Commissioner of Income Tax vs V.P. Agarwal, Prop. Agarwal Scientific Glass Industry

For the assessment year 1972-73, the Income Tax Appellate Tribunal has referred a common question of law in the aforesaid two Income Tax.

References and they arise out of different orders passed by the Income- tax Appellate Tribunal. The following question of law has been referred for the opinion of this Court:

Whether on the facts and in the circumstances of the case, the Tribunal was right in upholding the order of the Commissioner (Appeals), Agra whereby he annulled the assessment order dated 29-5-1980 by following the Tribunal''s order dated 30-12-1979.

The assessee-respondent is doing business under the name of M/s. Agarwal Scientific Glass Industries, Agra, dealing in manufacture and sale of Scientific Laboratory equipment. He filed a return of Income Tax for the assessment year 1972-73, the accounting for which had ended on 31-3-1972. An income of Rs. 29,407 was returned. The balance sheet filed in support of the return of Income Tax showed three creditors as follows:

M/s. K.K. Trading Corporation, Bombay Rs. 1,09,463

M/s. Reliable Trading Co., Bombay Rs. 44,949

M/s. Amritlal Brothers, Bombay Rs. 36,151

In the books of account the assessee had shown purchases of Rs. 85,773, Rs. 44,949 and Rs. 36,151 from the aforesaid parties respectively. The assessee had also filed copies of accounts of these parties as appearing in the books of account for different years showing purchases alleged to have been made during the accounting periods of assessment years 1970- 71 and 1971 -72. The assessing officer initiated enquiries into the transactions with the abovenamed parties. Enquiries made from the State bank of India repealed that cheques issued by the assessee purporting to be for payments in respect of purchases made from the said parties were bearer cheques and the payments thereof were received either by the assessee himself or by his employees. Enquiries revealed that firms styled as M/s. Reliable Trading Co. and M/s. K.K. Trading Corporation were not in existence at the addresses given by the assessee, while the third party M/s Amritlal Brothers denied any dealings with the assessee. Thereafter the assessee moved a petition u/s 271(4A) of the Income Tax Act, 1961. In that petition, he admitted that he had made an investment of about Rs. 90,000 outside the books of account and that money was utilised in making purchases from Bombay. He offered a sum of Rs. 80,000 to be assessed as his income. This disclosure petition was rejected by the Commissioner of Income Tax. In the meantime the voluntary disclosure of Income and Wealth Ordinance, 1975 was promulgated and the assessee made another disclosure petition stating that Rs. 80,412 that was the credit balance in the accounts of M/s. Reliable Trading Company and M/s. K.K. Trading Corporation, Bombay as on 31-12-1973 represented his own money which was utilised to make purchases from Bombay in respect of which he was unable to get any vouchers. It was also asserted that he had taken several other amounts as loans from his wife, mother and other members of the family. The wife and other members of the family also filed voluntary disclosure petitions under the aforesaid Ordinance declaring the respective amounts that were claimed to have been advanced as loan to the assessee during the period relevant to assessment years 1970-71 to 1974-75.

The assessment for assessment year 1972-73 in respect of the present assessee was completed by the Income Tax Officer on 29-3-1976 u/s 143(3) of the Income Tax Act, 1961 on a total income of Rs. 42,680 determining the said income the assessing officer did not make any addition to the income of the assessee in respect of the aforesaid transactions of purchases.

The Commissioner of Income Tax initiated action u/s 263 of the Act as in his view by not making addition in respect of the fictitious transactions in the names of three parties referred to above, the Assessing Officer had made an assessment order that was erroneous and prejudicial to the interests of revenue. The Commissioner, therefore, issued a show cause notice to the assessee and after examining the matter he set aside the assessment observing that there was no evidence to show that the close relatives of the assessee had actually lent any money to him and the assessing officer had erred in accepting the assessee''s contention without analysing the facts of the case in the light of the relevant provisions of law. The Commissioner observed that since the matter has not been properly examined by the Income Tax Officer, it would be in the interest of justice to restore the matter to him for further examination and for making an assessment de novo after allowing the assessee an opportunity of being heard.

The assessee then appealed to the Income Tax Appellate Tribunal which, after taking into consideration the respective submissions of the learned Counsel for the parties and the material on record, set aside the order of the Commissioner, by order dated 31-12-1979. It may be stated here that in the question referred to above, the date of order of the Tribunal is incorrectly mentioned as 30-12-1979 instead of 31-12-1979.

Against the aforesaid order of the Tribunal, the following question for opinion of this court in Income Tax Reference No. 299 of 1980 was referred at the instance of the Income Tax department:

Whether the Income Tax Appellate Tribunal, New Delhi was justified in law in holding that there was no infirmity in the order of the Commissioner of Income Tax (Appeals), Agra when reference application u/s 256(1) of Income Tax Act, 1961 in respect of the order u/s 263 of Income Tax Act for assessment year 1972-73 is pending for disposal? (p. 242)

The aforestated question was answered in negative, i.e., in favour of the department and against the assessee, by the judgment dated 27-11-1992. The said judgment in CIT v. V.P. Agarwal, Prop. Agarwal Scientific Glass Industries (1993) 68 Taxman 236 (All.).

It is not understandable under what circumstances the question stated in the opening of the judgment was referred for the same assessment year by the Tribunal. The learned Standing Counsel could not point out as to what was the necessity to refer the matter again to this Court, ITR No. 52 of 1994 arises out of the order of the Tribunal dated 31-12-1979 which order has already been found to be legally incorrect by this court in ITR No. 299 of 1980.

In this view of the matter, we are of the opinion that the question referred in ITR No. 52 of 1994 is of academic nature as the order of the Tribunal dated 31-12-1979 is no more in existence.

ITR No. 100 of 1994:

It so happened that in pursuance of the order passed by the Commissioner u/s 263 of the Income Tax Act, the Income Tax Officer framed fresh assessment order against the assessee. The said order was subject-matter of appeal before the Commissioner of income tax(Appeals) who by order dated 19-2-1981 annulled the fresh assessment order on the ground that the order of the Commissioner u/s 263 of the Income Tax Act is without jurisdiction which gave jurisdiction to the assessing officer to make fresh assessment has been set aside by the Tribunal. The said order of Commissioner (Appeals) was unsuccessfully challenged before the Tribunal by the department. The Tribunal vide order dated 7-6-1982upheld the order of Commissioner (Appeals). On these facts, the aforestated question mentioned in the opening of the judgment has been referred by the Tribunal as per direction of the High Court given in Income Tax Application No. 149 of 1983.

Heard Sri A.N. Mahajan, learned Standing Counsel for the department and Sri R.R. Agrawal, learned Counsel for the assessee.

The learned Counsel for the parties could not dispute the above factual position that the order of the Tribunal dated 31-12-1979 (wrongly mentioned as 30-12-1979 in the question) having been set aside, the order of Commissioner (Appeals) revived automatically, with the result the assessing officer had jurisdiction to pass fresh assessment order in pursuance thereof. The only point which could be urged by Sri R.R. Agrawal, Advocate is that the matter be restored back to the Commissioner (Appeals) to decide the appeal preferred by the assessee against fresh assessment order, on merits, i.e., on other points, if any, available to the assessee.

The said contention has got substance and the Tribunal, while passing the order in pursuance of this judgment, shall take into account the aforestated contention of the assessee.

Viewed as above, we find that the Tribunal was not justified in upholding the order of the Commissioner (Appeals), Agra whereby he annulled the fresh assessment order dated 29-5-1980.

We answer the question in negative, i.e., in favour of the revenue and against the assessee.