ORDER Per Anand Prakash, Accountant Member - This appeal is directed against the order under section 263 passed by the Ld. Commissioner of Income-tax, Allahabad in respect of assessment year 1983-84.
2. The setting of the facts, which led to the action under section 263 and the subsequent order passed therein may be noted :-
(i) The assessee is a contractor. In respect of assessment year 1983-84, he filed his return of income on 31-12-1983 showing an income of Rs. 1,12,800. The hearing of the aforesaid case was fixed by the ITO on 30th of January, 1984 after issuing notice under section 143(2). The assessee attended on the said date and the assessment was finalised by the ITO on the aforesaid date itself.
The order sheet entry reads as below :-
"30-1-84 Sri Y. N. Sharma present. T. D. S. Certificate filed. Discussed.
Assessed. Issue D.N & R.V."
The assessment order itself was short and reads, inter alia, as below :-
"Return filed showing income of Rs. 1,12,800. In response to notice under section 143(2), the assessee attended. The assessee is a contractor. Audited copies of trading account, profit and loss account and balance sheet by Shri Arjun Kapoor & Co. have been filed. After discussion, total income is computed as under :
Net profit as per P/L account Rs. 1,12,798 Add : subscription and donation Rs. 1,471 Out of car expenses 1/4th disallowed Rs. 2,715 Out of depreciation 1/4th disallowed Rs. 500 Rs. 117,084 3,568 Rs. 1,13,516 Rs. 1,13,520
(ii) Sometime after the aforesaid assessment had been completed, the CIT, Allahabad summoned the record of the assessee and discovered therefrom that the only material placed on record on the basis of which the assessment had been completed, consisted of copies of balance sheet trading and profit and loss account of the assessee and chart or tax deducted at source. As per this chart, gross receipts of the contract were of Rs. 48,10,215 inclusive of the cost of cement and steel supplied by the Varanasi Development Authority of the value of Rs. 4,89,046. The net profit of the assessee was shown to be Rs. 1,12,798, which, according to the working of the Commissioner, reflected a net profit rate of 2.34% of the gross receipts or 2.6% of the net receipts, excluding the value of the material supplied. The Commissioner further noted that the ITO had made no enquiries whatsoever, not had he examined the books of account. He further noted that in the assessees own case, in respect of the immediately preceding assessment year, net profit rate was more than 2 times of the figure declared by the assessee this year, and that in earlier years also the assessees trading results had not been accepted and Tribunal had upheld a net profit rate of 5% in the assessees case in respect of assessment years 1976-77 and 1977-78. In respect of assessment year 1982-83, the declared net profit rate of 5.35% (on gross receipts) and 6.36% of the net receipts was not accepted and a net profit rate of 10% had been applied. In view of these facts on record, the CIT felt that "the net profit rate of 2.6% as given in the chart in paragraph 3.2 could not be accepted without proper scrutiny and verification .... there is no indication any where in the records of the assessee as maintained by the ITO that he made necessary enquiries before coming to the conclusion that the net profit rate as low as 2.6% as disclosed by the assessee was acceptable."
3. The CIT held that once the aforesaid finding was reached, it had to be held that the order of the Income-tax Officer was erroneous and prejudicial to the interests of the Revenue. For the above proposition, he relied on the following three authorities :-
(i) Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC).
(ii) Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC).
(iii) Gee Vee Enterprise v. Addl CIT [1975] 99 ITR 375 (Delhi).
Accordingly, he set aside the assessment order with the direction to the Income-tax Officer, "to make a fresh assessment after allowing the assessee an opportunity of being heard as per provisions of law."
