JILA SAHAKARI KENDRIA BANK MARYADIT,SHAHDOL vs. PR. COMMISSIONER OF INCOME TAX -1, JABALPUR , JABALPUR

Per Sanjay Arora, AM

Explanation 1. – For the removal of doubts,… Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner,— (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.

(AY: 2017-18) Jila Sahakari Kendriya Bank Maryadit v. Pr. CIT 3. We have heard the parties, and perused the material on record. 3.1 We are wholly unimpressed with the argument by the ld. counsel for the assessee, Shri Usrethe, as regards the unsustainability of sec. 263 proceedings as the assessment proceedings had been initiated for the limited purpose of examining the cash deposit transactions during the relevant year (and which had been examined and found satisfactory), as well as that the re-assessment proceedings had also been initiated in the assessee‟s case. The assessee‟s return was selected for complete scrutiny and, therefore, the AO was not constrained in the assessment proceedings not to travel to areas other than the cash deposits, on the basis of which though the verification proceedings were invoked. Likewise, as noted by the ld. Pr.CIT, the re-assessment had not been initiated on the issue of claim u/s. 36(1)(viia), i.e., the subject matter of s.263 proceedings, so that there was no question of there being, as contended, two parallel proceedings on the same issue for the current year.

3.2 We are, nevertheless, at loss to understand the basis of invocation of s.263 in the instant case. True, an absence or even lack of enquiry would make an order per se erroneous insofar as it is prejudicial to the interests of the Revenue. This, as explained in Gee Vee Enterprises vs. Addl. CIT [1975] 99 ITR 375 (Del), is as the position and function of the Income-tax Officer (assessing authority) is very different from that of a civil court. The statements made in a pleading, proved by the minimum amount of evidence, may be adopted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income-tax officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. It is because it is incumbent on him to further investigate the facts stated in the return when circumstances would make (AY: 2017-18) Jila Sahakari Kendriya Bank Maryadit v. Pr. CIT such an inquiry prudent that the word “erroneous” in section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct. This, in fact, represents trite law, toward which case law is legion, explained per several decisions by the Hon‟ble Apex Court, with in fact the said decision, rendered with reference to judicial precedents, itself including two by the said court. The said condition stands since co-opted in the statute itself, reproduced hereinabove. The impugned order also bears reference thereto. It is also plain, nay, admitted, that there has been no enquiry by the AO in the matter, and toward which we have also perused the assessee‟s reply dated 25/11/2019 (PB pgs. 5-6), i.e., apart from the fact that there is no whisper in the assessment order of any such enquiry nor any claim by the assessee in its respect. So, however, it is only where the circumstance/s is such as to provoke an enquiry that an absence or lack of enquiry could be said to reflect non-application of mind, vitiating the ensuing order. The amended provision (s.263) itself conveys this to be the legislative intent, using the words “which should have been made”, i.e., in relation to an enquiry or verification. Now, what, one may ask, is there to show or suggest that the assessee’s claim u/s. 36(1)(viia) is not correct or in excess, much less by far? The Pr. CIT works out the same at Rs. 18.85 lacs. His working, however, is, and even as pointed out by the assessee thereto, without including the second component of the provision u/s. 36(1)(viia), i.e., qua the outstanding balance of the advances made by the rural branches of the bank, which the assessee claims to have computed under rule 6ABA at Rs. 1000.45 lacs, enclosing the said working as the part of it‟s reply dated 26/02/2022 (PB pgs. 10- 12, 61). The ld. Pr. CIT has merely chosen to ignore the assessee‟s clear and pointed reply in the matter. It would be a different matter, we may clarify, where the assessee had not satisfactorily replied or suitably addressed the concerns of the competent authority. Also, this, we are conscious, may not be feasible in all cases, 4 | P a g e (AY: 2017-18) Jila Sahakari Kendriya Bank Maryadit v. Pr. CIT and there may be circumstances, as where verification of facts and figures is required, in which case the ld. Pr. CIT would be justified in, stating the reason/s, directing the assessing authority suitably. How could in the instant case, then, the assessee’s claim, which, qua this limb (of the deduction), works to Rs. 156.88 lacs (i.e., Rs. 175.73 lacs – Rs. 18.85 lacs), be said to be in excess? It is only, where so, even if prima facie, that the revisionary authority can be regarded as within his province to say that the AO had not examined the same, remitting it back for necessary verification. Even here, there is scope for the assessee to explain his claim on the basis of admitted facts and law, as it may well be that the revisionary authority has misconstrued or not assumed the facts correctly. In other words, there must be scope for enquiry and verification, for which the revision is being proposed to be made by the revisionary authority. Without this basic condition being met, serving as a primary check, the exercise may degenerate into a probing exercise, which could then extend to every aspect of an assessee‟s return. It is to be borne in mind that it is the non-application of mind, that the absence or lack of inquiry exhibits, which renders an order erroneous and, thus, liable for revision (Malabar Indl. Co. Ltd. v. CIT [2000] 243 ITR 83 (SC)). The words „which should have been made‟ in Explanation 2 to sec. 263, in our view, and at the cost of repetition, provide the necessary perspective and framework, suggestive of there being circumstance/s warranting enquiry by the AO, which he has failed to. No such circumstance is available on record or otherwise brought to our notice in the instant case, thus failing the exercise of power of revision u/s. 263.

1. 1. The Appellant: Jila Sahkari Kendriya Bank Maryadit, Jila Sahakari Bank, Ganj Road, Shahdol - 484 001 (MP) 2. The Respondent: The Principal CIT-1, Jabalpur.