ORDER--Non-speaking order.
Ratio:
Where assessing officer's order was very brief and did not contain detailed discussion about scrutiny of investment or about sources of deposits in assessee's bank account or about correctness of sale price as declared, Commissioner was justified in setting it aside.
Held:
The assessment order was very brief and could not be said to be a speaking order. The Commissioner was, therefore, right in holding that there was nothing on the record to show that the Income Tax Officer had applied his mind to ascertain the extent of investment made in the purchase of chassic for the new truck as well as the expenditure incurred in the construction of the body thereof. In the assessment order, no mention was also made whether penalty proceedings under section 271(1)(c) were to be initiated. The revisional order was, therefore, justified.
Application:
Also to current assessment years.
Income Tax Act 1961 s.263 ORDER Per Shri V. P. Elhence, Judicial Member - The assessee is aggrieved of the order dated 6-3-1982 of the learned Commissioner under section 263 of the Income-tax Act, 1961 (the Act).
2. The facts are that for the assessment year 1977-78, the assessee originally filed his return on 23-8-1977 showing an income of Rs. 33,310. Out of this income an amount of Rs. 28,068 was shown as profit under section 41(2) of the Act resulting from the sale of truck No. UPZ 9030 to one Shri Munni Lal, son of Babu Lal on 7-4-1976. The ITO issued notices under section 142(1) and 143(2) of the Act on 4-3-1980. Thereafter on 17-3-1980, the assessee revised his return and declared an income of Rs. 53,311 which included the profit under section 41(2) at Rs. 48,068 as against Rs. 28,068 shown earlier. The assessment was completed by the ITO the same day, i.e., on 17-3-1980 under section 139(8) and 217 of the Act and also imposed penalty against the assessee under section 273(c) of the Act. Against the same, the assessee moved an application on 24-5-1980 before the Commissioner for waiver. That application was rejected on 15-10-1981 after obtaining reports dated 29-7-1980, 23-7-1981 and 17-8-1981 of the ITO after the ITO had obtained the written statement dated 10-8-1981 of the truck purchaser Shri Munni Lal aforesaid and had examined him on 14-8-1981. The Commissioner issued a notice dated 26-2-1982 to the assessee under section 263 to the effect that for the following reasons, it prima facie, appeared to him that the assessment order passed on 17-3-1980 was erroneous insofar as it was prejudicial to the interests of revenue :
"1. That the ITO initially wanted to scrutinise the case to examine the extent of investment made in the purchase of truck and the source thereof. But he completed the assessment without making any enquiry on any of these points.
2. That the ITO did not examine the source of deposits made by the assessee in his bank account.
3. That the ITO did not call for the copy of the three accounts/pass books which the assessee had in different banks in order to find out whether there were any deposits needing further scrutiny.
4. That in the original return, the assessee had disclosed that the truck was sold for Rs. 35,000 whereas in the revised return it was shown as Rs. 55,000 and the ITO did not make an enquiry in ascertaining the correct sale price.
5. That the ITO failed to initiate penalty proceedings under section 271(1)(c) and the proceedings were clearly attracted in the case of the assessee."