4. It is against the aforesaid order of Ld. Cit that the present appeal has been filed by the assessee. The learned counsel for the assessee assailed the above order of the Ld. CIT with a great deal of fervour and persuasiveness. According to him, proper enquiries had been made, in the present case by the ITO and he accepted the accounts of the assessee in view of the fact that the same had been audited by a Chartered Accountant, According to him, a reading of the order would clearly indicate that the ITO had applied his mind to the audited accounts filed before him and it was after discussion of the said case with the assessee that the assessment, in question, had been completed by him. The CIT had not brought on record any material to show that there was some defect in the accounts and as to why the book results could not be accepted. If there were no defects in the books of account, the assessees trading results, whatever they may be, including losses, had to be accepted, and this was no ground to set aside the assessment order that the net profit rate disclosed by the assessee this year was less than what was in earlier years. Then, pointed out the learned counsel for the assessee, the assessee had indicated several reasons for the decline in the gross profit rate this year in its reply to the show-cause notice under section 263. The CIT had not applied his mind to the said explanation of the assessee and, without examining the case of merits, had restored the matter back to the ITO on the short ground that he had not made proper enquiries. This action was, according to him, against law and, for this purpose, he drew our attention to the decision of D-Bench of Income-tax Appellate Tribunal, Delhi Benches in the case of Deepak Pneumatics (P.) Ltd. v. IAC [1989] 33 TTJ 552 and laid stress on the following observations appearing in the said judgment :
"... The CIT while exercising the powers under section 263 has not only an attached with it to see as to in what circumstances the interests of the Revenue suffered. This clearly cast a duty upon him to make enquiries or cause to be made i. e. to say the CIT can call for information from the assessee on the points on which he had a doubt and if the information furnished by the assessee clears his doubts, then he should not proceed with the setting aside of the assessment. Only if the details called for of the further information elicited lead to a prima facie case that there was some leakage of Revenue, that the CIT could interfere with the finality of the assessment by modifying it or setting it aside or enhancing it. But we do not think that it is open to him to call for the explanation but ignore to look into the details and leave it to the Assessing Officer to look into these details and then come to a conclusion whether the assessment made originally was proper or improper. The two safeguards provided in section 263 were aimed at securing finality or assessment and avoiding undue and capricious harassment. That was why the solitary principle of natural justice was woven into section 263 by making it compulsory on the part of the CIT to give to the assessee an opportunity of being heard. Secondly to make enquiries or cause enquiries to be made as he deems fit before coming to the conclusion that the assessment made by the ITO was erroneous and prejudicial to the interests of the Revenue. When the CIT ignores to observe either of these two principles, the exercise of jurisdiction under this section is open to attack on grounds of arbitrariness and capriciousness. This has been repeatedly held by the Courts and we do not have to dwell upon this subject any further."
According to the assessee, the facts of the cases, relied upon by the Ld. CIT (Allahabad) were different and that in all those cases there were facts on record to show that some enquiry was necessary before accepting the assessees version. In the assessees case there was nothing to suggest that an enquiry deserved to be made beyond what the ITO had already made. In the present case, the only charge of the CIT was the scrutiny of the accounts had not been done and that the books of account had not been looked into. According to the learned counsel for the assessee, this could not be the basis for action under section 263. Besides, he averred, the ITO had made proper scrutiny of the audited accounts of the assessee and books of CIT were not justified. The learned counsel for the assessee also drew our attention to the following authorities and submitted on their basis that the CIT could not have acted under section 263 on the basis of the reasons given by him in his order.
1. CIT v. R. K. Metal Works [1978] 112 ITR 445 (Punj. & Har.).
2. J. P. Srivastava & Sons (Kanpur) Ltd. v. CIT [1978] 111 ITR 326 (All.).
3. CIT v. Ratlam Coal Ash Co. [1988] 171 ITR 141 (MP).
4. CIT v. Kanda Rice Mills [1989] 178 ITR 446/44 Taxman 316 (Punj. & Har.).
5. Addl. CIT Jay Engg. Works Ltd. [1978] 113 ITR 389 (Delhi).
5. The learned Departmental Representative opposed the above submission of the learned counsel for the assessee. He strongly supported the order of the Ld. CIT and stressed the fact that, on the face of it, there was material on record to show that the ITO should have made proper enquiries regarding the decline of the net profit rate this year compared to what was declared by the assessee itself in earlier years. In this connection, he pointed out that in earlier years profits of the assessee, as declared, were not accepted and the matter had travelled up to the Income-tax Appellate Tribunal, which had upheld the rejection of the assessees trading results and had applied 5% net profit rate. This being so, it was necessary for the ITO to have applied his mind to the reasons, if any, for the decline in the net profit rate. Not making such enquiries amounted to passing an erroneous order, which was prejudicial to the interest of the Revenue. According to him, the scope of section 263 was wide and the Commissioner could act under it if he was convinced that enquiry in a given case should have been made, but was not made by the ITO. Besides, no prejudice was caused to the assessee, and the whole issue was open, and the assessee could prove his point now before the Income-tax Officer.
