Master Vijay R. Oswal Vs. Income-tax Officer - Court Judgment

Excerpt:
1. these are three appeals by three different assessees for assessment year 1992-93. they are directed against the respective orders of the id. cit dated 25-3-1999 passed under section 263 of the income-tax act, 1961 (the act). as a common issue is involved in all the three appeals, they are being disposed of together by this consolidated order for the sake of convenience. the common grievance of all the three assessees is that the order passed under section 263 is bad in law.2. the three assessees are brothers. they had filed their returns of income for the year under consideration at rajkot on 26-3-1993 disclosing total income of rs. 23,250, rs. 23,100 and rs. 22,895 respectively showing income from interest. the returns were processed under section 143(1)(a) of the act. subsequently, in financial year 1995-96, it came to light that one shri g.l. shah, manager, bank of baroda, sangli branch, had issued false authentications under foreign exchange (immunity) scheme, certifying the receipt of foreign gifts by certain parties. a list of persons involved in this fraud, who had obtained fabricated evidence of such gifts, was forwarded by the cbi to the cit, kolhapur. the list included the names of the three assessees before us. based on this information, the ito, ward-1 (6), kolhapur, who was assigned jurisdiction over these cases by the cit, kolhapur, issued notice under section 148 to the three assessees which was served on them at kolhapur on 13-8-1996. the assessees, who were all minors at the relevant time, instead of filing the returns in response to notice under section 148 at kolhapur, filed the returns through their father as natural guardian at rajkot on 11-9-1996. these returns were described as revised returns and were superscribed with the words "in response to notice under section 148". the returns were regularized by issuance of notice under section 148 by the rajkot ito on 22-10-1996.subsequently, letters dated nil were filed by the assessees before the rajkot ito on 11-12-1996 stating that returns filed on 11 -9-1996 be treated as filed in response to notice under section 148 dated 22-10-1996. notices dated 3-12-1996 and 18-2-1997 under section 143(2) were served on shri d.h. lotia, i.t.p., though till then no authority letter had been filed by him. assessment orders under section 143(3) were passed on 26-2-1997 accepting the returned income. in these returns, the assessees had offered the amounts purportedly received as foreign gifts and had paid tax thereon.3. perusal of the assessment records by the cit revealed that neither the assessees nor their father ever lived at rajkot at the address given in the returns. it was also revealed that the assessee's father had all along been staying at kolhapur and was engaged in business there. the records further showed that the so-called revised returns filed at rajkot had emanated from the valid notices issued under section 148 by kolhapur ito and served at kolhapur address of the assessees. the cit was, therefore, of the view that the returns filed at rajkot were not bona fide returns and, accordingly, proceedings under section 263 were initiated. in response to notice under section 263, written submissions were filed stating mainly that the gifts were shown as income and tax was paid thereon and that there was no mala fide intention. it was also stated that ito, kolhapur had no jurisdiction to assess the assessees. the cit, however, on the facts narrated earlier, held that ito, rajkot had no jurisdiction over the assessees at the time when order under section 263 was passed. further, according to the cit, since the assessees had themselves admitted the alleged foreign gifts to be their income, the returns filed at rajkot constituted evidence of admission of concealment of income in the original return of income. hence, according to him, penalty proceedings under section 271(1)(c) ought to have been initiated by the assessing officer. moreover, interest of rs. 14,420 was charged under section 234a, the correct amount of which, according to the cit(a), was rs. 1,05,162. in view of all these facts, in his order under section 263, cit held and directed as follows:- it is therefore obvious that the assessment under section 143(3) passed on 26-2-1997 by the ito ward-1(4), rajkot is both erroneous and prejudicial to the interest of revenue. the same is therefore set aside and restored to the file of the assessing officer to be completed afresh as per law by the ito having jurisdiction over the case of the assessee. the assessing officer is directed to transfer the records to the ito at kolhapur, having jurisdiction over the case of the assessee, for further necessary action as per law.4. the id. counsel for the assessee drew our attention to the fact that the assessment order was held to be erroneous primarily for two reasons, viz. (a) for not initiating penalty proceedings and (b) that the assessing officer at rajkot had no jurisdiction over the case. so far as the first reason is concerned, it was argued by the id. counsel that this cannot be a ground for holding the order to be erroneous because it is the satisfaction of the assessing officer that matters for initiation of such proceedings. as regards the second ground, it was submitted that the assessees are old assessees having filed their returns at rajkot way back in 1993. it was submitted that the question of jurisdiction could not be gone into by the cit as this issue was not before the assessing officer. the files and the returns were before him and hence the assessing officer assessed the income. it was argued that when income was assessed and tax was collected, there was no question of any prejudice being caused to the revenue. to buttress this point further, it was submitted that in the case of shri bharat oswal, the income assessed by the assessing officer at kolhapur was almost the same as that assessed by the rajkot ito and hence no prejudice was caused to the revenue. it was contended that the records were with the rajkot ito since assessee was first assessed in 1993 and hence there was no total lack of jurisdiction. there was nothing erroneous in assessing the income of the assessee and having collected the tax, no prejudice was caused to the revenue. for his various submissions, the id. counsel relied on the decision of the patna high court in the case of cit v. shantilal agarwalla [1983] 142 itr 778 : 15 taxman 107, of the himachal pradesh high court in the case of bhupindra food & malt industries v. cit [1998] 229 itr 496 : [1997] 95 taxman 203 and of the calcutta high court in the case of jai kumar kankaria v. cit [2001] 251 itr 707.5. the main contention of the id. d.r. was that two assessments in one case cannot stand. one of them had to be knocked down. in the instant case, the one done by rajkot ito had to be knocked down because this ito had no jurisdiction over the case. the