Income Tax Appellate Tribunal - Delhi
Manohar Lal Munshi Lal vs Income-Tax Officer on 16 May, 1990
Equivalent citations: [1990]34ITD4(DELHI)
ORDER
S.S. Mehra, Judicial Member
1. Appellant assessee by these two appeals challenges two separate orders of the learned CIT(A), New Delhi, passed under Section 263 of the IT Act, 1961, on identical ground as under:-
That on the facts and in the circumstances of the case the Commissioner of Income-tax had erred in law and on facts in setting aside the order of the Income-tax Officer and asking him to make a fresh assessment, the Commissioner had no jurisdiction in law to cancel the assessment.
2. Since facts, circumstances, issues end parties are common for the sake of convenience we propose to dispose of both the matters by a single order.
3. To start with we take up assessee's ITA No. 2504 (Delhi) 86 for the asst. year 1982-83. Assessee by status is a registered firm and returns of income were filed on 15-7-1972 for both the periods, i.e., from 1-4-1981 to 18-11-1981 and 19-11-1981 to 31-3-1982, showing income of Rs. 54,303 and Rs. 44,534 respectively. The assessment order was framed on 16-12-1983 under Section 143 (3) of the Act at an income of Rs. 55,603 for the first period and at Rs, 41,734 for the second period. Thus aggregate income for both the periods was of Rs. 97,337.
4. The assessment record for this year was subsequently the subject-matter of examination by the learned CIT, New Delhi. It was noticed by him that the learned ITO did not examine the materials seized during the course of search operations conducted on 24-5-1983. According to the learned CIT at the time of search two papers bearing revenue stamps without signature were found and seized. One of those papers showed that on Chaitsudi 8, Samvat 2039, a sum of Rs. 3,19,448 was due to the firm from Smt. Hem Lata. According to the learned CIT the learned ITO did not examine these papers. The learned ITO was not seen to have made any enquiries regarding the resources out of which the above amount was advanced by the assessee. Thus the assessment order framed by the learned ITO was considered as erroneous and prejudicial to the interest of revenue. A show-cause notice dated 24-2-1986 was sent to the assessee incorporating the learned CIT's intention and requiring the assessee to show cause as to why contemplated action should not be taken. A copy of that notice is seen at page 26 of the assessee's paper book. The said notice was replied by the assessee as per copy placed at pages 27&28 of the paper book. According to assessee's reply all notices issued by the learned 1TO were duly complied with and whatever material was needed was furnished also. According to the assessee there was no error and much less prejudice in the present situation. According to the assessee the provision of Section 263 was inapplicable in the present case. Reliance was also placed on the ratio in the case of O.C.M Ltd. (London) v. CIT [1982] 138 ITR 689 (All.). The learned CIT after considering the assessee's reply and submissions, set aside the asst. order to the learned ITO to make fresh assessment after proper enquiry and examination in accordance with law with the following observation:-
4.1 have considered the submissions made on behalf of the assessee. In the case of O.C.M Ltd. (London) case (supra), the High Court was dealing with the issue of revisional jurisdiction of Commissioner under Section 264 of the IT Act. In this case the paper bearing revenue stamps showed that the firm had advanced loan amounting to Rs. 3,19,448 to Smt. Hem Lata. This paper on which the name of the firm is printed was found at the residence of Smt. Hem Lata, one of the partners. That the paper is unsigned is immaterial. The ITO should have examined the seized materials including this paper before framing the assessment. He should have examined the partners of the firm as well as Smt. Hem Lata regarding the transaction recorded in this paper. He should have also enquired about the sources of the fund utilized for giving this advance. The want of such enquiry and examination resulted in prejudice to the interests of the revenue. The ITO committed an error in making the assessment of the assessee-firm without making proper and detailed examination and enquiry as referred to above. The order of assessment as framed by the ITO is erroneous in so far as it is prejudicial to the interests of the revenue. The order of assessment is, therefore, set aside with a direction to the ITO to make a fresh assessment after proper enquiry and examination and in accordance with law. Before making fresh assessment, the ITO will afford adequate opportunity of being heard to the assessee.