6. In rejoinder, the learned counsel for the assessee submitted that the question, in the present case, was not that the assessees case was not prejudiced because of the aforesaid order of the Commissioner because he had directed the ITO to redetermine the assessment after hearing the assessee. But the real question, according to him, was whether the CIT had jurisdiction to interfere with the assessment order passed by the ITO, more particularly when he did not point out any defects in the accounts of the assessee. It was, therefore, reiterated by the assessees learned counsel that the present order of the CIT deserved to be quashed.
7. We have given careful consideration to the facts of the case and rival submissions. The main consideration, which prevailed with the Ld. CIT, in the present case, when he held that the order of the ITO was erroneous and prejudicial to the interest of the Revenue was that the perusal of the records of the case indicated to him that, even though the past history of the assessees case was that its accounts had not been accepted and that additions of the assessees declared trading results had been made, yet the ITO had accepted without enquiry the net profit rate of 2.8%, which was much below the net profit rate disclosed in the assessees own case in earlier years. According to the Ld. Commissioner, the ITO, faced with the past history of the assessees case and with the fact that this year the assessees trading results were the lowest, should have undertaken detailed enquiry to find out the causes of the decline in the gross profit rate. Inasmuch as he did not undertake this enquiry, there was an error in the order of the ITO, which was prejudicial to the interest of the Revenue. He perused for this purpose the material, which was placed on record by the assessee and also took note of the proceedings as recorded by the ITO on the order sheet showing the process through which the mind of the ITO was made up. Both these went to show that, except for some discussion of which there is inking either on the order sheet or in the assessment order, no enquiries whatsoever made, even the books of account of the assessee were not perused by the ITO. Even in his order, the ITO does not refer to any particular line of enquiry which he might have undertaken with a view to satisfy himself as to the lowness of the gross profit and as to why he accepted the trading accounts of this year, despite the above state of the net profit rate, when, in earlier years, the trading results of the assessee had consistently not been accepted. The assessee no doubt gave certain causes for the decline in the gross profit rate before the CIT, through his reply to the show-cause notice, but the CIT did not to into the merits of the aforesaid pleas of the assessee, because the ITO had not examined those pleas and it required investigation into facts, which in his opinion, could best be done by the ITO.
8. We have to see whether in the aforesaid setting of the facts, the conclusion of the CIT was justified in law or if was against law. The Ld. CIT is relying for his view on the ratio of the judgment of the Honble Delhi High Court in the case of Gee Vee Enterprises (supra). At page 384, some observations, which are relevant for the aforesaid purpose, appear, and it will be appropriate to extract the said observations of their Lordships at this stage as below :-
"The only requirement for the exercise of this power is that the Commissioner should consider that the order passed by the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue. What is the meaning of erroneous in this context. It was argued for the assessee by Sri G. C. Sharma that the word erroneous means that the order must appear to be wrong on the fact of it. In other words, he equated the error with error of law apparent on the face of record which is a well-known ground for the review of a quasi-judicial order by this court under article 226. We are unable to agree with this interpretation. The intention of the Legislature was to give a wide power to the Commissioner. He may consider the order of the Income-tax Officer as erroneous not only because it contains some apparent error of reasoning or of law or of fact on the face of it but also because it is a stereo-typed order which simply accepts what the assessee has stated in his return and fails to make inquiries which are called for in the circumstances of the case."
9. It was pleaded by Shri G. C. Sharma in that as before their Lordships that there must be an enquiry from the Commissioner before he came to the conclusion that the order of the ITO was erroneous and that if he cancelled the order of the ITO without making further enquiries which might go to show that the order of the ITO was erroneous and prejudicial to the interest of the Revenue the action under section 263 would not be sustainable. The above plea was rejected by their Lordships of the Honble Supreme Court in the case of Rampyari Devi Saraogi (supra) and Tara Devi Aggarwal (supra) that "it is not necessary for the Commissioner to make further enquiries before cancelling the assessment order of the ITO. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case, the ITO should have made further enquiries before accepting the submissions made by the assessee in his return". After having stated as above, their Lordships elaborated the point further by stating as follows :-
"The reason is obvious. The position and function of the Income-tax Officer is very different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further enquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an enquiry. The meaning to be given to the word erroneous in section 263 emerges out of this context. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word erroneous in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct."
