M/s. Nandi Constructions, Shimoga V. CIT, Gadag

ITA 293/BANG/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0559 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-09-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 08-04-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JASON P BOAZ
• Assessee Lawyers: S R KIRON
• Keywords: Revision of order; Corroborative evidences; Revised return; TDS; Set aside
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI K.P.T. THANGAL, VICE PRESIDENT AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.293/BANG/2009 ASSESSMENT YEAR : 2004-05 M/S. NANDI CONSTRUCTIONS, NEAR ADI-CHUNCHANAGIRI SAMUDHAYA BHAVAN, SHARAVATHI NAGAR, SHIMOGA. : APPELLANT VS. THE COMMISSIONER OF INCOME-TAX, DAVANGERE. : RESPONDENT APPELLANT BY : SHRI S.R. KIRON RESPONDENT BY : SHRI JASON P. BOAZ O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER THIS APPEAL PREFERRED BY NANDI CONSTRUCTIONS A FIRM IS AGAINST THE ORDER OF THE LD. CIT, DAVANAGERE PASSED U/S 263 OF THE ACT FOR THE ASSESSMENT YEAR 2004-05. 2. THE ASSESSEE FIRM, IN ITS GROUNDS OF APPEAL, HAS RAISED FIVE GROUNDS, OUT OF WHICH, GROUND NO: 1 IS GENERAL IN NATURE AND NOT VERY SPECIFIC AND, THEREFORE, DOESNT STAND FOR ADJUDICATION. IN THE REMAINING GROUNDS, THE ESSENCE AND SUBSTANCE OF THE ISSUES ARE CONFINED TO ITA NO.293/B/09 PAGE 2 OF 11 (I) THERE WAS NO ERROR MUCH LESS AN ERROR PREJUDICIAL T O THE INTEREST OF THE REVENUE IN THE ORDER PASSED BY THE AO WARRANTING REVISION U/S 263 OF THE ACT; & (II) THE ASSESSEE MAY BE AWARDED COSTS IN PROSECUTING TH E APPEAL AND ALSO ORDER FOR THE REFUND OF THE INSTITUTION FE ES AS PART OF THE COSTS. 3. THE FACTS OF THE ISSUE, IN BRIEF, ARE THAT THE A SSESSEE FIRM PRIMARILY PWD CONTRACTORS FURNISHED ITS ROI, ADMITTING AN I NCOME OF RS.1.77 LAKHS ALONG WITH AUDIT REPORT AND AUDITED BALANCE SHEET. SUBSEQUENTLY, A REVISED RETURN WAS FILED WITH ANOTHER AUDIT REPORT, ADMITTI NG AN ENHANCED INCOME OF RS.3.33 LAKHS, ON WHICH, THE ASSESSMENT WAS CONCLUD ED, DETERMINING THE TOTAL INCOME AT RS.3.94 LAKHS. THE LD. CIT IN HIS SUO MOTTO ACTION HELD THAT THE ASSESSMENT COMPLETED WAS ERRONEOUS AND PRE-JUDI CIAL TO THE INTERESTS OF REVENUE AND, ACCORDINGLY, BY INVOKING THE PROVIS IONS OF S. 263 OF THE ACT, SET ASIDE THE ASSESSMENT IN QUESTION WITH DIRECTION S TO THE AO TO REFRAME THE ASSESSMENT AFRESH AFTER EXAMINING ALL THE RELEV ANT FACTS. BEFORE DOING SO, THE CIT HAD SET-OUT THE FOLLOWING REASONS THAT THE AOS IMPUGNED ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF R EVENUE AND THAT THE ASSESSEE WAS CALLED UPON TO FURNISH ITS OBJECTIONS, IF ANY: (I) AS PER THE