5. The present appeal by the assessee before us on the ground mentioned hereinabove is against that finding. Shri K.P. Bhatnagar, the learned advocate on behalf of the assessee took us through various pages of the paper book especially pages 1 to 21,24, 26,27,31 & 32. According to him whatever was required during the assessment proceedings was supplied to the learned ITO and notices were duly complied with. He contended that papers made mention of by the learned CIT since were not before the learned ITO at the time of framing the assessment, their non-discussion by him could not render the assessment order erroneous and prejudicial to the interest of revenue and thus the learned CIT was not justified to operate Section 263 on the basis of two papers which did not constitute the part of the assessment record. Shri Bhatnager submitted that Section 263 could not be the answer to the situation and at the most Section 148 of the Act could be looked into. According to him the learned CIT did not examine the 'record' which was before the learned ITO. It was also pointed out that the receipts were not on record. It was also submitted that the said papers had no evidentiary value either being unsigned. He also invited our attention to the copies of the capital accounts of the partners and statement of Smt. Hem Lala.
6. The learned counsel also made mention of the following ITRs:-
1. Ganga Properties v. ITO [1979] 118 ITR 447 (Cal.)
2. Bennett Coleman & Co. Ltd. v. Allahiri, ITO [1983] 141 ITR 239 (Bom.)
3. Behari Lal Chatterji v. CIT [1934] 2 ITR 377 (All.)
4. CIT v. Oil Village Industries (P.) Ltd. [1987] 165 ITR 88 (Delhi)
5. Umashankar Mishra v. CIT [1982] 136 ITR 330 (MP) 6.2ITD561(s/c)
7. CIT v. Ratlam Coal Ash Co. [1988] 171 ITR 141 (MP)
8. CIT v. Shantilal Agarwalla [1983] 142 ITR 778 (Pat.)
9. Mohammed Mahboob All Saheb v. I AC [ 1978] 113 ITR 167 (AP)
10. 161 ITR 693 (sic)
11. CIT v. Kashi Nath & Co. [1988] 170 ITR 28 (All.)
12. P.K. Syam v. State of Assam [1978] 112 ITR 447 (Gauhati)
13. CIT v. Late Sunder Lal [1974] 96 ITR 310 (All.)
14. CIT v. Trustees Anupam Charitable Trust [1987] 167 ITR 129 (Raj.)
7. On examination of the ratios it was discovered that by and large the same dealt with merit of the issue which the learned CIT in the present case has not gone into. We thus leave these ratios at that. The assertion of the learned counsel was that action of the learned CIT being erroneous should be vacated and a correct assessment order should be kept in tact.
8. On behalf of the revenue the learned departmental representative Shri B.K. Haider supported the order under challenge and mentioned further that 2 receipts made mention of in the order under challenge were found at the time of search and seized accordingly and this constituted part of the seized material and according to him the learned ITO was under a legal obligation to look into the seized material at the time of framing the assessment. On the basis of pages 1 to 4 of the revenue's paper book it was pointed out by the learned departmental representative that the existence of the seized material was in the knowledge of the learned ITO concerned and non-discussion thereof constituted an error rendering the asst. order erroneous and, therefore, prejudicial. According to Shri Haider the seized material constituted the asst. record which the learned ITO was under a legal obligation to peruse before finalizing the assessment. The learned departmental representative contended that the assessment was framed without proper enquiry by the learned ITO and thus was erroneous and prejudicial authorizing the learned CIT to operate Section 263. In this connection reliance by the learned departmental representative was placed on the ratio in the case of Gee Vee Enterprises v. Addl. C/7[1975] 99 ITR 375 (Delhi).
9. It was further pointed out by the learned departmental representative that the case laws made mention of by the learned counsel since dealt with the issues not discussed and' decided by the learned CIT, were of the point and need no consideration. It was also explained that the merit of the papers mentioned by the learned CIT will be looked into by the learned ITO only while framing the fresh assessment and thus the learned CIT could not be considered as under legal obligation to comment upon the merit of the papers.
