GANADHIPATI CONSTRUCTION PVT LTD,PATNA vs. PCIT, CENTRAL, PATNA

The grounds raised by the assessee in all the assessment years are common. Since facts for all the impugned years are identical and as both the sides have agreed to this fact, we, for the purpose of adjudication, take the facts and grounds of appeal raised for A.Y. 2017-18, which read as under:- (1) For that the Ld. Pr.CIT has erred in initiating proceedings u/s 263 in respect of an issue which stands concluded by order u/s 143(3) dated 31/03/2022. (2) For that Ld. Pr.CIT has erred in initiating the proceeding under section 263 of the Income Tax Act without existence of the condition precedent for such initiation. (3) For that the Ld. Pr.CIT has erred in recording certain findings which are contrary to the assessment records. (4) For that the Ld. Pr.CIT has traveled beyond the allegations contained in the notice under section 263 while passing the impugned order and thus has exceeded the jurisdiction by not limiting to the allegation in the show cause notice and thereby violating the principles of equity and natural justice. (5) For that the Ld. Pr.CIT has erred in invoking powers under section 263 and passing the order holding the order of assessment u/s 143(3) dated 31/03/2022 to be erroneous in so far as prejudicial without pointing out which of the two phraseology used in section 263 is applicable to the Appellant’s case. (6) For that the Ld. Pr.CIT has erred in raising issues on the seized material in the SCN which does not pertained/ belonging to the appellant’s company. 2 to 360/PAT/2024 Assessment Years: 2017-2018to 2021-2022 Gandhipati Construction Private Limited

Brief facts of the case are that the assessee is a Private Limited Company engaged in the business of construction. The assessee is a part of Janardan Prasad Group of cases, which was subjected to search & seizure operation under section 132(1) of the Act conducted on 29th October, 2020. Various documents were seized. Original return of income for A.Y. 2017-18 already stood filed by the assessee on 31.10.2017 declaring income of Rs.2,27,98,640/-. Post-search notice under section 153A of the Act was issued and in compliance, the assessee furnished the return on 24.12.2021 declaring income of to 360/PAT/2024 Assessment Years: 2017-2018to 2021-2022 Gandhipati Construction Private Limited Rs.70,00,000/-. Thereafter serving the assessee with valid notices under sections 143(2) and 142(1) of the Act along with the detailed questionnaire to which the assessee made due compliance. The ld. Assessing Officer has also referred to the appraisal report having some information and seized material placed at page GCPL-21 about unaccounted cash payments, as were not recorded in the regular books. The ld. Assessing Officer also observed that the assessee has claimed deduction under section 80IA of the Act. He declined the claim made by the assessee and concluded the assessment assessing income at Rs.2,97,98,640/-.

Thereafter ld. PCIT on examination of the assessment records deemed fit to issue show-cause notice under section 263 of the Act and the same issued on 26.03.2024 (copy placed at pages 97 to 120 of the paper book). Reply was given by the assessee stating that all the details mentioned in the show-cause notice were forming part of the notice issued under section 142(1) of the Act and the same have been duly examined by the ld. Assessing Officer. Ld. PCIT after considering the submissions filed by the assessee on 26.03.2024 and 28.03.2024 noted that they were repetitive in terms of submission of fact and the documents annexed to these replies were same/similar to the one submitted during the course of assessment proceedings. He observed that to 360/PAT/2024 Assessment Years: 2017-2018to 2021-2022 Gandhipati Construction Private Limited there was no explanation or new evidence available with the assessee for the non-cooperation during the search, post-search or assessment proceedings or for the deliberate delay in submission of replies. Ld. PCIT thereafter observed that nothing on record is available, which could show that there was any further correspondence or notice issued under section 133(6) of the Act related to third party verification/ confirmation and that whether any independent inquiry has been conducted by the ld. Assessing Officer.

Ld. PCIT also referred to Explanation 2 to section 263 of the Act observing as under:- “12. In the instant case, it is borne out of facts that not only did the assessee fail to file complete details along with supporting evidence and explanation before the Assessing Officer in respect of issues raised in notice[s] u/s 142[1] of the Income Tax Act, 1961, in time, the Assessing Officer, too, has also failed to do the needful and has passed the assessment order without raising such queries or making such inquiries and verification which should have been done in the light of seized material with him and transactions found recorded in the incriminating documents found during the course of search & seizure action dated 29.10.2020 in the case of assessee company. This was all the more necessary in the light of the fact that regular books of accounts were neither found during the course of search action nor properly produced by the assessee company during post-search enquiries. Explanation-2enjoins upon the Assessing Officer to conduct necessary enquiries and verifications before passing an assessment order and the failure to do so, would lead to invocation of the provisions of Section 263 of the Income Tax Act, 1961. The failure of the Assessing Officer to do so has rendered the assessment order passed 7 to 360/PAT/2024 Assessment Years: 2017-2018to 2021-2022 Gandhipati Construction Private Limited by him deemed to be erroneous in so far as it is prejudicial to the interests of the revenue. Thus, on factual matrix itself, the case of the assessee in these proceedings fails.