PROVISIONS OF S.44AD OF THE ACT, THE EST IMATION OF INCOME AT 8% ARISES TO AN ASSESSEE ENGAGED IN CIVIL CONSTRUCTION WHOSE GROSS RECEIPTS DOES NOT EXCEED RS.40 LAKHS FR OM SUCH BUSINESS WHEREAS IN THE CASE ON HAND, THE TURNOVER OF THE ASSESSEE WAS RS.93.86 LAKHS. THERE WERE VARIOUS ISSUES TO B E EXAMINED IN BOTH THE RSOI, BUT, NONE OF THESE POINTS HAVE BEEN EXAMINED; (II) IN THE P & L ACCOUNT FURNISHED ALONG WITH THE REVIS ED ROI, RS.1848466 WAS DEBITED TOWARDS LABOUR CHARGES. ON COMPARISON OF THE SAME WITH THE BREAKUP FURNISHED FOR LABOUR C HARGES, THE TOTAL WORKS OUT OF RS.1263866/- ONLY. THIS ISSUE S HOULD HAVE BEEN VERIFIED BY THE AO; ITA NO.293/B/09 PAGE 3 OF 11 (III) SIMILARLY, RS.40000/- WAS DEBITED TOWARDS CENTERIN G CHARGES THOUGH IT WAS ALREADY COVERED IN THE LABOUR CHARGES OF RS.187000/- CLAIMED IN THE P & L ACCOUNT. THIS ASP ECT HAS NOT BEEN EXAMINED BY THE AO; (IV) IN THE BALANCE SHEET, THE ASSESSEE HAD SHOWN SUNDRY CREDITORS AT RS.17.45 LAKHS AND FURNISHED A LIST OF SUNDRY CREDI TORS. ON VERIFICATION, THE ASSESSEE HAD DEBITED THE SUNDRY C REDITS IN THE NAMES OF NAGABHUSHANSWAMY AND NAGESH AMOUNTING TO RS.92520/- TWICE, BUT, THIS VERY FACT HAS BEEN LOST SIGHT OF THE AO; (V) FROM THE TDS CERTIFICATES OF THE PWD AUTHORITIES, T DS WERE DEDUCTED TO THE EXTENT OF RS.566554/- FROM THE GROS S CONTRACT RECEIPTS TOWARDS FSD/NSC, BUT, IT DOESNT FIND A PL ACE IN THE BALANCE SHEET. THIS ISSUE HAS NOT BEEN EXAMINED BY THE AO; (VI) ON VERIFICATION OF CONFIRMATION LETTERS OF SUNDRY C REDITORS, IT WAS NOTICED THAT SOME OF THE CONFIRMATIONS WERE FOR THE PAYMENTS TOWARDS MACHINERY RENT WHICH WORKED OUT TO RS.2.3 9 LAKHS, HOWEVER, NO EXPENSES WERE DEBITED TOWARDS MACHINER Y RENT IN THE P & L ACCOUNT. THIS ASPECT HAS NOT BEEN EXAMINE D IN THE COURSE OF ASSESSMENT PROCEEDINGS; (VII) LORRY HIRE CHARGES OF RS.947644/- AND RS.1282800/- WERE CLAIMED IN THE ORIGINAL AND REVISED RETURNS RESPECTIVELY WI TH NO SUPPORTING EVIDENCE TO VOUCH THE ENHANCED LORRY HIRE CHARGES I N THE REVISED RETURN. CONFIRMATION LETTERS AVAILABLE ON RECORD T O SUGGEST THAT AS ON 31.3.04, RS.428490 WAS DUE TOWARDS LORRY/TIPP ER HIRE CHARGES. IN THE ABSENCE OF ANY EVIDENCE/DETAILS, T HE DIFFERENCE OF EXPENDITURE OF RS.335156/- SHOULD HAVE BEEN BROUGHT TO TAX BY THE AO; & (VIII) IN THE P & L ACCOUNT [IN THE REVISED RETURN], THE I NTEREST PAID TO PARTNERS WAS DEBITED AT RS.58338/- WHICH WAS CALCUL ATED BY THE ASSESSEE AT 12% ON THE OPENING CAPITAL BALANCE OF P ARTNERS. ON VERIFICATION, IT WAS NOTICED THAT THE PARTNERS WITH DREW HUGE AMOUNTS, CONSEQUENT UPON WHICH, THE INTEREST ON PAR TNERS CAPITAL ACCOUNTS GET