- (1.) This appeal is directed against the order under section 263 passed by the Ld. Commissioner of Income Tax, Allahabad in respect of assessment year 1983-84.
(2.) The setting of the facts, which led to the action under section 263 and the subsequent order passed therein may be noted :- (i) The assessee is a contractor. In respect of assessment year 1983-84, he filed his return of income on 31-12-1983 showing an income of Rs. 1,12,800. The hearing of the aforesaid case was fixed by the ITO on 30th of January, 1984 after issuing notice under section 143(2). The assessee attended on the said date and the assessment was finalised by the ITO on the aforesaid date itself. The order sheet entry reads as below :- "30-1-84 Sri Y. N. Sharma present. T. D. S. Certificate filed. Discussed. Assessed. Issue D.N & R.V." The assessment order itself was short and reads, inter alia, as below :- "Return filed showing income of Rs. 1,12,800. In response to notice under section 143(2), the assessee attended. The assessee is a contractor. Audited copies of trading account, profit and loss account and balance sheet by Shri Arjun Kapoor & Co. have been filed. After discussion, total income is computed as under : Net profit as per P/L account Rs. 1,12,798 Add : subscription and donation Rs. 1,471 Out of car expenses 1/4th disallowed Rs. 2,715 Out of depreciation 1/4th disallowed Rs. 500 Rs. 117,084 3,568 Rs. 1,13,516 Rs. 1,13,520 (ii) Sometime after the aforesaid assessment had been completed, the CIT, Allahabad summoned the record of the assessee and discovered therefrom that the only material placed on record on the basis of which the assessment had been completed, consisted of copies of balance sheet trading and profit and loss account of the assessee and chart or tax deducted at source. As per this chart, gross receipts of the contract were of Rs. 48,10,215 inclusive of the cost of cement and steel supplied by the Varanasi Development Authority of the value of Rs. 4,89,046. The net profit of the assessee was shown to be Rs. 1,12,798, which, according to the working of the Commissioner, reflected a net profit rate of 2.34% of the gross receipts or 2.6% of the net receipts, excluding the value of the material supplied. The Commissioner further noted that the ITO had made no enquiries whatsoever, not had he examined the books of account. He further noted that in the assessees own case, in respect of the immediately preceding assessment year, net profit rate was more than 2 times of the figure declared by the assessee this year, and that in earlier years also the assessees trading results had not been accepted and Tribunal had upheld a net profit rate of 5% in the assessees case in respect of assessment years 1976-77 and 1977-78. In respect of assessment year 1982-83, the declared net profit rate of 5.35% (on gross receipts) and 6.36% of the net receipts was not accepted and a net profit rate of 10% had been applied. In view of these facts on record, the CIT felt that "the net profit rate of 2.6% as given in the chart in paragraph 3.2 could not be accepted without proper scrutiny and verification .... there is no indication any where in the records of the assessee as maintained by the ITO that he made necessary enquiries before coming to the conclusion that the net profit rate as low as 2.6% as disclosed by the assessee was acceptable."
(3.) The CIT held that once the aforesaid finding was reached, it had to be held that the order of the Income Tax Officer was erroneous and prejudicial to the interests of the Revenue. For the above proposition, he relied on the following three authorities :- (i) Rampyari Devi Saraogi v. CIT, 1968 67 ITR 84 (ii) Smt. Tara Devi Aggarwal v. CIT, 1973 88 ITR 323 (iii) Gee Vee Enterprise v. Addl CIT, 1975 99 ITR 375 Accordingly, he set aside the assessment order with the direction to the Income Tax Officer, "to make a fresh assessment after allowing the assessee an opportunity of being heard as per provisions of law.";