Income Tax Appellate Tribunal - Ahmedabad
Shri Ashok Manilal Thakkar vs Asstt. Cit on 23 August, 2005
Equivalent citations: [2005]279ITR143(AHD), (2006)99TTJ(AHD)1262
ORDER
I.P. Bansal, Judicial Member
1. These are the appeals filed by the assesses and are directed against two separate orders of CIT dated 24th March 1998 & 25th March, 1998 passed under the provisions of Section 263 of IT Act, 1961 for AYs 1993-94 & 1994-95 respectively.
2. The assessee is holding the card of Ahmedabad Stock Exchange and carrying on the activity of Stock Broker, under writing of public issue and dealing in the shares and securities under the name and style of "Ashok Manilal Thakkar". A survey was conducted at the business premises of assessee on 5.1.1994 wherein the assessee had disclosed additional income of Rs. 40 lacs and Rs. 20 lacs for AYs 1993-94 & 1994-95 respectively on account of income earned by him through following four activities (for short" four activities")-
i) Making multiple applications in public issues of companies in the name of various family members,
ii) Selling shares at premium prior to allotment (premium market operations),
iii) Preparing sale bills at lower rate than actual sale price and thus, partly suppressing sale receipts, and
iv) By making applications in the public issues in fictitious names.
3. According to assessee though documents found at the time of survey were minutely inspected and investigated, however, no objectionable notings, papers, or record of any kind were found which could indicate that the assessee is involved in any of the above mentioned four activities.
4. Subsequently, the assessee vide application dated 27..5.1994 filed on 30..5.1994 with the office of concerned CIT/DCIT and AO a letter of retraction to the above disclosure. A copy of such retraction is filed at pages 12 to 27 of the paper book. According to the said application the assessee after making the statement at the time of survey had requested the authorised officer to grant the copy of statement recorded. However, the concerned officer gave the understanding to the assessee that the same will be given to the assessee when it was to be used against him. Thus when the notices were received for the assessment proceedings of AY 1992-93 and for AY 1993-94, the authorised representative of the assessee approached the AO for grant of Xerox copy of statement and the said request was not acceded on one or other pretext till the end of April 1994 and ultimately Xerox copy of statement was granted on 5.5.1994. The submissions of assessee are contained in para 3.4 to 3.5 of the above mentioned letter of retaction. The same are reproduced below for the sake of convenience :
"3.4. It is to be noted that after recording of the statement, the authorised officer was requested to grant the copies of the statements recorded during the Survey Proceedings. However, it was given to understand that the same will be given to the assessee as and when the same are used against the assessee. Subsequently, as and when, notices were received for the assessment proceedings for assessment year 1992-93, as well as notices for the assessment year 1993-94, the authorised representative Shri Mundra and Shri Sunil K. Chalishazar, Chartered Accountants approached the assessing officer being the Asstt. Commissioner of Income-tax, Circle 2(4), Ahmedabad, with a request to grant xerox copies of the statement recorded of myself and other persons during the course of survey proceedings. The Asstt. Commissioner of Income-tax, Circle 2(4), Ahmedabad, refused to grant the xerox copies of the statements under one or other pretext with the reasons best known to him till the end of April, 1994.
3.5. Thereafter, Shri Dhiren Shah, Chartered Accountant of M/s. C.F. Patel & Shah, was consulted and he was given the authorization as an authorised representative who thereafter approached the Asstt. Commissioner of Income-tax, Circle 2(4), Ahmedabad, with a letter of authority and once again a request was made for granting xerox copies of the statement. The authorised officer there after granted xerox copies on 5th May, 1994 and for the acknowledgement of the receipt of the said, xerox, a letter from M/s. C.F. Patel & Shah, CAs dated 5/5/1994 was also placed on record of the Asstt. Commissioner of Income-tax, Circle 2(4), Ahmedabad and the signature of Shri Amit Patel from M/s. C.F. Patel & Shah, CAs was also taken on the said, letter for the receipt of the xerox copies of the statement by the A. C.I. T."
