JUDGMENT
1. At the instance of the assessee, the Income-tax Appellate Tribunal (Delhi Bench), referred the following question for the opinion of this court :
" Whether, on the facts and circumstances of the case, the Tribunal was right in law in holding that the order passed by the Commissioner of Income-tax under Section 263 was/in law maintainable ?"
2. Smt Lajja Wati Singhal wife of one Babu Lal is the assessee and she was a partner in the firm, Satya Industrial Corporation. The husband of the assessee constructed a house in the accounting years relevant for the assessment years 1975-76 and 1976-77. The husband of the assessee while explaining the investment in the construction, stated that the two advances of Rs. 12,000 and Rs. 15,000 had been taken by him from his wife in the accounting years relevant to the assessment years 1975-76 and 1976-77.
3. The assessee at the stage of the assessment for the years in question surrendered the amounts of advances of Rs. 12,000 and Rs. 15,000 and then the said two amounts were brought to tax in her hands.
4. Thereafter, the Commissioner of Income-tax found that no inquiry whatsoever was made by the assessing authority into the amounts surrendered by the assessee at the stage of the assessment made for the assessment years in question and he, therefore, invoked Section 263 of the Income-tax Act, 1961 (for short "the Act"), and concluded that the assessment orders made by the assessing authority to that extent were erroneous and prejudicial to the interests of the Revenue. Accordingly, the Commissioner of Income-tax set aside the assessment orders relating to the aforesaid years and directed the assessing authority to make the assessments de novo in accordance with the law.
5. Aggrieved, the assessee carried the dispute in appeal to the Income-tax Appellate Tribunal, which by an order dated July 22, 1980, affirmed the order of the Commissioner of Income-tax.
6. This is how the Tribunal referred the aforementioned question for both the assessment years 1975-76 and 1976-77 under Section 256(1) of the Act for the opinion of this court.
7. The submission of Sri Bharat Ji Agrawal, counsel for the assessee, is that to invoke Section 263 of the Act, it is not enough for the Commissioner to say that the order passed by the assessing authority was erroneous but it is incumbent upon the Commissioner to demonstrate that the order was prejudicial to the interests of the Revenue as well and unless two conditions : (i) that the order of the assessing authority was erroneous and (2) that the order was prejudicial to the interests of the Revenue concomitantly exist, no jurisdiction could be exercised under Section 263 of the Act. In support of his view, counsel for the assessee relied on the case of J.P. Srivastava and Sons (Kanpur) Ltd. v. CIT [1978] 111 ITR 326 (All). In this case this court referring to Section 33B of the Indian Income-tax Act, 1922 (analogous to Section 263 of the Income-tax Act, 1961), held that under Section 33B, the Commissioner can revise an order passed by the Income-tax Officer only if, (i) it is erroneous and (ii) is prejudicial to the interests of the Revenue. The submission of Sri Bharat Ji is that in the absence of necessary inquiry, the assessment orders made by the assessing authority for the years in question may be erroneous but there is no finding by the Commissioner of Income-tax that the orders passed by the assessing authority for the relevant years were prejudicial to the interests of the Revenue. It is, therefore, contended by Sri Bharat Ji that the order passed by the Commissioner of Income-tax under Section 263 of the Act is not sustainable.
8. In the impugned order passed by the Commissioner of Income-tax under Section 263 of the Act, he observed as under :
" The Income-tax Officer should also have examined whether the amount surrendered by the assessee was really available with her for giving a loan to her husband and whether the amount so surrendered could really be linked up with the investment in the construction of the property. He should have also examined whether the assessee had any particular undisclosed source of income and if so, what was the extent of income which had been earned from this source. There is also no discussion in the assessment order regarding the reasons of surrender of the amount in question. The Income-tax Officer also failed to make proper enquiries regarding the nature and the extent of the assessee's source of income from which the loan was given by her to her husband."
9. In para 5 of his order, the Commissioner of Income-tax further observed :
" I have considered the contentions raised by the assessee. It appears to be a case where the Income-tax Officer has not properly examined the nature and extent of the assessee's income and the various contentions raised by the assessee. He has merely accepted whatever was put up before him by the assessee without making the necessary basic enquiries. The possibility that the assessee was having a regular source of undisclosed income from which she was able to earn much more than what was disclosed by her can also not be ruled out. It also appears that the surrender of the amounts in question was made by the assessee in her return of income only to corroborate the story of the loan said to have been given by her to her husband."
