SHOBHA RAMCHANDRA CHAUDHARI,YAWAL vs. PRINCIPLE COMMISSIONER OF INCOME-TAX - 1, NASHIK

At the time of hearing, the parties herein agreed that facts and circumstances and the issues involved are similar and identical in both these appeals. Having heard the parties these cases were heard together and are being disposed of vide this consolidated order.

The only grievance of the assessees involved in both these appeals is that the ld. Pr. CIT was not correct in law in assuming his revisionary jurisdiction u/s 263 of the Income-tax Act, 1961 (hereinafter referred to as “the Act” for short). It is the contention of the assessee that the order u/s 263 of the Act was passed by the ld. Pr. CIT in relation to the issue of agricultural income. In this regard, the assessee submitted that the A.O has made all necessary inquiries and before the A.O the assessee had filed copies of 7/12 extracts, bank account details and pages of diary, where the assessee had noted the details of transactions regarding agricultural income.

In response to the opportunity notice assessee furnished through e- proceedings. In the submission assessee has stated all the details were submitted during assessment proceedings before the then AO. The assesse relying on various decisions requested to drop the proceedings. The submission of the assessee is placed on record.

In view of the above, it is admitted fact that the assessment proceedings in this case have been completed without verifying the main issues for which the case selected

The most important observation raised by the ld. P.CIT holding the assessment to be erroneous and prejudicial to the interest of revenue is that as per 7/12 extracts submitted by the assessee, there were no record of cultivation of watermelon, vegetables and chana at „pikperauttara‟ of the 7/12 extract of the land held by the assessee. Therefore, the alleged aggregate receipt amounting to Rs. 57,76,670/- on account of sale of watermelon, vegetables and chana was not justified as the source thereof was not disclosed which leads towards the fact that the sale receipts in proportionate amounting to Rs. 24,89,944/- (57,76,670 x 25/38) is nothing but the assessee‟s own income earned from undisclosed sources. It was also held by the ld. Pr. CIT that inspite of the 7/12 extracts was at the disposal of the A.O he has not bothered to enquire about the very fact that though there was no mention of watermelon, vegetable and chana in the said 7/12 extract then in that circumstances from where the assessee had earned the aggregate receipt amounting to Rs. 57,76,670/-. The Pr. CIT has invoked Explanation 2(a) to sec. 263 of the Act which is reproduced as follows:

In Gee Vee Enterprises Vs. Addl. CIT 1975 CTR (Del) 61, it was held that it is not necessary for the CIT to make further inquiries before cancelling the assessment order of the ITO. The CIT can regard the order as erroneous on the ground that in the circumstances of the case the ITO should have made further inquiries before accepting the statements made by the assessee in his return.

In CIT Vs. South India shipping Corporation Ltd. (1998) 147 CTR(Mad) 433, it was held that if the CIT on the basis of materials formed an opinion that the grant of allowance made by the Officer was erroneous and not warranted by law, the jurisdiction of the CIT u/s 263 of the Act was not ousted. It has been further held that the CIT in exercise of his power of revision can pass such order as the circumstances of the case would justify including an order directing a fresh assessment.

In CIT Vs. M.M. Khambhatwala (1992) 198 ITR 144 (Guj) it was held that the CIT would be entitled to revise the order of the ITO, if he is of the view that the order of the ITO is erroneous and prejudicial to the interests of the Revenue. The CIT can exercise his power u/s 263 of the Act even in a case where the issue is debatable. Revisionary powers u/s 263 are not comparable with powers of rectification of mistake u/s 154 of the Act.

In CIT vs. Bhagwan Das (2004) 191 CTR (All) 531, it was held that an order which has been passed without application of mind, will also fall under the expression “erroneous and prejudicial to the interest of the Revenue”. In the assessment order, there was no discussion regarding the question as to whether the amount of income shown by the assessee which was being claimed to be exempt had actually been earned by him or not and further, whether the entire amount of income from agriculture and poultry farming was exempt from tax. The CIT had rightly initiated proceedings u/s 263 of the Act as exemption had been granted without application of mind.

