COMMISSIONER OF INCOME TAX Vs. BHAGWAN DAS

JUDGEMENT

(1.) The Tribunal, Allahabad, has referred the following question of law under section 256(1) of IT Act, 1961 (hereinafter referred to as Act), for opinion of this Court :

(2.) Briefly stated facts giving rise to the present revision are as follows : The respondent-assessee is an individual. For the asst. yr. 1973-74, the relevant previous year being 1st April, 1972 to 31st March, 1973, the respondent filed his return of income showing an income of Rs. 10, 450/-. Notice under Section 143(2) of the Act was issued. In response the respondent appeared and after discussion, the ITO, Circle-II (9), Kanpur, vide order dt. 27th Nov., 1976, assessed a total income of Rs. 24, 750/-. He granted exemption of income from agriculture amounting to Rs. 30, 446/- and income from poultry-farming amounting to Rs. 33, 849/-. The CIT initiated proceedings under Section 263 of the Act on the ground that in- making the assessment the ITO did not make any enquiry or investigation as regards the nature, source or extent of income derived from agriculture and poultry-farming or investment from which these income arose. Further, the ITO also did not take any steps to verify whether the income from these sources as claimed were fully exempt. In response to the notice issued under Section 263, the respondent appeared before the CIT and stated that he has maintained proper accounts for these sources of income and will be in a position to produce evidence and proof to substantiate his claim. The CIT passed an order setting aside the assessment made by the ITO with a direction to reframe the assessment after making full and proper investigation in the nature, sources and extent of the income earned from these sources and the source of the investment made for earning these incomes. In doing so, the ITO will give full and proper opportunity to the assessee to present his side of the respondent. The respondent feeling aggrieved, preferred an appeal before the Tribunal. The Tribunal vide order dt. 27th Nov., 1979, had allowed the appeal filed by the respondent-assessee and had set aside the order of the CIT passed under Section 263. The Tribunal, while doing so had held as follows :

(3.) We have heard Shri A.N. Mahajan, learned standing counsel appearing for the Revenue. In spite of service of notice, nobody has put in appearance and the Court vide order dt. 11th of February, 2004, held the services to be deemed sufficient under the rules of the Court and directed for hearing of the revision. Shri A.N. Mahajan, learned standing counsel, submitted that from the perusal of the assessment order, it would be seen that the ITO had not applied his mind as to whether the income which has been claimed by the respondent assessee has been earned or whether it is exempted in full or in part. Thus, the order granting exemption to income from agriculture and poultry-farming has been without any application of mind. The CIT was, therefore, fully justified in taking recourse to proceedings under Section 263 of the Act and after giving an opportunity of hearing to the assessee, had rightly set aside the assessment order as the same was erroneous and prejudicial to the interest of Revenue. He relied upon the decision of Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CTT, (2000) 243 HR 83 (SC).