JUDGMENT M. Katju, J.
1. This appeal under Section 260A of the Income-tax Act, 1961, has been filed against the judgment of the Income-tax Appellate Tribunal, Allahabad, dated October 18, 2002, relating to the assessment year 1998-99.
2. Heard learned counsel for the parties.
3. The appellant owns properties at 199, Transport Nagar, Kanpur, and 24, Chak Road, Allahabad, jointly with his two brothers, Sri Girdhar Gopal Gulati and Sri Sat Pal Gulati. The appellant has a 1/3rd share in the said properties.
4. In the year 1993, the appellant and his brothers started construction of a building in a plot situate at 2/1/3, Minhajpur, Allahabad. The said construction was completed in the year 1997. In January, 1998, this building was let out to a society known as Shivram Das Memorial Society on rent for running an educational institution. On the basis of the rent received by the assessee, the income from the property was disclosed by the three brothers.
5. The Assessing Officer completed the assessment under Section 143(3) of the Act for the assessment year 1998-99 on March 9, 2001. The Commissioner of Income-tax set aside the aforesaid assessment order under Section 263 holding that the assessment order dated March 9, 2001, is prejudicial to the interests of the Revenue on the following grounds :
(i) Reasons for the selection of the case under scrutiny was to investigate the correct income from house property and to investigate the loss brought forward from the earlier year. To investigate the investment in the construction of the house property was also an issue for bringing the case under scrutiny. However, the assessment order in question reveals that the Assessing Officer has investigated none of the issues.
(ii) The assessment has been made in a very routine manner and no certification with reference to the rental income disclosed with that of the fair market value of the properties let out could be made.
(iii) Investment in the construction of the property could not be investigated as no enquiry regarding investment has been made by the Assessing Officer himself or by sending his inspector at the spot.
(iv) Income from other sources has also not been investigated by the Assessing Officer.
6. In coming to his conclusion, the Commissioner of Income-tax was of the view that the only papers filed by the assessee during the course of the assessment proceedings were :
(i) Details of drawings for household expenses ;
(ii) Extract from the minutes of the meetings of SRDC Memorial Society held on September 15, 1997, at 2.00 p.m ; and
(iii) Copy of approved valuer's report.
7. The Commissioner of Income-tax also considered the note written by the Assessing Officer in which it was mentioned that due to lack of time the fair rent of the property at 199, Transport Nagar, Kanpur, and, 24, Chak Road, Allahabad, could not be ascertained. In this note the Assessing Officer mentioned that the assessee is showing the rent of Rs. 1,250 in respect of the property at 199, Transport Nagar, Kanpur. The assessee was paying municipal tax of Rs. 10,412 on the property at 24, Chak Road, Allahabad, but he is showing the rent of Rs. 150. The Assessing Officer also mentioned that the assessee had shown 1/3rd share in the income of the property but there is no deed to show the assessee's share. The Commissioner of Income-tax also considered that the Assessing Officer has deputed an inspector for making an enquiry and the inspector submitted his report on July 23, 2001, which was placed on record. The inspector estimated the investment in this property at Rs. 1.5 crores as against Rs. 75,30,763 disclosed by the assessee. The inspector also reported that the property at 199, Transport Nagar, Kanpur, had been let out to a sister concern M/s. U. P. Transport Agency for monthly rent of Rs. 1,250. This property covers an area of about 4,000 sq. ft. and is situate at the market place, Hence, the inspector estimated the rental at Rs. 5,000 per month. The inspector also reported that the property situate at 24, Chak Road, Allahabad, consists of about 20 rooms and this property has also been let out to a sister concern, M/s. United Auto Mobile, at a monthly rent of Rs. 150.
8. The Commissioner of Income-tax hence concluded that the Assessing Officer had completed the assessment in undue haste and to save the assessment proceedings from becoming time barred and the Assessing Officer could not do the required investigations in the case of the assessee. Hence, the Commissioner of Income-tax was of the opinion that the order of the Assessing Officer was prejudicial to the interests of the Revenue. The Commissioner of Income-tax therefore set aside the assessment order dated March 9, 2001, and directed the Assessing Officer to make a fresh assessment after ascertaining the fair valuation of the property let out by the assessee to the sister concern and also ascertaining the cost of construction of the property at Minhajpur, Allahabad.
