Shri Pooranchand Chouksey,, Vidisha v. The ACIT, Sagar

ITA 131/JAB/2008 | 2002-2003
Pronouncement Date: 25-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 13122714 RSA 2008
Assessee PAN ACJPC8634Q
Bench Indore
Appeal Number ITA 131/JAB/2008
Duration Of Justice 2 year(s) 8 month(s) 16 day(s)
Appellant Shri Pooranchand Chouksey,, Vidisha
Respondent The ACIT, Sagar
Appeal Type Income Tax Appeal
Pronouncement Date 25-01-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 25-01-2011
Date Of Final Hearing 22-10-2010
Next Hearing Date 22-10-2010
Assessment Year 2002-2003
Appeal Filed On 09-05-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI R.C. SHARMA ACCOUNTANT MEMBER ITA NOS.127 TO 133/JAB/2008 A.YS. 1998 - 99 TO 2004 - 05 POORANCHAND CHOUKSEY CHOUKSEY VILLA VILL. MADHOGANJ VIDISHA PAN ACJPC 8634 Q APPELLANT VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE SAGAR RESPONDENT APPELLANT BY S/SH H.P. VERMA ASHISH GOYAL G.AGRAWAL RESPONDENT BY K.K. SINGH CIT DR ORDER PER R.C. SHARMA A.M. THESE APP EALS ARE FILED BY THE ASSESSEE AGAINST THE CONSOLIDATED ORDER OF LD. CIT - I JABALPUR DATED 28.3.2008 PASSED U/S 263 OF THE INCOME - TAX ACT 1961 ON THE COMMON GROUNDS WHICH READ AS UNDER: (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE ORDE R PASSED BY THE LD. CIT U/S 263 OF THE I.T. ACT IS ILLEGAL INVALID AND UNTENABLE IN LAW. THE SAME BE KINDLY QUASHED. - : 2 : - 2 (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT WAS NOT JUSTIFIED IN HOLDING THAT THE AO HAD NOT CONDUCTED PROPER ENQUIRIE S ABOUT THE BUSINESS ACTIVITIES OF THE APPELLANT AND IN DIRECTING THE AO TO MAKE THE ASSESSMENT DE - NOVO. (III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT WAS NOT JUSTIFIED IN HOLDING THAT THE AO DID NOT CONDUCT THE PROPER ENQUIRIES IN RELATION TO SIKMMI & LEASE HOLD LANDS BEFORE ACCEPTING THE INCOME FROM AGRICULTURE OF THE APPELLANT AND IN DIRECTING THE AO TO MAKE THE ASSESSMENT DE - NOVO. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS AN AGRICULTURIST AND CARRYING ON FOODGRAIN BUSINESS IN THE NAME OF M/S. RAHUL TRADERS. THERE WAS SEARCH AT THE ASSESSEE S PREMISES. DURING THE COURSE OF SEARCH VARIOUS PAPERS RELATED TO BUSINESS OF M/S. RAHUL TRADERS HAVE BEEN FOUND FROM THE RESIDENTIAL PREM ISES OF THE ASSESSEE. THESE PAPERS CONTAINED NUMEROUS TRANSACTIONS OF GRAIN BUSINESS. HOWEVER THE - : 3 : - 3 ASSESSEE HAD NOT SHOWN ANY INCOME ON ACCOUNT OF SUCH GRAIN BUSINESS. THE ASSESSEE HAD SHOWN AGRICULTURAL INCOME IN RESPECT OF AGRICULTURAL OPERATION ON LARGE AGRICULTURAL LAND HOLDINGS. IT WAS CLAIMED THAT HE WAS OWNER OF 56.92 ACRES OF AGRICULTURAL LAND AND ALSO POSSESSING SIKMMI LAND OF 88.48 ACRES AND LEASE HOLD LAND OF 54.5 ACRES. FOLLOWING AGRICULTURAL INCOME WAS OFFERED BY THE ASSESSEE IN THE RETURN FILE D IN COMPLIANCE OF NOTICE ISSUED U/S 153A IN VARIOUS ASSESSMENT YEARS : - ASSESSMENT YEAR INCOME FROM AGRICULTURE 1998 - 99 17 70 000.00 1999 - 00 18 20 000.00 2000 - 01 18 90 000.00 2001 - 02 19 30 000.00 2002 - 03 23 60 000.00 2003 - 04 24 80 000.00 2004 - 05 26 00 000.00 TOTAL 1 48 50 000.00 4. WHILE FRAMING THE ASSESSMENT U/S 153A/143(3) THE AO CONDUCTED DETAILED INQUIRIES