3. On behalf of the assessee, it was submitted before the learned Commissioner that the revised return had been filed by the assessee voluntarily and since the income shown in the revised return was found to be the correct income, it was, therefore, submitted that there was no error or prejudice to the interests of the revenue, if the ITO had accepted the return. It was also submitted that the provisions of section 271(1)(c) of the Act were not attracted as the revised return had been filed suo motu. However, the learned Commissioner was of the view that the assessment order had been passed by the ITO with undue haste and without proper enquiries and was, therefore, erroneous insofar as it was prejudicial to the interests of the revenue. He was of the view that the ITO had not applied his mind to ascertain the extent of investment made in the purchase of chassis of the new truck (No. UTY 355) as well as the expenditure incurred by the assessee on the construction of the body of the truck. He was of the view that this was the very purpose for which the ITO had selected this case for scrutiny instead of completing it under section 143(1). He found that the ITO had not obtained the copies of the assessees bank accounts and, therefore, the possibility of the investments/deposits in the bank accounts could not be ruled out. In this connection, he relied upon the assessees bank account with Vijaya bank Ltd. which showed that there were a number of deposits, some of which were by transfer from other accounts. He was also of the view that the ITO did not examine the correct sale price of the truck which was sold by the assessee. He was further of the view that there was nothing on the file to show that the ITO had decided not to initiate proceedings under section 271(1)(c) after considering the facts of the case. According to the learned Commissioner, there was omission on the part of the ITO to examine this aspect of the case. He, therefore, held that the assessment order passed by the ITO was erroneous insofar as it was prejudicial to the interests of the revenue. Accordingly, he set it aside and restored the matter to the file of the ITO for framing the assessment afresh after giving proper opportunity to the assessee of being heard and after making due and proper enquiries into the facts of the case.
4. The assessee being aggrieved, has come up in appeal before us, Shri V. B. Upadhyay, the learned counsel for the assessee, submitted that the ITO who wanted to verify the source of investment in the purchase of the new truck, had verified the sources of investments in detail by having the Vijaya Bank statement, financier, the balance paid by the assessee with its sources, which were in the statements filed with the return and the reply dated 17-3-1980 and, therefore, it could not be said that the ITO had not verified the sources of investment. He pointed out that in the past also, the practice followed was to have the copies of the bank accounts and the same was done for the assessment year in question also. Next, he submitted that the ITO had accepted the sale price of truck No. UPZ 9030 on the basis of the revised return in which the income had been shown at Rs. 53,310. He pointed out that if the income in the revised return was correctly shown in good faith, suo motu, no penalty under section 271(1)(c) was attracted and, therefore, the ITO had not initiated any such proceedings. In this connection, he also relied upon the decision of the Honble Delhi High Court in Addl. CIT v. J. K. D.Costa [1982] 133 ITR 7, for the proposition that if there was a failure on the part of the ITO to initiate penalty proceedings, the Commissioner could not pass an order under section 263. He also referred to the decisions of the Honble Calcutta High Court in Ganga Properties v. ITO [1979] 118 ITR 447 and of the Honble Madhya Pradesh High Court in H. H., Maharaja Raja Pawar Dewas v. CIT [1982] 138 ITR 518, for the proposition that the jurisdiction of the Commissioner under section 263 was confined to the record as it stood when the ITO passed his order. He also referred to the decision of the Honble Punjab and Haryana High Court in CIT v. Chawla Trunk House [1983] 139 ITR 182 for the proposition that the Commissioner should not only record a finding that the order of the ITO was prejudicial to the interests of the revenue but he should also mention in the order the material on the basis of which he had arrived at the conclusion. He submitted that the assessment order passed by the ITO was a speaking order under section 143(3) after making due enquiries and it could not be said that it had been passed in undue haste. He, therefore, argued that the order was liable to be set aside. in support of the aforesaid arguments, he relied upon the copies of the notices and copies of the various annexures filed before the Honble High Court in Criminal Miscellaneous Application No. 8504 of 1982 filed by the assessee against the Union of India.
5. On the other hand, Shri R. K. Upadhyay, the learned departmental representative, strongly supported the order of the learned Commissioner. He submitted that undue haste on the part of the ITO was clear from the fact that even though the ITO had issued notices under sections 143(2) and 142(1) on 4-3-1980, he completed the assessment on 17-3-1980 on which date itself the assessee had filed his revised return. In this connection, he referred to the notice under section 142(1) which required the assessee to produce all the books of account and all bank books for the year under consideration. He also relied upon the following note dated 23-8-1977 on the assessees return in the handwriting of the ITO :
"Investment in new truck No. UTY 355 to be looked into be fixed."