Thereafter ld. PCIT has relied on plethora of judgments and has even discussed the judgment referred to by the ld. Authorized Representative of the assessee distinguishing them on facts observing that the assessee failed to appreciate that the facts of the case relied upon, are different from the case under consideration in the present proceedings. In the case relied upon by the assessee, the Assessing Officer had made specific enquiry on the issue considered during assessment proceedings and nature of expenditure was explained by the assessee to him but in the instant case, the Assessing Officer failed to conduct any enquiry or verification.Finally, after making the detailed discussion as discussed above, ld. PCIT concluded the revisionary proceedings observing that there is no application of mind on the part of the ld. Assessing Officer, inasmuch to 360/PAT/2024 Assessment Years: 2017-2018to 2021-2022 Gandhipati Construction Private Limited as, the necessary verification on facts/inquiries, which should have been made, have not been made, making the order erroneous and prejudicial to the interest of revenue within the meaning of section 263 read with clause (a) of Explanation 2, which provides that the order is passed without making inquiries or verification, which should have been made. Accordingly, assessment orders passed under section 153A read with section 143(3) of the Act for A.Ys. 2017-18 to 2020-21 were set aside with a direction to pass fresh order after conducting proper inquiries including third party inquiries and investigation into the claim of the assessee-company, examination of seized material available with him and if ld. Assessing Officer considers, then he may invoke the provision of section 142(2A) of the Act i.e. special audit, depending upon his opinion and satisfaction considering the facts of the case as well as the material on record. Aggrieved, the assessee is now in appeal before this Tribunal commonly challenging the revisionary order passed under section 263 of the Act by the ld. PCIT for AY 2017-18 to 2021-22.

Ld. Counsel for the assessee firstly made reference to the paper book containing 623 pages, which contains the notice under section 142(1) of the Act issued by the ld. Assessing Officer for the impugned assessment years from 2017-18 to 2021-22 under appeals, various replies to 360/PAT/2024 Assessment Years: 2017-2018to 2021-2022 Gandhipati Construction Private Limited given by the assessee to such notices on multiple occasions, copies of assessment orders passed for A.Ys. 2017-18 to 2021-22 in case of other assesses of the group, copies of relevant page of audit report and bifurcation of non-operating income in respect of sale of scrap, copies of vouchers of cheque payments, copies of e-portal on which documents uploaded from time to time during the course of assessment proceedings. Regarding applicability and scope of Explanation (2) u/s.263 of the Act, ld. Counsel for the assessee referred and relied on the decision of the Coordinate Bench, Mumbai in the case of JRD Tata & Trust -vs.- DCIT (2021) 085 ITR (Trib.) 0431 and also the judgment in the case of CIT -vs.- Mukul Kumar (2009) 4 PLJR 417. Reliance also placed on the decision of Coordinate Bench in the case of Gyan Infrabuild Pvt. Limited [ITA Nos. 175 to 178/PAT/2023 dated 13.05.2024], where similar type of issue has also been adjudicated by this Tribunal deciding in favour of the assessee.

Ld. Counsel for the assessee further submitted that the seized material was available with the ld. Assessing Officer at the time of carrying out the assessment proceedings and questionnaire has been issued referring to each of the seized material to which detailed reply has been filed by the assessee. Since major transactions appearing in the seized documents were already recorded to 360/PAT/2024 Assessment Years: 2017-2018to 2021-2022 Gandhipati Construction Private Limited in the books of account, ld. Assessing Officer after examination of the said seized material, vis-à-vis the books of account maintained by the assessee did not make any addition. However, while computing the assessment, ld. Assessing Officer has made other additions for the unrecorded cash payments and disallowance and deduction under section 80IA of the Act. Therefore, it cannot be said that the assessment has been completed without making proper inquiries or no inquiries. He also submitted that the draft assessment orders were sent to the ld. JCIT for granting approval under section 153D of the Act and the same was granted on 31.03.2022, which itself proves that the detailed inquiry conducted by the ld. Assessing Officer has culminated into an assessment order and that the ld. JCIT, who also keeps a continuous track of the search and seizure assessment cases and after examining the assessment record and the draft order had accorded approval u/s. 153(1) of the Act pursuant to which final assessment order has been passed. He further submitted that ld. PCIT has not revoked the order under section 153D of the Act failing which the revisionary proceeding carried out by the ld. PCIT deserves to be quashed.