AND ACCEPTED THE INCOME RETURNED UNDER THE HEAD INCOME FROM AGRICULTURAL ONLY - : 4 : - 4 PARTLY . THE AO HAS ALSO COMPUTED INCOME ON ACCOUNT OF G RAIN BUSINESS. AFTER COMPLETION OF ASSESSMENT ON 29.3.2006 THE LD. CIT CALLED UPON THE RECORD AND FOUND THAT ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IN SUPPORT OF CIT S ALLEGATION THAT THE ASSES SEE HAS NOT DISCLOSED INCOME IN RESPECT OF ITS TRANSACTION IN M/S. RAHUL TRADERS IT WAS REPLIED THAT GRAIN BUSINESS BELONGS TO HIS BROTHER. THE LD. CIT FOUND THAT RAHUL IS THE NAME OF ONE OF HIS SONS AFTER WHOSE NAME THE GRAIN BUSINESS CONCERN HAS BEEN NA MED I.E. RAHUL TRADERS. THE LD. CIT FURTHER FOUND THAT IN THE COURSE OF SEARCH VARIOUS DOCUMENT WERE FOUND INDICATING THAT THE ASSESSEE WAS SELLING HIS AGRICULTURAL PRODUCE TO THIS CONCERN. HE MIGHT HAVE TAKEN THE GRAIN BUSINESS LICENCE IN THE NAME OF HIS BROTHER BUT THE AVAILABILITY OF DOCUMENTS INDICATE THAT IT WAS HIS CONCERN AND THE AO HAS NOT ENQUIRED INTO THIS ASPECT IN DETAIL WHICH HAS RENDERED THE ASSESSMENT ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTERESTS OF REVENUE . THE LD. CIT FURTHER FOUND THAT TURNOVER OF THE GRAIN BUSINESS WAS MORE THAN RS. 40 LAKHS IN TWO YEARS AND AS PER PROVISIONS OF SECTION 44AB THE SAME WAS - : 5 : - 5 REQUIRED TO BE AUDITED. THE ASSESSEE DESPITE HAVING TAXABLE INCOME DID NOT FILE THE RETURN. HE FURTHER OBSERVED THAT EVEN THOUGH THE ASSESSEE WAS REQUIRED TO FILE RETURN UNDER 1/6 TH SCHEME EVEN THEN NO RETURN WAS FILED. FURTHER OBSERVATION OF THE LD. CIT WAS THAT IF THE ASSESSEE HAD SHOWN THE AGRICULTURAL INCOME AS HE HAD CLAIMED THE SAME WOULD HAVE BEEN TAXED AT A HIGHER RATE AS AGRICULTURAL INCOME WOULD HAVE BEEN CONSIDERED FOR RATE PURPOSES. 5. WITH REGARD TO AGRICULTURAL INCOME SHOWN BY THE ASSESSEE IN THE BLOCK RETURN IT WAS SUBMITTED THAT VARIOUS DOCUMENTS SUPPORTING HOLDING OF HUGE AGRICULTURAL INCOME OF ASSESSEE IN ITS OWNER SHIP AS WELL AS ON LEASE IN RESPECT OF SIKMMI LAND WAS FILED BEFORE THE AO AND BEFORE ACCEPTING THE INCOME SO DECLARED THE AO HAS MADE FULL ENQUIRY AT THE TIME OF ASSESSMENT E A RNING PER ACRE AS ASSESSED BY THE DY. DIRECTOR OF AGRICULTURE WAS ALSO CLAIMED TO BE PLACED ON RECORD BEFORE THE AO. IT WAS CLAIMED THAT INCOME PER ACRE WAS RS. 10 000/ - IN RESPECT OF LEASE HOLD RENT THE LEASE RENT HAD BEEN PAID AT RS. 750/ - PER ACRE. THE LD. CIT OBSERVED THAT AS PER REPLY FILED BEFORE HIM DURING THE COURSE OF PROC EEDINGS U/S - : 6 : - 6 263 IT WAS SUBMISSION OF THE ASSESSEE THAT HE IS NOT MAKING ANY LEASE RENT PAYMENT IN RESPECT OF SIKMMI LAND. WITH RESPECT OF LAND O WNED BY THE ASSESSEE MEASURING 56.92 ACRES THE LD. CIT WAS SATISFIED. HOWEVER WITH CLAIM OF CULTIVATION OF SI KM M I AND LEASE HOLD LAND THE LD. CIT WAS NOT SATISFIED WITH THE INCOME SHOWN THEREFROM. THE LD. CIT ALSO FOUND THAT THE ORDER BY THE TEHSILDAR REGARDING HIS POSSESSION ON LAND BELONGING TO RAJESH S/O CHHOTELAL RAMGOPAL & AJAY SINGH SONS OF BHAGWAN SINGH SAME IS CONTRARY TO THE FACTS ON RECORD. IN THE ORDER IT HAS BEEN MENTIONED THAT THE ASSESSEE WAS IN OCCUPATION OF THE LANDS BELONGING TO THESE THREE PERSONS FOR LAST 5 - 6 YEARS. WHEREAS NO ENTRY IN THE KHASRA PANCH SHALA COLUMN NO.4 INDICATES THAT THE CLA IM OF POSSESSION OF THE LAND ACCEPTED BY THE TEHSILDAR WAS DOUBTFUL WHICH OUGHT TO HAVE BEEN ENQUIRED BY THE ASSESSING OFFICER BEFORE ACCEPTANCE OF ASSESSEE S CLAIM OF CULTIVATION OF AGRICULTURAL LAND TAKEN ON SIKMMI AND LEASE. 