ORDER SHEET ITA No.263 of 2005 IN HIGH COURT AT CALCUTTA SPECIAL JURISDICTION (INCOME TAX) ORIGINAL SIDE C.I.T. KOLKATA II Versus GLOBAL CAPITAL MARKETS LTD. BEFORE: Hon'ble JUSTICE SOUMITRA PAL Hon'ble JUSTICE ARINDAM SINHA Date : 30th October, 2014. Appearance: Mr. R. K. Chowdhury, Adv. for appellant. Mr. S. Dasgupta, Adv. Mr. P. Sarawagi, for respondent. Court : Pursuant to our earlier order service has been effected, though no affidavit of service has been filed but respondent appears. This appeal under Section 260A of Income Tax Act, 1961 has been preferred by Revenue against order dated 25th February, 2005 passed by Income Tax Appellate Tribunal E Bench, Calcutta, in ITA No.665/Kol/2004 for assessment year 1998 1999. By consent of parties appeal is treated as on day s list and taken up for hearing. questions of law formulated are as under: (I) Whether on facts and in circumstances of case, Tribunal was right in holding that Commissioner of Income Tax by passing order under section 263 setting aside assessment for making enquiries and investigation on same issue was not valid in law; 2 (II)Whether finding of Tribunal that order of Assessing Officer was not erroneous and prejudicial to interest of Revenue is based on irrelevant materials and/or perverse; (III)Whether on facts and in circumstances of case, Tribunal was justified in cancelling order under section 263 passed by Commissioner of Income Tax. Heard Mr. R. K. Chowdhury, learned Advocate for appellant and Mr. S. Das Gupta, learned Advocate for respondent. We find from order under Section 263 of Income Tax Act, 1961 passed by CIT that Revenue had obtained order which stated, inter alia, as follows: present assessment order dated 14.03.2002 u/s. 147/143(3) of I.T. Act, 1961 was completed at Rs.18,80,010/-. perusal of assessment records reveals that investment amounting to Rs.3,87,91,308/- was converted into stock-in-trade as detailed in show cause notice u/s.263 dt. 5.2.2004. Further, no enquiry or investigation was carried out by A.O. on this issue nor any explanation was sought from assessee company where as this issue involves important question of law as well as revenue involved is also quite substantiate. Thus as held by Hon ble High Court in case of Ram Payari devi Sarogi vs- CIT (1968) 67 ITR 84 as well as in Tara Devi Agarwal vs- CIT (1973)88 ITR 323, failure to make enquiries makes order in question erroneous for purpose of Sec.263 as well as prejudicial to interest of revenue. Therefore, in my opinion, it would be in interest of natural justice and fair play, if assessments restored back to file of A.O. on this limited issue to make necessary enquiries and investigation and decide issue as per law after giving reasonable opportunity of being heard to assessee. 3 Hence assesment order is Set Aside to be framed afresh as mentioned above. Aggrieved by said order assessee preferred appeal before Tribunal which held, inter alia, as follows: We have considered rival submissions and have perused orders of A.O. and C.I.T. From annexure filed by assessee along with its reply dated 5.2.2004 filed before C.I.T. in response to notice u/s. 263, computation u/s.45(2) of Act, after indexation of cost of shares on date of conversion, comes to loss figure of Rs.5,16,019/-. 600 shares of ITC Classic Finance Ltd. were not sold by assessee during period but were converted into 40 shares of ICICI Ltd., since company was merged with ICICI Ltd. and these shares are still held by assessee. We find that assessment in this case was set aside to file of A.O. in order to make necessary enquiries and investigation and to decide issue afresh as per law after giving reasonable opportunity of being heard to assessee. In our considered opinion, completed assessment cannot be set aside by C.I.T. in exercise of his powers u/s. 263 just in order to make enquiries and investigation on some issue. There is no finding in this case that order of A.O. is erroneous and prejudicial to interests of Revenue with regard to certain amount of income which may have been under assessed or has escaped assessment. provision of section 263 of Act cannot be invoked merely to make fresh enquiries and investigation. Revenue could not contradict case of assessee that computation u/s.45(2) of Act with regard to shares in question, comes to loss figure of Rs.5,16,019/- to assessee. In these facts, we hold that it cannot be said that order of A.O. is erroneous and prejudicial to interests of revenue and accordingly we cancel order of CIT passed u/s. 263 of Act and grounds of appeal of assessee are allowed. In result, appeal of assessee is allowed. 4 revenue has relied on judgment in case Rampyari Devi Saraogi- Vesus- Commissioner of Income Tax, West Bengal and Ors.: [1968] 67 ITR 84(SC) in support of its submission. Hon ble Supreme Court in considering whether fair opportunity was given to assessee in making of order impugned therein under Section 33B of Old Act, appreciated facts in that case which included But Income-tax Officer without making any enquries to satisfy himself passed assessment order on March 30, 1961, for assessment years 1952-53 to 1957-58 and on April 26, 1961, for assessment years 1958-59 to 1960-61. No bank account or any proper books of accounts were maintained by assessee or produced before Income-tax Officer. short stereotyped assessment order was made for each assessment year. As sample, Commissioner has reproduced assessment order for assessment year 1952-53 in his order. Profit from speculation was shown as Rs.3,085 and interest Rs.600, and Rs.500 was added for want of books of account and evidence. No evidence whatsoever was produced in respect of money-lending business done and interests income shown to have been received by assessee. No names were given as to parties to whom loans were advanced, with amounts and rate of interest and as to when interest income was received. It is not necessary to further detail reasons given by Commissioner because on face of record orders were prejudicial to interest of revenue, and even if facts which Commissioner introduced regarding enquires made by him had been indicated to assessee, result would have been same. assessee, in our view, has not in any way suffered from failure of Commissioner to indicate results of enquiries, mentioned above. Moreover, assessee will have full opportunity of showing to Income-tax Officer whether he had jurisdiction or not and whether income assessed in assessment orders which were originally passed was correct or not. 5 Mr. Dasgupta relied on judgment in case of Commissioner of Income Tax-Versus-Gabriel India Ltdl;[1993]203ITR 108 (Bom) wherefrom we find High Court of Bombay found in that case Assessing Officer had asked for explanation from assessee who had furnished detailed explanation vide his letter dated 19th September, 1995. In that case said High Court held, inter alia, . .. Cases may be visualized where Income Tax Officer while making assessment examines accounts, makes enquiries, applies his mind to facts and circumstances of case and determines income either by accepting accounts or by making some estimate himself . In view of judgments cited at bar, we are inclined to hold that lack of enquiry by itself is error. Commissioner having held no enquiry or investigation was carried out by A.O. on issue nor explanation sought from assessee company, such was failure to make enquiries which made order in question erroneous for purpose of Section 263 of said Act as prejudicial to interest of Revenue, Tribunal erred in cancelling same. We notice Tribunal did so without considering judgments referred to by CIT. Hence, impugned order of Tribunal is set aside and quashed. question nos. 1, 2 and 3 are answered in negative and in favour of Revenue. appeal is allowed. (SOUMITRA PAL, J.) (ARINDAM SINHA, J.) cs. C.I.T. Kolkata-II v. Global Capital Markets Ltd