On the other hand, ld. D.R. apart from supporting the detailed order of ld. PCIT also filed written submission running into 42 pages in support of his to 360/PAT/2024 Assessment Years: 2017-2018to 2021-2022 Gandhipati Construction Private Limited contention that proper inquiries were not conducted by the ld. Assessing Officer and he has not acted as an investigator but has merely accepted the submission made by the assessee without making any further inquiry to verify the veracity of the submissions filed before him. Ld. D.R. further submitted that in the instant case, the Commissioner had reasons to hold that creditworthiness of the alleged lenders was not enquired into. Mere examination of the bank pass book, profit and loss account and balance sheet of the creditors is not enough. When the requisite enquiry was not made, the order is bound to be erroneous and prejudicial to the interest of the revenue. The Tribunal proceeded on the theory that it was not a case of no enquiry; that no doubt is true, but that is not enough. If the relevant enquiry was not made, it may inappropriate cases amount to no enquiry and may also be a case of non-application of mind. The power u/s. 263 can be exercised where the order of the Assessing Officer is erroneous and prejudicial to the interest of the revenue. When an order is erroneous, then the order is also deficient and in order to remedy the situation, power under section 263 has been given. Therefore, the view that the power could not have been exercised to allow the Assessing Officer to make up the deficiency is altogether an incorrect impression of the law. to 360/PAT/2024 Assessment Years: 2017-2018to 2021-2022 Gandhipati Construction Private Limited It is not the law that the Assessing Officer occupying the position of an investigator and adjudicator can discharge his function by perfunctory or inadequate investigation. Such a course is bound to result in erroneous and prejudicial orders. Where the relevant enquiry was not undertaken, as in this case, the order is erroneous and prejudicial too and is revisable. Investigation should always be faithful and fruitful. Unless all fruitful areas of enquiry are pursued the enquiry cannot be said to have been faithfully conducted.

Reliance placed on following decisions:- (i) Rajmandir Estates Pvt. Limited -vs.- P_CIT-3, Kolkata [2017] 245 Taxmann 127 (SC); (ii) Anuj Jayendra Shah -vs.- Pr. CIT [2016] 67 Taxmann.com 38 (Mumbai); (iii) PCIT, Ludhiana -vs.- venus Woollen Mills [2019] 412 ITR 188 [P&H]; (iv) CIT -vs.- Ballarpur Industries [2017] 85 Taxmann.com 10 (Bombay); (v) Addl. CIT -vs.- Mukur Corpn. [1978] 111 ITR 312 (Guj); (vi) Addl. CIT -vs.- Krishna Narayan Nail [1984] 150 ITR 513; (vii) CIT -vs.- Precision Finance (P) Ltd. [1994] 208 ITR 465; (viii) Duggal & Co. -vs.- CIT [1996] 220 ITR 456; (ix) CIT -vs.- Anand Kumar Jain 370 ITR 140 (Allahabad); (x) Malabar Ind. Co. Ltd. 243 ITR 83 (SC); (xi) Tara Devi Agarwal -vs.- CIT 88 ITR 323 (SC); (xii) CIT -vs.- South India Shipping Corporation 233 ITR 546 (Mad.) 13 to 360/PAT/2024 Assessment Years: 2017-2018to 2021-2022 Gandhipati Construction Private Limited

Further reference was also made to various documents furnished in the paper book running into 426 pages and the following index highlights the documents furnished by the ld. D.R. INDEX S. no. Description Page no. 01 Written submission 1 to 42 02 Case gist- ANN-C1 1 to 4 03 Case gist- ANN-C2 5 to 10 04 Case gist-ANN-C3 11 to 17 05 Online service of order- ANN-1 18 to 24 06 Proposal for revision of order u/s 263-ANN-2 25 to 26 07 Form no.36 -ANN-3 27 to 44 08 Show cause notice- ANN-4 45 to 249 09 Reply of assessee- ANN-5 250 to 256 10 Reply of Notice u/s 142(1)- ANN-6 257 11 Reply of notice u/s 142(1)- ANN-7 258 to 284 12 Reply of notice u/s 142(1) -ANN-8 285 to 319 13 Reply of assessee-ANN-9 321 to 351 14 Order sheet details-ANN-10 352 to 354 15 355 to 366 Statement on oath of Sri Janardan Prasad u/s 131(1)-ANN-11 16 Statement on oath of Sri Umesh Kumar u/s 367 to 377 131(1)- ANN-12 17 Notice u/s 142(1)- ANN -13 378 to426

Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC)has laid down following ratio with regard to provisions of section 263 of the Act: “There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of 17 to 360/PAT/2024 Assessment Years: 2017-2018to 2021-2022 Gandhipati Construction Private Limited revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue - Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC)”.[Emphasis Supplied] 16. In the light of the provisions of section 263 of the Act and a settled position of law, powers u/s 263 of the Act can be exercised by the Pr. Commissioner/Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and also prejudicial to the interest of the Revenue. By 'erroneous' is meant contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry.

The ITAT in the case of Mrs. Khatiza S. Oomerbhoy vs. ITO, Mumbai, 101 TTJ 1095, analyzed in detail various authoritative pronouncements including the decision of Hon'ble Supreme Court in the case of Malabar Industries 243 ITR 83 and has propounded the following broader principle to judge the action of CIT taken under section 263: “(i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. 18 to 360/PAT/2024 Assessment Years: 2017-2018to 2021-2022 Gandhipati Construction Private Limited (ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view with which the CIT does not agree. If cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under law (vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power under s 263 is not permitted to substitute his estimate of income in place of the income estimated by the AO. (vii) The AO exercises quasi-judicial power vested in his and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not fee stratified with the conclusion. (viii) The CIT, before exercising his jurisdiction under s. 263 must have material on record to arrive at a satisfaction. (ix) If the AO has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows the claim on being satisfied with the explanation of the assessee, the decision of the AO cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard.”