10. Rival submissions have been heard and considered. The search was conducted on 24-5-1983 on the assessee's premises. Material was taken into possession including the two papers made mention of by the learned CIT. Thus those papers were, in our view, the parts of the assessment record. It is further seen from the revenue's paper book that the learned ITO had the knowledge about the raid and the papers. In these circumstances it was the learned ITO's legal duty to examine the seized material including the papers before framing the assessment for the year under consideration. For this conclusion we derive full support from the ratio in the case of Gee Vee Enterprises, 99ITR 375. It is observed by the Lordships of the Delhi High Court in the above case that absence of proper enquiry by the ITO at the assessment stage justify the operation of Section 263 by the learned CIT subsequently. This exactly has happened in the present case and, in our view, the jurisdiction was correctly assumed and rightly exercised. We thus see no scope for interference.
11. Next we take up assessee's ITA No. 3336 (Delhi) 86 for the asst. year 1983-84. The facts and circumstances for this year are similar to those of asst. year 1982-83. In fact common submissions were made by the contesting parties for both the years. For the detailed reasons discussed for the asst. year 1982-83 we confirm the order under challenge for the year under consideration also.
12. The paper books filed by the parties have been perused and the case laws looked into.
13. In the result the appeals are dismissed.
P.J. Goradia, Accountant Member
14. Though these appeals are filed against two separate undated orders, passed by the Commissioner of Income-tax assuming jurisdiction under Section 263 of the Act, the ground raised is common to both the appeals and the same reads as under:-
That on the facts and in the circumstances of the case the Commissioner of Income-tax had erred in law and on facts in setting aside the order of the Income-tax Officer and asking him to make a fresh assessment, the Commissioner had no jurisdiction in law to cancel the assessment.
15. For the purpose of the order, I would refer to the facts in respect of the assessment year 1982- 83 except whenever reference is made to the facts in respect of assessment year 1983-84.
16. The assessee is a registered partnership firm regularly assessed to tax. The assessment was completed under Section 143(3) of the Act vide order dated 16th December, 1983. The Commissioner of Income-tax assuming jurisdiction under Section 263 of the Act, issued show-cause notice on the following lines:-
The examination of the assessment records shows that the Income-tax Officer completed the assessment under Section 143(3) of the Income-tax Act without examining the materials seized during the course of the search. During the course of search, a paper bearing revenue stamps without signature was found and seized. This paper showed that on Chaitsudi 8, Samvat 2039 a sum of Rs. 3,19,448 was due to the firm from Smt. Hem Lata. The Income-tax Officer has not examined this paper. He did not make any enquiry regarding the sources out of which the sum of Rs. 3,19,448 could be advanced by the assessee firm.
16.1 The assessee replied in writing, the relevant portion of written submissions is reproduced below for the purpose of appreciating the facts and controversy correctly:-
With reference to the above notice we submit that we have nothing to do with the paper bearing revenue stamps without signature, which stated that on Chaitsudi 8,2039 a sum of Rs. 3,19,448 was due to the firm from Smt. Hem Lata. No paper of that nature was recovered or seized from our shop and therefore, we have absolutely no knowledge of the same. Moreover, the paper does not contain any signature of any partner of the firm and therefore, it has no veracity, authority or authenticity about it at all. Any body inimical to us, would concord such a unproved unidentified and evidenceless paper against us just to harass, intimidate and trouble us. Our books of account does not show this loan. Our books of account is duly closed, all purchases and sales are fully vouched and stock details tallied to the last article, aged have been duly accepted by the Income-tax department year after year. If as alleged an amount of Rs. 3,19,448 had been advanced by the firm it is for the department to bring in cogent material and evidence on records pointing out to any serious omission in the books of account, relating the same to the said advanced loan. On the basis of the impugned paper there is no case for the department to cancel the assessment, which had been made after examination of all the books of account and vouchers including vouchers for expenses incurred in the course of the day to day business, which are fully vouched. Further at the time the assessment was made, the so-called paper was not available with the department and therefore, it cannot be said that the assessment made was erroneous and unless and until the assessment order is erroneous it can't be said to be prejudicial. Therefore, on the basis of this paper alone, which is not owned either by the firm or Smt. Hem Lata (Her certificate enclosed), there is no warrant in law to cancel the assessment.
16.2 However, the Commissioner of Income-tax passed the order setting aside the assessment with a direction to redo the assessment. The relevant portion of the order is already reproduced in paragraph 4 of the order passed by the learned Judicial Member.