Thus' the assessee has filed a retraction letter with various income-tax authorities as mentioned above.
5. Assessment proceedings with respect to AY 1993-94 were started on 14th December, 1994 and for AY 1994-95 these were started on 17th January, 1996. The assessee has filed date-wise minutes of hearing in respect of both the assessment years under consideration and the same are comprising at pp.86 to 88 of the paper book the contents of which are as under:-
FOR ASSESSMENT YEAR 1993-94
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Date of Attended by Minutes of hearing Signature in
attendance the order-
sheet
14.12.94 D.M. Thakkar Attended and asked to furnish following Ashesh
Ashesh Shah details- Shah
D.M. Thakkar
1. Cash credit confirmation A.R.
2. Details of sub-brokerage payment.
3. Details of asset put to use during Sandip
relevant financial year. Pradhan
4. Show cause as to why the disclosed A.O.
amount during the survey should not
be added to the total income for AY
1993-94.
5. Details of H.H. Withdrawals,
H.H. expenses.
6. Details of application in public issue,
allotment & sale proceeds.
7. Details of system of accounting.
8. Details of salary expenses.
9. Procurement charges details.
10.Details of dividend income vis-a-vis
stock holding.
17.02.95 D.M. Thakkar Attended and discussed the case. The reply Ashesh
Ashesh Shah of the queries raised during previous Shah
hearing was filed. The books inventorised D.M. Thakkar
during the survey were examined and A.R.
books of accounts for relevant year also Sandip
verified. Pradhan
A.O.
27.03.95 D.M. Thakkar Attended and discussed the case. The Ashesh
Ashesh Shah impounded books of accounts examined Shah
and also produced books. D.M. Thakkar
A.R.
Sandip
Pradhan
A.O.
02.01.1996 Ashesh Shah Attended and discussed the case. Books of Ashesh
accounts may be produced on 22/1/96 at Shah A.R.
3.00 P.M. Sandip
Pradhan
A.O.
14.02.96 Ashesh Shah Attended and discussed the case. The Ashesh
books of accounts examined. Shah A.R.
Sandip
Pradhan
A.O.
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FOR ASSESSMENT YEAR 1994-95"
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17.01.96 Ashesh Shah
D.M. Thakkar Attended and discussed the case. Asked to Ashesh
furnish following details: Shah A.R.
Sandip
1. Details of monthwise trading Exp. Pradhan
2. Details of payment covered Under Section A.O.
40A(2)(b)Justification comparison
with other similar payment.
3. New cash credit confirmation.
4. addition in capital account source
thereof.
5. Details of withdrawals FDR
household exp.
6. Details of disclosure during the
survey and why it is not shown in
the income.
7. Copies of bills of new asset
acquired during the year.
8. Details of unpaid exp.
9. Monthwise sales & purchase. Ashesh
Next hearing fixed on 31/1/96. Shah A.R.
31.01.96 Ashesh Shah Sandip
D.M. Thakkar Attended and discussed the case, asked to Pradhan
furnish the reply to the query raised. In A.O.
adition, following information asked to
submit:
1. Details of bank account of various
family members.
2. Details of computer, books,
advertising, donation, misc. exp.
Postage & telephone exp.
3. Details of payment of brokerage.
4. Investment in shares made by the
assessee.
5. Partywise details of interest earned
& TDS.
6. System of accounting, books of
accounts may be produced on Ashesh
14/2/96. Shah A.R.
14.02.96 Ashesh Shah Sandip
D.M. Thakkar Attended & filed the reply. Books Pradhan
impounded at the time of survey examined A.O.
with books produced. Remaining queries to
be filed in subsequent hearing on 28/1/96. Ashesh
Shah A.R.
18.03.96 Ashesh Shah Sandip
D.M. Thakkar Attended and furnished the information'. Pradhan
Books and other documents A.O.
examined. Following details yet to filed, to
be furnished-
1. Cash credit confirmation of outside
parties.