6. IN VIEW OF THE ABOVE THE LD . CIT CONCLUDED THAT THE ASSESSEE S CLAIM OF EARNING HUGE AGRICULTURAL INCOME IS - : 7 : - 7 DOUBTFUL WHICH HE HAS PROCURED WITH A VIEW TO EXPLAIN AWAY VARIOUS INVESTMENT MADE BY HIM. 7. IT WAS FURTHER OBSERVED BY THE LD. CIT THAT THE RECOVERY OF NUMBER OF PAPERS/DOCUME NTS INDICATING HIS INVOLVEMENT IN BUSINESS ACTIVITIES CLEARLY SHOWS THAT THE CLAIM THAT HE WAS A PURE AGRICULTURIST TILL 01.04.2003 IS NOT ACCEPTABLE. APART FROM THE GRAIN BUSINESS HE HAD TAKEN LIQUOR SHOP IN FINANCIAL YEAR 2001 - 02 IN THE NAME OF MADANLAL CHOUKSEY WHICH APPEARS TO BE BENAMI OTHERWISE THE PAPERS WOULD NOT HAVE BEEN FOUND FROM HIS PREMISES. THE ASSESSEE WAS PARTNER OF M/S. SANCHI TRADERS AGAIN A LIQUOR BUSINESS IN FINANCIAL YEAR 1998 - 99 ALSO SHOWS THAT HE WAS INVOLVED IN THIS BUSINESS ACTIVI TY. THE ASSESSEE HAD PURCHASED THE LAND AND THE RECOVERY OF LAY OUT PLAN OF CHOUKSEY NAGAR ALSO INDICATES HIS INVOLVEMENT IN REAL ESTATE BUSINESS. 8. AFTER HAVING THE ABOVE OBSERVATION THE LD. CIT SET - ASIDE THE ORDER OF THE AO ON THESE POINTS AND RESTORED TH E MATTER BACK TO THE FILE OF THE AO FOR FRAMING FRESH ASSESSMENT DE NOVO AFTER MAKING PROPER ENQUIRIES INTO ALL THESE ISSUES. - : 8 : - 8 9. AGGRIEVED BY THE ABOVE ORDER THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 10. IT WAS CONTENDED BY THE LD. AUTHORIZED REPRESENTATIVE T HAT WITH REGARD TO THE INVESTMENT IN DALL MILL AND PURCHASE OF HOUSE PROPERTY THE LD. CIT HIMSELF HAS DROPPED THE PROCEEDINGS . IN RESPECT OF FOODGRAIN BUSINESS IN THE NAME OF RAHUL TRADERS IT WAS SUBMITTED THAT IT BELONGED TO THE ASSESSEE S ELDER BROTH ER. HOWEVER BEFORE THE AO THE ASSESSEE HAD SUBMITTED THAT HIS BUSINESS OF FOODGRAIN EARNED INCOME BELOW TAXABLE LIMIT. THE AO HAS CONSIDERED ALL THE ASPECTS AND MADE ADDITIONS EVEN IN RESPECT OF FOODGRAIN BUSINESS. AO HAS ALSO MADE DETAILED INQUIRIES WIT H REGARD TO HOLDING OF VARIOUS KINDS OF LAND ON OWNERSHIP LEASE HOLD SIKMMI ETC. AND ITS CULTIVATION AND ACCEPTED VERY SMALL PORTION OF SUCH AGRICULTURAL INCOME. THERE WAS NO INFIRMITY IN THE ORDER OF THE AO SO AS TO RENDER IT P REJUDICIAL TO THE INTERESTS OF REVENUE. 11. IT WAS FURTHER SUBMITTED THAT WITH RESPECT TO THE DISCLOSURE OF AGRICULTURAL INCOME ALL THE NECESSARY ENQUIRIES WERE DULY MADE BY THE ASSESSING OFFICER AFTER CONSIDERING ALL - : 9 : - 9 THE EVIDENCES PLACED ON RECORD AND WHICH ARE CONTAINED IN PAPER BOOK AS TABULATED BELOW. OUR ATTENTION WAS ALSO INVITED TO THE RELEVANT PAGE NOS. OF AO S ORDER WHEREIN HE HAS DEALT WITH THE RELEVANT EVIDENCE FOR EARNING OF AGRICULTURAL INCOME WHICH ARE AS UNDER : - AO PAGE I TEM/COLUMN 8. BS - 2/1 PB 43 9. BS - 2 /2 PAGE 17 ONWARDS. PB 44 10. BS - 2/3 PB 11. LPS - 1/4 & LPS - 1/6 PB 46 12. PAGE MARKED 85 PB 46 13. PARA 2(B) PB 48 16. PARA 33 & 37 PB 51. ENQUIRY 17. PARA 50 52 PB 30. PARA 3 4. PB 65 12. FURTHER CONTENTION OF THE