16.3 At the time of hearing on behalf of the assessee submissions were made contending that:-
(i) The papers sought to be made basis for assuming jurisdiction were not with the assessing officer at the time of assessment.
(ii) No cognizance could be taken of unsigned paper because the Commissioner of Income-tax was required to give his own finding.
(iii) There was no error either of fact or law.
16.4 Relevant judicial pronouncements were cited and they are stated in the order passed by the learned Judicial Member.
16.5 The Departmental Representative placed before us some papers on the basis of which it was sought to be added that assessing officer was aware that there was search. Therefore, it was the duty of the assessing officer to make the appropriate inquiries.
16.6 In my opinion, the Commissioner of Income-tax has no jurisdiction legally. From the order passed by the Commissioner of Income-tax it is clear that papers were found from the residence of Smt. Hem Lata, i.e., one of the partners. Therefore, it cannot be said the papers found formed part of assessment record, that would be only in the case of Smt. Hem Lata. Partner is a different entity other than the partnership firm. It cannot, therefore, be said that these papers formed part of the assessment records at the time of assessment.
16.7 On perusal of the papers submitted by the Departmental Representative, I find that the papers are in connection with retention of documents seized from the residential premises of Rama Nath Goel c/o Rama Nath Goel & Co. I do not know how this advances the case of the revenue. On the contrary, I find from the papers placed before us in the Paper Book filed by the assessee that even in February, 1984 the inquiries were going on in connection with the papers lying with Assistant Director of Inspection (Investigation). I also see on page 33 that the Assistant Director of Inspection, Mayur Bhavan, New Delhi, issued summons under Section 131 asking the assessee to produce books of accounts for the years 1981-82 and 1982-83. In June, 1987 the assessee had requested the assessing officer for the inspection of the records relating to the communication, if any, received by him from the Assistant Director of Inspection. As against this, when a reference is made to the assessment order for the assessment year 1983-84 in the assessee's own case, it is mentioned that there was survey operation under Section 133A on the business premises of the assessee on 11-11-1982 when thecae was found to be in order. This assessment order was passed on 30th February, 1984. It is, therefore, apparent that the impugned papers were lying with Assistant Director of Inspection (Intelligence Wing) and not with the assessing officer and again the same were in relation to altogether different identity. Therefore, the decision in the case of Ganga Properties (supra) is directly applicable.
16.8 Again from, the assessment orders we find that proper inquiries were made. Considering the type of evidence sought to be made the basis of assumption of jurisdiction, it cannot be said that no inquiries were made by the assessing officer. Therefore, the orders are not erroneous either.
16.9 We have no dispute with the ratio laid down in the case of Gee Vee Enterprises (supra) but the circumstances should warrant and the basis should be found existing before holding that no inquiries were made by the assessing officer.
16.10 In my opinion, therefore, the order passed by the Commissioner of Income-tax is required to be cancelled and, that passed by the assessing officer is required to be restored.
17. In respect of the assessment year 1983-84 for want of time it was submitted that the decision taken for assessment year 1982-83 be applied to the subsequent assessment year also. Therefore, the Commissioner's order under Section 263 is cancelled so as to restore that of the assessing officer.
18.1 have passed a separate order because I could not agree with my learned Brother on the decision he has taken, nor could he agree with my decision.
19. In the result, both the appeals are allowed.
G. Krishnamurthy, President
1. This case has come to me as a Third Member to express my opinion on the following point of difference that arose between the Members of Delhi Bench 'B', who heard this appeal originally:-
Whether, on the facts and in the circumstances of the case, the orders passed by the Commissioner of Income-tax assuming jurisdiction under Section 263 of the Income-tax Act, 1961 are required to be upheld?