2. Copy of assets put to the Ashesh
3. Justification of payments to relatives Shah A.R.
covered Under Section 40A(2)(b) Sandip
Hearing adjourned to 22/3/96. Pradhan
25.03.96 Ashesh Shah A.O.
D.M. Thakkar Attended and filed the submission. He has
again reiterated that books of accounts are
completed and audited. Hence disclosure
was ... the any basis and return should
be accepted. Impounded materials
examined.
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The reply of the assessee as submitted to AO with regard to disclosure made at the time of survey as found place at p.78 of the paper book is as under :-
"As regards your honour's query as to why the disclosed amount during the course of survey proceedings should not be added to the total income for the AY 1993-94, we have to submit as under :-
i) The survey proceedings Under Section 133A of the IT Act, 1961 were carried out on 5/1/1994 by your honour at the business premises situated 2235, Muharat Pole, Manek Chowk, Ahmedabad.
ii) After the survey proceedings, the assessee has filed a mercy petition for retraction of statement Under Section 133A of the IT Act, 1961 vide application dated 27/5/1994 which was filed with various authorities of the IT Department. In the statement of total income also the relevant notes were placed giving the reference of above petition.
iii) The books of accounts of the assessee are audited under the IT Act, 1961 for the purpose of Sections 44AB and the total income has been calculated on the basis of such audited accounts.
iv) For the reasons given in the above referred Mercy Petition as well as in the notes forming part of the statement of total income, the effect of the disclosure made during the course of survey proceedings has not been given in the statement of total income.
Your honour has been requested to consider the above mercy petition as well as notes forming part of statement of total income while deciding the issue of addition of the disclosed amount during the course of survey proceedings."
6. Similar reply was furnished in respect of AY 1994-95.
7. After considering these submissions, the AO had assessed the assessee at returned income vide his orders dated 29.2.96 and 29.3.96 for AY 1993-94 & 94-95 respectively. Copies of these assessment orders passed Under Section 143(3) of the Act are placed at pages 124 and 125 for AY 1993-94 & 94-95 respectively. Along with return of income the assessee had appended following note which is identically worded except difference in AYs. The said note is as under :-
"1. The survey proceeding Under Section 133A of the Income-tax Act, 1961, was carried out on 5.1.1994 at my business premises situated at 2235, Mahurat Pole, Manekchowk, Ahmedabad. The authorised officer recorded my statement and the statements of disclosure of Rs. 60 lacs was recorded for the assessment year 1993-94 and assessment year 1994-95. The Xerox copies of the statement recorded was made available to me only in this month of May, 1994 and on scrutiny and verification of said statements the facts come to surface that it was been manipulated and fabricated by the authorised officer irrespective of real factual aspects of the case and accordingly the retraction petition dated May 27, 1994 for the retraction of the statement has been filed with the various IT authorities namely, Commissioner of Income-tax Guj.II, Dy. Commissioner of Income-tax Range-2, Ahmedabad and Assistant Commissioner of Income-tax, Circle 2(4), Ahmedabad, as well as to other higher authorities under the Income-tax Act, 1961.
In pursuance of the contention taken in. the retraction statement as stated hereinbefore no effects of disclosure has been given in the statement of total income and return of income for assessment year 1993-94. (substituted as AY 1994-95 in the return for AY 1994-95)."
After the completion of assessment CIT issued show cause notices to the assessee invoking the provisions of Section 263 of the IT Act on the ground that order passed by AO was erroneous and prejudicial to the interest of revenue.
