Ranjan Gogoi, J.
1. An order dated 1.11.1996 passed by the Commissioner of Income-tax, N.E. Region, Shilong (hereinafter reference to as the CIT) under Section 263 of the Income-tax Act has been put to challenge in the present writ application, By the aforesaid order, the Commissioner of Income-tax has set aside the assessment of the petitioner for the assessment year 1992-93 and has directed the Assessing Officer to complete the assessment as per law. The facts, in brief, may be noticed at the outset.
2. The assessment of the petitioner to income-tax for the assessment year 1992-93 was completed by the Assessing Officer by an order dated 16.5.1994 passed under the provisions of Section 143(3) of the Income-tax Act, as it then existed, The Commissioner of Income-tax issued a notice dated 14/19.8.1996 stating that on perusal of the assessment records it has been revealed that the Assessing Officer had assessed the investment made by the petitioner in the house property at Rehabari, Guwahati on substantive basis without, however, making any enquiry as to whether the investment in the house property could be made from the known sources of income of the petitioner-assessee. In the notice issued, the Commissioner had also recorded that the Assessing Officer had accepted the investment made in the house property at Rs. 7.02 lakh without holding any enquiry. It was further mentioned that from the report of the C.B.I., ACB, Guwahati it appears that, according to the CBI, the investment in the aforesaid house property was made by one Sri Motilal Dutta, the son-in-law of the petitioner and that according to the CBI the cost of construction of the house was Rs. 16,16,500. On the aforesaid facts the Commissioner in the notice issued recorded his opinion that the assessment made for the assessment year in question being without necessary pro-assessment enquiries is erroneous and prejudicial to the interest of the revenue and, therefore, it was proposed by the Commissioner that the power under Section 263 would be exercised to set aside the order of assessment and direct the Assessing Officer to reassess the investment in the house property on protective or substantive basis, as the case may be.
2. On receipt of the aforesaid notice dated 14/19.8.1996 the petitioner-assessee showed cause by submitting a somewhat lengthy explanation dated 20.9.1996. In the explanations submitted by the petitioner-assessee it was contended that the house property in question was owned by the petitioner-assessee and the investments therein were made by her from her own sources. The petitioner, in the reply submitted, had shown the yearly investments made by her in the house property in question and it was further stated that along with the return filed by the petitioner for the assessment year in question, balance sheets for the period 31.3.1988 to 31.3.1992 showing the position of the assessee's assets and liabilities were also filed before the Assessing Officer. The details of the funds available to the petitioner-assessee were also disclosed. In the reply submitted, the petitioner-assessee had also taken certain other grounds questioning the jurisdiction of the Commissioner to invoke the power under Section 263 of the Act in the facts of the present case. Thereafter, by the impugned order dated 1.11.1996, the Commissioner after recording his opinion that the assessment for the assessment year in question was completed without proper enquiry regarding the investments made in the house property and the sources of income as well as the value of the investments, took the view that as the assesse has filed a written submission giving an exhaustive explanation and enclosing certain deeds, certificates and documents all such facts are required to be verified properly. Accordingly, the Commissioner set aside the assessment for the assessment year 1992-93 and directed the Assessing Officer to examine the submissions advanced by the petitioner-assessee and the documents brought on record in a proper manner and to complete the assessment in accordance with law. Aggrieved, this writ petition has been filed.
3. I have heard Dr. A.K. Saraf, learned senior Counsel appearing for the petitioner-assessee and Sri U. Bhuyan, learned Counsel appearing for the Revenue.
