ORDER
B. L. CHHIBBER, A.M. :
The only effective ground in both the appeals for consideration is in regard to the jurisdiction of the CIT, Rajkot, in passing the order under s. 263 of the IT Act, 1961 (hereinafter referred to as the Act). The order under s. 263 is a consolidated order for both the assessment years under appeal.
2. The assessments in the case of the assessee-firm were finalised under s. 143(1) of the Act. The assessee had claimed expenditure on seminar amounting to Rs. 54,570 and Rs. 92,390 in the asst. yrs. 1986-87 and 1987-88, respectively. The details of such expenses were not found on record. The CIT noted that the AO completed the assessments without collecting the relevant details and without considering whether such expenses were allowable in full. He accordingly held that the action of the AO in completing the assessments without considering the above aspects of the case, was found to be erroneous and prejudicial to the interests of the Revenue. He, therefore, set aside the assessments on this limited issue and directed the AO to frame the assessment de novo after considering the above points and after allowing the assessee a reasonable opportunity of presenting its case.
3. Shri M. M. Patel, the learned counsel for the assessee, submitted that it is pertinent to note that the assessments in the case of the assessee-firm were finalised under s. 143(1) of the Act. As held by the Honble Gujarat High Court in the case of CIT vs. Smt. Maniben S. Parikh (1995) 215 ITR 81 (Guj), the two conditions which must be satisfied before the CIT can exercise powers under s. 263 of the Act, are that the order of the assessing authority must be found to be erroneous and further that it must also be found to be prejudicial to the interests of the Revenue. It has further been held that unless both conditions are satisfied, the CIT does not get jurisdiction to pass the order under s. 263 revising the assessment order. He submitted that as per the scheme of s. 143(1) as it stood prior to asst. yr. 1989-90, AO was empowered to make an assessment of the total income or loss of the assessee, without requiring the presence of the assessee or the production of him by any evidence in support of the return, after making such adjustments to the income or loss declared in the return as duly prescribed. In the facts of the present case, the CIT has not found the order of the AO to be erroneous inasmuch as any of the conditions as prescribed in s. 143(1) have not been fulfilled. According to the learned counsel for the assessee, the contention of the CIT is that the action of the AO in completing the assessment without obtaining the details of the seminar expenses and examining the seminar expenses was erroneous and prejudicial to the interests of the Revenue. He has, therefore, set aside the assessment and directed the AO to frame the assessment de novo after considering the allowability of the seminar expenses. The learned counsel for the assessee, therefore, submitted that the learned CIT had no jurisdiction under s. 263 since the material condition as laid down by the Honble Gujarat High Court in the case of Smt. Maniben s. Parikh (supra) that the CIT must be satisfied that the order of the AO was erroneous and prejudicial to the interests of the Revenue, has not been fulfilled in the instant case. The assessment order was framed by the AO under s. 143(1) and looking to the provisions of s. 143(1) as referred to above, there was no error committed by the AO in accepting the returned income of the assessee firm. In support of his contentions the learned counsel for the assessee further relied upon the following authorities :
(1) Venkatakrishna Rice Company vs. CIT (1987) 163 ITR 129 (Mad);
(2) CIT vs. Gabriel India Ltd. (1993) 203 ITR 108 (Bom);
(3) Puranmall Narayan Prasad Kedia (HUF) vs. Asstt. CIT (1994) 48 ITD 439 (Cal) and
(4) Smt. Sarlaben Gopalbhai Bhagchandani vs. Asstt. CIT (1994) 48 TTJ (Ahd) 241.
4. Shri Sunil Agrawal, the learned Departmental Representative strongly supported the order of the CIT. He submitted that there is no bar at revising the order passed in the summary scheme i.e. under s. 143(1) by the CIT if he finds that the order passed by the AO is erroneous inasmuch as prejudicial to the interests of the Revenue. In support of his contentions he relied upon the following authorities :
(1) CIT vs. Pushpa Devi (1987) 164 ITR 639 (Pat);
(2) CIT vs. Smt. Rambha Devi (1987) 164 ITR 658 (Pat);
(3) CIT vs. Smt. Sharda Devi Lath (1989) 175 ITR 566 (Pat);
(4) CIT vs. Smt. Krishna Devi (1989) 175 ITR 591 (Pat) and
(5) CIT vs. Smt. Sangeeta Agrawal (1992) 196 ITR 647 (All).