2. The facts gathered from the order of the Commissioner of Income-tax are that this relates to the assessment year 1982-83 and in this case, the assessment was completed on a total income of Rs. 97,337. There was a search operation conducted on 24-5-1983 on the premises of Smt. Hem Lata a partner in the assessee firm when certain materials were seized in which two papers bearing revenue stamps without signatures were found. One of these papers showed that on Chaitsudi 8, Samvat 2039, a sum of Rs. 3,19,448 was due to the assessee firm from Smt. Hem Lata (one of the partners). According to the CIT, the Income-tax Officer did not examine this paper nor made any enquiries regarding the source out of which the said sum of Rs. 3,19,448 was advanced by the assessee firm to the said Hem Lata. From this he inferred that the order of assessment framed by the Income-tax Officer was erroneous in so far as it was prejudicial to the interest of the revenue. Thereafter a notice under Section 263 was issued to the assessee to show cause why an order should not be passed setting aside the assessment, with a direction to the ITO to make a fresh assessment after proper examination of the seized material. In response to the said notice, it was represented on behalf of the assessee that since the paper on which the transaction of loan of Rs. 3,19,448 was recorded, was not signed, it was not authenticated and in any case Hem Lata had denied having received any advance from the assessee-firm. It was further submitted that the provisions of Section 263 were not applicable in this case because the search that was conducted was not on the premises of the assessee-firm but it was on the premises of Smt. Hem Lata who was a partner. Even if Smt. Hem Lata happened to be a partner, the search conducted at her house could not be equated to a search conducted on the premises of the assessee much worse the documents seized in the course of the search were not forwarded to the ITO making the assessment of the firm. Thus, when the ITO was not aware of what happened in the search that took place in the premises of Hem Lata, the ITO could not be held to have committed an error in making the assessment causing prejudice to the interest of the revenue. Reliance was placed upon the decision of the Allahabad High Court in the case of O.C.M. Ltd. (London) (supra). The CIT held that the case cited by the assessee was inapplicable as it related to the interpretation of the provisions of Section 264 of the Income-tax Act and not to Section 263. Coming to the facts of this case, the CIT held that the paper bearing revenue stamp showed that the firm had advanced loan amounting to Rs. 3,19,448 to Smt. Hem Lata. The paper on which the name of the firm was printed was found at the residence of Smt. Hem Lata, though the paper was unsigned. Since it contained name of the firm, the ITO should have examined the seized material before making the assessment. By this the inference was that the ITO was in possession of the seized material and it formed part of the record of the firm. He should have examined the partners of the firm as well as Smt. Hem Lata regarding this transaction. He should have enquired into the source of the funds from which this advance emanated and since no such enquiry was made, the assessment made resulted in a prejudice to the interest of the revenue. He, therefore, disagreeing with the contentions advanced on behalf of the assessee, set aside the order passed by the ITO with a direction to him to make a fresh assessment, after proper enquiry and examination.
3. It was to this order that objection was taken and an appeal was filed before the Tribunal. The same contentions as were raised before the CIT were reiterated. In particular, it was pointed out that when the seized material was not before the ITO, it was not proper for the CIT to say that the seized material constituted the record of the assessee-firm and, therefore, the non-enquiry to that material resulted in causing prejudice to the interest of the revenue. The Departmental Representative, however, pointed out that the seized material was conveyed to the ITO long before the date of assessment and it was the fault of the ITO in not having discussed this seized material and, therefore, that non-discussion caused prejudice to the interest of the revenue, inasmuch as the relevant papers from the seized material constituted the record of the assessment of the firm. The ITO was under legal obligation to peruse those records before finalizing assessment and he having failed to consider it, the CIT was justified in setting aside the assessment. The learned Judicial Member was of the opinion that the said papers said to have been conveyed to the ITO long before the assessment was made, constituted record of the assessment of the firm, that the ITO had knowledge of those papers and the ITO having the knowledge of those papers and also about the raid, should have examined the seized material before framing the assessment and any assessment made without making a proper enquiry was erroneous in law and could be set aside. For this proposition, he relied upon the ratio of the decision of the Delhi High Court in the case of Gee Vee Enterprises (supra). But the learned Accountant Member was of a different opinion. He pointed out that the assessee was registered partnership firm regularly assessed to tax, that the