4. Dr. Saraf, learned Counsel appearing for the petitioner-assessee, has submitted that the Commissioner having invoked his power under Section 263 on the basis of materials that had subsequently come to light, i.e., the report of the CBI had exceeded his jurisdiction under Section 263 of the Act. According to learned Counsel, the power under Section 263 would be available to set aside an assessment on the basis of the records and the proceedings as available before the Assessing Officer and in the circumstances stated in the section itself, i.e., such assessment being erroneous and prejudicial to the interest of the revenue. It has been emphatically contended by Dr. Saraf that the satisfaction of the Commissioner that an assessment order is erroneous and prejudicial to the interest of the Revenue can be reached only on the basis of materials as available to the Assessing Officer and not on the basis of subsequent materials. In this regard, reliance has been placed on a judgment of the Apex Court in the case of The State of Kerala v. K.M. Cheria Abdulla and Co. reported in (1965) 16 STC 875. On the above basis there is a further argument that has been made by Dr. Saraf, learned Counsel for the petitioner, i.e., that the materials coming to light in the form of the report of the CBI, at best, could have been ground for the competent authority to invoke the power of reopening the concluded assessment of the petitioner under Sections 147/148 of the Income-tax Act. The said power, learned Counsel contends, is a distinct and separate power conferred on another authority by the provisions of the Act. In the instant case the learned Commissioner by seeking to exercise his powers under Section 263 of the Act has really trenched upon the powers vested in another authority by another provision of the Act. This, learned Counsel contends, is not permissible on the ratio of the law laid down by this Court in the case of Santalal Mehendiratta (HUF) v. Commissioner of Taxes and Ors. reported in (2002) 1 GLR 197 and in the case of Shree Automobiles (P.) Ltd. v. Commissioner of Taxes and Ors. reported in (2003) 3 GLT 40. Dr. Saraf, learned Counsel for the petitioner, has further argued by relying on the additional affidavit filed by the petitioner that in any event the report of the CBI cannot, as on date, furnish any basis to justify the impugned order dated 1.11.1996 of the CTT inasmuch as in the criminal proceeding instituted by the CBI against the son-in-law of the petitioner, it has been held by the competent court that the house property in question belongs to the petitioner and not to her son-in-law. A copy of the judgment of the criminal court has been brought on record by means of the additional affidavit filed.
Lastly, it has been argued by Dr. Saraf, learned Counsel for the petitioner, that in the present case the CIT has not come to any definite conclusion that the assessment order for the assessment year 1992-93 is erroneous and prejudicial to the interest of the Revenue, which finding alone will permit the CIT to set aside the assessment made in exercise of power under Section 263. Referring to the order dated 1.11.1996, learned Counsel for the petitioner has contended that the CIT instead of recording any firm conclusion in the matter has merely set aside the assessment order and has directed the Assessing Officer to re-complete the assessment after considering the contentions advanced by the petitioner-assessee and the documents brought forward by her. Such a course of action, according to learned Counsel for the petitioner, is not permissible and discloses a fundamental jurisdictional error which would require correction at the hands of the court. Reliance in this regard has been placed on a decision of the Bombay High Court in the case of Commissioner of Income-tax v. Gabriel India Ltd., reported in : [1993]203ITR108(Bom) and of the Punjab and Haryana High Court in the case of Commissioner of Income-Tax v. Kanda Rice Mills reported in .
5. The submissions advanced on behalf of the petitioner have been resisted by Sri Bhuyan, learned Counsel appearing for the Revenue. According to Sri Bhuyan, the basis on which the CIT had initiated the proceeding under Section 263 of the Act is evident from the notice dated 14/19.8.1996 itself. The CIT, on perusal of the records of the assessment, noticed that the investments made by the petitioner in the house property were accepted by the Assessing Officer without holding any enquiry as to whether such investments could have been made by the petitioner from her known sources of income. The finalisation of the assessment without, holding the necessary pre-assessment enquiries is itself erroneous and also has the potential of causing prejudice to the interest of the Revenue. According to Sri Bhuyan, the aforesaid satisfaction already reached on the basis of the record of assessment proceeding is only fortified by the subsequent report of the CBI but the satisfaction itself is not based on the said report of the CBI. On the aforesaid contentions the projections made by the writ petitioner in this regard have been sought to be demolished. Sri Bhuyan, learned Counsel for the Revenue by specifically referring to the provisions of Section 263 of the Act has submitted that under the said provision of the Act, the CIT is empowered either to enhance or modify the assessment made or cancel the same and direct a fresh assessment. This is required to be done after giving the assessee an opportunity of hearing and after making such enquiry as may be deemed necessary. In so far as the power to enhance or modify the assessment is concerned, Sri Bhuyan has submitted that if the CIT is proceeding to act accordingly a firm opinion that the assessment order is erroneous and prejudicial to the interest of the Revenue would be called for. However, in a situation where the CIT is cancelling assessment and directing a fresh assessment the opinion that the assessment order is erroneous and prejudicial to the interest of the Revenue is not required to be rested on the same pedestal. It could be an opinion of a lesser intensity, i.e., a strong prima facie opinion or a tentative opinion. In the present case this is precisely what the CIT has done. The assessment made in the case of the petitioner being without the necessary pre-assessment enquiries, the CIT had formed a tentative opinion that the aforesaid order is erroneous and prejudicial to the interest of the Revenue and on that basis has set aside the same by ordering a re-assessment. Reliance in this regard has been placed by Sri Bhuyan, learned Counsel for the petitioner, on a. judgment of the Gujarat High Court in the case of Additional Commissioner of Income-tax, Gujarat v. Mukur Corporation reported in : [1978]111ITR312(Guj) .