fact that notice under section 263 had to be served by affixture at rajkot, that the assessees' names appeared in the electoral rolls at kolhapur and that they held ration cards in kolhapur amply proved that only kolhapur ito had the jurisdiction and not the rajkot ito. accordingly, the id. d.r.supported the order under section 263.6. we have duly considered the rival contentions. besides the decisions referred to earlier, the id. counsel has also placed reliance on several decisions in support of the contention that in order to invoke jurisdiction under section 263 of the act, both the conditions have to be fulfilled, i.e., the order should be erroneous and that it should be prejudicial to the interests of the revenue. there can be no dispute about these principles and hence in the present order, we shall see whether both these conditions were fulfilled or not which could give power to the cit under section 263 of the act.7. in the case of jai kumar kankaria (supra), a society granted approval for the purposes of section 35cca for the period 13-12-1982 to 12-12-1985. based on this approval, assessee donated rs. 1.00 lakh to the society and was allowed deduction in assessment year 1985-86.subsequently, the approval was withdrawn in 1987 with retrospective effect from 13-12-1982. section 263 was invoked to hold the assessment order to be erroneous and prejudicial to the interests of the revenue.it was held by the calcutta high court that there was no scope for reopening the assessment on a subsequent event or on any new material.we fail to see any connection between this decision and the case on hand and hence in our opinion, the same cannot be of any help.8. in the case of bhupindra foods malt industries (supra), ito, shimla had sought to reopen the assessment for assessment year 1964-65 under section 147 of the act. the ito, solan came into being only in 1977.hence, it was claimed by the assessee that ito, shimla had no jurisdiction. the high court held that there was no lack of inherent jurisdiction in ito, shimla and hence he could reopen the assessment under section 147. in the present case, it is not shown how ito, kolhapur did not have jurisdiction, who had issued notice under section 148. moreover, the assessee in our case had filed the return described as revised return and later on the ito, rajkot issued notice under section 148 to regularize the same. thus, the facts in our case are to be viewed in a different matrix and hence the decision of calcutta high court is not helpful in the present case.9. before referring to the case of shantilal agarwalla (supra), it would be advantageous to refer to the decision of the supreme court in the case of smt. tara devi aggarwal v. cit [1973] 88 itr 323. in this case, the income of the assessee for assessment years 1955-56 to 1959-60 were assessed by ito, j-ward, calcutta accepting the initial capital and the fact that the assessee had been carrying on money-lending and speculation business. for assessment year 1960-61 also, the return was filed with the same ito. thereafter, by a letter, the assessee informed the ito that her place of business had been shifted to lillooah, howrah and on the basis of this letter, assessee's file was transferred to ito, howrah. assessment was completed by the howrah ito. despite certain defects, the ito did not investigate into the various sources of investments. cit issued notice under section 33b of the income-tax act, 1922 and held that assessment was made in post-haste without making any enquiry or investigations into the antecedents of the assessee. it was further held that on enquiry it had been ascertained that the assessee never resided nor carried on any business at lillooah, howrah and hence the ito, howrah had no jurisdiction over the assessee. the assessment for assessment year 1960-61 was thus cancelled by action under section 33b of the 1922 act.tribunal held that the assessee could not have carried on any business at the address given by her but where an assessment has been made without territorial jurisdiction it could not be said to be prejudicial to the interests of revenue. this exactly is the argument of the id.counsel in the case before us also.10. of the three questions which were before the high court, the only one which ultimately survived for its consideration was as follows : whether, on the facts and in the circumstances of the case, the tribunal was right in holding that there were no materials before the commissioner to justify his finding that the assessment order for 1960-61 was erroneous in so far as it was prejudicial to the interests of the revenue the high court answered the above question against the assessee on the ground that the ito had no jurisdiction to make the order which itself would have been sufficient for the commissioner to set aside the assessment (underline by us).11. before the supreme court, it was contended on behalf of the assessee that the commissioner had no jurisdiction to cancel the assessment made by the income-tax officer inasmuch as it cannot be said that where an assessee has been assessed to tax, it was prejudicial to the interests of revenue on the ground that no assessment could have been made in respect of the income of which she made a voluntary return. in this connection, it would be advantageous to reproduce the observations of the supreme court which are at page 328 of 88 itr : this contention in our view is unwarranted by the language of section 33b. the words of the section enable the commissioner to call for and examine the record of any proceeding under the act and to pass such orders as he deems necessary as the circumstances of the case justify when he considers that the order passed was erroneous in so far as it is prejudicial to the interests of the revenue. it is not, as submitted by the learned advocate, prejudicial to the interests of the revenue only if it is found that the assessment for the year was disclosed on the basis that an income had been earned which is assessable. even where an income has not been earned and is not assessable, merely because the assessee wants it to be assessed in his or her hands in order to assist someone else who would have been assessed to a larger amount, an assessment so made can certainly be erroneous and prejudicial to the interests of the revenue. if so and we think it is so the commissioner under section 33b has ample jurisdiction to cancel the assessment and may initiate proceedings for assessment under the provisions of the act against some other assessee who according to the income-tax authorities is liable for the income thereof.the wordings in section 263(1) are exactly identical to the wordings in section 33b of the 1922 act and hence, the above principle squarely applies to the proceedings under section 263 of the new act.12. now, we come to the decision of the patna high court in the case of shantilal agarwalla (supra) on which reliance has been placed by the id. counsel. in