It is pertinent to mention here that in the case of CIT Vs. Shree Manjunathesware Packing Products & Camphor Works, 231 ITR 53, in the context of Sec.263, Hon'ble Supreme Court held as under:

That it is a clear cut rationale which has been upheld by various judicial pronouncements that the ld. CIT can resort to revisionary jurisdiction u/s 263 of the Act if he considers that any order passed by the A.O is erroneous so far as it is prejudicial to the interest of the revenue. An order can be said to be prejudicial to the interests of revenue when the income has been under- assessed, loss has been over-assessed, income has been assessed at a lower rate, excess deduction/allowances and reliefs have been allowed to the assessee. The Hon‟ble Allahabad High Court in the case of CIT Vs. Bhagwandas (2004) 272 ITR 367, has held that non-application of mind by the A.O is also prejudicial to the interests of revenue. Similarly, the order of the A.O shall be deemed to be erroneous if such order is passed without making inquiry or verification which should have been made. The order is passed allowing any relief without inquiring into the scheme, the order has not been made in accordance with an order, direction or instruction issued by the Board u/s 119 of the Act.

In the present facts and circumstances of the case, we find that though 7/12 extracts was before the A.O where the assessee has shown having received income from sale of watermelon, vegetables, chana but the reality was there was no cultivation of these crops in the said 7/12 extracts submitted by the assessee. This fact was only brought out by the ld. Pr. CIT in his inquiry. The non-inquiry in this case by the A.O has resulted the order to be erroneous so as to be prejudicial to the interests of revenue since the source of the money showed as receipt from the sale of such fruits and vegetables has clearly turned out to be incorrect and the source of such money is still to be ascertained in the given facts and circumstances of this case, meaning thereby the tax which was lawfully excisable has not been imposed or that by application of the relevant statutes on an incorrect and incomplete interpretation a lesser tax than what was just has been imposed. We find that Hon‟ble Calcutta High Court in the case of Dawjee Dadabhoy & Co. Vs. S.P. Jain and Anor (1957) 31 ITR 872 (Cal) upholding the revisionary jurisdiction u/s 263 of the Act held that the CIT is correct in resorting to passing of an order u/s 263 of the Act when he finds from the records of the assessment orders that such are not in accordance with law, inconsequence whereof lawful revenue due to the State has not been realized or cannot be realized. The Hon‟ble Delhi High Court in the case of Gee Vee Enterprises (supra) has observed and held that the position and function of the ITO is very different from that of the Civil Court. The Civil Court is neutral. It simply gives decision on the basis of pleadings and evidences which comes before it. The I.T.O is not only an adjudicator but also an investigator. It is his duty to ascertain the truth of the facts stated in the return where the circumstances of the case are such as to provoke an inquiry. It is incumbent on the part of the ITO to further investigate the facts stated in the return which if not done then with the words “erroneous” in sec. 263 shall include the failure to make such an inquiry. The order becomes erroneous simply 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. In the said judgment, Hon‟ble Delhi High Court has referred to earlier decisions of the Hon‟ble Supreme Court in the case of Rampyari Devi Saraogi Vs. CIT (1968) 67 ITR 84 (SC) and Tara Devi Aggrawal Vs. CITY (1973) 88 ITR 323 (SC) wherein it has been held that where the A.O has accepted a particular contention/issue without any inquiry or evidence whatsoever, the order is erroneous and prejudicial to the interests of the Revenue. The aforesaid observation has to be understood in the light of the present case, where the A.O has not conducted any inquiry or examined the said 7/12 extracts which were in front of him. Therefore, this case has to be seen differently from the case where the A.O has conducted inquiry but the findings were erroneous. In the present facts it‟s a case of lack of inquiry by the A.O and not inadequate inquiry.

In view of the aforestated examination of facts and circumstances and judicial pronouncements we are of the considered view that the ld. Pr. CIT was justified in assuming revisionary jurisdiction and passing an order u/s 263 of the Act which is hereby upheld.

In the result, the appeal of the assessee stands dismissed. 16 Since parties had agreed that the facts and circumstances and the issues in A.Y. 2016-17 in the case of Shobha Ramchandra Chaudhary are absolutely identical with the case of the assessee (Ramchandra Vishnu Chaudhary) in for A.Y. 2016-17. Therefore, our decision in ITA No. 177/PUN/2021 for A.Y. 2016-17 shall apply mutatis mutandis to ITA No. 176/PUN/2021 for A.Y. 2016-17.

In the combined result, both the appeals of the assessee are dismissed.