CIT, Agra has moved these applications under section 256(1) in respect of assessment years 1981-82, 1982-83 and 1983-84. Since similar questions have been moved in respect of common issue, we are disposing them of by this consolidated order. According to applicant, following questions are questions of law arising out of order passed by Tribunal in ITA Nos. 5193 to 5195 for asst. years 1981-82, 1989-1983 and 1983-84 which need be referred to their lordships for their opinion: "1. Whether on facts and in circumstances of case, Tribunal was correct in holding that provisions of section 263 are not applicable and in cancelling order of CIT passed under section 263? 2. Whether Tribunal's decision that mere failure on part of ITO to make enquiries and investigation regarding assessee's versions and his acceptance of whatever has been said by assessee in return and papers accompanying it without any enquiry regarding sources of income and its ownership is not sufficient to come to conclusion that ITO's order is erroneous and prejudicial to interest of revenue and that something more should be shown indicating loss of revenue and if this is not done, order of CIT could be said to be suffering from legal infirmity? 3. Whether decisions of Allahabad High Court in cases of J.P. Srivastava & Sons (Kanpur) Ltd. v. CIT [1978] 111 ITR 326 and that of Punjab and Haryana High Court in case of CIT v. R.K. Metal Works [1978] 112 ITR 145 have been correctly applied in facts and circumstances of this case? 4. Whether Hon'ble Tribunal is legally justified in rejecting decisions of Supreme Court and High Courts quoted extensively in Annexure 'A' to CIT's order under section 263 and whether its interpretation of ratio decidendi in these cases is correct? 5. Whether fact that in circumstances similar to this case, Hon'ble Tribunal in two cases mentioned in statement of facts, has itself found Commissioner's orders under section 263 to be legally correct is in itself sufficient to show that questions of law do arise from Tribunal's order?" Relevant facts to be considered are that assessee is family trust which filed its returns of income for asstt. years 1981-82 to 1983-84. For asstt. year 1981-82, return was filed on 11-8-1981 showing income of Rs. 1,30,483. ITO made assessment on 6-10-1982. For asst. year 1982- 8 3 return showing income of Rs. 1,24,150 was filed on 26-8-1982. assessment was completed on 6-10-1982. For asstt. year 1983-84, return showing income of Rs. 1,28,680 was filed on 26-8-1982 and was completed on 13-7-1983. On going through assessment orders CIT was of view that assessments were made in haste without making necessary enquiries. He, therefore, after hearing assessee caused assessments to be set aside under section 263 of IT Act, 1961. He directed ITO to re-do assessments after making necessary enquiries. assessee feeling aggrieved, brought issue in appeal before Appellate Tribunal. Tribunal after hearing counsel for appellant as well as departmental representative was of view that assessment orders made by ITO were neither erroneous nor prejudicial to interest of revenue. Consequently, it was of opinion that CIT was not justified in proceeding under section 263 to set aside assessments. It cancelled order passed by CIT under section 263 in respect of these assessment years and restored assessments made by ITO. It is on these facts, aforesaid questions have been referred for all these three years. We first take up question suggested for asstt. year 1981-82. As far as first question is considered it does not refer to any particular aspect of finding. Tribunal had reached finding after detailed examination of facts and circumstances of case and is as contained in its finding in paragraph 13. Tribunal has brought adequate reason to back its finding. We cannot consider question to be suitable question for being referred to their Lordships. 2. We have same finding for second question as well which refers t o failure of ITO to undertake such enquiries as were necessary according to CIT before making assessment. In our opinion, answer to this question even if referred to their lordships will not be able to change effect of order of Tribunal. According to Tribunal, it was not merely error committed by ITO which entitled CIT to proceed under section 263 of Act. CIT must show that error was prejudicial to interest of revenue. CIT has not brought out anywhere in his order that erroneous order passed by ITO had been prejudicial to interest of revenue. Unless this was established that errors had been to interest of revenue it is not possible for us to hold that CIT would be justified for assuming jurisdiction under section 263 and cancel assessment order. Taking this view of matter we are of view that no useful purpose will be served by referring this question to their Lordships. 3. As far as question Nos. 3 and 4 are concerned these are in our opinion vague and full of ambiguity. These are, in our view undoubtedly unsuitable for being referred to their Lordships. 4. As none of questions sought to be referred has been found to be eligible question request of applicant Commissioner to refer questions cannot be allowed. 5. We now take up questions proposed for asstt. years 1982-83 and 1983-84. Since similar questions as were sought to be referred for asstt. year 1981-82 have been proposed for asstt. years 1982-83 and 1983-84 they have to meet with same fate and treatment as questions proposed for asstt. year 1981-82. None for that year has been found eligible for being referred to their Lordships. We cannot find similar questions for subsequent two years as eligible for being referred to their Lordships. 