- EXAMINE THE ACCOUNTS AND DETERMINE THE INCOME HIMSE LF AT A HIGHER FIGURE. ITIS BECAUSE THE INCOME-TAX OFFICER HAS EXERCISED THE QU ASI-JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRIVED AT CONCLUSIO N AND SUCH A CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEEL SATISFIED WITH THE CONCLUSION. X X X X THERE M UST BE SOME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT TAX WHICH WAS LAWFULLY EXIGI BLE HAS NOT BEEN IMPOSED OR THAT BY THE APPLICATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTERPRETATION A LESSER TAX THAN WHAT WAS JUST HAS BEEN IMPOSED. X X X X WE MAY NOW EXAMINE THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THE POWERS OF THE COMMISSIONER SET OUT ABOVE. THE INCOME-TAX OFFI CER IN THIS CASE HAD MADE ENQUIRIES IN REGARD TO THE NATURE OF THE EXPENDITUR E INCURRED BY THE ASSESSEE. THE ASSESSEE HAD GIVEN DETAILED EXPLANATION IN THAT REG ARD BY A LETTER IN WRITING. ALL THESE ARE PART OF THE RECORD OF THE CASE. EVIDENTLY , THE CLAIM WAS ALLOWED BY THE INCOME-TAX OFFICER ON BEING SATISFIED WITH THE EXPL ANATION OF THE ASSESSEE. SUCH DECISION OF THE INCOME-TAX OFFICER CANNOT BE HELD T O BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE D ISCUSSION IN THAT REGARD.. 4.4 WHILE ADJUDICATING A SIMILAR ISSUE, HONBLE SUPREME COURT IN THE CASE OF CIT VS MAX INDIA LTD. (SUPRA) RELYING UPON ITS EARL IER DECISION IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. (SUPRA) HELD AS UNDER: THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE RE VENUE IN SECTION 263 OF THE INCOME-TAX ACT, 1961, HAS TO BE READ IN CONJUNCTION WITH THE EXPRESSION ERRONEOUS ORDER PASSED BY THE ASSESSIN G OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSI NG OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. FOR EXAMPLE, WHEN THE ASSESSING OFFICER ADOPTS ONE OF TWO COURSES PERMISSIBLE IN LA W AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE AS SESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE , IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE REVENUE, UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. ITA NO.1390/AHD/2006 15 4.5 SIMILAR VIEWS WERE EXPRESSED BY THE HONBLE APEX COURT IN GREENWORLD CORPORATION(SUPRA). 4.6 SIMILARLY, HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS R. K. CONSTRUCTION CO. 313 ITR 65 HELD AS UNDER: AS FAR AS LAW IS CONCERNED, THE ASSESSING OFFICER H AS TAKEN A PARTICULAR VIEW ON THE BASIS OF EVIDENCE PRODUCED B EFORE HIM. ON THE BASIS OF THE SAID MATERIAL AND MATERIALS WHICH WERE COLLECTED BY THE CIT IN REVISIONAL PROCEEDINGS, THE COMMISSIONER HAS TAKEN A DIFFERENT VIEW. HOWEVER, IN THE REVISIONAL PROCEEDI NGS UNDER SECTION 263, IT IS NOT OPEN FOR THE COMMISSIONER TO TAKE SU CH A DIFFERENT VIEW IN VIEW OF THE DECISIONS OF THE HON'BLE SUPREM E COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. THERE IS NOTHIN G ON RECORD TO SUGGEST THAT THE VIEW TAKEN BY THE ASSESSING OFFICE R IS UNSUSTAINABLE AT LAW. THIS COURT HAS ALSO TAKEN THE SAME VIEW IN CASE OF ARVIND JEWELLERS WHEREBY THE ORDER PASSED B Y THE COMMISSIONER UNDER SECTION 263 OF THE ACT WAS QUASH ED AND SET ASIDE. . 