LILA CHOUDHURY Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) AN order dated 1.11.1996 passed by the Commissioner of Income -tax, N.E. Region, Shilong (hereinafter reference to as the CIT) under Section 263 of the Income -tax Act has been put to challenge in the present writ application, By the aforesaid order, the Commissioner of Income -tax has set aside the assessment of the petitioner for the assessment year 1992 -93 and has directed the Assessing Officer to complete the assessment as per law. The facts, in brief, may be noticed at the outset.

(2.) THE assessment of the petitioner to income -tax for the assessment year 1992 -93 was completed by the Assessing Officer by an order dated 16.5.1994 passed under the provisions of Section 143(3) of the Income -tax Act, as it then existed, The Commissioner of Income -tax issued a notice dated 14/19.8.1996 stating that on perusal of the assessment records it has been revealed that the Assessing Officer had assessed the investment made by the petitioner in the house property at Rehabari, Guwahati on substantive basis without, however, making any enquiry as to whether the investment in the house property could be made from the known sources of income of the petitioner -assessee. In the notice issued, the Commissioner had also recorded that the Assessing Officer had accepted the investment made in the house property at Rs. 7.02 lakh without holding any enquiry. It was further mentioned that from the report of the C.B.I., ACB, Guwahati it appears that, according to the CBI, the investment in the aforesaid house property was made by one Sri Motilal Dutta, the son -in -law of the petitioner and that according to the CBI the cost of construction of the house was Rs. 16,16,500. On the aforesaid facts the Commissioner in the notice issued recorded his opinion that the assessment made for the assessment year in question being without necessary pro -assessment enquiries is erroneous and prejudicial to the interest of the revenue and, therefore, it was proposed by the Commissioner that the power under Section 263 would be exercised to set aside the order of assessment and direct the Assessing Officer to reassess the investment in the house property on protective or substantive basis, as the case may be. 2. On receipt of the aforesaid notice dated 14/19.8.1996 the petitioner -assessee showed cause by submitting a somewhat lengthy explanation dated 20.9.1996. In the explanations submitted by the petitioner -assessee it was contended that the house property in question was owned by the petitioner -assessee and the investments therein were made by her from her own sources. The petitioner, in the reply submitted, had shown the yearly investments made by her in the house property in question and it was further stated that along with the return filed by the petitioner for the assessment year in question, balance sheets for the period 31.3.1988 to 31.3.1992 showing the position of the assessee's assets and liabilities were also filed before the Assessing Officer. The details of the funds available to the petitioner -assessee were also disclosed. In the reply submitted, the petitioner -assessee had also taken certain other grounds questioning the jurisdiction of the Commissioner to invoke the power under Section 263 of the Act in the facts of the present case. Thereafter, by the impugned order dated 1.11.1996, the Commissioner after recording his opinion that the assessment for the assessment year in question was completed without proper enquiry regarding the investments made in the house property and the sources of income as well as the value of the investments, took the view that as the assesse has filed a written submission giving an exhaustive explanation and enclosing certain deeds, certificates and documents all such facts are required to be verified properly. Accordingly, the Commissioner set aside the assessment for the assessment year 1992 -93 and directed the Assessing Officer to examine the submissions advanced by the petitioner -assessee and the documents brought on record in a proper manner and to complete the assessment in accordance with law. Aggrieved, this writ petition has been filed.

(3.) DR . Saraf, learned Counsel appearing for the petitioner -assessee, has submitted that the Commissioner having invoked his power under Section 263 on the basis of materials that had subsequently come to light, i.e., the report of the CBI had exceeded his jurisdiction under Section 263 of the Act. According to learned Counsel, the power under Section 263 would be available to set aside an assessment on the basis of the records and the proceedings as available before the Assessing Officer and in the circumstances stated in the section itself, i.e., such assessment being erroneous and prejudicial to the interest of the revenue. It has been emphatically contended by Dr. Saraf that the satisfaction of the Commissioner that an assessment order is erroneous and prejudicial to the interest of the Revenue can be reached only on the basis of materials as available to the Assessing Officer and not on the basis of subsequent materials. In this regard, reliance has been placed on a judgment of the Apex Court in the case of The State of Kerala v. K.M. Cheria Abdulla and Co. reported in (1965) 16 STC 875. On the above basis there is a further argument that has been made by Dr. Saraf, learned Counsel for the petitioner, i.e., that the materials coming to light in the form of the report of the CBI, at best, could have been ground for the competent authority to invoke the power of reopening the concluded assessment of the petitioner under Sections 147/148 of the Income -tax Act. The said power, learned Counsel contends, is a distinct and separate power conferred on another authority by the provisions of the Act. In the instant case the learned Commissioner by seeking to exercise his powers under Section 263 of the Act has really trenched upon the powers vested in another authority by another provision of the Act. This, learned Counsel contends, is not permissible on the ratio of the law laid down by this Court in the case of Santalal Mehendiratta (HUF) v. Commissioner of Taxes and Ors. reported in (2002) 1 GLR 197 and in the case of Shree Automobiles (P.) Ltd. v. Commissioner of Taxes and Ors. reported in (2003) 3 GLT 40. Dr. Saraf, learned Counsel for the petitioner, has further argued by relying on the additional affidavit filed by the petitioner that in any event the report of the CBI cannot, as on date, furnish any basis to justify the impugned order dated 1.11.1996 of the CTT inasmuch as in the criminal proceeding instituted by the CBI against the son -in -law of the petitioner, it has been held by the competent court that the house property in question belongs to the petitioner and not to her son -in -law. A copy of the judgment of the criminal court has been brought on record by means of the additional affidavit filed.