this case, assessee filed his return of income for assessment year 1966-67 with ito, b-ward, dhanbad. later on, the file of the assessee was transferred to d-ward, dhanbad and the assessment was made by ito, d-ward. invoking his powers under section 263, addl.cit cancelled the assessment order on the ground that ito, d-ward had no jurisdiction over the assessee. tribunal quashed the order of the addl. cit on the ground that the addl. cit had not at all shown in what respect underassessment had been made and how the assessment made was prejudicial to the interests of the revenue. the high court referred to the decision of the supreme court in the case of smt. tara devi aggarwal (supra) and observed that the supreme court did not hold the order of assessment erroneous and prejudicial to the interests of the revenue merely on the ground that the ito had no jurisdiction to make the order. the supreme court also pointed out that as the assessee in that case wanted to be assessed in order to assist someone else who would have been assessed to a larger amount, such assessment was certainly erroneous and prejudicial to the interests of the revenue.13. harmonising the decisions in the case of smt. tara devi aggarwal (supra) and shantilal agarwalla (supra) we have to see in the present case whether the order of the ito, rajkot was erroneous in so far as it was prejudicial to the interests of the revenue or not. from the records, it is well established that it was only the ito, kolhapur who had proper jurisdiction over the assessee. enquiries revealed that the three assessees never stayed at the rajkot address. it is also on record that the names of the assessees appear in the electoral rolls at kolhapur and they also hold ration cards there. at the relevant time, the father of the assessees was carrying on business at kolhapur. thus, it is quite clear that it was only the ito, kolhapur who had proper jurisdiction of the assessees. the fact that the assessees were once assessed at rajkot over the original return, will not, in our opinion, make any difference and hence, ito, kolhapur was justified in issuing notices under section 148 on the basis of the information supplied by cbi.14. the main point, which now comes for consideration is as to how the order passed by the ito, rajkot is prejudicial to the interests of the revenue when the assessees have offered the foreign gifts for taxation and have paid tax thereon. as mentioned earlier, it is evident that notice under section 148 was issued by the kolhapur ito on the basis of enquiry conducted by the cbi. the ito, kolhapur obviously had to conduct detailed enquiries in the matter to find the source of the money purportedly received as foreign gift. the said ito did conduct a detailed enquiry as is evident from the two assessment orders that are placed on record by the revenue. one is in the case of mahesh oswal and the other is in the case of bharat oswal in the case of mahesh oswal, the rajkot ito had accepted the income of rs. 2,54,400 as returned by the assessee. on the other hand, the ito, kolhapur, after detailed enquiry, assessed the total income at rs. 3,23,790. similarly, in the case of bharat oswal the total income came to be assessed at rs. 2,90,180 by the kolhapur ito as against rs. 2,28,500 as returned by the assessee and accepted by the rajkot ito. this amply shows that though the rajkot orders were passed under section 143(3), no due enquiry was conducted and the returned income was accepted. on the other hand, kolhapur ito conducted detailed enquiry and the incomes came to be assessed at a higher figure. we fail to understand, if this is not enough to cause prejudice to the interests of the revenue, what else can it be. the finding of the commissioner in his order under section 263 is very clear when he states that"...it appears that the return filed at rajkot on 11-9-1996 was to defeat the proceedings going on before the ito ward-1(2), kolhapur". thus, the order of the cit is in consonance with both the decisions, viz. that of the supreme court in the case of smt. tara devi aggarwal (supra) and of the patna high court in the case of shantilal agarwalla (supra).15. in the passing, it is pertinent to observe that when the assessees were permanently settled in kolhapur and when the ito, kolhapur had jurisdiction over them, there was no reason to respond to the notice issued by him under section 148 by filing the return at rajkot and particularly when the ito at rajkot had no jurisdiction over the cases.such an indiscreet act on the part of the assessee can only cause chaos in the tax administration, which in turn, will cause prejudice to the interests of the revenue. in this connection, we can do no better than to quote the observations of the madras high court in the case of venkata krishna rice co. v. cit [1987] 163 itr 129 : 30 taxman 528. at page 138 of the report, the following observations are made : in this context, therefore, the expression "prejudicial to the interests of the revenue" must be regarded as involving a conception of acts or orders which are subversive of the administration of revenue. there must be some grievous error in the order passed by the income-tax officer, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the commissioner might think to be prejudicial to the interests of revenue administration. there might be cases where the commissioner might wish to interfere with an order of the income-tax officer in order to safeguard the fair name and reputation of the income-tax department without any thought of going into the particular aspects of the assessment. assessments which are mala fide, politically and communally motivated may be, however, set aside as being prejudicial to the interests of the revenue. it is unnecessary, for us to illustrate the point any further. all that we wish sto observe is that the scope of the interference under this section is not to set aside merely unfavourable orders and bring to tax some more money to the treasury. nor is the section meant to get at sheer escapement of revenue which, as is well known, is taken care of by provisions elsewhere in the act such, for instance, as section 147 of the act. the prejudice must be prejudice to the revenue administration.16. in conclusion, we hold that the cit was justified in invoking his powers under section 263 on the ground that the assessments made at rajkot were erroneous and prejudicial to the interests of the revenue.we clarify that the assessment orders were erroneous and prejudicial on the ground that they were passed without jurisdiction, which had undoubtedly caused prejudice to the revenue. so far as non-initiation of penalty proceedings is concerned, we uphold the contention of the id. counsel that that cannot be the ground for invoking jurisdiction under section 263 of the act. however, in substance, the orders of the cit are upheld.17. in the result, the three appeals of the three assessees are dismissed.