6. In result, applications for all three years, therefore, fail and are dismissed. Per Shri Anand Prakash, Accountant Member - In my opinion mixed question of fact and law arises out of order of Tribunal and question not deserves to be referred to Hon'ble High Court. other questions are covered by question No. 1. Hence separate reference thereof is not necessary, therefore, accept revenue's reference and refer question No. 1 for valued opinion of Hon'ble High Court. AS PER BENCH AS PER BENCH As it has not been possible for us to come to agreed conclusion in this reference application, following question is referred for valued opinion of Hon'ble Third Member: "Whether, on facts and in circumstances of present case, mixed question of law as follows arises out of order of Tribunal: 1. Whether, on facts and in circumstances of case, Tribunal was correct in holding that provisions of section 263 of Income-tax Act, 1961 are not applicable and in cancelling order of Commissioner of Income-tax, passed under section 263? " THIRD MEMBER ORDER Per Shri Ch. G. Krishnamurthy, President - In disposing of these reference applications filed by Commissioner of Income-tax, Agra learned brothers who heard these reference applications had difference of opinion. questions raised by learned Commissioner of Income-tax for reference to Hon'ble High Court are as under: "1. Whether on facts and in circumstances of case, Tribunal was correct in holding that provisions of section 263 are not applicable and in cancelling order of CIT passed u/s 263? 2. Whether Tribunal's decision that mere failure on part of ITO to make enquiries and investigation regarding assessee's versions and his acceptance of whichever has been said by assessee in return and papers accompanying it without any enquiry regarding sources of income and its ownership is not sufficient to come to conclusion that ITO's order is erroneous and prejudicial to interest of revenue and that something more should be shown indicating loss of revenue and if this is not done, order of CIT could be said to be suffering from legal infirmity? 3. Whether decisions of Allahabad High Court in cases of J.P. Srivastava & Sons (Kanpur) Ltd. v. CIT [1978] 111 ITR 326 and that of Punjab and Haryana High Court in case of CIT v. R.K. Metal Works [1978] 112 ITR 445 have been correctly applied in facts and circumstances of case? 4. Whether Hon'ble Tribunal is legally justified in rejecting decisions of Supreme Court and High Courts quoted extensively in Annexure 'A' to CIT's order u/s 263 and whether its interpretation of ratio decidendi in these cases is correct? 5. Whether on facts and in circumstances of case, Hon'ble Tribunal in two cases mentioned in statement of facts has itself found Commissioner's order under section 263 to be legally correct is in itself sufficient to show that questions of law do arise from Tribunal's order?" learned Judicial Member was of opinion that findings reached b y Tribunal in its order were purely findings of facts and those findings did not give rise to any question of law. What actually happened was that assessments made by ITO were considered by CIT as erroneous and prejudicial to interests of revenue and for that reason were set aside in exercise of powers of CIT u/s 263 of IT Act, 1961. It is to this order objection was taken to by assessee before Tribunal, by raising various points and facts showing that ITO completed assessments not in haste or hurry as was supposed by CIT, but after proper and due enquiry and after calling for all relevant documents material and evidence. Tribunal on appeal against orders of CIT held that ITO made proper enquiries, considered all facts necessary and relevant and then came to conclusion to which he did. It could not in circumstances be said that those assessments were made in haste or hurry so as to be called erroneous so as to cause prejudice to interests of revenue. Tribunal, therefore, set aside order passed by CIT u/s 263. It was aggrieved by this order of Tribunal that CIT filed reference applications stating that questions extracted above arise out of order of Tribunal. learned Judicial Member held that since findings arrived at by CIT were found to be improper and since assessments made by ITO were found to be proper and justified, conclusion reached by CIT was incorrect and that those findings recorded by Tribunal to above effect, was pure finding of fact based upon appreciation of evidence which did not give rise to any question of law. learned Accountant Member held that in his opinion mixed question of law and fact arose out of order of Tribunal and at least question No. 1 deserves to be referred to High Court for its opinion. He further held that since other questions were covered by question No. 1 separate reference of those questions was not necessary. In other words, in so far as reference of question Nos. 2 to 5 were concerned, both Members agreed that they need not be referred to High Court as questions of law arising out of order of Tribunal. There was thus difference of opinion with regard to question No. 1 while Judicial Member holds that that was question of fact, learned Accountant Member holds that that was question of law. Now matter is before me as Third Member to express my opinion on this matter. 2. Before I express my opinion, it is necessary to notice few facts which are material for purpose of disposal of this difference of opinion. This difference of opinion arose in respect of assessments made for assessment years 1981-82, 1982-83 and 1983-84. These appeals are disposed of by Tribunal by consolidated order. assessee was assessed in status of AOP for assessment years under consideration, returns were filed by assessee on 11th August, 1981, 25th August, 1982 respectively for these three years. assessments under section 143(3) of IT Act, 1961 were completed on 6th October, 1982 for first two years and on 17th July, 1983 for third year. Subsequently CIT held view that these assessments were made in hurry and haste and proposed to set aside them as erroneous and prejudicial to interests of revenue in exercise of his powers u/s 263 of IT Act, 1961. Pursuant to show cause notice issued by CIT, assessee filed on 31st August, 1984 detailed explanation which was quoted in full in order passed by Tribunal which I do not think it necessary to reproduce here. But it was mentioned clearly in that order that in reply to notice, it was mentioned that ITO made every enquiry i.e. necessary