assessment in this case was completed on 16th December, 1983 under Section 143(3), that the search had taken place not in the premises of the assessee-firm but in the premises of the partner Hem Lata where such papers must have been found, that those papers found although said to be on the letter head of the assessee-firm did not contain any signatures of any partner of the firm and, therefore, they had no veracity, authority and authenticity of it, that it was possible that the partner herself could have utilized the letter head of the firm to make certain entries not relating to the firm and that by itself did not constitute any material to hold that the money was advanced by the assessee-firm, that the books of accounts of the firm did not show any such loan, that the ITO making the assessment of the firm had no knowledge of those papers before making the assessment, that if at all any income was held to have escaped assessment, the proper course would have been to reopen the assessment of the firm under Section 147 but not to set aside the assessment under Section 263 for which the requirements of law were totally different from the requirements of law needed to reopen the assessment under Section 147. Referring to the papers submitted by the Departmental Representative, based upon which he submitted that the ITO assessing the firm was given the papers and, therefore, those papers constituted the assessment record of the firm, the learned Accountant Member pointed out that even in February, 1984 the Asstt. Director of Inspection (Investigation) in whose custody the seized papers were lying was making enquiries as to which ITO the papers should be sent for making proper assessment which shows that the seized material could not have been with the ITO. Further those papers related to the documents seized from the residential premises of Rama Nath Goel c/o Rama Nath Goel & Co., who is different from either Hem Lata or the assessee-firm. Thus there was not only non communication of the papers to the concerned ITO and even otherwise the communication was with reference to a different party and that could not constitute the assessment record of the assessee firm and, therefore, the CIT was not justified in observing that the assessing officer knew about the search operations, the seized material and the paper containing the figure of Rs. 3,19,448 said to have been the money advanced by the assessee-firm to the said Hem Lata. Thus he could not agree with the view expressed by the learned Judicial Member and held that the order passed by the CIT was not proper and deserves to be cancelled. It was thus the above difference of opinion arose and the matter was referred to me as Third Member.
4. I have heard Shri K.P. Bhatnagar along with Sh. S. Ramanand Aiyyar for the assessee and Shri D. V. Srivastava for the department. After going through the papers, I am of the opinion that it is not correct to say that the seized material was conveyed to the ITO so that it could be said that he ignored or bypassed it before making the assessment. In the paper book filed by the department on which reliance was placed by the Judicial Member to come to the view that the seized material was put before the ITO assessing the assessee-firm, there were only four papers. The first paper related to a letter written by the ITO, Distt. III. B(2), New Delhi to the Commissioner of Income-tax seeking permission to retain documents seized from the residential premises of Shri Prem Nath Goel, partner of M/s. Prem Nath Goel & Co., Nay a Bazar, Delhi on 24-5-1983. This does not relate to the assessee firm even though wife of Prem Nath Goel happens to be a partner in the assessee-firm but the documents seized related to Prem Nath Goel, partner of Prem Nath Goel & Co. but not to the wife of Prem Nath Goel who happens to be a partner in the assessee-firm. This document cannot, therefore, be said to have any relation to the affairs of the assessee-firm. The second paper is a proposal to the CIT for the retention of the documents seized under Section 132(8) of the Income-tax Act, 1961. The third document is again related to the documents seized from the premises of Prem Nath Goel, Pahar Ganj. Delhi. It is no doubt true that there is a reference in this list to Annexure 'K' in which it was mentioned that a transaction containing an amount of Rs. 2,45,000 in mandi language on the letter head of Manoharlal Munshilal, Khari Baoli, Delhi, i.e., the assessee herein, without date and with two revenue stamps affixed and unsigned was made. There was also a reference to the transaction of Rs. 3,19,448 again in mandi language on the letter head of M/s. Manoharalal Munshilal, Khari Baoli, Delhi on 1-4-1982 with two unsigned revenue stamps affixed. These documents were sent to the ITO. Distt. III.B(2) by the Asstt. Director of Inspection to seek permission of the CIT to retain those documents for more than 180 days. The purpose of this communication is to seek retention of the documents in the possession of Assistant Director of Inspection beyond the period of 180 days. These documents must have been sent by the ITO to the CIT with the proposal for grant of permission to retain the documents beyond 180 days. How can the reference be construed as a reference as to form part of the record of the assessee-firm. The Asstt. Director of Inspection was by then still seized of the matter.