10. It is true that the Commissioner of Income-tax has himself not made any inquiry into the question whether the assessee could receive the two amounts said to have been advanced by her to her husband for the purpose of construction of the house. However, the Appellate Tribunal has gone into this question and recorded a finding as under :
"From the stand taken by the assessee in the said reply and the accompanying affidavit as aforesaid, we find firstly that she had no evidentiary material to support her version that in the affidavit sworn by her she suppressed the names and addresses of the relations from whom she is stated to have taken the loans and also the dates and specific amounts of the said loans ...... Thus, when the loan source and much more the income sources itself remained undisclosed, it would not, in our opinion, lie in the assessee's mouth to say that an enquiry into undisclosed sources could not have revealed her income at higher than the disclosed figures. We, therefore, conclude that the assessee failed to show that the Income-tax Officer's orders were not prejudicial to the interests of the Revenue."
11. It is noteworthy that the above reproduced finding of the Appellate Tribunal has not been challenged by the assessee in this reference. From the decision of the Tribunal, it is amply clear that the assessee absolutely failed to establish that the two amounts said to have been advanced by her to her husband during the years in question were received by her from the two sources, that is, paternal and maternal sides as averred. No evidence whatsoever was adduced by the assessee before the assessing authority, except the affidavits which were filed in the proceedings taken up under Section 263 of the Act. The said affidavits are bereft of any material particulars and, therefore, the Tribunal did not accept the contention of the assessee and came to the conclusion that the assessment orders in this behalf were prejudicial to the interests of the Revenue. No exception can be taken to the view taken by the Appellate Tribunal. The Appellate Tribunal after the appraisal of the affidavits filed by the assessee for the first time in the proceedings initiated under Section 263, came to the conclusion that no evidence whatsoever was adduced by the assessee to show that she received the two amounts said to have been advanced by her to her husband in the respective assessment years and that was why the Tribunal concluded that the Commissioner of Income-tax rightly held that the orders of the assessing authority were erroneous and prejudicial to the interests of the Revenue. The Commissioner of Income-tax may have failed to make necessary inquiry himself and he may have failed to gather necessary material to come to the conclusion that the assessment orders passed by the assessing authority were prejudicial to the interests of the Revenue but the fact remains that the Appellate Tribunal perused the material produced by the assessee and then it came to the conclusion that there was no material at all to support the contention of the assessee that she had obtained the amounts said to have been advanced by her to her husband from her paternal and maternal sides, as averred. Such a finding of the Tribunal having not been disputed in this reference by the assessee, the conclusion reached by the Tribunal that in the absence of any cogent material on the record, the orders passed by the assessing authority for the years in question were prejudicial to the interests of the Revenue, cannot be ignored.
12. Sri Bharat Ji then submits that no prejudice is caused to the interests of the Revenue, inasmuch as both the amounts have been subjected to tax after being surrendered. The question is not whether the amount is taxed or not but the question is whether the amounts in question are taxable in the hands of the assessee. If the amounts are not taxable in the hands of the assessee and if they are surrendered by the assessee for being taxed then certainly the orders passed by the assessing authority will be prejudicial to the interests of the Revenue. A similar view was taken by the Supreme Court in the case of Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323, when the court held as follows (page 328) :
" 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."
13. The Commissioner of Income-tax in the instant case clearly held that it appears that the "assessee surrendered the two amounts said to have been advanced by her to her husband during the years in question only to corroborate the story of loan said to have been given by her to her husband".
14. One may surrender a given income with an ulterior motive. The duty of the assessing authority in such a case is to make full inquiry and satisfy himself that the income surrendered was, in fact, earned by the assessee and that was liable to be assessed in her hands. No exception can, therefore, be taken to the view taken by the Appellate Tribunal that the assessment of the income surrendered without any inquiry, will be prejudicial to the interests of the Revenue.
15. For the above reasons, we answer the aforementioned question in the affirmative, that is, in favour of the assessee and against the Revenue (sic).
16. Interim order dated January 22, 1982, is discharged.