Judgment:
1. These are three appeals by three different assessees for assessment year 1992-93. They are directed against the respective orders of the Id. CIT dated 25-3-1999 passed under Section 263 of the Income-tax Act, 1961 (the Act). As a common issue is involved in all the three appeals, they are being disposed of together by this consolidated order for the sake of convenience. The common grievance of all the three assessees is that the order passed under Section 263 is bad in law.

2. The three assessees are brothers. They had filed their returns of income for the year under consideration at Rajkot on 26-3-1993 disclosing total income of Rs. 23,250, Rs. 23,100 and Rs. 22,895 respectively showing income from interest. The returns were processed under Section 143(1)(a) of the Act. Subsequently, in financial year 1995-96, it came to light that one Shri G.L. Shah, Manager, Bank of Baroda, Sangli Branch, had issued false authentications under Foreign Exchange (Immunity) Scheme, certifying the receipt of foreign gifts by certain parties. A list of persons involved in this fraud, who had obtained fabricated evidence of such gifts, was forwarded by the CBI to the CIT, Kolhapur. The list included the names of the three assessees before us. Based on this information, the ITO, Ward-1 (6), Kolhapur, who was assigned jurisdiction over these cases by the CIT, Kolhapur, issued notice under Section 148 to the three assessees which was served on them at Kolhapur on 13-8-1996. The assessees, who were all minors at the relevant time, instead of filing the returns in response to notice under Section 148 at Kolhapur, filed the returns through their father as natural guardian at Rajkot on 11-9-1996. These returns were described as revised returns and were superscribed with the words "In response to notice under Section 148". The returns were regularized by issuance of notice under Section 148 by the Rajkot ITO on 22-10-1996.