8. The assessee vehemently objected to such initiation of proceedings vide written submissions submitted on 12th April, 1997, a copy of which is placed at pp. 89 to 99 and 100 to 117 for Asstt. Year 1993-94 and 94-95 respectively. It was pointed out therein that on receipt of copy of statement recorded at the time of survey the assessee within reasonable time had filed letter of retraction before various authorities describing therein the facts and circumstances under which the disclosure was made. A Note was also attached along with the return stating all the facts regarding statement made at the time of survey and retraction thereof. It was further pointed out that during original assessment proceedings the AO had conducted intensive enquiries regarding so called disclosure made during the course of survey. After considering the submissions of assessee, he did not add any sum to the returned income of the assessee. The assessment proceedings were carried on for a long period of 14 months and assessments were within the knowledge of DCIT and CIT. The AO could not bring any material on record to prove the existence of any of the facts and circumstances on the basis of which the so called disclosure was made by the assessee. Thus after making detailed enquiries with regard to business activities of the assessee, the assessments were framed. It was further pointed out that the case was monitored by the DCIT. Thus the assessment order passed by AO cannot be said to be erroneous or prejudicial to the interest of revenue and, therefore, show cause notice should be dropped.
9. Ld. CIT did not accept such submission of assessee and directed the AO to pass fresh assessment order to tax disclosed amount of Rs. 40 lacs and Rs. 20 lacs for AYs 1993-94 & 94-95 respectively. The ld. CIT in his order has relied only on the statement made by the assessee during the survey proceedings as he has not given any finding of fact that assessee is in reality found to be involved in any of the above mentioned four activities. For holding that such addition was to be made he has relied on following two decisions :-
(i) V. Kunhmbu & Sons v. CIT 219 ITR 235 (Ker)
(ii) Rameshchandra & Co. v. CIT
10. The concluding portion of CITs order for Asstt. Year 1993-94 is reproduced herein below for the sake of convenience:-
"6. I have carefully considered the arguments put forth on behalf of the assessee in this regard. It is observed that the thrust of the assessee's argument is that the statement recorded during the survey disclosing additional income of Rs. 40 lacs during the year cannot be relied upon merely because it has been subsequently retracted by the assessee and the authorities concerned have not controverted the retraction petition. It is also stated that the statement recorded contained fabricated and manipulated allegations against the assessee. It is, however, observed that the assessee has not clarified as to how the facts mentioned in the statement duly recorded Under Section 133A(3) of the Act were fabricated and manipulated when the statement has been duly signed by the assessee. In the retraction petition, it is mentioned that the AO did not furnish copies of the statement till 5.5.1994 and after receiving the copies, they found that the one of the pages did not contain the assessee's signatures while on some pages, there was discrepancy in the date mentioned.
7. I have considered this argument of the assessee also. Firstly, assessee has not produced any evidence as to when he first applied for obtaining Xerox of the statement recorded on 5.1.1994. The retraction of the statement recorded was made on 30.5.1994 while the copy of the statement is stated to have been received on 5.5.1994. If the assessee thought that the statement recorded during the survey which has been duly signed by him, was not correct, he would have normally retracted the same on the very next day or as early as possible thereafter which has not been the case here. The fact that on one of the pages, the assessee's signature is not there or that there is some discrepancy of date, does not detract from the authenticity of the statement so recorded. As a. matter of fact, the relevant page on which amount of disclosure is mentioned, is duly signed by the assessee and authorised officer. The assessee 's contention is that there are no signatures of the witnesses. In this connection, it may be stated that no witnesses are required during the survey proceedings and, therefore, the question of signatures of the witnesses on the statement does not arise at all. Similarly, the assessee's contention that since the retraction petition was not controverted by the authorities, it stands confirmed, is also not correct in law. If a per son retracts his earlier statement, the onus is on him to prove that the first statement was not voluntary or was recorded under mistaken belief or mistake of facts or was under threat or coercion. None of the situations exist here and the assessee has not discharged the onus cast on him in this regard.
8. In the case of V. Kunhmbu & Sons v. CIT (Ker) 219 ITR p.235 (1996), it was observed that :-
"If a partner of the firm came forward to disclose about the non-entry of the excess stock in the registers during the course of search the Income-tax Officer could use it even though there was no actual verification of the stock. The assessment was based on the statement of the assessee. Since no case had been made that the statement was made under a mistaken belief of fact or law and the statement being a voluntary one there was no scope for the assessee to challenge the correctness of the assessment."