Hon’ble Apex Court in the case of Malabar Industrial Company Ltd. (supra) has held that every loss of revenue as a consequent of an order of the AO cannot be treated as prejudicial to the interest of revenue unless the AO do not adopt one of the courses permissible in law. In the given set of appeals, we find that the seized materials have been examined by the AO in reference to the detailed replies filed by the assessee and after he being convinced that the transactions indicated in the seized material are duly accounted for in the regular books of account, there was no occasion to make the addition because the transactions were duly explained by the assessee. It is quite 21 to 360/PAT/2024 Assessment Years: 2017-2018to 2021-2022 Gandhipati Construction Private Limited obvious that if the transactions appearing in the seized material are accounted for in the regular books and the profits for the year have been duly offered to tax, it is not open for the AO to make the additions in the hands of the assessee. We find that Ld. AO after carrying out adequate enquiry has completed the assessments which are neither prejudicial to the interest of the revenue nor are they erroneous in nature. The correctness of the assessment order is further supported by the approval granted by ld. JCIT u/s. 153D of the Act which still remains intact as Ld. PCIT has not revised the said order.

We also notice that in the recent decision of this tribunal in the case of Gyan Infrabuild (P) Ltd.(supra) the facts are almost identical because in the case of Gyan Infrabuild (P) Ltd.(supra) also search was carried out and Ld. AO completed the assessment proceeding after making detailed enquiry and also got the approval u/s. 153D of the Act and the assessment order u/s. 153A r.w.s. 143(3) of the Act was the subject matter of the revisionary proceeding and this Tribunal quashed 22 to 360/PAT/2024 Assessment Years: 2017-2018to 2021-2022 Gandhipati Construction Private Limited the revisionary orders firstly on the ground that Ld. Pr. CIT before revising the assessment order should have also revised the approval u/s. 153D of the Act and secondly that when detailed and adequate enquiry has been conducted by the AO in the assessment proceedings for the issues referred in the show cause notice u/s. 263 of the Act and the Ld. AO has adopted one of the courses permissible under the law, ld. Pr. CIT cannot assume jurisdiction u/s. 263 of the Act. Relevant part of the decision of this Tribunal in the case of Gyan Infrabuild (P) Ltd.(supra) reads as under: “11. We have heard rival contentions and perused the material placed before us. Search and seizure action u/s 132 and Survey u/s 153A of the Act on 23/02/2018 was carried out at the business premises of Subhash Prasad Yadav Group which included the assessee. Various documents were seized and statements of various persons who were attached with the assessee company were also recorded and this mainly included the statement of Shri Satyendra Kumar Sharma, who is working as Director of the assessee company, and other employees, mainly, Mrs. Muskan Pandey, Shri Hulas Pandey, Shri Atul Kumar Agarwal etc,. Subsequent to search, notice u/s 153A of the Act were issued to the assessee company to which necessary compliances were made and return was filed. However, the returned income as disclosed in the original return filed on 30/09/2015 was again shown as income in the return filed in compliance to notice u/ s 153A of the Act furnished on 02/12/2019. Thereafter the assessee was served with the statutory notices u/s 143(2) & 142(1) of the Act and various questions were raised in the notice u/s 142(1) of the Act as well as during the course of assessment proceedings. In the assessment order framed u/s 153A of the Act, the ld. Assessing Officer has mentioned that the details were filed along with the submissions as well as copies of returns, computation of 10 to 178/Pat/2023 Assessment Year: 2015-16 to 2018-19 Gyan Infrabuild Private Limited income and point-wise reply. Further the assessment was completed after taking necessary approval u/s 153D of the Act from JCIT, Central, Range-1, Patna. Finally, the assessment for all the impugned assessment years for Assessment Year 2015-16 to 2018-19 were completed accepting the returned income filed by the assessee. Now, all the four assessment years evenly dt. 27/12/2019 are the subject matter of the revisionary proceedings invoked by the ld. Pr. CIT u/s 263 of the Act, wherein after referring to the seized material and other discussions, all these four assessments have been held to be erroneous and prejudicial to the interest of the revenue.

A bare perusal of sub section-1 would reveal that powers of revision granted by section 263 to the learned Commissioner have four compartments. In the first place, the learned Commissioner may call for and examine the records of any proceedings under this Act. For calling of the record and examination, the learned Commissioner was not required to show any reason. It is a part of his administrative control to call for the records and examine them. The second feature would come when he will judge an order passed by an Assessing Officer on culmination of any proceedings or during the pendency of those proceedings. On an analysis of the record and of the order passed by the Assessing Officer, he formed an opinion that such an to 360/PAT/2024 Assessment Years: 2017-2018to 2021-2022 Gandhipati Construction Private Limited order is erroneous in so far as it is prejudicial to the interests of the Revenue. By this stage the learned Commissioner was not required the assistance of the assessee. Thereafter the third stage would come. The learned Commissioner would issue a show cause notice pointing out the reasons for the formation of his belief that action u/s 263 is required on a particular order of the Assessing Officer. At this stage the opportunity to the assessee would be given. The learned Commissioner has to conduct an inquiry as he may deem fit. After hearing the assessee, he will pass the order. This is the 4th compartment of this section. The learned Commissioner may annul the order of the Assessing Officer. He may enhance the assessed income by modifying the order. He may set aside the order and direct the Assessing Officer to pass a fresh order. At this stage, before considering the multi-fold contentions of the ld. Representatives, we deem it pertinent to take note of the fundamental tests propounded in various judgments relevant for judging the action of the ld. Pr. CIT taken u/s 263.

Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC)has laid down following ratio with regard to provisions of section 263 of the Act: “There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue - Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC)”.[Emphasis Supplied] 15. In the light of the provisions of section 263 of the Act and a settled position of law, powers u/s 263 of the Act can be exercised by the Pr. Commissioner/Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and also prejudicial to the interest of the Revenue. By 'erroneous' is meant contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the possible views, no action to to 360/PAT/2024 Assessment Years: 2017-2018to 2021-2022 Gandhipati Construction Private Limited exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry.

The ITAT in the case of Mrs. Khatiza S. Oomerbhoy vs. ITO, Mumbai, 101 TTJ 1095, analyzed in detail various authoritative pronouncements including the decision of Hon'ble Supreme Court in the case of Malabar Industries 243 ITR 83 and has propounded the following broader principle to judge the action of CIT taken under section 263: “(i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view with which the CIT does not agree. If cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under law (vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power under s 263 is not permitted to substitute his estimate of income in place of the income estimated by the AO. (vii) The AO exercises quasi-judicial power vested in his and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not fee stratified with the conclusion. (viii) The CIT, before exercising his jurisdiction under s. 263 must have material on record to arrive at a satisfaction. (ix) If the AO has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows the claim on being satisfied with the explanation of the assessee, the decision of the AO cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard.”

In the light of the above, we would like to examine the fact of the instant case. Before us, the first contention made by the ld. Counsel for the assessee is that the impugned revisionary proceedings are not valid in the eyes of law because only the order framed u/s 153A of the Act has been held to be erroneous and prejudicial to the interest of the revenue but the same cannot be held to be justified until and unless the approval given u/s 153D of the Act has also been held to be erroneous and prejudicial to the interest of the revenue. Now, under Chapter 14 of the procedure for assessment, so far as the assessments relating to search cases are concerned, separate procedures have been laid down. Starting from Section 153A for assessments in the case of search or acquisition, Section 153B for time limit for completion of assessment u/s 153A, Section 153C for assessment of income of any other person and Section 153D i.e., prior approval necessary for assessment in case of search or acquisition. So far as Section 153D of the Act is concerned, the same reads as follows:-

Before us, the ld. Counsel for the assessee, has referred to plethora of decisions whether the revisionary order u/s. 263 of the Act has been quashed, where only the order u/s 153A of the Act is revised without revising order u/s 153D of the Act.

Further, the ld. D/R failed to rebut this fact that the ld. Assessing Officer is not the only person who is involved in completing the assessment and along with to 360/PAT/2024 Assessment Years: 2017-2018to 2021-2022 Gandhipati Construction Private Limited him, the ld. JCIT is also part of the assessment proceedings because once the draft assessment order is prepared by the ld. Assessing Officer, he/she has to approach the Joint Commissioner for prior approval, who again examines the seized material with the draft assessment order framed by the ld. Assessing Officer and after being satisfied, either suggests necessary changes or he accords the approval after which, the ld. Assessing Officer passes the final assessment order.

We also observe that learned PCIT u/s 263 of the Act before initiating the revisionary proceedings was required to carry out necessary enquiry in support of his assumption that the documents belongs to the assessee or that the ld. Assessing Officer has not enquired. The Hon'ble High Court of Delhi in the case of Income-tax Officer v. D.G. Housing Projects Ltd. reported in [2012] 343 ITR 329 has held that “in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under Section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous.”Further the Hon’ble Apex Court in its judgment in the case of CIT vs. Electro House reported in 82 ITR 824, had held that “the CIT before reaching his decision and not before commencing his enquiry is to give the assessee an opportunity of being heard and make or cause to make such enquiry as he deems necessary”. We note that in the instant case the learned PCIT before reaching his decision that the documents found, belongs to the assessee had made no enquiry whatsoever. Thus learned PCIT failed to appreciate that before he could have considered the assessment order to be erroneous and prejudicial to the interest of the revenue, he ought to have brought material on record to show that the documents belongs to the assessee and not by merely referring to those very documents which already stood examined by the ld. Assessing Officer and considering the statement of Shri Satyendra Kumar Sharma, for coming to the conclusion that the documents cannot be said to be belonging to the assessee.