Subsequently, letters dated nil were filed by the assessees before the Rajkot ITO on 11-12-1996 stating that returns filed on 11 -9-1996 be treated as filed in response to notice under Section 148 dated 22-10-1996. Notices dated 3-12-1996 and 18-2-1997 under Section 143(2) were served on Shri D.H. Lotia, I.T.P., though till then no authority letter had been filed by him. Assessment orders under Section 143(3) were passed on 26-2-1997 accepting the returned income. In these returns, the assessees had offered the amounts purportedly received as foreign gifts and had paid tax thereon.

3. Perusal of the assessment records by the CIT revealed that neither the assessees nor their father ever lived at Rajkot at the address given in the returns. It was also revealed that the assessee's father had all along been staying at Kolhapur and was engaged in business there. The records further showed that the so-called revised returns filed at Rajkot had emanated from the valid notices issued under Section 148 by Kolhapur ITO and served at Kolhapur address of the assessees. The CIT was, therefore, of the view that the returns filed at Rajkot were not bona fide returns and, accordingly, proceedings under Section 263 were initiated. In response to notice under Section 263, written submissions were filed stating mainly that the gifts were shown as income and tax was paid thereon and that there was no mala fide intention. It was also stated that ITO, Kolhapur had no jurisdiction to assess the assessees. The CIT, however, on the facts narrated earlier, held that ITO, Rajkot had no jurisdiction over the assessees at the time when order under Section 263 was passed. Further, according to the CIT, since the assessees had themselves admitted the alleged foreign gifts to be their income, the returns filed at Rajkot constituted evidence of admission of concealment of income in the original return of income. Hence, according to him, penalty proceedings under Section 271(1)(c) ought to have been initiated by the Assessing Officer. Moreover, interest of Rs. 14,420 was charged under Section 234A, the correct amount of which, according to the CIT(A), was Rs. 1,05,162. In view of all these facts, in his order under Section 263, CIT held and directed as follows:- It is therefore obvious that the assessment under Section 143(3) passed on 26-2-1997 by the ITO Ward-1(4), Rajkot is both erroneous and prejudicial to the interest of revenue. The same is therefore set aside and restored to the file of the Assessing Officer to be completed afresh as per law by the ITO having jurisdiction over the case of the assessee. The Assessing Officer is directed to transfer the records to the ITO at Kolhapur, having jurisdiction over the case of the assessee, for further necessary action as per law.