He pointed out that even after this note, the ITO did not make enquiries which supported the inference of the learned Commissioner that the assessment order had been passed in undue haste and without making proper enquiries. He submitted that if the return was revised, the penalty for concealment of income could be imposed in a given case. Relying upon the decision of the Honble Delhi High Court in Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375. he submitted that the Commissioner could regard the other as erroneous on the ground that in the circumstances of the case, the ITO should have made further enquiries before accepting the statements made by the assessee in his return. He pointed out that the ITO was not only an adjudicator but also an investigator and he could not remain passive in the face of a return which was apparently in order but which called for further enquiry. Elaborating on this submission further he submitted that it was the duty of the ITO to ascertain the truth of the facts stated in the return as the circumstances of the case were such as to provoke an enquiry. Referring to the decision of the Honble Allahabad High Court in the case of Amjad Ali Nazir Ali v. CIT [1977] 110 ITR 419, he submitted that a revised return could be filed only when the assessee discovered any omission or any wrong statement therein of which the assessee was not aware at the time of filing of the original return but not otherwise. Referring to the omission on the part of the ITO to initiate penalty proceedings under section 271(1)(c) in the assessment order, the learned departmental representative referred to the decision of the Honble Allahabad High Court in the case of Addl. CIT v. Saraya Distillery [1978] 115 ITR 34 for the proposition that an order could be said to be erroneous either when it did not decide a point or record a finding on an issue which ought to have been done or decided it wrongly. His point was that the department could not become helpless or remediless if penalty proceedings were not initiated by the ITO. Lastly, he referred to the decision of the Honble Madhya Pradesh High Court in Addl. CIT v. Kantilal Jain [1980] 125 ITR 373 for the proposition that if during the pendency of proceedings which ultimately ended in an order of assessment, the ITO had omitted to take notice of facts attracting the provisions of section 273(b), the order would be erroneous and the CIT would be entitled to exercise the revisional jurisdiction conferred on him under section 263. Summing up, his arguments, the learned departmental representative submitted that the order of the learned Commissioner was perfectly valid and called for no interference. He also pointed out that the learned Commissioner had only set aside the assessment order and directed the ITO to frame the assessment afresh after giving proper opportunity to the assessee and after making due and proper enquiries into the facts of the case and, therefore, the assessee had a full opportunity of establishing his case before the ITO and no prejudice was caused to him by such an order.
6. We considered the rival submissions as also the decisions relied upon on their behalf. It is true that the jurisdiction of the Commissioner under section 263 is confined to the record as it stood when the ITO passed his order and that he could only have the record of the proceedings which was before the ITO and to examine it is order to consider whether, on the basis of the materials which were before the ITO and formed part of the record, the order passed by the ITO was erroneous and prejudicial to the interests of the revenue. The assessment order was passed on 17-3-1980 and, therefore, the material on the record of the ITO up to that date has to be looked into, Shri S. N. Srivastava, ITO, had filed a counter-affidavit before the Honble High Court on 23-2-1983 not only after the assessment order but even after the passing of the order under section 263 by the learned Commissioner and the filing of the present appeal before us. It is, therefore, not entitled to be looked into for purposes of examining whether the order passed by the ITO was erroneous and prejudicial to the interests of the revenue. The facts appearing from it may be seen only for purposes of examining whether the order passed by the ITO was erroneous and prejudicial to the interests of the revenue. The facts appearing from it may be seen only for purposes of narration of complete facts. For the same reason, waiver application of the assessee dated 24-5-1980, the reports of the ITO and the statements, etc., of Shri Munni Lal and the order of the Commissioner dated order was passed by the ITO under section 143(3) but no detailed order was passed. In fact, in the notice of demand under section 156 of the Act only the following lines appear in the handwriting of the ITO :
"Assessed under section 143(3) on total income of Rs. 55,000 after giving deduction under section 80C on agreed basis. Issue notice of demand and challan. Penalty notices under section 273(c) and section 10(1) of CDS has also been issued.