REDUCED. THUS, THE INTEREST ON PARTNE RS CAPITAL ACCOUNTS CLAIMED IN THE ORIGINAL RETURN AT RS.39408 /- SEEMS TO BE CORRECT. HOWEVER, THIS ASPECT HAS NOT BEEN EXAMINE D BY THE AO AND, THUS, HAD FAILED TO BRING TO TAX THE DIFFERENC E. 3.1. AFTER CONSIDERING THE ELABORATE CONTENTIONS PUT-FORTH BY THE ASSESSEE FIRM OPPOSING TO INVOKE THE PROVISIONS OF S.263 OF THE ACT, THE LD. ITA NO.293/B/09 PAGE 4 OF 11 CIT COUNTERED THEM IN A COMPREHENSIVE MANNER WHICH, FOR THE SAKE OF CLARITY AND PROPER UNDERSTANDING, IS SUMMARIZED AS UNDER: (I) NOTHING CONTAINED IN S.44AD SHALL APPLY IN A CASE W HERE THE GROSS RECEIPTS PAID/PAYABLE EXCEED RS.40 LAKHS AND, THUS, COMPUTING PROFITS AND GAINS OF BUSINESS OF CIVIL CO NTRACTS BY ESTIMATING THE PROFITS AT 8% OF GROSS RECEIPTS AND ALLOWING THERE- FROM THE SALARY AND INTEREST PAID TO PARTNERS WAS N OT ADMISSIBLE UNDER THE LAW; (II) THE PAYMENTS MADE AGAINST THE PURCHASE OF MATERIALS AND OTHER EXPENSES HAVE NOT BEEN VERIFIED; (III) THE IMPUGNED ORDER OF THE AO MERELY SAYS THAT THE ASSESSEE VOLUNTARILY AGREEING FOR ESTIMATION OF THEIR INCOME AT 8% OF THE TOTAL CONTRACT RECEIPTS AS APPLICABLE TO OTHER CIVI L CONTRACTORS SUBJECT TO ALLOWANCE OF REMUNERATION AND INTEREST T O PARTNERS. ON VERIFICATION OF RECORD, IT IS SEEN THAT THE ASSESSE E FIRM HAS VOLUNTARILY FILED THE REVISED RETURN OF INCOME WHIC H IS IN TIME AND ACCORDINGLY, CONSIDERING THE NATURE OF BUSINESS OF ASSESSEE, THE CLAIM MADE BY THE ASSESSEE FOR ESTIMATION OF THE TO TAL INCOME AT 8% AS NORMALLY DECLARED BY THE CIVIL CONTRACTORS IS ACCEPTED. IN THE CASE OF MALABAR INDUSTRIAL CO. V. CIT REPORTED IN 243 ITR 83, THE HONBLE SUPREME COURT HAD RULED THAT IF DUE TO AN ERRONEOUS ORDER OF THE AO, THE REVENUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE INT ERESTS OF THE REVENUE; - THE HONBLE APEX COURT IN ITS WISDOM HAD UPHELD THE FINDING OF THE HONBLE KERALA HIGH COURT REPORTED IN 199 IT R 611 WHEREIN THE HONBLE HIGH COURT HAD OBSERVED THAT .THE ITO FAILED TO APPLY HIS MIND TO THE CASE I N ALL PERSPECTIVE AND THE ORDER PASSED BY HIM WAS ERRONEO US. IT APPEARS THAT THE RESOLUTION PASSED BY THE BOARD OF THE APPELLATE-COMPANY WAS NOT PLACED BEFORE THE ASSESSI NG OFFICER. THUS, THERE WAS NO MATERIAL TO SUPPORT TH E CLAIM OF THE APPELLANT THAT THE SAID AMOUNT REPRESENTED COMP ENSATION FOR LOSS OF AGRICULTURAL INCOME. HE ACCEPTED THE E NTRY IN THE STATEMENT OF THE ACCOUNT FILED BY THE APPELLANT IN THE ABSENCE OF ANY SUPPORTING MATERIAL AND WITHOUT MAKING ANY I NQUIRY. ON THESE FACTS THE CONCLUSION THAT THE ORDER OF THE ITO WAS ERRONEOUS HAS RIGHTLY HELD THAT THE EXERCISE OF THE JURISDICTION BY THE CIT U/S 263(1) WAS JUSTIFIED; ITA NO.293/B/09 PAGE 5 OF 11 (IV) DRAWING STRENGTH FROM (A) DECISION OF HONBLE MADRA S HIGH COURT REPORTED IN 295 ITR 293; (B)THE FINDING OF TH E HONBLE TRIBUNAL IN ITA NO:287 & 288/B/2008 DATED: 3/10/20 08, THE ORDER PASSED BY THE ITO IN THE PRESENT CASE IS ERRO NEOUS AND PREJUDICIAL TO THE REVENUE AND THE SAME WAS SET ASI DE WITH DIRECTIONS TO THE AO TO FRAME THE ASSESSMENT AFRESH AFTER DUE VERIFICATION/EXAMINATION OF POINTS. 4. AGGRIEVED, THE ASSESSEE HAS COME UP WITH THE P RESENT APPEAL. THE SUBMISSION OF THE LD. A R REVOLVED AROUND MORE OR LESS WHAT HAS BEEN PUT-FORTH BEFORE THE FIRST APPELLATE AUTHORITY. 4.1. ON REVENUES PART, THE LD. D R WAS VERY FI RM IN HIS RESOLVE THAT THE AO HAD NOT EXAMINED THE VARIOUS POINTS PINNED DOWN BY THE LD.CIT, AS A RESULT OF WHICH, THE IMPUGNED ORDER OF THE AO WAS ERRONEOUS AND PRE- JUDICIAL TO THE REVENUE. IT WAS, THEREFORE, PLEADE D THAT THE CIT, IN A JUDICIOUS MANNER, SET ASIDE THE ERRONEOUS ORDER OF THE AO WHICH REQUIRES TO BE SUSTAINED. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS AND ALSO DULY PERUSED THE RELEVANT RECORDS. WE HAVE CLOSELY PERU SED THE IMPUGNED ORDER OF THE AO WHICH, IN OUR CONSIDERED VIEW, WAS BALD AND DOESNT GIVE ANY CLUE WHETHER THE AO HAD EXAMINED THE BALANCE SH EET, P & L ACCOUNT AND OTHER ENCLOSURES ANNEXED TO THE ORIGINAL AND SU BSEQUENT REVISED RETURNS WHEREIN THE ASSESSEE FIRM HAD ENHANCED ITS INCOME. WHAT PROMPTED THE ASSESSEE FIRM TO REVISE ITS INCOME FRO M THE ORIGINAL RETURN HAS BEEN LOST THE SIGHT OF THE AO? THIS VERY CRUCIAL A SPECT HAS BEEN GIVEN A GO-BY BY THE AO. THE AO HAD IN HIS EARLIER COMMUNI CATION TO THE HIERARCHY ITA NO.293/B/09 PAGE 6 OF 11 SOUGHT ADMINISTRATIVE PERMISSION TO SCRUTINIZE THE RETURNS FURNISHED BY THE ASSESSEE ON VARIOUS POINTS. HOWEVER, THE AO, WITHO UT CONSIDERING ANY OF THE POINTS ON WHICH HE SOUGHT PERMISSION TO VERIFY, HAD CONCLUDED THE ASSESSMENT. WHAT WOULD HAVE BEEN THE OBVIOUS REASO N(S) FOR THE AO TO ARRIVE AT SUCH A CONCLUSION IS RATHER INTRIGUING US ? MANY POINTS, AS LISTED OUT BY THE LD. CIT IN THE IMPUGNED ORDER, REQUIRE T HOROUGH VERIFICATION WHICH HAD NOT BEEN DONE BY THE AO. 5.1. THE ASSESSEES CONTENTION THAT THE VARIOUS ISSUED POINTED OUT BY THE CIT IN HIS NOTICE U/S 263 OF THE ACT AS CONSTIT UTING ERRORS PREJUDICIAL TO THE INTEREST OF REVENUE WERE IN FACT EXAMINED IN DE TAIL BY THE ASSESSING OFFICER IN THE ASSESSMENT PROCEEDINGS AND, THEREFOR E, THE VIEW OF THE LEARNED CIT FOR WHICH THE PROVISIONS OF SECTION 263 OF THE ACT CANNOT BE INVOKED IS LACKING CONVICTION. EVEN ON A CURSORY PERUSAL OF T HE ORDER OF THE AO DOES EXHIBIT WHICH IS QUITE CONTRARY TO THE CLAIM OF THE ASSESSEE. 5.2. LET US NOW ANALYZE THE VERSIONS OF THE LEGAL PUNDITS (LUMINARIES) ON THE ISSUE: (I) IN THE CASE OF CIT V. SMT. D. VALLIAMMAL REPORT ED IN 230 ITR 695 WHEREIN THE HONBLE HIGH COURT OF MADRAS HAD HELD T HAT WHEN THE EXPLANATION OFFERED BY THE ASSESSEE WAS A CCEPTED BY THE CIT WITH REGARD TO THE ALLEGED UNDISCLOSED INCO ME OF RS.1 LAKH, THEN THERE IS NO ERROR IN THE ORDER PASSED BY THE ITO IN THE CASE OF THE ASSESSEE FOR THE AY 74-75. THE COMMISS IONER SET- ASIDE THE ORDER PASSED BY THE ITO ON THE GROUND THA T VERIFICATION OF ACCOUNT IS NEEDED, WITH A CLARIFICATION OF THE A SSESSEE. THIS CANNOT BE A GROUND FOR INVOKING THE JURISDICTION U/ S 263 OF THE ACT. THEREFORE, ON THE FACTUAL FINDING, THE ORDER PASSED BY THE TRIBUNAL IN HOLDING THAT THE CIT HAS NO JURISDICTIO N TO INVOKE THE PROVISIONS OF S.263 OF THE ACT IS IN ORDER. ITA NO.293/B/09 PAGE 7 OF 11 WE HAVE PERUSED THE FINDING OF THE HONBLE COURT WH ICH, IN OUR CONSIDERED VIEW, IS DISTINGUISHABLE AS THE ISSUE ON HAND IS ON A DIFFERENT FOOTING. IN THE PRESENT CASE, THE CIT HA D POINTED OUT THE FACTUAL ERRORS AND CERTAIN CLAIMS MADE BY THE A SSESSEE HAVE SINCE BEEN ACCEPTED BY THE AO WITHOUT EXAMINING THE ADMISSIBILITY OF SUCH CLAIMS. THUS, THE FINDING O F THE HONBLE COURT ON WHICH THE ASSESSEE PLACED RELIANCE DOESNT COME TO THE RESCUE OF THE ASSESSEE; (II) THE HONBLE HIGH COURT OF MADHYA PRADESH IN TH E CASE OF CIT V. DEEPAK KUMAR GARG REPORTED IN 299 ITR 435 HAD RESOL VED THAT THE AO ACCEPTED THE VERSION OF THE ASSESSEE WITHOU T PROPER ENQUIRY, AS A RESULT, SUBSTANTIAL AMOUNT OF TAXABLE INCOME WAS NOT BROUGHT TO TAX. IN SUCH CASE, THE ASSESSMENT ORDER OULD BE ERRONEOUS AND PRE-JUDICIAL TO THE INTEREST OF REVEN UE BECAUSE LAW ENJOINS UPON THE AO TO MAKE ASSESSMENT ORDER BRINGI NG ALL TAXABLE INCOME TO TAX. THE CIT HAS RECORDED A CATE GORICAL FINDING THAT THE ORDER OF THE AO FOR WANT OF ADEQUA TE ENQUIRY WAS ERRONEOUS AND PRE-JUDICIAL TO THE INTEREST OF REVEN UE AND AFTER SETTING-ASIDE THE ASSESSMENT ORDER RIGHTLY REMANDED THE MATTER TO THE AO FOR FRESH ASSESSMENT ON MERITS. WITH RESPECTS, WE ARE OF THE UNANIMOUS VIEW THAT TH E RULING OF THE HONBLE COURT REFERRED SUPRA, IS DIRECTLY APPLI CABLE TO THE FACTS OF THE ISSUE ON HAND. IN THE PRESENT CASE, TH E AO HAD SOUGHT PERMISSION OF THE CCIT TO SELECT THE CASE FO R SCRUTINY WHICH WOULD FACILITATE HIM TO VERIFY THE VARIOUS PO INTS LISTED OUT IN HIS EARLIER COMMUNICATION TO THE CCIT. HOWEVER, WH ILE CONCLUDING THE ASSESSMENT, WITHOUT VERIFYING ANY OF THE POINTS, THE AO HAD VIRTUALLY CONCEDED TO THE CLAIMS OF THE ASSESSEE WHICH, IN FACT, IS ERRONEOUS AND THUS PRE-JUDICIAL TO THE REVENUE ITA NO.293/B/09 PAGE 8 OF 11 AS RIGHTLY REMARKED BY THE LD. CIT IN THE IMPUGNED ORDER WHICH IS IN DISPUTE. (III) THE HONBLE TRIBUNAL IN ITA NO:307(BANG)/2009 DATED: 24/7/2009 DEALT WITH A SIMILAR ISSUE AND AFTER ANA LYZING THE MATTER COMPREHENSIVELY AND ALSO DRAWING STRENGTH F ROM THE RULINGS IN THE CASES OF (I) DUGGAL & CO. V. CIT (2 20 ITR 455) (DEL); (II) K.A.RAMASWAMY CHETTIAR & ANOTHER V. CIT (200 ITR 657) (MAD) AND (III) SMT.RENU GUPTA V. CIT (301 ITR 45) (RAJ), HAD OBSERVED THUS 5..IN RESPECT OF EXPENDITURE CLAIMED BY THE ASSE SSEE, WE FIND THERE IS NO DISCUSSION IN THE ORDER OF THE AO WITH REFERENCE TO ALLOWABILITY OF THE CLAIM NOR IS THERE ANY MATERIAL POINTING OUT ANY EXAMINATION BY THE AO ON THIS ASPECT. FOR THES E REASONS, WE ARE OF THE VIEW THAT THE ORDER OF THE AO SUFFERS FR OM INFIRMITY AND THE SAME IS ERRONEOUS AND PREJUDICIAL TO THE INTERE STS OF REVENUE (IV) YET AN ANOTHER RULING, THE HONBLE JURISDICTIO NAL TRIBUNAL IN ITA NOS: 287 & 288/B/2008 DATED: 3/10/2008 HAD AN OCCAS ION TO DEAL WITH A SIMILAR ISSUE, THE RELEVANT PORTION OF ITS FINDING, FOR THE SAKE OF READY REFERENCE, IS REPRODUCED AS UNDER: 7. SECTION 263 CONFERS POWER ON THE COMMISSIONER O F INCOME- TAX TO CALL FOR AND EXAMINE THE RECORD OF ANY PROCE EDING UNDER THE ACT AND TO PASS SUCH ORDER THEREON AS THE CIRCUMSTA NCES OF THE CASE JUSTIFIED, INCLUDING AN ORDER ENHANCING OR MOD IFYING OR CANCELING THE ASSESSMENT AND DIRECTING A FRESH ASSE SSMENT, IF HE CONSIDERS THE ORDER PASSED BY THE ASSESSING OFFICER TO BE ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTER ESTS OF THE REVENUE. HE SHALL, HOWEVER, GIVE THE ASSESSEE AN O PPORTUNITY OF BEING HEARD AND CAN EVEN MAKE AN ENQUIRY WHICH HE D EEMS NECESSARY. THE COMMISSIONER OF INCOME-TAX HAS BEEN CONSTITUTED AS A REVISING AUTHORITY OVER THE ASSESSMENTS. IN P .R.ESWARAN V. SIXTH ITO (1969) 72 ITR 263, THE DIVISION BENCH OF MADRAS HIGH ITA NO.293/B/09 PAGE 9 OF 11 COURT, SPEAKING THROUGH HONBLE JUSTICE RAMAPRASADA RAO, OBSERVED AT PAGE 269 THAT IT IS THE ASSESSING OFFIC ERS BOUNDEN DUTY AS A PROSPECTOR OF REVENUE TO GO INTO (SUCH) S UBTERRANEAN DETAILS. THE ASSESSING OFFICER IS NOT EXPECTED T O MERELY EXAMINE THE RETURN AND THE ACCOMPANYING STATEMENTS BEFORE COMPLETING THE ASSESSMENTS. HIS DUTY IS TO EXAMINE THE RETURNS WITH CIRCUMSPECTION AND ASSIDUITY AND WHEREVER THE FACTS, THE NATURE OF THE BUSINESS AND THE VOLUME OF THE TRANSA CTIONS WARRANT OR JUSTIFY, HE IS BOUND IN LAW TO MAKE SUCH ENQUIRI ES AS ARE REQUIRED TO SATISFY HIMSELF ABOUT THE CORRECTNESS O F THE RETURN. HIS POWERS OF ENQUIRY GIVEN UNDER THE VARIOUS PROVISION S OF THE INCOME-TAX ACT, TWO OF WHICH HAVE BEEN REFERRED TO BY THE COMMISSIONER OF INCOME-TAX, ARE TO BE USED IN SUCH CASES AS THE PRESENT WHERE THE ASSESSES ARE ENGAGED IN THE BUSIN ESS OF EXECUTING CIVIL CONTRACTS WITH A HUGE TURNOVER OF R S.10.43 CRORES IN THE CASE OF BALARAMA REDDY AND RS.5.62 CORES IN THE CASE OF RAMESH BABU AND WHERE THE DIPPER HIRE CHARGES AND E XPENDITURE INCURRED UNDER THE HEAD LABOUR AND MATERIALS RUN IN TO SEVERAL CRORES OF RUPEES. IT MAY ALSO BE ADDED THAT THE WO RK-IN-PROGRESS FIGURES ARE ALSO QUITE SUBSTANTIAL. A PERUSAL OF T HE ASSESSMENT ORDERS DO NOT SHOW THAT ANY WORTHWHILE ENQUIRY WAS CONDUCTED BY THE ASSESSING OFFICER BEFORE HE COMPLETED THE ASSES SMENTS. CONSIDERING THE QUANTUM OF THE LABOUR AND MATERIALS CHARGES, THE ASSESSING SHOULD CERTAINLY HAVE CROSS-VERIFIED THE EXPENDITURE ESPECIALLY WHEN HE HAS NOTICED THAT SOME OF THE EX PENDITURE IS NOT GENUINE AS THE SAME IS SUPPORTED BY SELF-MADE VOUCHERS. 8. IN THALIBAI F JAIN AND OTHERS (SUPRA) -[(1975) 101 ITR 1]- THE HONBLE KARNATAKA HIGH COURT HAS HELD THAT AN A SSESSMENT MADE WITHOUT ENQUIRY AND EVIDENCE IS ERRONEOUS AND PRE-JUDICIAL TO THE INTERESTS OF REVENUE. THE HONBLE HIGH COUR T APPLIED THE RATIO OF THE JUDGMENT OF THE SUPREME COURT IN SMT. TARADEVI AGARWAL V. CIT (1973) 88 ITR 323 WHERE IT WAS HELD THAT WHERE AN INCOME HAS NOT BEEN EARNED BY THE ASSESSEE BUT I S INCLUDED IN HIS RETURN MERELY TO ACCOMMODATE SOME ONE ELSE, THE ASSESSMENT ACCEPTING SUCH RETURN WOULD BE ERRONEOUS AND PREJUD ICIAL TO THE INTEREST OF THE REVENUE AND DESERVES TO BE CANCELLE D U/S 263. IT IS SIGNIFICANT TO NOTE THAT THE RATIO OF THIS JUDGMENT HAS BEEN APPLIED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF THALIBAI F JAIN (SUPRA) WHICH IS A CLEAR ANSWER TO THE CONTENT ION OF THE LEARNED REPRESENTATIVE FOR THE ASSESSEE THAT THE FA CTS OF THE PRESENT APPEALS ARE DIFFERENT FROM THE FACTS BEFORE THE HONBLE KARNATAKA HIGH COURT. IN OUR HUMBLE OPINION THE RA TIO OF THE JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT IS THA T AN ITA NO.293/B/09 PAGE 10 OF 11 ASSESSMENT MADE WITHOUT ENQUIRY OR EVIDENCE IS PRE- JUDICIAL TO THE INTERESTS OF THE REVENUE THE REASON ACCORDING TO THE DELHI HIGH COURT - [(1 975) 99 ITR 375] IS THAT THE ASSESSING OFFICER IS BOTH AN INV ESTIGATOR AND ADJUDICATOR AND CANNOT REMAIN PASSIVE IN THE FACE O F A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER ENQUIRY. IT WAS HELD THAT IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETURN WHEN THE CIRCUMSTANCES ARE SUCH AS TO PR OVOKE AN ENQUIRY. THE WORD ERRONEOUS APPEARING IN