4. The Id. counsel for the assessee drew our attention to the fact that the assessment order was held to be erroneous primarily for two reasons, viz. (a) for not initiating penalty proceedings and (b) that the Assessing Officer at Rajkot had no jurisdiction over the case. So far as the first reason is concerned, it was argued by the Id. counsel that this cannot be a ground for holding the order to be erroneous because it is the satisfaction of the Assessing Officer that matters for initiation of such proceedings. As regards the second ground, it was submitted that the assessees are old assessees having filed their returns at Rajkot way back in 1993. It was submitted that the question of jurisdiction could not be gone into by the CIT as this issue was not before the Assessing Officer. The files and the returns were before him and hence the Assessing Officer assessed the income. It was argued that when income was assessed and tax was collected, there was no question of any prejudice being caused to the revenue. To buttress this point further, it was submitted that in the case of Shri Bharat Oswal, the income assessed by the Assessing Officer at Kolhapur was almost the same as that assessed by the Rajkot ITO and hence no prejudice was caused to the revenue. It was contended that the records were with the Rajkot ITO since assessee was first assessed in 1993 and hence there was no total lack of jurisdiction. There was nothing erroneous in assessing the income of the assessee and having collected the tax, no prejudice was caused to the revenue. For his various submissions, the Id. counsel relied on the decision of the Patna High Court in the case of CIT v. Shantilal Agarwalla [1983] 142 ITR 778 : 15 Taxman 107, of the Himachal Pradesh High Court in the case of Bhupindra Food & Malt Industries v. CIT [1998] 229 ITR 496 : [1997] 95 Taxman 203 and of the Calcutta High Court in the case of Jai Kumar Kankaria v. CIT [2001] 251 ITR 707.

5. The main contention of the Id. D.R. was that two assessments in one case cannot stand. One of them had to be knocked down. In the instant case, the one done by Rajkot ITO had to be knocked down because this ITO had no jurisdiction over the case. The fact that notice under Section 263 had to be served by affixture at Rajkot, that the assessees' names appeared in the electoral rolls at Kolhapur and that they held ration cards in Kolhapur amply proved that only Kolhapur ITO had the jurisdiction and not the Rajkot ITO. Accordingly, the Id. D.R.supported the order under Section 263.

6. We have duly considered the rival contentions. Besides the decisions referred to earlier, the Id. counsel has also placed reliance on several decisions in support of the contention that in order to invoke jurisdiction under Section 263 of the Act, both the conditions have to be fulfilled, i.e., the order should be erroneous and that it should be prejudicial to the interests of the revenue. There can be no dispute about these principles and hence in the present order, we shall see whether both these conditions were fulfilled or not which could give power to the CIT under Section 263 of the Act.

7. In the case of Jai Kumar Kankaria (supra), a society granted approval for the purposes of Section 35CCA for the period 13-12-1982 to 12-12-1985. Based on this approval, assessee donated Rs. 1.00 lakh to the society and was allowed deduction in assessment year 1985-86.

Subsequently, the approval was withdrawn in 1987 with retrospective effect from 13-12-1982. Section 263 was invoked to hold the assessment order to be erroneous and prejudicial to the interests of the revenue.

It was held by the Calcutta High Court that there was no scope for reopening the assessment on a subsequent event or on any new material.

We fail to see any connection between this decision and the case on hand and hence in our opinion, the same cannot be of any help.

8. In the case of Bhupindra Foods Malt Industries (supra), ITO, Shimla had sought to reopen the assessment for assessment year 1964-65 under Section 147 of the Act. The ITO, Solan came into being only in 1977.

Hence, it was claimed by the assessee that ITO, Shimla had no jurisdiction. The High Court held that there was no lack of inherent jurisdiction in ITO, Shimla and hence he could reopen the assessment under Section 147. In the present case, it is not shown how ITO, Kolhapur did not have jurisdiction, who had issued notice under Section 148. Moreover, the assessee in our case had filed the return described as revised return and later on the ITO, Rajkot issued notice under Section 148 to regularize the same. Thus, the facts in our case are to be viewed in a different matrix and hence the decision of Calcutta High Court is not helpful in the present case.

9. Before referring to the case of Shantilal Agarwalla (supra), it would be advantageous to refer to the decision of the Supreme Court in the case of Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323. In this case, the income of the assessee for assessment years 1955-56 to 1959-60 were assessed by ITO, J-Ward, Calcutta accepting the initial capital and the fact that the assessee had been carrying on money-lending and speculation business. For assessment year 1960-61 also, the return was filed with the same ITO. Thereafter, by a letter, the assessee informed the ITO that her place of business had been shifted to Lillooah, Howrah and on the basis of this letter, assessee's file was transferred to ITO, Howrah. Assessment was completed by the Howrah ITO. Despite certain defects, the ITO did not investigate into the various sources of investments. CIT issued notice under Section 33B of the Income-tax Act, 1922 and held that assessment was made in post-haste without making any enquiry or investigations into the antecedents of the assessee. It was further held that on enquiry it had been ascertained that the assessee never resided nor carried on any business at Lillooah, Howrah and hence the ITO, Howrah had no jurisdiction over the assessee. The assessment for assessment year 1960-61 was thus cancelled by action under Section 33B of the 1922 Act.

