Y. UPADHYAY, VICE PRESIDENT: Order assessee is in appeal against order of CIT under s. 263 of Act. fact is that Shri Pradip Kr. Rampuria was doing business. He was member of his HUF. Shri Rampuria took loan of Rs. 6 lakhs and odd from M/s Hazareemull Heeralal of 148, Cotton Street, Calcutta carrying interest. said loan was taken by Shri Pradip Kr. Rampuria who joined association of M/s. B . C. Kochar & ORs. on basis of agreement dt 2nd Dec., 1974 for construction of multi storeyed flats for sale. Shri Pradip Kr. Rampuria died on 15th May, 1977 leaving his wife Smt. Sudha Devi Rampuria and mother Smt. Gulabdevi Rampuria. Smt. Sudhadevi Rampuria, wife of deceased, was co-opted in association of M/s. B. C. Kochar & ORs. by agreement dt. 11th Jan., 1978. Shri Pradip Kr. Rampuria was making payment of interest to M / s Hazareemull Heeralal and he was also getting interest on amount advanced to association of M/s. B. C. Kochar & ORs. interest, however, has not been earned during asst. yr. 1978-79 from M/s. B. C. Kochar & ORs. whereas interest was payable to M/s Hazareemull Heeralal and accordingly s u m of Rs. 63,801.81 was claimed as interest paid or payable to M/s Hazareemull Heeralal. It was stated in course of argument that some flats were sold in earlier yeas but no flat was sold during year under appeal and financial position of association of M/s B. C. Kochar & ORs. was such that they did not pay interest to lady. 2. It was also claimed that partition took place between widow Smt. Sudha Devi Rampuria and her mother-in-law Smt. Gulab Devi Rampuria and liability pertaining to M/s Hazareemull Heeralal was assigned to Smt. Sudha Devi Rampuria. 3 . Smt. Sudha Devi Rampuria filed her return for asst. yr. 1978-79 showing following income : "1. Income from House property 1. Gross rent received from premises No. 86 Biplabi 147394.51 . Rash Behari B s u Road, Calcutta. Less: 33296.00 . . Corporation Tax Multistored . . . Property 1752.00 . . tax Service 504.00 . . charges Surcharge 16648.00 55955.57 . on Corpn. tax B.A.V. . . . 91438.97 Less: 1/6th 19016.00 . . for repair 6 per cent collections 6845.00 25861.00 65577.97 charges B/F . . . 65577.97 2. Business Income/Loss 1/4th share of profit from Hazarimull Heeralal, 148, Cotton 10745.26 . St., Cal (subject to completion of Firm s assessment) Interest income from 11474.53 . above . 22219.79 . Less : Expenses . . (1) 1/4th share of loss of M/s Pradip Pratishthan, 4, . 4255.37 . Meredith St., Cal(subject to completion of Firm s assessment) (2) Interest payable to Hazareemull Heeralal in respect 63801.81 . of loan of Sri Pradip Kumar Rampuria (3) printing & Stationery 911.36 . (4) Postage, Telegram & 360.20 . Telephone (5) General charges 717.21 . (6) Conveyance charges 53.35 . (7) Legal charges 315.00 . (8) Staff welfare 1681.12 . (9) Salary paid to . . R. K. Sethia 7000/ . . ( )81765.42 K. L. Bothra 2670/ 59545.63 ( ) Total Rs. . Income 6032.34 less : Admissible deductions Rs. . under s. 80C 1810.00 Rs. . . 4222.34 Rounded . . off to Rs. 4220" return was filed on 30th March 1981 and assessment was completed by ITO under s. 143 (1) on total income of Rs. 4220 on 2nd Sept., 1981. 4. CIT took action on perusal of record under s. 263 of Act on ground that assessee should not have been allowed interest of Rs. 63,881.81. ITO did not properly investigate into facts and as he completed assessment under s. 143(1), order passed by him was erroneous and prejudicial to interests of Revenue. He issued show cause notice to assessee and assessee from time to time appeared as well as submitted written submissions through her letters dt. 4th April, 1983 and 12th April, 1983. CIT did not accept arguments of assessee and he set aside assessment by observing as follows : "I have carefully gone through submission of assessee and find myself unable to agree with same. circumstances under which loan liability of deceased husband devolved on widow, how loan money was actually utilised by deceased husband, how widow could be forced to agree to forego interest on advances made to joint venture when agreement clearly stipulated payment of interest on such advances, have all got to be examined before any final decision can be taken about nature and character of interest expenditure of Rs. 53,802 and its claim for admissibility as deductible business expenditure. This brings us to next point. assessee claimed deduction in computing her business income