Assessments made without proper inquiry can be considered erroneous and prejudicial to the interests of the revenue, justifying revision under section 263 of the Income Tax Act.

Jagannatha Shetty, J.—In this batch of writ petitions under article 226 of the Constitution, the petitioners challenge the validity of the orders made by the Commissioner of Income Tax under section 263 of the Income Tax Act, 1961, for short "the Act".

2. The facts in all these cases are similar and, for the sake of convenience, I set out those leading up to the petition in W.P. No. 6660 of 1974. The petitioner herein is a lady. She filed voluntary returns of income for the assessment that it was her previous savings inclusive of the gifts given to her at the time of her marriage. She was not assessed to tax previously. Along with the returns of income she filed a letter dated October 20, 1972, which reads as follows :

"With reference to the above, I beg to request you that out of my previous savings I am now having cash of Rs. 31,500 with me and that I may be assessed as under :

 Y.E.

Asst. Year :

Rs.

21-10-68

69-70

7,500

9-11-69

70-71

7,800

30-10-70

71-72

8,000

19-10-71

72-73

8,200

31,500

and have enclosed Form No. 3 for all the above 4 years. I have not been assessed to Income Tax anywhere in India and have submitted the above 4 returns voluntarily."

On October 25, 1972, she submitted another letter stating thus :

"In continuation of my letter dated October 20, 1972, I write to inform you that my father at the time of marriage paid the cash to me. Subsequently I used to lend this privately and I earned interest. Thus, all the cash of Rs. 31,500 is now offered for assessments. I have no documentary evidence to prove the same. My husband, Shri Formal Nanaji, is an assessee and paying Income Tax. I further state that no part of this amount has been received from my husband."

3. While accepting the returns, spot assessments were made by the Income Tax Officer spreading over the income for the assessment years 1969-70 to 1972-73 as desired by the petitioner. Large number of similar assessments were made on other assesses. Thereafter, it was brought to the notice of the Commissioner of Income Tax that the income of these assesses has been invested in the business of their husbands. In the enquiry made, it was discovered that the assesses during the relevant period of assessment had no business of their own, much less any money-lending business.

4. The Commissioner issued a notice dated October 14, 1974, calling upon the petitioner to show cause why the assessments should not be set aside with a direction to the Income Tax Officer to re-do the same in accordance with law. On October 18, 1974, the petitioner filed her objection raising various contentions. After hearing the petitioner and considering her contentions, the Commissioner formed prima facie opinion that the returns filed by the assessee did not disclose her circulating capital for any of the five years and there was no evidence that she was engaged in the money-lending business. He further observed thus :

"Any Income Tax Officer who does his duties diligently would have sat up, on reading the assessee's letter and seeing the assessee's returns and would have made elementary enquiries to satisfy himself that there was a business done by the assessee and there was income earned from it as alleged. That he did not so and misdirected himself in accepting the returns under section 143(1) without the basic necessaries prescribed thereunder is enough to establish prejudice to revenue. The subsequent enquiries, as already stated, only confirmed what should have occurred prima facie to any diligent and industrious Income Tax Officer doing his functions without haste and with due deliberation. The result of these enquiries have no doubt been put in my notice to the assessee, but they do not form the sole basis for prejudice. Prejudice can be easily deduced on the facts of her record from the very returns filed by the assessee and the impossible explanations given in her letter and the fact that the assessments were completed in great haste without any enquiry being made in a new case and on the