Tribunal held that the assessee could not have carried on any business at the address given by her but where an assessment has been made without territorial jurisdiction it could not be said to be prejudicial to the interests of revenue. This exactly is the argument of the Id.

counsel in the case before us also.

10. Of the three questions which were before the High Court, the only one which ultimately survived for its consideration was as follows : Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that there were no materials before the Commissioner to justify his finding that the assessment order for 1960-61 was erroneous in so far as it was prejudicial to the interests of the revenue The High Court answered the above question against the assessee on the ground that the ITO had no jurisdiction to make the order which itself would have been sufficient for the Commissioner to set aside the assessment (underline by us).

11. Before the Supreme Court, it was contended on behalf of the assessee that the Commissioner had no jurisdiction to cancel the assessment made by the Income-tax Officer inasmuch as it cannot be said that where an assessee has been assessed to tax, it was prejudicial to the interests of revenue on the ground that no assessment could have been made in respect of the income of which she made a voluntary return. In this connection, it would be advantageous to reproduce the observations of the Supreme Court which are at page 328 of 88 ITR : This contention in our view is unwarranted by the language of Section 33B. The words of the Section enable the Commissioner to call for and examine the record of any proceeding under the Act and to pass such orders as he deems necessary as the circumstances of the case justify when he considers that the order passed was erroneous in so far as it is prejudicial to the interests of the revenue. It is not, as submitted by the learned advocate, prejudicial to the interests of the revenue only if it is found that the assessment for the year was disclosed on the basis that an income had been earned which is assessable. Even where an income has not been earned and is not assessable, merely because the assessee wants it to be assessed in his or her hands in order to assist someone else who would have been assessed to a larger amount, an assessment so made can certainly be erroneous and prejudicial to the interests of the revenue. If so and we think it is so the Commissioner under Section 33B has ample jurisdiction to cancel the assessment and may initiate proceedings for assessment under the provisions of the Act against some other assessee who according to the income-tax authorities is liable for the income thereof.

The wordings in Section 263(1) are exactly identical to the wordings in Section 33B of the 1922 Act and hence, the above principle squarely applies to the proceedings under Section 263 of the new Act.

12. Now, we come to the decision of the Patna High Court in the case of Shantilal Agarwalla (supra) on which reliance has been placed by the Id. counsel. In this case, assessee filed his return of income for assessment year 1966-67 with ITO, B-Ward, Dhanbad. Later on, the file of the assessee was transferred to D-Ward, Dhanbad and the assessment was made by ITO, D-Ward. Invoking his powers under Section 263, Addl.

CIT cancelled the assessment order on the ground that ITO, D-Ward had no jurisdiction over the assessee. Tribunal quashed the order of the Addl. CIT on the ground that the Addl. CIT had not at all shown in what respect underassessment had been made and how the assessment made was prejudicial to the interests of the revenue. The High Court referred to the decision of the Supreme Court in the case of Smt. Tara Devi Aggarwal (supra) and observed that the Supreme Court did not hold the order of assessment erroneous and prejudicial to the interests of the revenue merely on the ground that the ITO had no jurisdiction to make the order. The Supreme Court also pointed out that as the assessee in that case wanted to be assessed in order to assist someone else who would have been assessed to a larger amount, such assessment was certainly erroneous and prejudicial to the interests of the revenue.