6. Having noticed the arguments advanced on behalf of the rival parties the court may now proceed to appreciate the same.
The argument advanced by Dr. Saraf, learned Counsel for the petitioner, to the effect that the satisfaction that an order of assessment is erroneous and prejudicial to the interest of the Revenue must be reached on the basis of the record of the proceeding as available to the Assessing Officer at the time of completion of assessment and that the CIT cannot travel beyond the said record is difficult to accept. Not only the above argument has been negated by this Court in Shree Automobiles (P.) Ltd. (supra), the decision of the Apex Court in the State of Kerala v. K.M. Cheria Abdulla and Co. (supra) does not countenance the above view. In State of Kerala v. K. M. Cheria Abdulla and Company (supra) the Apex Court, in an appeal filed by the State of Kerala, was considering the correctness of the view recorded by the High Court that Section 12 or the Madras General Sales Tax Act, 1939 limited the scrutiny of the revisional authority to the record of the proceedings as before the Assessing Officer, The High Court had taken the further view that as Rule 14A of the Rules framed conferred a wider power of enquiry, the same was, therefore, ultra vires. The Apex Court disapproved the view taken by the High Court for reasons which are to be found in the following observations:
Turning, then to the jurisdiction which the revising authority may exercise under Section 12(2), attention must first be directed to the phraseology used by the Legislature. The Deputy Commissioner is thereby invested with power to satisfy himself about the legality or propriety of any order passed or proceeding recorded by any officer subordinate to him, or the regularity of any proceeding of such officer, and to pass such orders with respect thereto as he thinks fit. For exercising this power, he may suo motu or on application call for and examine the record of any proceeding or order. There is no doubt that the revising authority may only call for the record of the order or the proceeding, and the record alone may be scrutinized for ascertaining the legality or propriety of an order or regularity of the proceeding. But there is nothing in the Act that for passing an order in exercise of his revisional jurisdiction, if the revising authority is satisfied that the subordinate officer has committed an illegality or impropriety in the order or irregularity in the proceeding he cannot make or direct any further enquiry. The words of Sub-section (2) of Section 12 that the Deputy Commissioner 'may pass such order with respect thereto as he thinks fit' means such order as may in the circumstances of the case for rectifying the defect be regarded by him as just. Power to pass such order as the revising authority thinks fit may in some cases include power to make or direct such further enquiry as the Deputy Commissioner may find necessary for rectifying the illegality or impropriety of the order, or irregularity in the proceeding. It is, therefore, not right baldly to propound that in passing an order in the exercise of his revisional jurisdiction, the Deputy Commissioner must in all cases be restricted to the record maintained by the officer subordinate to him, and can never make enquiry outside that record.' (pages 883-884) [(1965) 16 STC 875].