The learned Departmental Representative further relied upon the decision of the Ahmedabad Bench of the Tribunal in the case of Shreno Ltd., vs. Dy. CIT (ITA No. 2126/Ahd/1991 decided 13th December, 1995) for asst. yr. 1988-89 to which one of us (Accountant Member) was a party.
5. We have considered the rival submissions and perused the facts on record. As held by the Honble Madras High Court in the case of Venkatakrishna Rice Co. vs. CIT (supra), when an order of assessment of the ITO is in accordance with law, it cannot be held to be erroneous in law and consequently it cannot be prejudicial to the interests of the Revenue and hence the action of the CIT in such a case cannot be justified. The following observations of the Honble Madras High Court on pages 156 & 157 of the said judgment are very significant :
“In our judgment, the expression “prejudicial to the interest of the Revenue” is not to be construed in a petty-fogging manner, but must be given a dignified construction. It may be noted that the use of the expression “Revenue” in our opinion, is significant. It denotes some kind of abstraction or symbol in the same sense in which the expression “crown” is used to distinguish it from any person enthroned. The interests of the Revenue is not to be equated to rupees and paise, merely. There is a biblical saying that we do not live by bread alone. Varying this saying, it may be said that the Revenue does not live by tax alone. In this sense, therefore, the interests of the Revenue are not tied up merely with realising as much Revenue as possible, willy nilly, merely looking to the productivity aspect of taxation. The jurisdiction of the CIT under s. 263 is undoubtedly a supervisory jurisdiction. It is intended for interference in special cases to counteract orders which are erroneous as well as prejudicial to the interests of the Revenue. In this context, therefore, the expression “prejudicial to the interests of the Revenue” must be regarded as involving a conception of acts or orders which are subversive of the administration of Revenue. There must be some grievous error in the order passed by the ITO, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the CIT might think to be prejudicial to the interests of Revenue administration. There might be cases where the CIT might wish to interfere with an order of the ITO in order to safeguard the fair name and reputation of the IT Department without any thought of going into the particular aspects of the assessment. Assessments which are mala fide, politically and communally motivated may be, however, set aside as being prejudicial to the interests of the Revenue. It is unnecessary for us to illustrate the point any further. All that we wish to observe is that the scope of the interference under this section is not to set aside merely unfavourable orders and bring to tax some more money to the treasury. Nor is the section meant to get at sheer escapement of revenue which, as is well known, is taken care of by provisions elsewhere in the Act such, for instance, as s. 147 of the Act. The prejudice must be prejudice to the Revenue administration.”
The Honble Bombay High Court in the case of CIT vs. Gabriel India Ltd. (supra) has also held that the order to be revised under s. 263 must be an order which is not in accordance with law or which has been passed by the ITO without making any enquiry in undue haste. The following observations at p. 116 of the said judgment are again highly significant :
“We, therefore, hold that in order to exercise power under sub-s. (1) of s. 263 of the Act there must be material before the CIT to consider that the order passed by the ITO was erroneous insofar as it is prejudicial to the interests of the Revenue. We have already held what is erroneous. It must be an order which is not in accordance with law or which has been passed by the ITO without making any enquiry in undue haste. We have also held as to what is prejudicial to the interests of the Revenue if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realised or cannot be realised. There must be material available on the record called for by the CIT to satisfy him prima facie that the aforesaid two requisites are present. If not, he has no authority to initiate proceedings for revision. Exercise of power of suo motu revision under such circumstances will amount to arbitrary exercise of power. It is well settled that when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on record to satisfy it in that regard. If the action of the authority is challenged before the Court it would be open to the Courts to examine whether the relevant objective factors were available from the records called for and examined by such authority. Our aforesaid conclusion gets full support from a decision of Sabyasachi Mukharji J. (as his Lordship then was) in Russell Properties (P) Ltd. vs. A. Chowdhury, Addl. CIT (1977) 109 ITR 229 (Cal). In our opinion, any other view in the matter will amount to giving unbridled and arbitrary power to the revising authority to initiate proceedings for revision in every case and start re-examination and fresh enquiries in matters which have already been concluded under the law. As already stated it is a quasi-judicial power hedged in with limitation and has to be exercised subject to the same and within its scope and ambit.”