13. Harmonising the decisions in the case of Smt. Tara Devi Aggarwal (supra) and Shantilal Agarwalla (supra) we have to see in the present case whether the order of the ITO, Rajkot was erroneous in so far as it was prejudicial to the interests of the revenue or not. From the records, it is well established that it was only the ITO, Kolhapur who had proper jurisdiction over the assessee. Enquiries revealed that the three assessees never stayed at the Rajkot address. It is also on record that the names of the assessees appear in the electoral rolls at Kolhapur and they also hold ration cards there. At the relevant time, the father of the assessees was carrying on business at Kolhapur. Thus, it is quite clear that it was only the ITO, Kolhapur who had proper jurisdiction of the assessees. The fact that the assessees were once assessed at Rajkot over the original return, will not, in our opinion, make any difference and hence, ITO, Kolhapur was justified in issuing notices under Section 148 on the basis of the information supplied by CBI.14. The main point, which now comes for consideration is as to how the order passed by the ITO, Rajkot is prejudicial to the interests of the revenue when the assessees have offered the foreign gifts for taxation and have paid tax thereon. As mentioned earlier, it is evident that notice under Section 148 was issued by the Kolhapur ITO on the basis of enquiry conducted by the CBI. The ITO, Kolhapur obviously had to conduct detailed enquiries in the matter to find the source of the money purportedly received as foreign gift. The said ITO did conduct a detailed enquiry as is evident from the two assessment orders that are placed on record by the revenue. One is in the case of Mahesh Oswal and the other is in the case of Bharat Oswal In the case of Mahesh Oswal, the Rajkot ITO had accepted the income of Rs. 2,54,400 as returned by the assessee. On the other hand, the ITO, Kolhapur, after detailed enquiry, assessed the total income at Rs. 3,23,790. Similarly, in the case of Bharat Oswal the total income came to be assessed at Rs. 2,90,180 by the Kolhapur ITO as against Rs. 2,28,500 as returned by the assessee and accepted by the Rajkot ITO. This amply shows that though the Rajkot orders were passed under Section 143(3), no due enquiry was conducted and the returned income was accepted. On the other hand, Kolhapur ITO conducted detailed enquiry and the incomes came to be assessed at a higher figure. We fail to understand, if this is not enough to cause prejudice to the interests of the revenue, what else can it be. The finding of the Commissioner in his order under Section 263 is very clear when he states that"...it appears that the return filed at Rajkot on 11-9-1996 was to defeat the proceedings going on before the ITO Ward-1(2), Kolhapur". Thus, the order of the CIT is in consonance with both the decisions, viz. that of the Supreme Court in the case of Smt. Tara Devi Aggarwal (supra) and of the Patna High Court in the case of Shantilal Agarwalla (supra).

15. In the passing, it is pertinent to observe that when the assessees were permanently settled in Kolhapur and when the ITO, Kolhapur had jurisdiction over them, there was no reason to respond to the notice issued by him under Section 148 by filing the return at Rajkot and particularly when the ITO at Rajkot had no jurisdiction over the cases.

Such an indiscreet act on the part of the assessee can only cause chaos in the tax administration, which in turn, will cause prejudice to the interests of the revenue. In this connection, we can do no better than to quote the observations of the Madras High Court in the case of Venkata Krishna Rice Co. v. CIT [1987] 163 ITR 129 : 30 Taxman 528. At page 138 of the report, the following observations are made : In this context, therefore, the expression "prejudicial to the interests of the Revenue" must be regarded as involving a conception of acts or orders which are subversive of the administration of revenue. There must be some grievous error in the order passed by the Income-tax Officer, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the Commissioner might think to be prejudicial to the interests of Revenue administration. There might be cases where the Commissioner might wish to interfere with an order of the Income-tax Officer in order to safeguard the fair name and reputation of the Income-tax Department without any thought of going into the particular aspects of the assessment. Assessments which are mala fide, politically and communally motivated may be, however, set aside as being prejudicial to the interests of the Revenue. It is unnecessary, for us to illustrate the point any further. All that we wish sto observe is that the scope of the interference under this Section is not to set aside merely unfavourable orders and bring to tax some more money to the treasury. Nor is the Section meant to get at sheer escapement of revenue which, as is well known, is taken care of by provisions elsewhere in the Act such, for instance, as Section 147 of the Act.

The prejudice must be prejudice to the revenue administration.

16. In conclusion, we hold that the CIT was justified in invoking his powers under Section 263 on the ground that the assessments made at Rajkot were erroneous and prejudicial to the interests of the revenue.

We clarify that the assessment orders were erroneous and prejudicial on the ground that they were passed without jurisdiction, which had undoubtedly caused prejudice to the revenue. So far as non-initiation of penalty proceedings is concerned, we uphold the contention of the Id. counsel that that cannot be the ground for invoking jurisdiction under Section 263 of the Act. However, in substance, the orders of the CIT are upheld.17. In the result, the three appeals of the three assessees are dismissed.