LD. AUTHORIZED REPRESENTATIVE WAS THAT WHEN ENQUIRY IN DE TAIL WAS MADE BY THE ASSESSING OFFICER IT CANNOT BE SAID THAT THE CIRCUMSTANCES SUGGESTED THAT MORE ENQUIRY WOULD HAVE BEEN NECESSARY OR PRUDENT AS OBSERVED BY THE LD. CIT AT PAGE 2 PARA 3.2. BY - : 10 : - 10 RELYING THE DECISION OF CALCUTTA TRIBUNAL IN THE CASE OF J. K. INDUSTRIES LIMITED 283 ( AT) 101 IT WAS SUBMITTED THAT IF THE LD. AO FOLLOWED A PERMISSIVE VIEW IT CANNOT BE SAID THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. RELYING ON THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF GANPAT RAM BIGHNOI 296 ITR 292 WHEREIN IT WAS HELD THAT THE LD. CIT HAS NO POWER TO RE - START ENQUIRY TO GO INTO THE PROCESS OF ASSESSMENT AGAIN. AS PER LD. AUTHORIZED REPRESENTATIVE WHERE IT WAS FOUND THAT THE AO HAS MADE ASSESSMENT AFTER MA KING RELEVANT ENQUIRY AND CONSIDERING ALL ASPECTS OF THE MATTER JURISDICTION U/S 263 CANNOT BE ASSUMED. HE FURTHER SUBMITTED THAT THE ASSESSEE WAS AWARDED KRISHAK RATNA AWARDED BY THE PRESIDENT OF INDIA WHICH ITSELF PROVE THE EARNING OF SUBSTANTIAL AGRIC ULTURAL INCOME BY THE ASSESSEE . 13. WITH RESPECT TO LIQUOR BUSINESS OF SANCHI TRADERS CONTENTION OF LD. AUTHORIZED REPRESENTATIVE WAS THAT THERE WAS NO REASON BEFORE THE LD. CIT TO PRESUME AND OBSERVE THAT THE ASSESSEE TOOK LIQUOR SHOP IN THE FINANCIAL YEAR 2 001 - 02 IN THE NAME OF MADANLAL CHOUKSEY. HE WAS PARTNER OF M/S. SANCHI - : 11 : - 11 TRADERS IN FINANCIAL YEAR 1998 - 99 AND THESE FACTS WERE DULY ENQUIRED INTO BY THE ASSESSING OFFICER ABOUT LIQUOR BUSINESS. BY RELYING ON THE RELEVANT PROPOSITION HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIES 243 ITR 83 IT WAS SUBMITTED THAT WHERE TWO VIEWS ARE EQUALLY POSSIBLE THE VIEW TAKEN BY THE ASSESSING OFFICER AFTER DUE ENQUIRY MAY NOT JUSTIFY REVISION. 14. ON THE OTHER HAND THE LD. CIT DR DREW OUR ATTENTION TO DETAILED OB SERVATION MADE BY CIT IN HIS ORDER U/S 263 HIGHLIGHTING THE LACK OF INQUIRY MADE BY THE ASSESSING OFFICER BEFORE ACCEPTING THE INCOME OFFERED BY THE ASSESSEE. AS PER LD. CIT DR SINCE THE MATTER IS RESTORED BACK TO THE AO FOR MAKING INQUIRY AND DECIDE THE I SSUE ACCORDINGLY THE ASSESSEE SHOULD NOT BE AGGRIEVED BY THE SAME. 15. WE HAVE CONSIDERED THE RIVAL CONTENTIONS CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND DELIBERATED ON THE CASE LAWS CITED BEFORE US IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE. SECTION 263 EMPOWERS THE CIT FOR REVISION OF THE ORDERS IN A CASE WHERE AFTER CALLING FOR AND EXAMINING THE RECORD OF ANY PROCEEDINGS UNDER THE ACT HE - : 12 : - 12 CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. IN THAT CASE HE IS EMPOWERED TO PASS ORDER U/S 263 BY WHICH HE CAN ENHANCE OR MODIFY THE ASSESSMENT OR CANCEL THE ASSESSMENT AND DIRECT THE ASSESSING OFFICER TO MAKE A FRESH ASSESSMENT AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD. IN THE CASE OF MALABAR INDUSTRIAL COMPANY VS. CIT (243 ITR 83) WHILE INTERPRETING SECTION 263 IT HAS BEEN HELD BY HON BLE SUPREME COURT THAT FOR EXERCISING POWER U/S 263 IT IS ESSENTIAL THAT THE ASSESSMENT ORDER WHICH IS P ASSED BY THE ASSESSING OFFICER AND WHICH IS SUBJECT TO SECTION 263 SHOULD BE ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. IT WAS OBSERVED THAT IN ORDER TO INVOKE SECTION 263 THE COMMISSIONER HAS TO BE SATISFIED ON TWO CONDITIONS: (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IF ONE OF THEM IS ABSENT IF THE ORDER OF THE INCOME - TAX OFFICER IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE INTEREST OF REVENUE O R IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE INTEREST OF REVENUE RECOURSE CANNOT BE TAKEN TO SECTION - : 13 : - 13 263 (1) OF THE ACT. IT WAS OBSERVED THAT THE PROVISIONS OF SECTION 263 CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMI TTED BY THE ASSESSING OFFICER. IT IS ONLY WHEN AN ORDER IS ERRONEOUS SECTION 263 WILL BE ATTRACTED. DEFINING THE WORD ERRONEOUS IT WAS OBSERVED THAT AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF T HE ORDER BEING ERRONEOUS. THEREFORE IN ORDER TO HOLD AN ORDER TO BE ERRONEOUS IT MUST BE PASSED EITHER ON AN INCORRECT ASSUMPTION OF FACTS OR THERE MUST BE AN INCORRECT APPLICATION OF LAW. WHILE DEFINING THE TERM PREJUDICIAL TO THE INTEREST OF REVENUE IT WAS OBSERVED BY HON BLE SUPREME COURT THAT IT IS NOT AN EXPRESSION OF ART AND IS NOT DEFINED IN THE ACT. THE SAID TERM UNDERSTOOD IN ITS ORDINARY MEANING IS OF WIDE IMPORT AND IS NOT CONFINED TO MERE LOSS OF TAX. THE SCHEME OF THE ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND SUCH TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO AN ERRONEOUS ORDER OF THE ASSESSING OFFICER THE REVENUE IS LOSING TAX PAYABLE BY A PERSON IT WILL CERTAINLY BE PREJUDICIAL TO THE INTEREST O F THE REVENUE. IT WAS OBSERVED THAT THE PHRASE PREJUDICIAL TO THE - : 14 : - 14 INTEREST OF REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CAN NOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF REVENUE. FURTHER CLARIFYING IT WAS OBSERVED THAT WHEN AN ITO ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE OR WHERE TWO VIEWS WERE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH COMMISSIONER DOES NOT AGREE IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF REVENUE UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE TO LAW. WITH RESPECT TO THE RELIANCE PLACED BY LD . CIT DR ON THE PROPOSITION OF DELHI HIGH COURT IN THE CAS E OF GEE VEE ENTERPRISES (SUPRA ) WHEREIN NON MAKING OF INQUIRY BY THE AO WAS STATED TO JUSTIFY THE ACTION OF CIT U/S 263 IT IS VERY PERTINENT TO MENTION THE LATEST DECISION OF HON'BLE JURISDICTIONA L HIGH COURT IN THE CASE OF M/S VIKAS POLYMERS IN ITR 3/1991 DATED 16.8.2010 WHEREIN IT WAS OBSERVED THAT MERELY BY STATING THAT ASSESSEE HAS NOT FILED CERTAIN DOCUMENTS ON RECORD AT THE TIME OF ASSESSMENT IT DOES NOT - : 15 : - 15 JUSTIFY THE CONCLUSION ARRIVED AT B Y THE COMMISSIONER THAT AO HAS SHIRKED HIS RESPONSIBILITY OF EXAMINING AND INVESTIGATING THE CASE. IT WAS FURTHER OBSERVED THAT IN VIEW OF THE FACT THAT ASSESSEE HAS EXPLAINED THE CAPITAL INVESTMENT MADE BY THE PARTNERS WHICH HAD BEEN CALLED INTO QUESTIO N BY THE COMMISSIONER DURING THE COURSE OF PROCEEDINGS BEFORE HIM THE CIT WAS HELD TO BE NOT JUSTIFIED IN PASSING ORDER U/S 263. IN VIEW OF THE ABOVE JUDGMENT AS PER OUR CONSIDERED VIEW WHEN THE ASSESSEE HAS