4.7 IN THE CASE OF CIT V. ARVIND JEWELLERS [2003] 259 ITR 502 (GUJ) IT WAS OBSERVED THAT THE FINDING OF FACT GIVEN BY THE TRIB UNAL WAS THAT THE ASSESSEE HAD PRODUCED RELEVANT MATERIAL AND OFFERED EXPLANATIONS IN PURSUANCE OF THE NOTICES ISSUED UNDER SECTION 142(1) AS WELL AS SECTION 143( 2) OF THE ACT AND AFTER CONSIDERING THE MATERIAL AND EXPLANATIONS, THE INCO ME-TAX OFFICER HAD COME TO A DEFINITE CONCLUSION. SINCE THE MATERIAL WAS THERE O N RECORD AND THE SAID MATERIAL WAS CONSIDERED BY THE INCOME-TAX OFFICER AND A PART ICULAR VIEW WAS TAKEN, THE MERE FACT THAT A DIFFERENT VIEW CAN BE TAKEN SHOULD NOT BE THE BASIS FOR AN ACTION UNDER SECTION 263. THE HONBLE JURISDICTIONAL HIGH COURT, THEREFORE, TOOK THE VIEW THAT THE ORDER OF REVISION WAS NOT JUSTIFIED. IN TH E WORDS OF THE HONBLE HIGH COURT IT WAS HELD AS UNDER: COMING TO THE FACTS OF THE PRESENT CASE, IT IS THE FINDING OF FACT GIVEN BY THE TRIBUNAL THAT THE ASSESSEE HAS PRODUCED RELEVANT MA TERIAL AND OFFERED EXPLANATIONS IN PURSUANCE OF THE NOTICES ISSUED UND ER SECTION 142(1) AS WELL AS SECTION 143(2) OF THE ACT AND AFTER CONSIDERING THE MATERIALS AND EXPLANATION, THE INCOME-TAX OFFICER HAS COME TO A DEFINITE CONCLUSIO N. THE COMMISSIONER OF INCOME-TAX DID NOT AGREE WITH THE CONCLUSION REACHE D BY THE INCOME-TAX OFFICER. SECTION 263 OF THE ACT DOES NOT EMPOWER HIM TO TAKE ACTION ON THESE FACTS TO ARRIVE AT THE CONCLUSION THAT THE ORDER PASSED BY T HE INCOME-TAX OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. SINCE THE MATERIAL WAS THERE ON RECORD AND THE SAID MATERIAL WAS CONSIDERE D BY THE INCOME-TAX OFFICER ITA NO.1390/AHD/2006 16 AND A PARTICULAR VIEW WAS TAKEN, THE MERE FACT THAT A DIFFERENT VIEW CAN BE TAKEN, SHOULD NOT BE THE BASIS FOR AN ACTION UNDER SECTION 263 OF THE ACT AND IT CANNOT BE HELD TO BE JUSTIFIED. 4.8 IN CIT V. MEHROTRA BROTHERS 270 ITR 157 (MP), THE HONBLE HIGH COURT GAVE THE STAMP OF APPROVAL TO THE ORDER OF TH E TRIBUNAL WHICH, AFTER RELYING ON CIT V. RATLAM COAL ASH CO. [1988] 171 ITR 141, HAD HELD THAT WHEN THE AO CONSIDERED THE RECORDS BEFORE HIM AND COMPLETED THE ASSESSMENT AFTER CONSIDERING THE EVIDENCE FILED AND AFTER HIS SATISF ACTION ABOUT THE GENUINENESS OF CASH CREDITS, THE ORDER OF REVISION UNDER SECTION 2 63 ON THE VAGUE GROUND THAT THE AO DID NOT MAKE PROPER ENQUIRY WAS NOT VALID. 