5. In the 4th paper which is the last paper of the paper book filed by the department, there was a letter written by Assistant Director of Inspection (Inv.) on 5-11-1983 addressed to the ITO Distt. III. B(2) which again related to Prem Nath Goel, partner of M/s. Prem Nath Goel & Co., Lajpat Nagar, New Delhi. It was mentioned in this letter that action under Section 132(1) was taken on 24-5-1983 at the residential premises of Shri Prem Nath Goel at 7715, Ram Nagar, Pahar Ganj, and certain records were seized as per annexure C, D, F, K & L and also a Panchnama was recorded on that date and a request was made to obtain the necessary permission of the CIT well in time for the retention of those documents beyond the period of 180 days and it was no doubt true that Panchnama and annexure A to Q which must have included annexure 'K' must have been forwarded to the ITO. Here again this is only in connection with the search conducted on the premises of Prem Nath Goel. There was nothing in this letter to indicate that the assessee-firm was involved in any manner. It is only an inference to be drawn because annexure 'K' referred to the transactions of Rs. 2,45,000 and Rs. 3,19,448 on the letter head of the assessee-firm and it must be supposed to have been sent to the ITO assessing the firm and thus the ITO assessing the firm must have had the know ledge of the seized material. But the record of the assessing officer does not show these annexure. The learned Departmental Representative submitted at this stage that in the course of the search at the premises of Smt. Hem Lata, a statement was recorded from her and in that statement, there was a reference to these two transactions and this statement was submitted to the ITO assessing the firm on 7-11-1983 and since he made the assessment on 16-12-1983 without making any enquiry, prejudice was caused to the interest of the revenue by the non-enquiry of the ITO into his efforts. But here again the statement said to have been forwarded was not made available to me. Assuming it was so still the CIT, in the notice given under Section 263 before passing the order, did not refer to any of these documents. In the notice that he sent to the party, he categorically stated that the examination of the assessment record showed that the ITO completed the assessment under Section 143(3) of the Income-tax Act without examining the materials seized during the course of the search. It was further pointed out in the notice that the seized papers showed an advance of Rs. 3,19,448 by the assessee to Hem Lata and that the ITO did not examine this paper. Actually such a paper did not exist and the paper that existed was in the name of Prem Nath Goel, partner of Prem Nath Goel & Co. and no reference was made to those papers in the show-cause notice issued by the CIT under Section 263 in other words, a proper charge was not made available to the assessee to allow him the opportunity of rebutting the same. Unless the charge is specific, it cannot be said that the assessee was given a proper opportunity of meeting it. If the papers were really available with the file, nothing prevented the CIT from making a reference to Prem Nath Goel, partner of Prem Nath Goel & Co. and to the papers seized in the search on the premises of Prem Nath Goel and to refer to these transactions. There is also nothing to suggest from the records that the statement recorded from Hem Lata was forwarded to the concerned ITO on 7-11-1983 but on the other hand, there was evidence to show that even after the assessment was made, the Asstt. Director of Inspection (Inv.), Mayur Bhavan, was enquiring as to whom the seized material was to be sent for making the assessment, which shows that the Asstt. Director of Inspection was in the custody of the material and he had not sent the papers to the concerned ITO. It is, therefore, very difficult to agree that the ITO was in possession of the seized material before making the assessment. Though it can be said he might had the knowledge but is that record. May be that after having a look into the combined records of the assessee-firm and ks partners it may be possible to draw a conclusion that the transactions of the assessee-firm as reflected in the seized papers in the raids conducted at the premises of the partners was not properly enquired into before making the assessment on the assessee-firm but the records of the partners do not constitute the records of the assessee-firm. It is, therefore, in my opinion incorrect to state that the record of the assessee-firm showed these transactions into which the ITO had not made any enquiry before making the assessment. I am, therefore, inclined to agree with the view expressed by the learned Accountant Member and hold that these papers could hot be said to be constituting the record of the assessee-firm before making the assessment. May be true that the ITO might have had knowledge of a search being conducted in the premises of the partners of the assessee-firm, I do not think that that knowledge is enough to hold that the assessment made on the firm is such as to be called erroneous and prejudicial to the interest of the revenue unless the seized material was communicated to the ITO to be inquired into. Without going into the merits of other contentions raised before me, I hold in my/limited capacity as a Third Member, that the view taken by the learned Accountant Member appears to be correct and justified and I agree with him. The learned Judicial Member had not enquired into the nature of the documents that formed part of the department's paper book and construed them as relating to the assessee-firm which it was not.
6. Now the matter will go before the regular Bench to dispose of the appeal in accordance with opinion of the majority.