But the power conferred by Rule 14A by the use of the expression 'making such enquiry as such appellate or revising authority considers necessary' must be read subject to the scheme of the Act. It would not invest the revising authority with power to launch upon enquiries at large so as either to trench upon the powers which are expressly reserved by the Act or by the Rules to other authorities or to ignore the limitations inherent in the exercise of those powers. For instance, the power to reassess escaped turnover is primarily vested by Rule 17 in the assessing officer and is to be exercised subject to certain limitations, and the revising authority will not be competent to make an enquiry for reassessing a taxpayer. Similarly the power to make a best judgment assessment is vested by Section 9(2)(b) in the assessing authority and has to be exercised in the manner provided. It would not be open to the revising authority to assume that power. The revisional power has to be exercised for ascertaining whether the order passed is illegal or improper or the proceeding recorded is irregular and it is in aid of that power that such orders may be passed as the authority may think fit. One of the inquiries in considering the legality or propriety of the orders passed by the subordinate officer which the revising or the appellate authority may make is about the correctness of the tax levied and if after perusing the record the authority is prima facie satisfied about the illegality or impropriety of the order or about the irregularity of the proceeding, it may in passing its order direct an additional enquiry. Neither Section 12 nor Rule 14A authorizes the revising authority to enter generally upon enquiries which may properly be made by the assessing authorities and to reopen assessments.' (pages-886-887) [(1965) 16 STC 875]
In Shree Automobiles (supra) this Court understood the scope of the enquiry required to be made by the revisional authority before initiating a suo motu revision proceeding, in the following manner:
7. Coining to the argument advanced on behalf of the writ petitioner, it must be noticed that the Apex Court in the case of State of Kerala v. Cheria Abdullah and Co. reported in (1965) 1 STC 875 (SC), reliance on which has been placed on behalf of the petitioner, has clearly held that while it would not be correct to say that in exercise of the revisional power, the authority would not be competent to make an enquiry beyond the record of the proceedings sought to be revised, the power to make such an enquiry must necessarily be understood, in the context of the scheme or the Act, While exercising such powers and in conducting such enquiry, the authority must not encroach upon the other corrective powers, vested in other authorities, by the provisions of the Act....
7. In the present case a reading of the notice dated 14/19.8.1996 issued by the CIT to the petitioner-assessee initiating the proceeding under Section 263 would go to show that the foundation for the decision to initiate the proceeding was the satisfaction of the CIT that the assessment for the assessment year 1992-93 was erroneous and prejudicial to the interest of the Revenue as the same had been made without holding necessary enquiries as to the source of the funds shown to have been invested by the petitioner in her house property. In this regard a reading of the aforesaid notice makes it clear that Sri Bhuyan, learned Counsel for the Revenue, is right in contending that the foundation for the satisfaction of the CIT is not the subsequent report of the CBI which has only been referred to give further credence to the conclusion already reached. In the above stated position, the argument advanced by the learned Counsel for the petitioner that the subsequent report of the CBI could have at best furnished a ground to reopen the assessment of the petitioner and that in exercising the powers under Section 263 the Commissioner had trenched upon the power of another authority under the Act would stand self-answered.
8. This would bring the court to the core issue in the case, i.e., whether the impugned order dated 1.11.1996 setting aside the assessment and directing a fresh assessment has been made without recording any firm conclusion that the assessment order is erroneous and prejudicial to the interest of the Revenue. There can be no manner of doubt that the power conferred by Section 263 of the Act to interfere with an assessment made can be exercised only if the Commissioner is of the opinion that such assessment order is erroneous and prejudicial to the interest of the Revenue.
9. Though much argument has been advanced as to what is the correct meaning of the two expressions, i.e., 'erroneous' and 'prejudicial to the interest of the Revenue', the aforesaid aspect of the matter need hardly detain the court. The matter has been succinctly explained by the Bombay High Court in Commissioner of Income-Tax v. Gabriel India Ltd. (supra) wherein the view taken by a Division Bench of this Court in Rajinder Singh v. Superintendent of Taxes and Ors. reported in (1990) 79 STC 10 appears to have been reiterated. An erroneous order does not mean a wrong order; it does not mean an order with which the Commissioner is unable to agree. An erroneous order would be an order which suffers from a patent lack of jurisdiction; the error must be with reference to jurisdiction. Prejudicial to the interest of the Revenue would mean an erroneous order which goes against the interest of Revenue collection. Both the conditions must pre-exist to enable the CIT to exercise the power under Section 263. Having said that, it will not be necessary to burden this order with any further description or narration. The foundation for the exercise of the power being the formation of an opinion or conclusion, there is no escape from the view that the CIT must record his conclusions in the matter before setting aside an order of assessment in exercise of the power under Section 263. It will again be futile to embark upon any discussion as to the 'intensity' or 'strength' of the conclusion that must be reached by the CIT before setting aside an assessment under Section 263 as the answer to the said question would really depend on the facts that may be confronting the Commissioner in any given case. The position can be best resolved by saying that in certain situations the opinion or conclusion recorded would be the final opinion ; in other situations it may be 'less than final'. What would be necessary for our purposes is to take note of the fact that there has to be an opinion that the assessment which has been set aside is, indeed, erroneous and prejudicial to the interest of Revenue. Furthermore, the power under Section 263 being quasi-judicial such conclusion must be reached after hearsay the assessee which is mandated by the statute itself and after recording the reasons for the conclusions reached, a requirement, imposition of which, would be consistent with the well-settled principles of exercise of quasi-judicial powers.