9. Against this order an appeal was filed before the Tribunal which has been dismissed and hence this appeal.
10. Learned counsel for the appellant submitted that all details regarding the income from the property were furnished before the Assessing Officer and these details show computation of the income furnished by the assessee along with the return. A valuation report was also furnished before the Assessing Officer. It is alleged that the assessment was not done in undue haste. It is alleged that the Commissioner of Income-tax considered the office note written by the Assessing Officer but there is no law which permits the Assessing Officer to make a note after the assessment order is passed, and the note cannot be made the basis for action under Section 263.
11. We cannot agree with the submissions of learned counsel for the appellant. The case of the assessee was selected for scrutiny and the Assessing Officer was expected to make investigation in detail. As observed in paragraph 8 of the Tribunal's order, the first hearing in the case was fixed on November 2, 1999, and there was no hearing thereafter for more than one year. On November 1, 1999, certain details were asked for and the Assessing Officer fixed the case of hearing on November 25, 1999, However, there was no hearing at all till March 7, 2001, and the Assessing Officer passed the order on March 9, 2001, as the Assessing Officer was under the impression that the case was becoming time barred.
12. On the facts of the case we do not find any error of law in the order of the Tribunal. It is evident from the facts that the Assessing Officer did not properly try to find the fair rent of the property let out to the sister concern or the investment made in the Minhajpur, Allahabad, property. The assessment order is very brief and does not show any detailed enquiry made by the Assessing Officer. It is evident that the Assessing Officer did not try to investigate the details furnished by the assessee.
13. When an assessment is done under Section 143(3) of the Act it is expected that the Assessing Officer will make a detailed enquiry to find out the correct income of the assessee and not take the facts placed by the assessee on their face value. No proper enquiry appears to have been made by the Assessing Officer in this case. The case was taken up for hearing in March, 2001, after the first hearing in November, 1999. In fact it has been admitted by the Assessing Officer that he could not make proper enquiries as the assessment was becoming time barred.
14. It is well settled that if the Assessing Officer fails to make a proper enquiry this is erroneous and prejudicial to the interests of the Revenue vide K.A. Ramaswamy Chettiar v. CIT [1996] 220 ITR 657 (Mad); Addl. CIT v. Mukur Corporation [1978] 111 ITR 312 (Guj); Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375 (Delhi); Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC); CIT v. Active Traders (P.) Ltd. [1995] 214 ITR 583 (Cal) ; Swarup Vegetable Products Industries Ltd. (No. 1) v. CIT [1991] 187 ITR 412 (All); CIT v. Rampiyari Khemka [1967] 63 ITR 367 (Cal); Bagsu Devi Bafna v. CIT [1967] 63 ITR 333 (Cal); CIT v. Kiran Debi Singhee [1967] 65 ITR 501 (Cal); CIT v. Mahavar Traders [1996] 220 ITR 167 (MP); CIT v. Everest Cold Storage [1996] 220 ITR 241 (MP) and Duggal and Co. v. CIT [1996] 220 ITR 456 (Delhi), etc.
15. Learned counsel for the appellant has stated that the Assessing Officer made all necessary enquiries. We cannot agree with this submission. The Assessing Officer had himself stated that he could not make the relevant enquiries, as the assessment was becoming time barred. There is no reason to disbelieve this note of the Assessing Officer.
16. In paragraph 11 of the order of the Tribunal the full details have been given and we are satisfied on perusing the same that the Assessing Officer did not make the proper enquiries as he was expected to do as he has himself admitted. As regards the appellant's contention that the Assessing Officer cannot made an office note after passing an assessment order because there is no provision for doing so we cannot accept this submission. The office note indicates that proper enquiries were not made by the Assessing Officer as he himself admits. There is no statutory bar in making an office note. There is also no statutory bar in relying on the office note under Section 263 by the office note. The Assessing Officer has expressed his opinion that he was not able to make proper enquires. When the Assessing Officer has himself made this admission it is not for the appellant to dispute it. Moreover, the report of the inspector indicates that the assessee has not given the correct details about the valuation and income of the properties in question as stated in paragraph 12 of the impugned order of the Tribunal.
