AGARWAL, J. - (1.) BOTH these cases relate to the income-tax assessment of an assessee for the same year, i.e., the asst. yr. 1972-73. They were heard together and are disposed of by this common order.
(2.) THE assessee-respondent is doing business under the name of Agarwal Scientific. Glass Industries, Agra, dealing in manufacture and sale of scientific laboratory equipment. He filed return of income-tax for the asst. yr. 1972-73, the accounting for which had ended on 31st March, 1972. An income of Rs. 29,407 was returned. The balance sheet filed in support of the return of income- tax showed there creditors as follows : In the books of account the assessee had shown purchases of Rs. 85,773, Rs.44,949 and Rs. 36,151 from the aforesaid parties, respectively. The assessee had also filed copies of accounts of Rs. 1. K. K. Trading Corporation, Bombay 1,09,463 2. Reliable Trading Co., Bombay 44,949 3. Amritlal Bors. Bombay 36,151 these parties as appearing in the books of account for different years showing purchases alleged to have been made during the accounting periods of asst. yr. 1970-71 and 1971-72. The AO initiated enquiries into the transactions with the abovenamed parties. Enquiries made from the State Bank of India revealed that cheques issued by the assessee purporting to be for payments in respect of purchases made from the said parties were bearer cheques and the payments thereof were received either by the assessee himself or by his employees. Enquiries revealed that firms styled as Reliable Treading Co. and K.K. Trading Corporation were not in existence at the addresses given by the assessee, while the third party Amrital Bros. denied any dealings with the assessee. Thereafter the assessee moved a petition under S. 271(4A) of the IT Act, 1961 ('the Act'). In that petition, he admitted that he had made an investment of about Rs. 90,000 outside the books of account and that money was utilised in making purchases from Bombay. He offered a sum of Rs. 80,000 to be assessed as his income. This disclosure petition was rejected by the CIT. In the meantime the Voluntary Disclosure of Income and Wealth Ordinance, 1975 was promulgated and the assessee made another disclosure petition stating that Rs. 80,412 that was the credit balance in the accounts of Reliable Trading Co. and K.K. Trading Corporation, Bombay as on 3rd Dec., 1973 represented his own money which was utilised to make purchases from Bombay in respect of which he was unable to get any vouchers. It was also asserted that he had taken several other amounts as loans from his wife, mother and other members of the family. The wife and other members of the family also filed voluntary disclosure petitions under the aforesaid Ordinance declaring the respective amounts that were claimed to have been advanced as loan to the assessee during the period relevant to the asst. yrs. 1970-71 to 1974-75. The assessment for the asst. yr. 1972-73 in respect of the present assessee was completed by the ITO on 29th March, 1976 under S. 143(3) of the Act. On a total income of Rs. 42,680 determining the said income the AO did not make any addition to the income of the assessee in respect of the aforesaid transactions of purchases.
(3.) THE CIT initiated action under S. 263 as in his view by not making addition in respect of the fictitious transactions, in the names of three parties referred to above, the AO had made an assessment order that was erroneous and prejudicial to the interests of the Revenue. The CIT, therefore, issued a show-cause notice to the assessee and after examining the matter he set aside the assessment observing that there was no evidence to show that the close relatives of the assessee had actually lent any money to him and the AO had erred in accepting the assessee's contention without analysing the facts of the case in the light of the relevant provisions of law. The CIT observed that since the matter has not been properly examined by the ITO, it would be in the interest of justice to restore the matter to him for further examination and for making an assessment de novo after allowing the assessee an opportunity of being heard.;