However, it is an admitted fact that the Learned ACIT had duly examined each of the allegations stated in the notice under section 263 as is evident from the notice of the Learned ACIT issued under section 142(1) of the Act dated 11-11- 2019, a copy thereof is placed at pages24-27 of the PB-I for the assessment year 2015-16. In fact in respect of all the allegation regarding the alleged discrepancy in respect of the transaction with M/s Broadson Commodities Pvt Ltd at item number 19, the AO had called for the assessee' explanation which was in respect of the advances made to M/s Broadson Commodities Pvt. Ltd. The assessee in response to said notice had duly explained the same, vide its response dated 24-12-2019 a copy of which has been placed at page 28 to 364 of the PB-I, wherein at para 18 the alleged discrepancy had duly been explained (at page 76-79). Further, on perusal of 33 to 360/PAT/2024 Assessment Years: 2017-2018to 2021-2022 Gandhipati Construction Private Limited the said response which is running into 337 pages, we note each of the issues had been duly explained. Thus, we note that the Learned CIT while revising the order under section 263 has completely overlooked the assessee's response as also the order sheet entries made by ld. Assessing Officer in the assessment file of the assessee. We note that the Learned CIT has also overlooked that the Learned ACIT had examined Shri Baban Singh, Director, of M/s Broadson Commodities Pvt Ltd under section 133(6)/131 of the Act which is evident from the Order Sheet entry dated 25/12/2019 of the assessment file.

Thus, in the light of the settled judicial precedents referred supra and on our examination of the facts of the case including the enquiries conducted by the ld. Assessing Officer regarding the transactions carried out during the impugned year as well as examining the seized material, and then getting necessary approval u/s 153D of the Act and also observing that the ld. Pr. CIT did not make any specific enquiry prior to assuming jurisdiction, find the impugned revisionary proceedings as bad in law and deserves to be quashed on account of the following:- to 360/PAT/2024 Assessment Years: 2017-2018to 2021-2022 Gandhipati Construction Private Limited “a) that when there is an approval u/s 153D of the Act, it has been held consistently by the Hon’ble Courts (referred supra) that revisionary power u/s 263 of the Act cannot be exercised. b) even otherwise, without revising the order u/s 153D of the Act, and finding them to be erroneous and prejudicial to the interest of the revenue, revisionary powers cannot be invoked for the assessment order framed u/s 153A/143(3) of the Act after getting approval u/s 153D of the Act. c) that when the ld. Assessing Officer has conducted detailed enquiry, examined the seized records, made necessary observations in the assessment order, referred to various statements filed by the assessee and having taken one of the legally permissible view, then in such circumstances, the revisionary powers cannot be exercised just on the ground that adequate enquiry has not been done. d) that revisionary proceedings cannot be held to be justified unless ld. Pr. CIT had carried out independent enquiry specifically dealing with the details in his possession, for the issues raised in the show cause notice u/s 263 of the Act. e) that when the Assessing Officer, based on his observations and examination of records had made addition in the hands of another assessee, the ld. Pr. CIT without revising the assessment order of other assessee, which has been framed by the same Assessing Officer cannot revise the assessment order in the case of the assessee and directing to make the additions as the same would tantamount to double addition. f) that the finding on merit of the ld. Pr. CIT contains various mistakes as the documents referred are not for the assessment year in dispute and some of the documents are not belonging to the assessee.”

Thus, in view of our discussion(supra)and our examination of the facts, as the order of the Assessing Officer is neither erroneous nor prejudicial to the interest of revenue, there was no scope for the ld. Pr. CIT to revisit the order of the ld. Assessing Officer. Therefore, the impugned order u/s 263 of the Act is quashed and assessment order framed u/s 153A/143(3) of the Act dt. 26/03/2022, is restored. The effective grounds raised

The replies portion in the paper book filed by the assessee clearly indicate that ld. Assessing Officer has raised specific query for each and every seized material to which the assessee had furnished reply with supporting evidence and also giving the explanation as to whether such entry or the amount appearing in the seized material is part of the transaction disclosed in the regular books of account or the seized material having no date and narration are merely rough document for which no explanation can be made.

So far as the applicability of Explanation 2(a) to section 263 of the Act, before proceeding, we would like to take note of the decision dated 28th December, 2020 of the Coordinate Bench, Mumbai in the case of JRD Tata Trust-vs.- DCIT reported in 85 ITR 431(supra), which reads as under:- “19. The question that we also need to address is as to what is the nature of scope of the provisions of Explanation 2(a) to Section 263 to the effect that an order is deemed to be "erroneous and prejudicial to the interests of the revenue" when Commissioner is of the view that "the order is passed without making inquiries or verification which should have been made".