The main enquiry, therefore, which an appellate authority has to make while adjusting upon the correctness or other wise of an action under section 263 is as to whether the Commissioner is able to point out the circumstances of the case, which would necessitate further enquiries, which the ITO had failed enquiry to make. If the Commissioner is able to make out such a case for further enquiry, which would appeal to the appellate court, the action under section 263 would be in order. But, if on the other hand, the appellate court is of the opinion that the reasons given by the Commissioner of Income-tax are either non-existent or illusory or incorrect, it would be incumbent on the Court to quash the order under section 263. No court has laid down the proposition as widely as the learned counsel sought to make out before us, namely, that the order of the ITO could not be held to be erroneous merely because in the opinion of the CIT the facts of the case would require further investigation. The order of the Income-tax Appellate Tribunal, D-Bench, Delhi, on which great reliance was placed by the learned counsel for the assessee, also accepted the ratio of the Honble Delhi High Court in the above case as, indeed, they were duty bound, being situated within the jurisdiction of the said High Court, and a careful reading of the facts of the said case would clearly show that our learned brothers had examined the facts of that case very carefully and the reasons given by the CIT for setting aside the order of assessment and had thereafter given, a clear cut finding that the reasons given by the CIT could never justify the finding that the order of the IAC was erroneous and prejudicial to the interest of the revenue. In the opening paragraph of that order itself, our learned Brothers defined the task which they were facing in the said appeal, in the following words :-
"We felt the basic issue in this case is a pure question of fact to be tackled for its answer on the question that we have set out above, namely whether an enquiry had been made into the various aspects necessary for making an assessment before completing the assessment by the IAC."
Our Brothers, therefore, in paragraph 2 of their order noted the five points, which were listed by the Commissioner to show that the necessary enquiries had not been made by the IAC (Asst.). The Tribunal then considered all the aforesaid grounds in paragraphs 4, 5, 6, 7, 8, 9 and 10 of their order, and summarized their conclusion in paragraph 11 of the said order in the following words :-
"11. Thus we find that the reasons adduced by the CIT to come to the finding that the assessment made by the IAC was without any enquiry and serious prejudice was caused to the interests of the Revenue does not appear to be founded on justifiable proper and correct grounds. In the directions given by the CIT at the end of the order, we find that he has mentioned that the ITO would not only make enquiries and investigations into the issue listed in the order, which we have discussed above, and found no need for making any enquiry or investigation, but also mentioned that various other aspects also should be looked into without specifying what those aspects were. This means this is a very vague direction intended to carry out a wild goose chase, if we may say so. Therefore, on the consideration of the above materials, it cannot be said that the IAC made the assessment without proper enquiry and all the aspects that were needed to be looked into have been looked into and the IAC was entitled to rely upon the past record to arrive at the conclusion whether the accounts maintained by the assessee and the system of accounting adopted by it was such as to deduce proper income therefrom."
Once the aforesaid be the finding of fact, the Tribunal is duty bound to quash the order under section 263. But if the finding be to the contrary, it would not, in our opinion, be correct to quash the order of the Commissioner merely on the ground that he did not make enquiries himself before coming to the conclusion that the order of the ITO was erroneous. The Honble Gujarat High Court also had the occasion to examine the scope of section 263 in Addl. CIT v. Mukur Corpn. [1978] 111 ITR 312, and even they were of the opinion that the Commissioner was not bound to make any enquiry before the original assessment order was cancelled and the ITO was directed to make a fresh assessment. The judgment of the Honble Allahabad High Court in the case of J. P. Srivastava & Sons (Kanpur) Ltd. (supra) was considered by their Lordships in the aforesaid judgment and it was pointed out that the facts in that case did not lay down the above wider proposition in law, but was merely confined to the facts of that case, which were distinguishable, because the Commissioner himself was not sure in his mind in that case as to whether the order of the ITO was erroneous and prejudicial to the interest of the Revenue. That was a case where not only the ITO had not applied his mind, but even the CIT had not applied his mind to the declaration made by the assessee in part D of the return.