4.9 HONBLE PUNJAB & HARYANA HIGH COURT IN THE CA SE OF CIT VS DEEPAK MITTAL 324 ITR 411 HELD THAT CHANGE OF OPINION BY REAPPRAISING THE EVIDENCE IS NOT WITHIN THE PARAMETERS OF REVISIONAL JURISDICTION OF THE COMMISSIONER UNDER SECTION 263 OF THE ACT. 4.10 AS REGARDS DECISION IN MARTIN BURN LTD.(SUP RA) ,RELIED UPON BY THE LD. DR, THE ISSUE WAS AS TO WHETHER THE TRIBUNAL HAS THE POWER TO RESTORE AN OR DER UNDER S.263 BACK TO THE COMMISSIONER OF INCOME-TAX . APPA RENTLY, THIS DECISION IS NOT OF ANY HELP TO THE REVENUE. 5. IN THE LIGHT OF VIEW TAKEN IN THE AFORESAID DECISIONS , IT IS APPARENT THAT THE CIT HAS TO GIVE REASONS TO JUSTIFY THE EXERCISE OF SUO MOTO REVISIONAL POWERS BY HIM TO RE-OPEN A CONCLUDED ASSESSMENT. IN THE INSTA NT CASE ,A QUERY WAS RAISED DURING THE COURSE OF SCRUTINY BY THE AO, WHICH WAS ANSWERED TO THE SATISFACTION OF THE AO BUT NEITHER THE QUERY NOR THE ANSWER WERE REFLECTED IN THE ASSESSMENT ORDER. BUT THIS WOULD NOT BY ITSELF LEAD TO THE CON CLUSION THAT THE ORDER OF THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF RE VENUE . THE AO HAD NOT SHIRKED HIS RESPONSIBILITY OF EXAMINING AND INVESTI GATING THE CASE. MORE SO, IN VIEW OF THE FACT THAT THE ASSESSEE FILED THE CONFI RMATIONS OF THE AFORESAID LENDERS AND FURNISHED THEIR PAN . APPARENTLY, THE AO WAS SATISFIED WITH THE EXPLANATI ON OF THE ASSESSEE REGARDING GENUINENESS OF THE CREDIT S ON THE BASIS OF THE CONFIRMATIONS FILED BY THE ASSESSEE. A CHANGE OF OP INION OR VIEW WOULD NOT ITA NO.1390/AHD/2006 17 ENABLE THE CIT TO EXERCISE JURISDICTION U/S 263 OF THE ACT MORE SO, WHEN THE AO HAD CONSIDERED THE DETAILS AND THE EXPLANATION OFFE RED BY THE ASSESSEE . C HANGE OF OPINION BY REAPPRAISING THE EVIDENCE IS NOT WITHIN THE PARA METERS OF REVISIONAL JURISDICTION OF THE COMMISSIONER UNDER S ECTION 263 OF THE ACT. IN VIEW THEREOF, WE SET ASIDE THE IMPUGNED ORDER U/S 263 OF THE ACT AND QUASH THE SAME. THEREFORE, GROUND NOS. 1 & 5(A) IN THE APPEAL ARE A LLOWED. CONSEQUENTLY, GROUND NOS. 2 TO 4 & 5(II) DO NOT SURVIVE FOR OUR ADJUDIC ATION . 6. GROUND NO. 6 BEING GENERAL IN NATURE ,DOES N OT REQUIRE ANY SEPARATE ADJUDICATION WHILE NO ADDITIONAL GROUND HA VING BEEN RAISED IN TERMS OF THE RESIDUARY GROUND NO.7 IN THE APPEA L , ACCORDINGLY, THESE GROUNDS ARE DISMISSED. 7. IN THE RESULT , APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 8 -10 -2010 SD/- SD/- (T K SHARMA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 8 -10-2010 COPY OF THE ORDER FORWARDED TO: 1. SHRI AMRATLAL NATVARLAL NANAVATI, THROUGH L/H HI TENDRA A NANAVATI, PROP. OF M/S SURAT TYRE & OIL CENTRE, SHO P NO.2, SURAT TRADE HOUSE, UNA PANI ROADM, SURAT-395003 2. ACIT, CIRCLE-7, SURAT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR, BENCH-C, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD