ORDER
SHEET ITA No.263 of 2005 IN THE HIGH COURT AT CALCUTTA SPECIAL JURISDICTION (INCOME TAX) ORIGINAL SIDE C.I.T.KOLKATA II Versus GLOBAL CAPITAL MARKETS LTD.BEFORE: The Hon'ble JUSTICE SOUMITRA PAL The Hon'ble JUSTICE ARINDAM SINHA Date : 30th October, 2014.
Appearance: Mr.R.K.
Chowdhury, Adv.… for the appellant.
Mr.S.Dasgupta, Adv.Mr.P.Sarawagi, for the respondent.
The Court : Pursuant to our earlier order service has been effected, though no affidavit of service has been filed but the respondent appeaRs.This appeal under Section 260A of the Income Tax Act, 1961 has been preferred by the Revenue against the order dated 25th February, 2005 passed by the Income Tax Appellate Tribunal ‘E’ Bench, Calcutta, in ITA No.665/Kol/2004 for the assessment year 1998 – 1999.
By consent of the parties the appeal is treated as on the day’s list and taken up for hearing.
The questions of law formulated are as under: “ (I) Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the Commissioner of Income Tax by passing the order under section 263 setting aside the assessment for making enquiries and investigation on the same issue was not valid in law; (II)Whether the finding of the Tribunal that the order of the Assessing Officer was not erroneous and prejudicial to the interest of the Revenue is based on irrelevant materials and/or perverse; (III)Whether on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the order under section 263 passed by the Commissioner of Income Tax.” Heard Mr.R.K.
Chowdhury, learned Advocate for the appellant and Mr.S.Das Gupta, learned Advocate for the respondent.
We find from the order under Section 263 of the Income Tax Act, 1961 passed by the CIT that the Revenue had obtained an order which stated, inter alia, as follows: “The present assessment order dated 14.03.2002 u/s.147/143(3) of I.T.Act, 1961 was completed at Rs.18,80,010/-.
A perusal of the assessment records reveals that investment amounting to Rs.3,87,91,308/- was converted into stock-in-trade as detailed in the show cause notice u/s.263 dt.
5.2.2004.
Further, no enquiry or investigation was carried out by the A.O.on this issue nor any explanation was sought from the assessee company where as this issue involves important question of law as well as revenue involved is also quite substantiate.
Thus as held by Hon’ble High Court in the case of Ram Payari devi Sarogi –versus CIT (1968) 67 ITR84as well as in Tara Devi Agarwal –versus CIT (1973)88 ITR323 failure to make enquiries makes the order in question “erroneous” for the purpose of Sec.263 as well as prejudicial to the interest of revenue.
Therefore, in my opinion, it would be in the interest of natural justice and fair play, if the assessments restored back to the file of the A.O.on this limited issue to make necessary enquiries and investigation and decide the issue as per law after giving reasonable opportunity of being heard to the assessee.
Hence assesment order is ‘Set Aside’ to be framed afresh as mentioned above.” Aggrieved by the said order the assessee preferred appeal before the Tribunal which held, inter alia, as follows: “We have considered the rival orders of the A.O.and the C.I.T.submissions and have perused the From annexure ‘A’ filed by the assessee along with its reply dated 5.2.2004 filed before the C.I.T.in response to notice u/s.263, the computation u/s.45(2) of the Act, after indexation of the cost of shares on the date of conversion, comes to the loss figure of Rs.5,16,019/-.
The 600 shares of ITC Classic Finance LTD.were not sold by the assessee during the period but were converted into 40 shares of ICICI Ltd., since the company was merged with ICICI LTD.and these shares are still held by the assessee.
We find that the assessment in this case was set aside to the file of the A.O.in order to make necessary enquiries and investigation and to decide the issue afresh as per law after giving reasonable opportunity of being heard to the assessee.
In our considered opinion, the completed assessment cannot be set aside by the C.I.T.in exercise of his powers u/s.263 just in order to make enquiries and investigation on some issue.
There is no finding in this case that the order of the A.O.is erroneous and prejudicial to the interests of the Revenue with regard to certain amount of income which may have been under assessed or has escaped assessment.
The provision of section 263 of the Act cannot be invoked merely to make fresh enquiries and investigation.
The Revenue could not contradict the case of the assessee that the computation u/s.45(2) of the Act with regard to the shares in question, comes to the loss figure of Rs.5,16,019/- to the assessee.
In these facts, we hold that it cannot be said that the order of the A.O.is erroneous and prejudicial to the interests of the revenue and accordingly we cancel the order of the CIT passed u/s.263 of the Act and the grounds of appeal of the assessee are allowed.
In the result, the appeal of the assessee is allowed.” The revenue has relied on the judgment in the case Rampyari Devi SaraogiVesus- Commissioner of Income Tax, West Bengal and Ors.: [1968].67 ITR84SC) in support of its submission.
The Hon’ble Supreme Court in considering whether fair opportunity was given to the assessee in the making of the order impugned therein under Section 33B of the Old Act, appreciated the facts in that case which included …… “ But the Income-tax Officer without making any enquries to satisfy himself passed the assessment order on March 30, 1961, for the assessment years 1952-53 to 1957-58 and on April 26, 1961, for the assessment years 1958-59 to 1960-61.
No bank account or any proper books of accounts were maintained by the assessee or produced before the Income-tax Officer.
A short stereotyped assessment order was made for each assessment year.
As a sample, the Commissioner has reproduced the assessment order for the assessment year 1952-53 in his order.
Profit from speculation was shown as Rs.3,085 and interest Rs.600, and Rs.500 was added for want of books of account and evidence.
No evidence whatsoever was produced in respect of the money-lending business done and interests income shown to have been received by the assessee.
No names were given as to the parties to whom the loans were advanced, with amounts and rate of interest and as to when the interest income was received.
It is not necessary to further detail the reasons given by the Commissioner because on the face of the record the orders were prejudicial to the interest of the revenue, and even if the facts which the Commissioner introduced regarding the enquires made by him had been indicated to the assessee, the result would have been the same.
The assessee, in our view, has not in any way suffered from the failure of the Commissioner to indicate the results of the enquiries, mentioned above.
Moreover, the assessee will have full opportunity of showing to the Income-tax Officer whether he had jurisdiction or not and whether the income assessed originally passed was correct or not.” in the assessment orders which were Mr.Dasgupta relied on the judgment in the case of Commissioner of Income Tax-Versus-Gabriel India Ltdl;[1993].203ITR108(Bom) wherefrom we find the High Court of Bombay found in that case the Assessing Officer had asked for an explanation from the assessee who had furnished a detailed explanation vide his letter dated 19th September, 1995.
In that case the said High Court held, inter alia, ….
….“Cases may be visualized where the Income Tax Officer while making an assessment examines the accounts, makes enquiries, 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 himself”.
In view of the judgments cited at the bar, we are inclined to hold that lack of enquiry by itself is an error.
The Commissioner having held no enquiry or investigation was carried out by the A.O.on the issue nor explanation sought from the assessee company, such was failure to make enquiries which made the order in question erroneous for the purpose of Section 263 of the said Act as prejudicial to the interest of the Revenue, the Tribunal erred in cancelling the same.
We notice the Tribunal did so without considering the judgments referred to by the CIT.
Hence, the impugned order of the Tribunal is set aside and quashed.
The question Nos.1, 2 and 3 are answered in the negative and in favour of the Revenue.
The appeal is allowed.
(SOUMITRA PAL, J.) (ARINDAM SINHA, J.) cs.