10. Turning to the facts of the present case what is noticeable from the impugned order dated 1.11.1996 is that the CIT has not recorded 'any opinion that the order of assessment of the petitioner for the assessment year 1992-93 is erroneous and prejudicial to the interest of the Revenue. That was the opinion recorded in the notice dated 14/19.8.1996 but the said opinion being recorded in a notice issued to the petitioner asking to show cause, the same must be understood to be a highly rebuttable view. Such view/opinion was required to be reiterated after hearing, the petitioner and after holding the necessary enquiry. On receipt of the show cause notice dated 14/19.8.1996 the petitioner submitted an elaborate reply laying materials before the Commissioner to show that sufficient proof of income of the assessee was laid before the Assessing Officer to enable the said authority to come to the conclusion that the investments in the house property were made from the known sources of income of the assessee. The said materials were in the form of the balance sheets and the details of the funds available to the petitioner from time to time. In the above facts the petitioner-assessee had contended that the assessment order in question was not erroneous and prejudicial to the interest of the Revenue. The CIT on receipt of the reply of the petitioner could not have ignored the same. Rather, it was incumbent on the Commissioner to consider the explanations offered and on that basis to record his opinion/conclusion as to whether he still considered the assessment order in question to be erroneous and prejudicial to the interest of Revenue and, if so, the reasons therefor. The Commissioner did not do that. Instead, in the order dated 1.11.1996 the Commissioner has recorded that the assessee has filed a written submission giving an exhaustive explanation in 7 pages and enclosing copies of various deeds, certificates, etc., which were required to be verified in detail. The Commissioner, in the above facts, set aside the assessment order and directed the Assessing Officer to make a fresh assessment after examining the submissions and contentions advanced by the assessees and after due scrutiny of the documents adduced, the course of action adopted was clearly impermissible in law in absence of a finding that on consideration of the explanations submitted and for the reasons shown the assessment has to be reiterated to be erroneous and prejudicial to the interest of the Revenue. Unfortunately the Commissioner did not do so which omission will have the effect of rendering the impugned order dated 1.11.1996 legally fragile.
11. In the above circumstances and in the light of the discussions that have preceded, I am of the view that this writ petition has to be allowed which I hereby do. The impugned order dated 1.11.1996 is accordingly set aside.
12. The basis on which this Court had thought it proper to interfere with the order dated 1.11.1996, as discussed above, ordinarily and in the normal course would not have precluded the Commissioner to redo the exercise if the said authority so desires. However, from the materials placed before the court by means of the additional affidavit filed by the petitioner it would appear that the competent Criminal Court, i.e., the court of the Special Judge, Assam in Special Case No. 27(c)/1994, by judgment and order dated 9.6.2003, has exonerated the son-in-law of the petitioner from any liability on account of the house property in question by holding the same to be belonging to the petitioner. The findings recorded by the learned Special Judge in this regard cannot be brushed aside by the Revenue. In such circumstances, I am of the view that any de novo proceedings at this stage would be futile and may turn into a weapon of harassment against the petitioner. In such circumstances, I am of the view that after recording the interference made with the impugned order dated 1.11.1996 passed by the learned Commissioner of Income-tax, N.E. Region, Shillong, this Court should proceed to direct the Revenue to treat the assessment of the petitioner for the assessment year 1992-93 made by order dated 16.5.1994 to be complete and final.
The writ petition is accordingly allowed in terms of the above directions.