which is as it should be, because, assuming that all claims in assessee s story are correct, interest paid on loan taken by husband from firm for utilising i n joint venture, which was adventure in nature of trade, should correctly be treated as only business expenditure as interest paid on capital borrowed for purpose of business. reference to its admissibility under head `other source , as made out in submission in course of proceedings under s. 263, appears to be after-thought and not at all tenable. In instant case, as per paragraph 10 of joint venture agreement, profit will be ascertained and divided only on completion of entire project and profit of joint venture was ascertained only on 31st March 1982. expenditure incurred on interest paid on capital borrowed for purpose of this joint venture will be deductible only against profit of this joint venture, as and when it is determined and divided among membeRs. Before that, question of allowing such expenditure should not arise. On this ground alone, assessee deserves to be set aside under s. 263. Even otherwise, since assessment was completed in summary manner when facts of case demanded proper scrutiny, assessment deserved to be set aside for being made afresh. assessment is accordingly set aside and ITO is directed to redo same in light of above discussion." 5. Dr. Pal who appeared along with Shri S. P. Choudhary on behalf of assessee, attacked order of CIT and urged that CIT was not justified in passing order under s. 263 when ITO completed assessment under summary scheme. He referred particularly to show cause notice issued by CIT dt. 25th Jan., 1981 and urged that CIT was not justified to set aside assessment on other grounds than grounds indicated in show cause notice. assessment cannot be set aside simply because it was made under s. 143(1) of Act. No other ground has been taken by CIT and, therefore, he stated that in view of Calcutta High Court decision in 1983 TLR 843, order of CIT may be set aside. Dr. Pal further stated that on merit case of assessee is very strong. Once amount has been borrowed for joint venture and assessee has been co opted as member of association of M/s. B. C. Kochar & ORs., interest paid by her was allowable expenditure. He placed reliance in Madhava Prasad Jatia vs. CIT (1979) 10 CTR (SC) 375 : (1979) 118 ITR 200 (SC). Dr. Pal even otherwise urged that CIT was not justified in taking action under s. 263 of Act, and, therefore, order passed by him may be set aside. 6 . Shri Chaliha, Sr. Departmental Representative on other hand, very strongly supported order of CIT and urged that order passed by ITO was erroneous as well as prejudicial to interests of Revenue and, therefore, CIT was perfectly justified in taking action under s. 263 of Act. He placed reliance in Gee Vee Enterprises vs. Addl. CIT (1975) 99 ITR 375 (Del). He further urged that it is not necessary to issue notice to assessee. assessee had been allowed proper opportunity of being heard. He relied in CIT vs. Electro House (1971) 82 ITR 8 24 (SC). He further urged that one proper jurisdiction had been assumed by CIT, CTR passed necessary order under s. 263 of Act. He relied in Kanhaiyalal vs. CIT (1981) 20 CTR (Raj) 105 : (1975) 99 ITR 375 (Del), (1982) 136 ITR 24 3 (Raj), CIT vs. Electro House (1971) 82 ITR 8 24 (SC) and 1983 TLR 848. Lastly, Shri Chaliha urged that even if there is any lacuna in show cause notice of CIT, same shall be covered by provisions of s. 297 (B) of Act. He urged that assessee did not file any paper to justify allowance of interest and, therefore, CIT was justified in passing order under s. 263 of Act. 7 . facts relating to issue in dispute have been given earlier. Shri Pradip Kr. Rampuria was doing business independently. He was member of HUF. Shri Rampuria took loan of Rs. 6 lakhs and odd from M/s Hazareemull Heeralal in 1974 on basis of agreement. loan carried interest. loan was invested in association of M/s. B. C. Kochar & ORs. who jointly took venture of constructing flats for purpose of sale. Shri Rampuria died on 16th May, 1977 and his wife Smt. Sudha Devi Rampuria was co-opted as member of association on basis of agreement dt. 11th Jan., 1978. computation of income filed by assessee as given on page 7 of paper book has been reproduced above. Shri Choudhury counsel of assessee, in answer to specific question indicated that along with return assessee filed P&L A/c, Balance Sheet and