10. Let us examine the facts of the present case in the light of the above position in law. The Commissioner of Income-tax brought out in the present case the circumstances in which, according to him, enquiry should have been made by the ITO regarding the correctness or otherwise of the net profit declared by the assessee. As we have pointed out above, the Commissioner noted in this case :
(i) That the assessee was a contractor whose accounts had not been accepted in earlier years;
(ii) That in earlier years the question of adequacy or otherwise of the trading results of the assessee was adjusted upon even by the Tribunal in respect of assessment years 1976-77 and 1977-78 and the Tribunal had applied the net profit rate of 5% as against the declared net profit rates of 3.3% and 4.8% respectively by the assessee.
(iii) That in the immediately preceding assessment year, the assessee itself had shown net profit rate of 5.4% which was not accepted by the ITO and who had applied a net profit rate of 10% to work out the resultant income of the assessee for the assessment 1982-83.
(iv) That in the present assessment year, the net profit rate of 2.6% as disclosed by the assessee was the lowest of all the years.
(v) And that these circumstances justified an enquiry by the ITO into the causes for the decline in the gross profit rate this year.
It is difficult for us to hold that the aforesaid circumstances as pointed out by the Commissioner did not, prima facie, justify an enquiry by the ITO. We note from the Order sheet dated 30th of January, 1984, and from the material which was placed on record by the ITO, that he, in fact, never made an enquiry into this aspect of the matter, the he more or less accepted the assessees trading results without any enquiry. In such a situation, it was entirely in order for the Commissioner to hold that the order of the ITO was erroneous and prejudicial to the interest of the Revenue. The aforesaid finding of the Commissioner is, in our opinion, entirely in accordance with law on the subjects as laid down by their Lordships of the Honble Supreme Court in the case of Rampyari Devi Saraogi (supra). The plea that the setting aside of the order of the ITO and restoration thereof to the ITO per se might cause prejudice to the assessee was put forward for the consideration of their Lordships of the Honble Supreme Court in the case of Rampyari Devi Saraogi (supra). The same was, however, rejected by their Lordships by pointing out, inter alia, as below :-
"The assessee, in our view, has not in any way suffered from the failure of the Commissioner to indicate the results of the enquiries, mentioned above. Moreover the assessee will have full opportunity of showing to the Income-tax Officer whether he had jurisdiction of not and whether the income assessed in the assessment orders which were originally passed was correct or not."
In Mukur Corpn.s case (supra), also this line of approach was rejected by their Lordships of the Honble Gujarat High Court. Their Lordships referred to the provisions of section 263 and then observed as follows :-
"The section specifically says that enquiry should be as deemed necessary by the Commissioner. Here, the Commissioner has given direction to the Income-tax Officer to give proper opportunity to the assessee to substantiate its pleas as well as to cross-examine Dr. Vyas. Therefore, on the facts of this case, the Commissioner was not bound to make any enquiry before passing the final order...."
In the present case, also no prejudice can be said to have been caused to the assessee by the failure of the Commissioner to go into the averments made by the assessee for the first time before him with regard to the reasons on account of which according to him, gross profit of the assessee was as low as 2.6% this year compared to what has been in earlier years. The Commissioner has directed the ITO to go into all that the assessee would have to show before him and then to determine the assessment in accordance with law. No prejudice can be said to have been caused to the assessee by such a direction. Nor can it be said that for that reason the order or the Commissioner was wrong. As noted earlier, the facts of the case of J. P. Srivastava & Sons (Kanpur) Ltd. (supra) were altogether different. There, the assessee had shown in part D of the return a sum of Rs. 1 lac with the following noting :-
"addition to capital reserve... Rs. 1,00,000
(i) It is also not taxable as capital gains on account of aggregate capital loss of Rs. 21,09,010 brought forward under section 24(2B) from 1954-55 and 1956-57."
The ITO passed an assessment order on March 7, 1964 in respect of assessment year 1960-61, but did not deal with the claim of the assessee contained in part D of the return. The Commissioner initiated action under section 33B with regard to the aforesaid sum of Rs. 1 lac and set aside the order of the ITO without making any comments on the merits of the aforesaid sum. The aforesaid order of the Commissioner was held by their Lordships to be erroneous. Their Lordships pointed out, inter alia, as follows :-
"We are of the opinion that the approach of the Commissioner is erroneous. The failure of the Income-tax Officer to deal with the claim of the assessee in the assessment order may be an error but an erroneous order by itself is not enough to give jurisdiction to the Commissioner to revise it under section 33B. It must further be shown that the order was prejudicial to the interests of the revenue..."