9. In the case of Rameshchandra and Co. v. CIT , the Bombay High Court observed that where the assessee made a statement of facts, he can have no grievance if the taxing authority taxes him in accordance with that statement. It is, thus, clear from the above that the statement recorded by the Assessing Officer during the course of survey should have been utilized by the Assessing Officer while making the assessment and the income disclosed therein should have been brought to tax as there is nothing to show that the statement was not a voluntary one. The assessment order passed by him not including the disclosed amount of Rs. 40 lacs is, therefore, erroneous and prejudicial to the interest of revenue. The AO is, therefore, directed- to pass a fresh assessment order and bring to tax the disclosed amount of Rs. 40 lacs along with the other income already assessed after giving the assessee an opportunity of being heard. "
(For Asstt. Year 1994-95 ld. CIT has referred to his order for Asstt. Year 1993-94).
11. The AO has framed assessments under Section 143(3) read with Section 263 for both the years to give effect to the orders under Section 263. Copies of both the assessments are filed at pp. 126 to 129 and 130 to 133 of the paper book for Asstt. Year 1993-94 and 94-95 respectively.
It is seen that in these orders also the addition is simply based on the orders of CIT and no material whatsoever has been pointed out to prove the existence of any of the above mentioned four activities carried on by the assessee on the basis of which the said disclosure was stated to be made. It is also seen from the assessment orders that no other income is added except the disclosure made by assessee during the course of survey proceedings. For Asstt. Year 1994-95, ld. CIT has referred to certain other issues for which no addition whatsoever has been made in the order passed Under Section 143(3) read with Section 263 of the Act. Thus other issues for initiation of proceedings under Section 263 have become irrelevant for the purpose of deciding the validity or otherwise of the proceedings under Section 263 of the Act.
12. Referring to the above mentioned facts, ld. Counsel of the assessee pleaded that there is a fundamental difference between the statement recorded under the provisions of Section 132 and that of statement recorded under Section 133A of the Act, According to the ld. AR Section 132(4) authorises an authorised officer to examine on oath any person who is found to be in possession or control of any books of accounts, documents, money, bullion, jewellery or other valuable article or things and any such statement made by such person during such examination can be thereafter used in evidence in any proceedings under the Income-tax Act. Whereas though in a statement recorded under the provisions of Section 133A(3)(iii) an Income-tax Authority acting under said section can record the statement of any person which may be useful for, or relevant to, any proceedings under the Income-tax Act. He contended that thus there is a basic difference between these statements. The statement recorded Under Section 132(4) thus can be used as an evidence in subsequent proceedings. As against that statement recorded under the provisions of Section 133A(3)(iii), cannot be used as an evidence but at the most it can be useful or relevant to any of the proceedings under the Income-tax Act. He contended that immediately after receiving the copy of statement the assessee has filed letters of retraction and brought it to the notice of AO as well as higher Income-tax Authorities that such disclosure was not proper and was made under mistaken belief. Thus statement given by the assessee under the provisions of Section 133A(3)(iii) could not be used as an "evidence" as envisaged Under Section 132(4) of the Act. He, therefore, contended that CIT is patently wrong to use the retracted statement of assessee as an evidence. He contended that by bringing retraction petition the assessee had expressly made it clear that there was no substance in the disclosure made by him and thus the onus was shifted on revenue to show by bringing positive material on record that the assessee was engaged in any of the above four activities on the basis of which such disclosure was made. To bring out the difference between the statement recorded during the course of search and that recorded in survey proceedings, he placed reliance on the decision in the case of Paul Mathews & Sons v. CIT . In the said case it is held that a power to examine a person on oath is specifically conferred on the authorised officer only under Section 132(4) in the course of any search or seizure. Thus, the Income-tax Act, whenever it thought fit and necessary to confer such power to examine a person on oath, has expressly provided for it, whereas Section 133A does not empower any Income-tax authority to examine any person on oath. This is in contradiction to the power under Section 133A, Section 132(4) of IT Act enables the authorised officer to examine a person on '.oath and any statement made by such person during such examination can also be used in evidence under the Income-tax Act. On the other hand, whatever statement recorded under Section 133A of the IT, Act is not given an evidentiary value.