computation of total income. assessee in computation of total income apart from other things claimed interest payment of Rs. 63,801.81 paid or payable to M/s Hazareemull Heeralal. This did not relate to existing business of assessee. assessee succeeded to business left by her husband. copy of agreement indicating partition among family has been filed. same is appearing on p. 17 of paper book. This agreement has been concluded on 15th Aug. 1982. On basis of this agreement it has been claimed that loan pertaining to M/s Hazareemull Heeralal was assigned to assessee. surprising fact is that return was filed in present case on 30th March, 1981. assessment was completed on 2nd Sept., 1981. assessee s counsel has made statement that only P&L A/c. Balance Sheet and computation of income were filed along with return. Therefore, claim of assignment which was made on basis of agreement of 1982 cannot be made in 1981 unless memorandum of partition must have been prepared much earlier and it was only reduced in writing in 1982. This point was not very clear even though specific query was put before counsels. summary assessment requires satisfaction of ITO on production of all necessary paper and evidences. This is very clear in Circular of CBDT No. (F. No. 237/16/76- A& PAC-II) dt 5th July 1976. ITO could not have satisfaction without production of any paper for allowance of interest of Rs. 63,801.81 to M/s. Hazareemull Heeralal. assessee did not file any agreement with Shri Pradip Kr. Rampuria when assessee was co-opted as member of association. assessee has also not filed gist of memorandum of partition when it was reduced in writing on basis on which loan was assigned to assessee and assessee become interested in joint venture and accordingly claimed deduction for interest. No paper was filed indicating joint venture of M/s. K. C., Kochar & ORs. who were paying interest to Shri Pradip Kr. Rampuria who stopped payment of interest on some ground or other. If all facts are taken, it is clear that order passed by ITO was erroneous and prejudicial to interests of Revenue and ITO without following guideline given for summary assessment by CBDT, completed assessment and did not look into when he should have looked into. If assessing Officer does not investigate into facts which he should have done, order passed under said situation is erroneous and prejudicial to interests of Revenue. Dr. Pal has laid much emphasis on show cause notice issued by CIT dt. 25th Jan., 1983 and his case is that on basis of decision in 1983 TLR 843 order passed by CIT is bad in law. If notice is read properly, CIT has taken point that ITO did not look into properly as to why interest claimed for M/s Hazareemull Heeralal should be allowed. Incidentally, he has mentioned that this has happened because ITO made assessment under s. 143(1) of Act. Therefore, facts which have been highlighted by Dr. Pal and got supported by decision in 1983 TLR 843 are not correct. CIT has pointed out through show cause notice that ITO has not investigated properly into fact before he completed assessment under s. 143 (1) of Act. 8. other ground of Dr. Pal was that in view of decision in Madhav Prasad Jatia vs. CIT (1979) 10 CTR (SC) 375 : (1979) 118 ITR 200 (SC) on merit interest claimed by assessee for M/s. Hazareemull Heeralal was allowable expenditure and, therefore on merit order passed by ITO could not be said to be erroneous and prejudicial to interest of Revenue. argument made by Dr. Pal may not be correct. ITO has not been given agreement between Shri Pradip Kr. Rampuria and M/s. B. c. Kochar & Ors, agreement between assessee and M/s. B. C. Kochar & ORs., letters indicating inability of M/s B. C. Kochar & ORs. to pay interest and memorandum of alleged partition of 1982 by which loan was assigned to lady. If there were not before ITO and unless these facts are looked into and proper investigation is done, it would be difficult to accept argument of Dr. Pal that interest claimed by assessee was allowable expenditure. Under said circumstances, after considering arguments of both sides, case laws and paper look filed by assessee, it is concluded that finding recorded by CIT is correct that order passed by ITO was erroneous and prejudicial to interests of Revenue and accordingly finding of CIT in setting aside order of ITO is maintained. 9. In result, appeal is dismissed. *** SMT. SUDHA DEVI RAMPURIA v. INCOME TAX OFFICER