to be made in this regard. It was also pointed out to CIT that for assessment year 1980-81 which was first year of assessment, ITO issued various notices and fixed number of dates for hearing when details and explanation on various points were called for and examined. During course of assessment proceedings assessee filed following documents:- (a) Copy of trust deed. (b) Bank certificate. (c) Profit & Loss Account. (d) Balance-sheet. (e) Account of beneficiaries. (f) Original vouchers of parties in whose arhat business was done. It was also pointed out that parties in whose names commission business was conducted were genuine parties and several other details furnished to ITO were also mentioned in that notice. CIT, however, after considering explanation came to conclusion that assessments could still be said to have been completed in haste and hurry without exercising proper care and caution. These assessments were, therefore, set aside and ITO was directed to make fresh assessments after making enquiry. Then there was appeal before ITAT against order passed by CIT u/s. 263. It was contended before Tribunal that assessee had filed all necessary details before ITO, ITO made thorough enquiry and after satisfying himself he came to conclusion that trust was genuine and that income was correctly disclosed. It was also submitted that assessee pointed out to CIT that all transactions were made through account payee cheques and they were cleared through banks and that bank certificate in that regard was filed. It was further submitted that full details which required to be filed and which were required to be examined by ITO were filed and were examined by ITO and, therefore, assessments made by him could not be said to be erroneous. Still CIT held that assessments made were erroneous and prejudicial to interests of revenue without giving any finding thereon in his order passed u/s. 263. Reliance was placed upon decision of Allahabad High Court in case J.P. Srivastava & Sons (Kanpur) Ltd. v. CIT [1978] 111 ITR 326 where Allahabad High Court held that in proceedings u/s. 263, CIT should examine case on merits and that he could take action only if he had rejected pleas raised on behalf of assessee. Reliance was also placed before Tribunal on order passed by Tribunal in another case namely Gauri Shanker (P.) Family Trust, Agra where under similar circumstances orders passed by CIT u/s. 263 were set aside by Tribunal as not being prejudicial to interests of revenue. Tribunal after considering all material and cases relied upon, came to conclusion that orders passed by ITO could not be said to be orders passed without proper enquiry much less in haste and hurry. categorical finding given by Tribunal was that CIT was wrong in saying that that assessments made by ITO were in haste and hurry and therefore caused prejudice to interests of revenue. Tribunal referred to all details filed by assessee before ITO on various types of examination that ITO conducted before assessments were finalised. entire history of creation of trust as well as trust deed were explained to ITO and he was satisfied as to its genuineness. Tribunal also noted that ITO mentioned in his assessment order that he had gone through trust deed and refers to observations made by him that nothing was done in contravention of terms and conditions of deed. Tribunal also noted that ITO mentioned that trust executed some business and earned profits, that trust invested money in certain other concerns and derived interest for benefit of beneficiaries, that since trust deed specified shares of beneficiaries, trust would not be assessed to tax but only beneficiaries in respect of income that fell to their share, as provided for in section 161 of IT Act, 1961. Tribunal also noted that profit & loss account, balance-sheet and other details were filed before ITO and were examined by him. In view of this overwhelming evidence, Tribunal held that it was not proper on part of CIT to say that ITO had not properly examined accounts and came to erroneous conclusion. Tribunal further noticed that CIT nowhere held as to how assessments made by ITO were prejudicial to Interests of revenue nor he did give any finding that documentary evidence produced by assessee was either insufficient to prove assessee's case or was not genuine. Tribunal also pointed out that CIT did not point out any material to say that income disclosed by trust did not belong to it but to some one else. Tribunal, therefore, held that ruling of Allahabad High Court helps assessee's case. Tribunal also found that facts of case were similar to facts of case obtaining in case of Gauri Shanker (P.) Family Trust decided by Tribunal under identical circumstances in favour of assessee. Eventually, Tribunal held that orders passed by ITO could neither be erroneous nor prejudicial to interests of revenue and that CIT was not justified in setting aside assessments. 3. In my view, findings recorded by Tribunal that orders passed by ITO were neither erroneous nor prejudicial to Interests of revenue were pure findings of fact based upon ample material. It cannot be said on facts of this case that ITO had not examined evidence and then completed assessments in haste and hurry. All findings recorded by Tribunal in its order go to justify improper exercise of jurisdiction by CIT u/s. 263 and that findings recorded by Tribunal were pure findings of fact. 4. In my view, therefore, those findings of fact do not give rise to any question of law. As I have already mentioned in beginning, that there is difference of opinion between my learned brothers only with regard to question No. 1 and in my opinion, and for reasons mentioned above even that question is pure question of fact and not mixed question of law and fact requiring reference to Hon'ble High Court for its opinion. Therefore, these reference applications are liable to be rejected. 5. matter will now go before Regular Bench to pass final order in accordance with opinion for majority view. *** COMMISSIONER OF INCOME TAX v. MUKAND FAMILY TRUST