13. He further pleaded that the pre-requisite for the exercise of jurisdiction by the Commissioner Under Section 263 is that the order of ITO should be erroneous in so far as it is prejudicial to the interest of revenue. The Commissioner has to satisfy of twin conditions namely -(i) the order of AO sought to be revised is erroneous; and (ii) it is prejudicial to the interests of revenue. If one of them is absent - if the order of Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse cannot be had to Section 263(1) of the Act. The provisions cannot be invoked to correct each and every type of mistake or error committed by the AO, it is only when an order is erroneous that section will be attracted. He pointed out that the scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the revenue. Only if due to erroneous order of the AO, the revenue is losing tax lawfully payable by the person, it will be prejudicial to the interest of revenue. He contended that in the present case tax is being levied by revenue authorities only on the basis of statement and there is no material on record to prove that tax was payable by the assessee on the so called disclosure. Thus he contended that the tax being raised by the department cannot be said to be "lawfully payable tax". For raising such proposition he relied on the decision of Hon. Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 (SC).
14. He further pleaded that AO had made enquiries in regard to the disclosure made by the assessee and assessee had given a detailed explanation in that regard and all these correspondences are part of the record (he in this regard referred to the minutes of the proceedings carried by AO and also has been reproduced in the above part of this order). Thus it is evident that after considering those submissions the AO did not add the said sum to the income of assessee on being satisfied with the explanation of the assessee and thus the assessment order passed cannot be held to be "erroneous" simply because the AO in his order did not make an elaborate discussion in that regard. Having not found any material to prove the existence of any of the above four activities by the assessee on the basis of which disclosure was made, the order of AO cannot be said to be erroneous within the meaning of Section 263 of the Act. He in this regard placed reliance on the decision of Hon. Bombay High Court in the case of CIT v. Gabriel India Ltd. 203 ITR 108 (Bom). It was further pleaded that provisions of Section 263 cannot be invoked to correct each and every type of mistake or error committed by AO, it is only when an order is erroneous that section will be attracted. Only incorrect assumption of facts of incorrect application of law will satisfy the requirement of the order being erroneous. The assessee had produced relevant material and other explanation in pursuance of the notices issued under Section 142(1) as well as 143(2) and after considering those materials and explanation the AO had come to the definite conclusion. The Commissioner did not agree with the conclusion reached by AO. Section 263 did not empower him to take action on these facts to arrive at the conclusion that the order passed by the AO was erroneous and prejudicial to the interest of revenue. Since the material was there on record and the said material was considered by AO and a particular view was taken, the mere fact that different view could be taken, should not be the basis for an action under Section 263 and it could not be held to be justified. Reference in this regard was made to the decision of Jurisdictional High Court in the case of CIT v. Arvind Jewellers (2002) 124 Taxman 615 (Guj).
15. He also placed reliance on following decisions for raising propositions as enumerated above :-
1. CIT v. Shree Manjuathesware Packing Products and Camphor Works 231 ITR 53 (SC).
2. CIT v. Mehsana District Co-op. Milk Producers Union Ltd. 263 ITR 645 (Guj)
3. Nabha Investments (P) Ltd. v. Union of India and Ors., 246 ITR 41 (Del).
16. He also referred to the documents relating to disclosure made, retraction thereof filed with various authorities, reply to the show cause notice for initiation of proceedings under Section 263, original assessment orders passed by the AO, assessment orders passed in pursuance of orders under Section 263 and all these are part of paper book filed by the assessee.
17. On the other hand, ld. DR referring to the observations of CIT in order under Section 263 contended that a disclosure was made by the assessee during the course of proceedings under Section 133A of the Act. Thus assessee was bound by the disclosure made by him. He pleaded that so called retraction by the assessee was made after considerable gap of about five months and thus it was after thought. The assessee could not prove that the statement was obtained under pressure or coercion. Thus he pleaded that ld. CIT was right in invoking the provisions of Section 263 of the Act as the original assessment orders passed by the AO were erroneous as well as prejudicial to the interest of revenue. The AO did not make any addition according to the disclosure made by the assessee in the assessment order. Thus the order of AO was erroneous within the meaning of Section 263 and once it was erroneous, the lawful revenue of state had, therefore, been lost and thus the provisions of Section 263 were rightly invoked by CIT. He, therefore, pleaded that order of CIT should be confirmed.