FILED ALL THE INFORMATION AS CALLED BY THE C IT BEFORE HIM HE SHOULD HAVE EXAMINED THE SAME AND IF NOTHING IS FOUND WRONG HE SHOULD HAVE DROPPED THE PROCEEDINGS RATHER THAN RESTORING THE MATTER BACK TO THE FILE OF THE AO FOR EXAMINING AGAIN. THE PRIMARY CONDITION WITH REGARD TO THE ORDER OF THE AO BEING PREJUDICIAL TO THE INTEREST OF THE REVENUE IS NOT SATISFIED IN THIS CASE THEREFORE HON BLE COURT HAS HELD THAT THE ORDER OF CIT U/S 263 WAS BAD IN LAW. ACCORDINGLY IT WAS HELD THAT WHERE THE CIT HAS STATED IN HIS ORDER THAT AO HAS NOT EXAMINED CE RTAIN ITEMS ASSUMING THIS TO BE SO THE ORDER WILL ONLY BE ERRONEOUS BUT IT CANNOT BE SAID TO BE PREJUDICIAL TO THE INTEREST OF THE REVENUE TILL THE CIT DEALT - : 16 : - 16 WITH THE EXPLANATION GIVEN BY THE ASSESSEE WITH REGARD TO THE ITEMS ALLEGED BY HIM IN THE COURS E OF PROCEEDINGS U/S 263. MEANING THEREBY THE CIT SHOULD HAVE APPRECIATED THE REPLY FILED BY THE ASSESSEE AND MERELY BY STATING THAT AO HAS NOT EXAMINED CERTAIN POINTS HE CANNOT EXERCISE HIS REVISIONARY JURISDICTION U/S 263 INSOFAR AS SUCH ORDER CAN BE BRANDED AS ERRONEOUS BUT CANNOT BE SAID TO BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. SINCE BOTH THE CONDITIONS OF ORDER BEING ERRONEOUS AND ALSO PREJUDICIAL TO THE INTEREST OF REVENUE IS REQUIRED TO BE SATISFIED WHILE PASSING THE ORDER U/S 263. MERE LY ON THE PLEA THAT ORDER OF THE AO IS ERRONEOUS POWER U/S 263 CANNOT BE EXERCISED UNLESS THE ORDER IS ALSO FOUND TO BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. FROM THE RECORD WE FOUND THAT THE ASSESSEE WAS AGRICULTURIST THEREFORE NO RETURN WAS FI LED ON THE PLEA THAT THE SAME WAS NOT LIABLE TO TAX. THERE WAS SEARCH AT ASSESSEE S PREMISES ON 8.12.2003. AFTER SEARCH THE AO ISSUED NOTICE U/S 153A AND THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE PRECEDING 6 YEARS ON 13.12.2006 ALONGWITH PERIOD OF S EARCH. IN THE RETURNS SO FILED HUGE AGRICULTURAL INCOME WAS SHOWN. DURING THE COURSE OF - : 17 : - 17 SEARCH VARIOUS BANK ACCOUNTS IN THE NAME OF FAMILY MEMBERS OF ASSESSEE WERE FOUND AND INVENTORIZED . A S PER ANNEXURE BK - I THE ASSESSEE IS PARTNER IN M/S. ASHOK TRADER S. HE HAS CLAIMED THAT HIS SOURCE OF INCOME IS AGRICULTURAL ACTIVITIES. HE HAS ALSO GIVEN BANK GUARANTEE WORTH RS. 1 CRORE TO EXCISE DEPARTMENT ON BEHALF OF FIRM M/S. ASHOK TRADERS . HE HAS NEVER FILED HIS RETURN OF INCOME BUT HE HAS BEEN ALLOTTED PAN. 16. VA RIOUS DOCUMENTS IN RESPECT OF TRANSACTION OF M/S. RAHUL TRADERS W ERE ALSO FOUND. WHILE FRAMING THE ASSESSMENT U/S 153A THE AO OBSERVED THAT M/S. RAHUL TRADERS BELONGS TO THE ASSESSEE AND IS CARRYING ON FOODGRAIN BUSINESS OF A VERY SMALL SCALE. THE AO FURT HER OBSERVED THAT THE ASSESSEE ALSO SELLS IS OWN AGRICULTURAL PRODUCE THROUGH THE ABOVE CONCERN. BY OBSERVING THAT BUSINESS WAS CARRIED ON AT A VERY SMALL SCALE THE AO ESTIMATED INCOME AT 0.5% ON THE ESTIMATED SALES. WITH REGARD TO THE AGRICULTURAL INCOME SHOWN THE AO OBSERVED THAT THE ASSESSEE WAS HAVING AGRICULTURAL LAND IN HIS NAME AND IN THE NAME OF HIS FAMILY MEMBERS WHERE ON DIFFERENT FOODGRAINS WERE PRODUCED. IN RESPECT OF THE AGRICULTURAL INCOME SHOWN BY THE ASSESSEE THE AO HAS - : 18 : - 18 