17. In CIT v. Christian Mica Industries Ltd. [1979] 120 ITR 627, the Calcutta High Court held that the power of the Commissioner is not confined to assessment orders by the Income-tax Officer. It extends to all orders passed by the Income-tax Officer.
18. It must be remembered that this court can only see errors of law in the orders of the Tribunal under Section 260A but it cannot go into factual controversies. The question whether proper enquiries were made or not is a factual question and there is material to support this finding of fact as is evident from paragraphs 11 and 12 of the Tribunal orders. Hence, this court cannot interfere under Section 260A of the Income-tax Act.
19. In CIT v. Shree Manjunathesware Packing Products and Camphor Works [1998] 231 ITR 53, the Supreme Court has held that the word "record" in the Explanation to Section 263(1) includes all the records relating to the proceedings under the Act available at the time of examination by the Commissioner and is not confined to the material available to the Income-tax Officer. Thus the revisional power of the Commissioner under Section 263 is of wide amplitude. It enables the Commissioner of Income-tax to call for and examine the record of any proceedings under the Act. It empowers the Commissioner of Income-tax to make or cause to be made such inquiry as he deems necessary in order to find out if any order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. After examining the records and after making or causing to be made an inquiry if he considers the order to be erroneous then he can pass the order thereon as the circumstances of the case justify, i.e., enhancing the assessment or he may modify the assessment, cancel the assessment and direct a fresh assessment. In this way, the Commissioner's order cannot be faulted because he cancelled the assessment and directed a fresh assessment.
20. The Supreme Court in the case of Malabar Industrial Co. Ltd, v. CIT [2000] 243 ITR 83 defines the words "erroneous and prejudicial to the Revenue" as follows (headnote) :
"An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the Revenue' is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Assessing Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue."
21. In the present case it prima facie appears that the appellant has not made correct disclosure. He has shown the rent of the property at 24, Chak Road, Allahabad, at only Rs. 150 per month, which is prima facie unbelievable in these days when rents are soaring for a property which has 20 rooms as found by the inspector. He has also shown rent of Rs. 1,250 per month for the property at 199, Transport Nagar, Kanpur, which is difficult to believe considering that the property covers an area of about 4,000 sq. ft. and is in a market place.
22. Thus in the present case the Commissioner after taking into consideration the assessment order and material on record came to the conclusion that the order of the Assessing Officer is erroneous inasmuch as it is prejudicial to the interests of the Revenue. Hence, there was valid assumption of jurisdiction under Section 263 of the Act by the Commissioner and the Tribunal has not committed any error of law in confirming the order of the Commissioner of Income-tax in setting aside the assessment order under Section 263 and directing the Assessing Officer to make fresh assessment for the assessment year 1998-99 after ascertaining the fair rental values of the properties let out by the assessee to his sister concerns and after ascertaining the cost of construction in respect of the property situated at Minhajpur, Allahabad.
23. For the reasons given above, we find no merit in this appeal and it is dismissed.
24. Before parting with this case we would like to mention that it is often found that assessments are being done in an improper manner without proper enquiries and the explanation given is that it was done in a hurry as limitation was expiring. This is often a pretext for not doing a proper assessment and it raises apprehensions that the Assessing Officer is hand-in-glove with the assessee. It is the practice of the Department not to scrutinise every case in detail, but when a case is picked up for scrutiny surely the duty of the Assessing Officer is to do a thorough investigation but he did not do it in this case, which is indeed lamentable. We are, therefore, of the opinion that the Central Board of Direct Taxes should issue appropriate circulars to the income-tax authorities that at least in scrutiny cases there should be thorough enquiries by the Assessing Officer, and in such cases his functioning should be monitored by a superior officer. The plea that he did not have time and that he was making a hurried assessment as the assessment was becoming time barred should not be accepted in such cases.
25. Let a copy of this judgment be sent by the Registrar General of this court to the Central Board of Direct Taxes, New Delhi, and all Chief Commissioners and Commissioners of Income-tax in U. P.