18. We have carefully considered the rival submissions in the light of material placed before us. The law regarding applicability or otherwise of Section 263 is well settled. In order to invoke the provisions of Section 263 the order passed by AO should not only be erroneous but should also be prejudicial to the interest of revenue. Thus both the conditions should be fulfilled simultaneously. If any one of them is absent, it will be held that the provisions of Section 263 were not lawfully invoked. The term 'erroneous' though has not been defined specifically under the IT Act, 1961 but it is now well settled that each and every type of mistake or error committed by AO cannot be said to be an error on the part of AO to bring his order to be covered under the provisions of Section 263. An incorrect assumption of facts, or an incorrect application of law can only satisfy the requirement of the order being "erroneous". Thus there should be an incorrect assumption of facts by the AO or there should be an incorrect application of law to bring the order of AO within the category of its being "erroneous". An enquiry was made by AO with regard to disclosure made by the assessee during the course of survey proceedings and this is evident from the date-wise minutes of hearing reproduced in the above part of this order whereby on 14th December, 1994 and 17th January, 1996 for Asstt. Year 1993-94 and 94- 95 respectively, the assessee was specifically required by the AO to show as to why in the return of income the disclosed income was not included. The assessee had filed a detailed reply explaining therein that in what circumstances the disclosed amount was not shown in the return of income. A perusal of date-wise minutes of hearing carried out for both the years under consideration will reveal that assessment proceedings in the present cases were carried out for a pretty long period and the assessee had submitted all the required explanations/evidences with regard to the Different queries made by AO which included the query regarding disclosure made at the time of survey. The books of account and other details were produced and AO verified those books with reference to impounded material. Details of bank accounts of various family members, details of application of public issues and other details were called for and verified by the AO. Even in the order passed Under Section 263 it is not the case of CIT that assessee did not furnish the required details or evidence. Thus it cannot be the case of revenue even till today that assessee did not co-operate or did not furnish any information/detail/evidence at any level. As against this, the case of assessee is that all the books of accounts, details, evidences and explanations were made available to the department for thorough scrutiny and department remains unable to find out there-from any iota of evidence/instance to prove that the assessee was actually engaged in any of the above mentioned four activities on the basis of which the disclosure was made. It is seen that in the order passed under Section 263 or assessment order passed under Section 143(3) r.w.s 263 no reference whatsoever is made to the material, if any, on the basis of which it can be said that the assessee was involved in any of the four activities on the basis of which the said disclosure was made. As against this, in the assessment order passed under Section 143(3) the returned income has been accepted and in the order passed under Section 143(3) read with Section 263 the addition is made only with regard to disclosure made by the assessee as per direction of CIT. Thus there is an apparent absence of any material to say that assessee had any business activity which was not recorded in the books of accounts. Otherwise it establishes that the assessee could support all the entries recorded in his books of accounts. Thus keeping in view these facts, it can not at all be inferred that AO while assessing the income at the returned figure had drawn any incorrect assumption of facts as there is no material on record to prove that assessee was engaged in any of the four activities on the basis of which the disclosure was made. It cannot be also said that he incorrectly applied the law in not making any addition to the returned income of the assessee as what can be lawfully assessed is the income earned by the assessee. The lawful assessment cannot solely based on statement particularly when assessee made the retraction and entire business affairs of the assessee were subjected to thorough investigation under the scrutiny assessment to be framed under the provisions of Section 143(3) of the Act. Thus the assessment order passed by AO under the provisions of Section 143(3) cannot be said to be "erroneous" within the meaning of Section 263 of the Act as there was no incorrect assumption of facts, or incorrect application of law. Thus the first condition for invoking Section 263 cannot be said to have been fulfilled.