OBSERVED THAT THE INCOME HAS BEEN ESTIMATED BETWEEN RS. 9000/ - TO RS. 13000/ - PER ACRE FROM YEAR TO YEAR. BY OBSERVING THAT THE ASSESSEE WAS USING MECHANICAL EQUIPMENT MODERN SEEDS LATEST TECHNIQUE OF CULTIVATION ON HIGH IRRIGATED LAND THE ESTIMATION OF INCOME AS OFFERE D BY THE ASSESSEE WAS REDUCED BY APPLYING THE RATE OF 8750/ - + 10 750/ - PER ACRE. 17. WITH REGARD TO AO S QUERY REGARDING EARNING OF HUGE AGRICULTURAL INCOME FOLLOWING EXPLANATION W AS SUBMITTED BEFORE THE AO : - THE ASSESSEE AND HIS WIFE SMT. KUNTIDEVI CHOUKS EY OWNED APPROXIMATELY 25 ACRES OF AGRICULTURAL LAND IN VILLAGE VIJAYPUR AND KHEJADA IN DISTRICT VIDISHA FOR PAST MANY YEARS. THEY WERE ALSO HAVING THE LAND ON SHIKMI AT 88.45 ACRES INVESTMENT ILL. VIJAYPUR KHEJADA BEHRIYAI IN VIDISHA DISTRICT. SINCE THE A SSESSEE WAS IN POSSESSION OF LAND FOR MORE THAN 15 YEARS THE LAND HAS BEEN TRANSFERRED IN HIS NAME BY TAHSILDAR U/S 114/116 OF M.P. LAND REVENUE CODE 1959. HE WAS ALSO IN POSSESSION OF LEASE HOLD LAND AT ABOUT 54.55 ACRES FOR MORE THAN 10 YEARS IN VILL. ANDIYAKALA PIPALDHAR AND GODIYAKHEDA. THE ASSESSEE PURCHASED NEARLY 32 ACRES OF AGRICULTURAL LAND DURING THE PERIOD 01.04.97 TO 29.10.02. THE - : 19 : - 19 DETAILS OF ALL THE LAND IN OWNERSHIP ( 56.92 ACRES) IN SHIKMI ( 88.45 ACRES) AND LEASE (54.45 ACRES) TOTALING TO 199.82 ACRES ARE PLACED AT P.NO.1 OF COMPILATION. THE TITLE DEEDS ABOUT THE OWNERSHIP LAND ARE ENCLOSED AT P.NO. 3 TO 77. THE COPIES OF THE ORDER OF THE TAHSILDAR FOR TRANSFER OF LAND IN THE NAME OF ASSESSEE ADMEASURING ABOUT 88.45 ACRES ARE PLACED AT P.NO .92 TO 94 & 107 TO 109. THE AFFIDAVIT OF SHRI VIKRAM SINGH HARVILAS AND NARAYANSINGH ARE ENCLOSED AT P.NO.116 & 144 WHICH CONFIRM THAT THEIR LAND WAS GIVEN ON LEASE TO THE ASSESSEE AT THE FIXED RENTAL OF DIFFERENT RATES IN DIFFERENT YEAR FOR IRRIGATED AND UNIRRIGATED LAND. ALL THIS LAND AT ABOUT 200 ACRES IS BEING CULTIVATED BY THE ASSESSEE. ALL THE LAND OF THE ASSESSEE IS UNDER THE MECHANIZED FARMING AND IRRIGATED FROM THE SOURCES OF WELLS (5) TUBE WELL (1) AND RIVER. HE ALSO OWNS THREE TR ACTORS THRESHE RS (3) AND HASTI PIPES MEASURING 30000 FT. AND SPRINKLES. THE ASSESSEE IS ONE OF THE BIG CULTIVATOR IN VIDISHA DISTRICT. HE WAS ALSO AWARDED THE FIRST PRIZE AS A UTKRISHT KISSAN OF THE DISTRICT. ALL THE LAND WAS UNDER CULTIVATION AND THE ASSESSEE WAS PRODU CING DIFFERENT CROPS LIKE SOYABEAN TUR WHEAT GRAM AND MASOOR AND SAFEDMOSLI FROM TIME TO TIME. THE ASSESSEE COULD NOT GET THE COPIES OF KHASRA FOR ALL THE YEARS UNDER CONSIDERATION BECAUSE THE KHASRA RECORD IN TAHSIL - : 20 : - 20 OFFICE IS AVAILABLE FOR ONLY 5 YEARS. HOWEVER THE KHASRA COPIES FOR 2001 ONWARDS ARE AVAILABLE AND THE COPIES OF THE SAME ARE ENCLOSED HEREWITH. THE SUMMARY OF THE KHASRA FOR THREE YEARS IS PLACED AT P.NO.2 OF THE COMPILATION. AT THE TIME OF SEARCH CERTAIN RECEIPTS SHOWING STORAGE OF THE AG RICULTURAL PRODUCE IN GOVERNMENT GODOWNS AND THEIR SALES WERE FOUND. SUCH SEIZED PAPER REFLECT THE SALE OF AGRICULTURAL PRODUCT OF RS. 22 00 000/ - IN DIFFERENT ASSESSMENT YEARS. THESE SEIZED PAPERS ARE PLACED AT P.NO.145 TO 254 OF THE COMPILATION. 