Dated : 17-3-1980 Sd/- ITO"
We are in entire agreement with the learned Commissioner that the assessment order was too brief to be termed as a speaking order. The contention raised on behalf of the assessee that since it had been written by the ITO in his own handwriting on From No. 7, hence, the same is speaking order, cannot be accepted. It is trite proposition that a speaking order is one which gives the controversy or the questions raised, the decision of the authority and the reasons of the authority for taking that decision. Having regard to the note made by the ITO on the return on 23-8-1977 as also the revision of the return, the order should have been a detailed one. At any rate, the mere fact that it was passed under section 143(3) does not show that due and proper enquiries as intended by the ITO vide his noted dated 23-8-1977 and as warranted by the facts, had been made by the ITO. It also does not appear that the ITO had examined the source of deposits made by the assessee in his bank account or that the copies if the accounts/pass books of the assessee in the three bank accounts were seen and examined. The mere filing of the chart by the assessee along with he return was not enough and there is no material before us to show that they were examined. In the original return, the assessee had disclosed that Truck No. UPZ-9030 was sold for Rs. 35,000 whereas in the revised return the sale price was shown as Rs. 55,000. There is no material to show as to whether any enquiries were made by the ITO and if so what was the correct sale price. The ITO had not enquired into the reasons of variation in the figures of profit under section 41(2) shown in the two returns. The learned Commissioner was, therefore, right in holding that there was nothing on the record to show that the ITO had applied his mind to ascertain the extent of investment made in the purchase of chassis for the new truck as well as the expenditure incurred in the construction of the body thereof. The learned Commissioner was also right in pointing out that since the copy of the assessees bank account with Vijaya Bank Ltd., showed a number of deposits, some of which were by transfer from other accounts, the ITO should have examined the nature and source thereof. In the assessment order no mention is made whether penalty proceedings under section 271(1)(c) were to be initiated. The assessee could say that because the ITO had mentioned the issue of penalty notices under section 273(c) and not under section 271(1)(c) and, therefore, he had consciously omitted to do so. But in the view which we have taken, namely, that due and proper enquiries were not made by the ITO before completing the assessment, it would amount to an omission on the part of the ITO to take notice of facts and make proper enquiry on the basis of which only the ITO could have been in a position to have a prima facie satisfaction whether or not to initiate proceedings under section 271(1)(c). This is the very aspect which was emphasised by the Honble Madhya Pradesh High Court in the case of Kantilal Jain (supra). Even in the case of J. K. DCosts (supra) relied upon on behalf of the assessee, what all was decide by the Honble Delhi High Court was the penalty proceedings had to be initiated in the course of the proceedings for assessment and that it was not a legal requirement that the ITO should record in the assessment order that penalty proceedings were initiated. it was also held in that case that the failure of the ITO to record in the assessment order his satisfaction or the lack of it in regard to the leviability of the penalty could not be a factor vitiating the assessment order in any respect. In any case, even if this aspect of the matter is taken out of consideration, the other reasons given in the notice under section 263 were duly established and on the basis of which the learned Commissioner was quite justified in coming to the conclusion that due and proper enquiries had not been made and that the assessment order has been passed by the ITO with undue haste. We do not agree with the contention raised on behalf of the assessee that there was no material before the learned Commissioner for acting under section 263. The decision of the Honble Delhi High Court in Gee Vee Enterprises case (supra) was fully applicable to the facts of the present case and since the ITO had failed to make further enquiries before accepting the revised return filed by the assessee, the learned Commissioner was quite justified in holding the assessment order to be erroneous insofar as it was prejudicial to the interest of the revenue. The learned departmental representative is also justified in pointing out that the learned Commissioner has not foreclosed the matter and that he has only set aside the assessment order to be made afresh after making due and proper enquiries into the facts of the case and after giving proper opportunity to the assessee. Accordingly, we find no force in this appeal, which must fail and be dismissed.
7. In the result, the appeal is dismissed.