19. Similarly, to qualify an assessment order as an order being "prejudicial to the interest of revenue", the order should cause lawful loss of tax to the revenue. That condition is also not fulfilled. In the present case, Section 263 has been invoked on the ground that the income of Rs. 40 lacs and Rs. 20 lacs was assessable in the hands of assessee for AYs 1993-94 & 94-95 respectively on the basis of statement made by assessee during the course of survey under Section 133A of the Act. It has already been pointed out that there is no material on record till date to show that assessee was engaged in any of the four activities on the basis of which disclosure was made. It has been argued before us that there is a basic difference between the statement recorded under the provisions of Section 132(4) vis-a-vis under Section 133A(3)(iii) of the Act. The said difference has well been explained in the decision in the case of Paul Mathews and Sons v. CIT (supra) The statement of the assessee recorded under the provisions of Section 133A(3)(iii) can be said to be useful or relevant to the assessment proceedings only in the circumstances when there is a material on record to prove the existence of any of the four activities on the basis of which the disclosure is stated to be made. It has been explained in the aforecited decision of Kerala High Court that statement recorded under Section 133A cannot be given evidentiary value as such evidentiary value is not attached with by the provisions of Sections 133A of the Act. Thus it cannot be said that only on the basis of statement given by the assessee the disclosed income was assessable as lawful income of the assessee. There being no evidence/material available on record to prove the existence of such disclosed income or earning of such income in the hands of assessee it cannot be said that the tax was lawfully payable by assessee in his hand on the disclosed income. Thus it cannot be said that revenue has lost lawful tax payable by the assessee. Thus the second condition that assessment order should be prejudicial to the interests of revenue also cannot be said to be in existence to bring the present case within the para mater of Section 263 of the Act.
20. In the case of CIT v. Gabriel India Ltd. (supra) it has been held by Hon. Bombay High Court that when there was material on record to show that Income-tax Officer on being satisfied with the explanation of the assessee has formed a view, the said view of Income-tax Officer cannot be held to be erroneous simply because in his order he did not make an elaborate discussion in that regard. Therefore, department cannot take shelter of the argument that AO did not discuss any thing about the disclosure made by the assessee in the order passed under Section 143(3) of the Act as assessee has placed enough material on record to show that queries were raised by AO with regard to disclosure made during the survey and explanation was given by assessee in this regard and after taking into consideration all these explanations and verifying the books of account, impounded material etc. the AO had reached the conclusion that no addition could be made on account of so called disclosure. A specific note was also appended with the computation of income stating all the circumstances regarding disclosure. Thus the material produced before AO in the original assessment proceedings indicates that he had taken a conscious decision with regard to disclosure made by assessee during the survey proceedings and after considering all the material he did not consider it proper to make any addition in that regard. Similar is the view expressed by Hon. Gujarat High Court in the case of CIT v. Arvind Jewellers (supra).
21. In absence of any adverse material, except a statement recorded Under Section 133A(3)(iii) (which according to law had no evidentiary value) the view taken by AO cannot be said to be a view impermissible in law. Therefore, order Under Section 263 cannot also be upheld only on the ground that CIT is not in agreement with the view taken by AO in the original assessment proceedings.. The law is well settled that when an ITO adopted between the course permissible in law and it resulted in loss of revenue or where two views are possible and the ITO has taken one view with which the CIT does not agree it cannot be treated as an erroneous order prejudicial to the interest of revenue unless it is found that view taken by ITO is unsustainable in law as it has already been pointed out that the view adopted by AO in the assessment order passed under Section 143(3) was not unsustainable in law and was one of the possible view. Reference in this regard can be made to the decision of Hon. Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT (supra).
22. Thus keeping in view the entirety of facts and position of law as discussed above, we are of the opinion that the Commissioner has wrongly exercised his power under the provisions of Section 263 of the Act for both the years and his orders are, therefore, quashed for both the years. The appeals filed by the assessee are, therefore, allowed.