18. AFTER CONDUCTING DETAILED INQUIRIES WITH REGARD TO ASSESSEE S LAND HOLDING AND CONSIDERING THE ENTIRE MATERIAL PLACED ON RECORD WITH REGARD TO TAKING ON LEASE OF THE AGRICULTURAL LAND VIS - - VIS SIKMI LAND AND THE AGRICULTURAL LAND OWNED BY THE ASSESSEE HIMSELF THE AO HAS REACHED TO THE FOLLOWING CONCLUSIONS : - A.Y. LAND AREA AGRICUL - TURAL INCOME SHOWN RATE/ACRE RATE ADOPTED BY AO AGRICUL TURAL INCOME CALCULATED BY AO ADDI TION AM OUNT SUSTAIN ED BY AO 1998 - 99 18 9 .62 1770000 9334.458 8750 1659175 110825 199 9 - 00 189.62 1820000 9598.144 8750 1659175 160825 - : 21 : - 21 2000 - 01 194.01 1890000 9741.766 9250 1794592 95408 2001 - 02 194.01 1930000 9947. 941 9250 1794592 135408 2002 - 03 197.36 5 2360000 11957.54 9750 1924308 435692 2003 - 04 199.82 2480000 12411.17 10250 2048155 4 31845 2004 - 05 199.82 2600000 13011.71 10750 2148065 451935 19. IT IS CRYSTAL CLEAR FROM THE DETAILED ENQUIRY MADE BY THE ASSESSING OFFICER THAT HE HAS PARTLY ACCEPTED AGRICULTURAL INCOME OFFERED BY THE ASSESSEE. THE AMOUNT OF INCOME ARRIVED AT BY THE ASSESS ING OFFICER PER ACRE OF LAND APPEARS TO BE VERY REASONABLE WHICH HE HAS ARRIVED AT AFTER MAKING DETAILED ENQUIRY. THERE IS NO DISPUTE TO THE WELL SETTLED PROPOSITION THAT POWER U/S 263 CANNOT BE EXERCISED WHERE THE AO HAS TAKEN ONE VIEW AFTER MAKING DETAI LED INQUIRY TO WHICH THE LD. CIT DOES NOT AGREE UNLESS THE SAME IS SUSTAINABLE IN LAW. SECTION 263 CANNOT BE INVOKED JUST TO SUBSTITUTE CIT S OPINION IN PLACE OF AO S OPINION REACHED AFTER MAKING DETAILED INQUIRY. KEEPING IN VIEW THE DETAILED INQUIRY MADE BY THE ASSESSING OFFICER WHILE ARRIVING AT THE AGRICULTURAL INCOME BEING EARNED BY HIM - : 22 : - 22 OUT OF TOTAL AGRICULTURAL INCOME OFFERED BY HIM WE DO NOT FIND ANY INFIRMITY IN THIS PART OF THE AO S ORDER. ACCORDINGLY THE INTERFERENCE OF LD. CIT U/S 263 ALLEGING THIS PART OF ORDER OF THE AO AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE IS NOT SUSTAINABLE AT ALL. 20. WITH RESPECT TO THE INCOME EARNED THROUGH M/S. RAHUL TRADERS WE FOUND THAT VARIOUS INCRIMINATING DOCUMENTS AS FOUND DURING COURSE OF SE ARCH WERE NOT ENQUIRED FULLY TO ARRIVE AT THE CORRECT INCOME BEING EARNED BY THE ASSESSEE. HOWEVER THE AO HAS JUST ESTIMATED 1 % INCOME ON THE TURNOVER FOR THE ASSESSMENT YEAR 1998 - 99 TO 2002 - 03 AND IN RESPECT OF ASSESSMENT YEAR 2003 - 04 AND ASSESSMENT YEA R 2004 - 05 @ 2%. SINCE THE PROPER ENQUIRY WAS NOT MA DE IN THE INCRIMINATING DOCUMENTS FOUND DURING COURSE OF SEARCH IN RESPECT OF TRANSACTIONS WITH BUSINESS CARRIED ON BY THE ASSESSEE I N THE NAME M/S. RAHUL TRADERS THE FINDING OF THE LD. CIT TO THE EFFECT THAT THIS PART OF THE AO S ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE IS UPHELD. ACCORDINGLY WE UPHOLD ONLY THIS PART OF - : 23 : - 23 THE LD. CIT S ORDER U/S 263 WITH A DIRECTION TO THE AO TO MAKE THE FULL ENQUIRY AND DECIDE THE ISS UE AFRESH. 21. IN THE RESULT THE APPEAL OF THE ASSESSEE IN ALL THE YEARS ARE ALLOWED IN PART IN TERMS INDICATED HEREINABOVE . THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 25 TH JANUARY 201 1 . SD/ - SD/ - (JOGINDER SINGH) (R.C. S HARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 25 TH J AN U ARY 2011 . CPU * 12 25