SEC.263 INCLUDES A CASE WHERE THERE HAS BEEN A FAILURE TO MAKE THE NEC ESSARY ENQUIRIES. THE ORDER BECOMES ERRONEOUS MERELY BECA USE THE ENQUIRY HAS NOT BEEN CARRIED OUT AND NOT BECAUSE TH ERE IS ANYTHING WRONG WITH THE ASSESSMENT ORDER IF ALL THE FACTS STATED THEREIN ARE ASSUMED TO BE CORRECT. THE GUJARAT HIG H COURT TOOK A SIMILAR VIEW OF SECTION 263 IN ADDL. CIT V. MUKUR CORPORATION (1978) 111 ITR 312. IN THIS CASE ALSO IT WAS HELD THAT THE FAILURE TO MAKE AN ENQUIRY INTO THE CLAIMS OF THE ASSESSEE RESULTS IN PREJUDICE TO THE INTERESTS OF THE REVENUE AND ACTIO N U/S 263 CAN BE TAKEN TO SET RIGHT THE PREJUDICE. IN THIS CASE, IT WAS FURTHER HELD THAT IT WAS NOT NECESSARY FOR THE CIT, WHILE PASSIN G ORDERS U/S 263 TO COME TO FIRM CONCLUSIONS REGARDING THE MERIT S OF THE ASSESSMENT OR THE RETURN. IN THE LIGHT OF THIS JUD GMENT IT IS NOT POSSIBLE THAT THE CIT HAS NOT POINTED OUT TO ANY IN FLATION OF EXPENDITURE OR ESCAPEMENT OF INCOME IN THE NOTICE O R ORDER U/S 263. THE FURTHER ARGUMENT THAT THE CIT CANNOT DIRE CT A FISHING AND ROVING ENQUIRY CANNOT ALSO BE ACCEPTED IN THE L IGHT OF THE AUTHORITIES REFERRED TO ABOVE. AS POINTED OUT IN A LL OF THEM, THE MERE FAILURE ON THE PART OF THE ASSESSING OFFICER T O CARRY OUT SUCH ENQUIRIES AS ARE WARRANTED ON THE FACTS OF A PARTIC ULAR CASE AND ESPECIALLY WHEN THE RETURN IS SUCH AS TO PROVOKE AN ENQUIRY, JUSTIFIES ACTION U/S 263 AND THE CIT CAN SET ASIDE THE ASSESSMENT AND DIRECT THE AO TO REFRAME THE SAME AFTER CARRYIN G OUT THE NECESSARY ENQUIRIES.. 5.3. IN AN OVERALL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE ISSUE BEFORE US AND ALSO DRAWING STRENGTH FROM THE LEGAL PRECEDENTS DELIBERATED IN THE FORE-GOING PARAGRAPHS, WE ARE OF THE UNANIMOUS VIEW THAT THE LD.CIT WAS FULLY JUSTIFIED IN HIS ENDEAVOU R IN INVOKING THE PROVISIONS OF S.263 OF THE ACT ON THIS SCORE. IT I S ORDERED ACCORDINGLY. ITA NO.293/B/09 PAGE 11 OF 11 6. THE ASSESSEES ANOTHER GROUND IS THAT IT MAY BE AWARDED COSTS IN PROSECUTING THIS APPEAL AND ALSO ORDER FOR THE REFU ND OF THE INSTITUTION FEES AS PART OF THE COSTS. WE HAVE SINCE UPHELD THE STAND OF THE CIT IN INVO KING THE PROVISIONS OF S.263 OF THE ACT AND THUS DECIDED THE ISSUE AGAINST THE ASSESSEE, THIS GROUND OF THE ASSESSEE HAS BECOME RE DUNDANT AND, ACCORDINGLY, DISMISSED WITHOUT GOING TO THE MERIT O F THE ISSUE. 7. IN THE RESULT , THE ASSESSEES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF OCTOBER, 2009. SD/- SD/- (K.P.T. THANGAL ) (A. MOHAN ALANKAMONY ) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE, DATED, THE 30 TH OCTOBER, 2009. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.