Undoubtedly, the expression used in Explanation 2 to Section 263 is "when Commissioner is of the view," but that does not mean that the view so formed by the Commissioner is not subject to any judicial scrutiny or that such a view being formed is at the unfettered discretion of the Commissioner. The formation of his view has to be in a reasonable manner, it must stand the test of judicial scrutiny, and it must have, at its foundation, the inquiries, and verifications expected, in the ordinary course of performance of duties, of a prudent, judicious and responsible public servant- that an Assessing Officer is expected to be. If we are to proceed on the basis, as is being urged by the learned Departmental Representative and as is canvassed in the impugned order, Assessment year: 2014-15 that once Commissioner records his view that the order is passed without making inquiries or verifications which should have been made, we to 360/PAT/2024 Assessment Years: 2017-2018to 2021-2022 Gandhipati Construction Private Limited cannot question such a view and we must uphold the validity of revision order, for the recording of that view alone, it would result in a situation that the Commissioner can de facto exercise unfettered powers to subject any order to revision proceedings. To exercise such a revision power, if that proposition is to be upheld, will mean that virtually any order can be subjected to revision proceedings; all that will be necessary is the recording of the Commissioner's view that "the order is passed without making inquiries or verification which should have been made". Such an approach will be clearly incongruous. The legal position is fairly well settled that when a public authority has the power to do something in aid of enforcement of a right of a citizen, it is imperative upon him to exercise such powers when circumstances so justify or warrant. Even if the words used in the statute are prima facie enabling, the courts will readily infer a duty to exercise a power which is invested in aid of enforcement of a right--public or private--of a citizen. [L Hirday Naran Vs Income Tax Officer [(1970) 78 ITR 26 (SC)]. As a corollary to this legal position, when a public authority has the powers to do something against any person, such an authority cannot exercise that power unless it is demonstrated that the circumstances so justify or warrant. In a democratic welfare state, all the powers vested in the public authorities are for the good of society. A fortiorari, neither can a public authority decline to exercise the powers, to help anyone, when circumstances so justify or warrant, nor can a public authority exercise the powers, to the detriment of anyone, unless circumstances so justify or warrant. What essentially follows is that unless the Assessing Officer does not conduct, at the stage of passing the order which is subjected to revision proceedings, inquiries and verifications expected, in the ordinary course of performance of duties, of a prudent, judicious and responsible public servant- that an Assessing Officer is expected to be, Commissioner cannot legitimately form the view that "the order is passed without making inquiries or verification which should have been made". The true test for finding out whether Explanation 2(a) has been rightly invoked or not is, therefore, not simply existence of the view, as professed by the Commissioner, about the lack of necessary inquiries 42 to 360/PAT/2024 Assessment Years: 2017-2018to 2021-2022 Gandhipati Construction Private Limited and verifications, but an objective finding that the Assessing Officer has not conducted, at the stage of passing the order which is subjected to revision proceedings, inquiries and verifications expected, in the ordinary course of performance of duties, of a prudent, judicious and responsible public servant that the Assessing Officer is expected to be.

That brings us to our next question, and that is what a prudent, judicious, and responsible Assessing Officer is to do in the course of his assessment proceedings. Is he to doubt or test every proposition put forward by the assessee and investigate all the claims made in the income tax return as deep as he can? The answer has to be emphatically in negative because, if he is to do so, the line of demarcation between scrutiny and investigation will get blurred, and, on a more practical note, it will be practically impossible to complete all the assessments allotted to him within no matter how liberal a time limit is framed. In scrutiny assessment proceedings, all that is required to be done is to examine the income tax return and claims made therein as to whether these are prima facie in accordance with the law and where one has any reasons to doubt the correctness of a claim made in the income tax return, probe into the matter deeper in detail. He need not look at everything with suspicion and Assessment year: 2014-15 investigate each and every claim made in the income tax return; a reasonable prima facie scrutiny of all the claims will be in order, and then take a call, in the light of his expert knowledge and experience, which areas, if at all any, required to be critically examined by a thorough probe. While it is true that an Assessing Officer is not only an adjudicator but also an investigator and he cannot remain passive in the face of a return which is apparently in order but calls for further inquiry but, as observed by Hon'ble Delhi High Court in the case of Gee Vee Enterprises Vs ACIT [(1195) 99 ITR 375 (Del)], "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. (Emphasis, by underlining, supplied by us). It is, therefore, obvious that when the circumstances are not such as to provoke an inquiry, he need not put every proposition to the test and probe everything 43 to 360/PAT/2024 Assessment Years: 2017-2018to 2021-2022 Gandhipati Construction Private Limited stated in the income tax return. In a way, his role in the scrutiny assessment proceedings is somewhat akin to a conventional statutory auditor in real- life situations. What Justice Lopes said, in the case of Re Kingston Cotton Mills [(1896) 2 Ch 279, 288)], in respect of the role of an auditor, would equally apply in respect of the role of the Assessing Officer as well. His Lordship had said that an auditor (read Assessing Officer in the present context) "is not bound to be a detective, or, as was said, to approach his work with suspicion or with a foregone conclusion that there is something wrong. He is a watch-dog, but not a bloodhound.". Of course, an Assessing Officer cannot remain passive on the facts which, in his fair opinion, need to be probed further, but then an Assessing Officer, unless he has specific reasons to do so after a look at the details, is not required to prove to the hilt everything coming to his notice in the course of the assessment proceedings. When the facts as emerging out of the scrutiny are apparently in order, and no further inquiry is warranted in his bonafide opinion, he need not conduct further inquiries just because it is lawful to make further inquiries in the matter. A degree of reasonable faith in the assessee and not doubting everything coming to the Assessing Officer's notice in the assessment proceedings cannot be said to be lacking bonafide, and as long as the path adopted by the Assessing Officer is taken bonafide and he has adopted a course permissible in law, he cannot be faulted- which is a sine qua non for invoking the powers under section263. In the case of Malabar Industrial Co Ltd Vs CIT [(2000) 243 ITR 83 (SC)], Hon'ble Supreme Court has held that "Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law." The test for what is the least expected of a prudent, judicious and responsible Assessing Officer in the normal course of his assessment work, or what 44 to 360/PAT/2024 Assessment Years: 2017-2018to 2021-2022 Gandhipati Construction Private Limited constitutes a permissible course of action for the Assessing Officer, is not what he should have done in the ideal circumstances, but what an Assessing Officer, in the course of his performance of his duties as an Assessing Officer should, as a prudent, judicious or reasonable public servant, reasonably do bonafide in a real-life situation. It is also important to bear in mind the fact that lack of bonafides or unreasonableness in conduct cannot be inferred on mere suspicion; there have to be some strong indicators in direction, or there has to be a specific failure in doing what a prudent, judicious and responsible officer would have done in the normal course of his work in the similar circumstances. On a similar note, a coordinate bench of the Assessment year: 2014-15 Tribunal, in the case of Narayan T Rane vs ITO [(2016) 70 taxmann.com 227 (Mum)] has observed as follows: 20. Clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provision shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld. Pr.CIT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO vis- a-vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying our enquiries or verification, which a reasonable and prudent officer would have claimed out or not. It does not authorise or give unfettered powers to the Ld Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made.