5.1 We also find that there is a direct decision of the Tribunal Calcutta Bench in the case of Puranmall Narayan Prasad Kedia (HUF) (supra) where the Tribunal was concerned with a case where an assessment finalised under s. 143(1) was revised by the CIT. After an elaborate consideration of the facts of the case and also the CBDT Instruction No. 1617, dt. 18th May, 1985 and Circular No. 176, dt. 26th August, 1987, the Tribunal was pleased to hold that revisionary power cannot be invoked by the CIT in case an assessment was completed under s. 143(1) of the Act. Our own Tribunal Bench at Ahmedabad in the case of Sarlaben Gopalbhai Bhagchandani (supra) has held as under :
“The assessments under s. 143(1) of the IT Act and under s. 16(1) of the WT Act were made in accordance with the various circulars issued by the Board and as such they cannot be held to be erroneous and, therefore, cannot be revised.”
5.2 Now, we take up the cases relied upon by the learned Departmental Representative referred to supra. On the basis of which he tried to conclude that the CITs revisionary jurisdiction in respect of orders under s. 143(1) cannot be challenged. We have gone through the contents of these cases and find that in none of the cases relied upon by the Departmental Representative, the question of jurisdiction from the angle as raised before this Tribunal in the present case was raised and hence this issue never came to be decided as such in any of the decisions of any High Court. Merely because in a particular case the assessee has not challenged the CITs jurisdiction on the ground as raised in the present case, that cannot lay down a judicial precedent. What the High Courts have held is that on the facts of those particular cases that there was no bar at revising the order passed under the summary scheme provided the same are erroneous in the eyes of law and the facts so warrant. Hence, from this point of view all the decisions cited by the learned Departmental Representative are clearly distinguishable. In fact, only two direct decisions on this point are those of the Calcutta Bench and Ahmedabad Bench of this Tribunal as referred to hereinabove.
5.3 As regards the Departmental Representative reliance on unreported decision in the case of Shreno Ltd. vs. Dy. CIT in ITA No. 2126/Ahd/1991 referred to supra, we find that in that case the assessee claimed deduction under s. 32AB of the Act amounting to Rs. 83,000 at Rs. 4,11,612 the income earned by the assessee not from the business or profession for which deduction was allowable and thus the CIT set aside the assessment on that limited point and directed the AO to re-compute the income from business eligible for deduction under s. 32AB in accordance with law. On appeal by the assessee, the Tribunal noted that there was nothing on record from the side of the assessee to show that as to what was the source of other income of Rs. 4,11,612 and unless that source was there, the CITs action in passing the necessary order under s. 263 had to be treated as justified because “unless the AO has made enquiry to find out whether the income of Rs. 4,11,612 does fall in the category of eligible business as defined under s. 32AB(2) no deduction can be granted on the same”. The Tribunal further held that as there was no such enquiry and CIT was justified to set aside the assessment to that extent and in directing the AO to make necessary enquiry and to find out whether that income can be included for working out the deduction under s. 32AB of the Act or not. The facts are clearly distinguishable.
5.4 From the above legal and factual position, we are of the views that there is no bar at reviewing the order under s. 143(1), provided it is erroneous as well as prejudicial to the interests of the Revenue. But the expression “prejudicial to the interests of the Revenue” is to be construed in a petty-fogging manner but must be given a dignified construction. The expression must be regarded as involving a conception of acts or orders which are subversive of the administration of Revenue and further there must be some grievous error in the order passed by the AO.
5.5 In the present case, the assessee is a marginal assessee and whose case fell fit for completion under s. 143(1) and merely because the assessee did not file the details of expenses on seminars along with the return, will not take the case of the assessee out of the scheme which was intended to help the small and marginal taxpayers. It is clear from a reading of the Boards Instruction No. 1617 dt. 18th May, 1985, and Circular No. 176, dt. 26th August, 1987, issued by the Directorate of Inspection (IT and Audit) admittedly reflecting the Boards views that the Government is prepared to suffer the loss of revenue by making summary assessments under s. 143(1) on the ground that the time and effort involved in unearthing the loss is the commensurate with the benefit likely to be obtained and they may be better channelised in scrutiny of cases involving larger revenue.
5.6 In the instant case, the orders under s. 143(1) were passed by the AO in pursuance of the aforesaid Instruction of the CBDT and hence these do not suffer from any grievous error. We, therefore, hold that the CIT acted without jurisdiction. We accordingly reverse his findings and allow the appeals of the assessee.
6. In the result, the appeals are allowed.