It was, in this connection, that their Lordships and observed further as below :-
"The Commissioner should have examined that plea on merits. He could take the action that he did only if he rejected the plea of the assessee. It must not be forgotten that under section 33B the Commissioner can himself modify or enhance the assessment and that he can only do if he considers and decides on merits the objection raised by the assessee. We are, therefore, of opinion that without going into the merits of the claim of the assessee it was not possible for the Commissioner to say the order of the Income-tax Officer had caused any prejudice to the interests of the revenue."
What their Lordships had, thus, pointed out in the aforesaid case was that even though the order of the Income-tax Officer was erroneous, it had not shown by the CIT to be prejudicial to the interests of the revenue, and that when both the ingredients namely, the erroneous nature of the order and its prejudicial nature are not present, action under section 33B (which is analogous to that under section 263 of 1961 Act) could not have been taken. In the present case, however, the facts clearly go to indicate that the Commissioner has held the order of the Income-tax Officer to be not only erroneous, but also prejudicial to the interests of the Revenue, because he has accepted the assessees income, even though the assessee had shown lowest net profit rate this year, without making enquiries, when the facts of the case and the history of the case clearly indicated the need for an enquiry. The order of the Commissioner of Income-tax cannot, therefore, be said to be without jurisdiction.
11. The authorities which the assessee had relied upon have been examined by us in detail. Their facts appear to us to be different from those in the present case. Thus, in the case of R. K. Metal Works (supra), their Lordships found that the order of revision, passed by the Commissioner, contained no indication as to the basis on which the Commissioner came to the, prima facie, conclusion that the order of the ITO was proceeded on the basis of the conclusion that the capital borrowed by the firm was utilized for purposes other than that of the firms business, but he did not indicate the basis of such conclusion in the order. Such an order was quashed by the Tribunal and their Lordships upheld the Tribunals order. The basis, on which the aforesaid order was quashed, as will be readily seen, is absent in the present case. We have noted in detail the reasons given by the Commissioner in his order for holding that the order of the ITO was erroneous and prejudicial to the interests of the Revenue, and we have expressed our agreement with the conclusion reached by the Commissioner on the basis of the said reasons. Therefore, the aforesaid judgment is of no help to the assessee.
12. In Jay Engg. Works Ltd.s case (supra) the original account books of the assessee had been destroyed in fire. The Auditors Report was, however, on the record of the ITO. He had allowed certain deductions from the assessees income on the basis of the said Auditors report. The Commissioner held that the aforesaid action of the ITO was erroneous and prejudicial to the interest of the Revenue. The Tribunal, however, could not uphold the above order of the CIT and held that "Where the original account books of the assessee had been destroyed in fire, the ITO, in allowing a deduction, could be inferred that the deductions were properly supported by the relevant entries in the account books." The above order of the Tribunal was upheld by the Honble High Court.
13. This judgment also does not, in our opinion, help the assessee for, in the present case, the question was not as to whether the deductions in the accounts were properly supported by the relevant entries in the account books, but, as to how and why the net profit of the assessee had declined so drastically this year compared to earlier years and whether there was any justifiable reason for it and whether the trading results of the assessee were verifiable in the context that in earlier years it had been held that they were not verifiable. We have held above that in the aforesaid circumstances, an enquiry should have been made by the ITO and he had does it, it could be said that the action of the ITO was erroneous and prejudicial to the interest of the Revenue. The aforesaid judgment of the Honble Delhi High Court does not, therefore, render any help to the assessee.
14. In Kanda Rice Mills case (supra) the Tribunal found, after scrutinising the order of the Commissioner under section 263 that the Commissioner had not arrived at any firm conclusion as to whether the order of the ITO was correct or not and whether it was prejudicial to the interest of the Revenue or not, and in this setting the Tribunal had observed that when the Commissioner did not express his opinion and came to no conclusions with regard to the erroneous prejudicial nature of the order, he could exercise jurisdiction under section 263. Obviously, the aforesaid ratio has no application to the facts found by us in the present case.
15 In view of the above discussion we reject the present appeal.