Now going through the above judgment and also taking note of the relevant provision of Explanation 2, sub-clause (a) of section 263 of the Act and also taking note of the judgment of the Hon’ble Delhi High Court in the case of DG Housing (supra), we find that ld. PCIT before setting aside the assessment order holding it as erroneous in so far as prejudicial to the interest of revenue, needs to first carry out independent inquiry or verification at his own end. Once the documents establishes that ld. Assessing Officer has conducted the inquiry to the extent what was needed under the given facts and circumstances, then the burden shifts over to the ld. PCIT to make specific reference to certain issues or transactions or seized material and then discussing such issue after giving due opportunity to the assessee should come to a firm conclusion that such transaction which deserved to be added in the hands of assessee had not been done by the ld. Assessing Officer due to lack of carrying out proper inquiry. Merely giving general observation that ld. Assessing Officer has not carried out adequate inquiry will not meet the requirement of law as provided under section 263 of the Act. Perusal of the impugned order indicates that ld. PCIT after having referred to show-cause notice and the reply filed by the assessee has concluded the revisionary proceedings by to 360/PAT/2024 Assessment Years: 2017-2018to 2021-2022 Gandhipati Construction Private Limited referring certain judicial pronouncements without discussing any fact of the case. Under these given facts and circumstances, since ld. PCIT has not carried out any independent inquiry before arriving at to the decision that the order of ld. Assessing Officer is erroneous in so far as prejudicial to the interest of revenue, Explanation 2(a) to sec. 263 of the Act cannot be applied for a valid revisionary proceeding and, therefore, the impugned proceedings are to be held as invalid and without jurisdiction.

Before concluding, we also note that the assessment order in question have been passed after getting proper approval under section 153D of the Act by the superior authority to ld. Assessing Officer. However, ld. PCIT has only used his revisionary powers for setting aside the assessment order but has not revised the approval order under section 153D of the Act. In the preceding para, where we have referred to the decision of this Tribunal in the case of Gyan Infrabuild Ltd. (supra) wherein reliance has been placed on the decision of Coordinate Bench Delhi in the case of Smt. Abha Bansal v. Principal Commissioner of Income-tax (supra), decision of Mumbai Tribunal in the case of Surendra L. Heera Nandani v. Pr.CIT (supra), decision of ITAT, Pune in the case of Dhariwal Industries Ltd. v. CIT (supra) and that of Coordinate Bench Hyderabad in the case of Trinity Infraventures Ltd. v. Dy. CIT (supra), it has to 360/PAT/2024 Assessment Years: 2017-2018to 2021-2022 Gandhipati Construction Private Limited been consistently held that without revising the approval u/s. 153D of the Act, Ld. Pr. CIT cannot revise the assessment order u/s. 153A of the Act. Same is the situation in the present case where the assessments have been framed u/s. 153A read with section 143(3) of the Act after the draft order being accorded the approval u/s. 153D of the Act. Therefore, the ratio laid down by the Coordinate Benches squarely applies on the instant case also and, therefore, on this ground also the assessee succeeds and the impugned orders u/s. 263 of the Act deserves to be quashed.

We accordingly allow the effective grounds of appeal challenging the assumption of jurisdiction and validity of orders u/s. 263 of the Act raised by the assessee for AYs 2017-18 to 2021-22 and restore the assessment orders framed for the respective assessment years u/s. 153A read with section 143(3) of the Act evenly dated 30.03.2022.

In the result, all the appeals of the assessee bearing 359 & 360/PAT/2024 are allowed.