SANJEEV KUMAR RANA,ROPAR vs. PRINCIPAL COMMISSIONER OF INCOME TAX, CHANDIGARH

The assessee, vide reply dated 17-04-2023, opposed revision on any issue and filed various submissions. However, Ld. Pr. CIT held an opinion that the enquires carried out by Ld. AO were unsatisfactory and incomplete and the assessment was fit for revision. Accordingly, Ld. AO was directed to re-examine these three issues. Aggrieved as aforesaid, the assessee is in further appeal before us.

From assessee’s submissions to Ld. Pr. CIT (as extracted in the impugned order), it could be seen that the assessee was allotted liquor contract at Rajpur Bhaiyan as well as at Chandigarh for the first time during this year and accordingly, there was no opening stock. The liquor rates were not settled at the beginning of the year between the state excise department and distilleries which supplied the material to the assessee. The assessee lifted the material against valid liquor pass in Form L-34 as issued by the Excise & Taxation Department, Punjab and made sales of liquor. However, upon settlement of rates, the sales invoices were issued by the distilleries at a later stage which were accordingly entered into regular books of accounts. Further, the purchases as made by the assessee was subjected to TCS and all purchase transactions were reflected in Form 26AS. During assessment proceedings, the assessee duly furnished books of accounts and other documents and explained the said position. The audited books including sales and purchases were test checked by Ld. AO and after having satisfied himself, Ld. AO accepted the same. Therefore, no case of bogus sales could be made out against the assessee. The payment of Rs.1.50 Lacs was stated to be paid to State Excise Department against lottery draw organized by them for allotting liquor vends. The payment being to state government was allowed under Rule 6DD. On the issue of capital introduction, the assessee furnished ledger accounts of firm M/s Raman Kumar & Co. to Ld. Pr. CIT from where capital was sourced. The same documents were stated to be furnished to Ld. AO.

After due consideration of these submissions, it could be ascertained that no case of revision of the assessment order could be made out against the assessee. Not only these issues were examined by Ld. AO during the course of assessment proceedings, but all the three issues were well explained by the assessee before Ld. Pr. CIT along with sufficient documentary evidences to substantiate the same. However, there is no finding by Ld. Pr. CIT on assessee’s submissions and no case of assessment order being erroneous and prejudicial to the interest of the revenue has been made out against the assessee. Simply because some further verification was required or simply because the verification was not done in a particular manner, the same could not justify revision of the order unless it was shown that the view of Ld. AO was erroneous or opposed to any law.

The Hon’ble Supreme Court in Malabar Industrial Co. Ltd. vs. CIT (243 ITR 83) has held that 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 consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of the revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue, unless the view taken by the Income-tax Officer is unsustainable in law. The said principal has been reiterated by Hon’ble Court in its subsequent judgment titled as CIT V/s Max India Ltd. (295 ITR 282). Similar principal has been followed in Grasim Industries Ltd. V/s CIT (321 ITR 92). The ratio of all these decisions is that where two views are possible and AO has preferred one view against another view, order could not be said to be erroneous or prejudicial to the interest of the revenue.

In the case of Gabriel India Ltd. (203 ITR 108), Hon’ble Bombay High Court observed that from a reading of sub-section (1) of section 263, it is clear that the power of suo-motu revision can be exercised by revisionary authority only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is "erroneous in so far as it is prejudicial to the interests of the Revenue". However, this power is not an arbitrary or unchartered power. It could be exercised only on fulfilment of the requirements laid down in sub-section (1). The consideration of revisionary authority must be based on materials on the record of the proceedings called for by him. The revisionary authority could not initiate proceedings with a view to start fishing and roving enquiries in matters or orders which already stood concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. If Ld. AO, acting in accordance, with law makes a certain assessment, the same could not be branded as erroneous simply because, according to revisionary authority, the order should have been written more elaborately. This section does not visualize a case of substitution of the judgment of the revisionary authority for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. When the assessee filed detailed explanation which are part of the record, it could be said that Ld. AO was satisfied with the explanation of the assessee. Such decision of the Income-tax Officer cannot be held to be "erroneous" simply because in his order he did not make an elaborate discussion in that regard. Further inquiry and / or fresh determination can be directed by revisionary authority only after coming to the conclusion that the earlier finding of the Income-tax Officer was erroneous and prejudicial to the interests of the Revenue.

The Hon’ble Delhi High Court in the case of ITO vs. DG Housing Projects Ltd. (343 ITR 329) held that AO is both an investigator and an adjudicator. A distinction has to be drawn between a case where the AO has not conducted any enquiry or examined any evidence whatsoever (“lack of inquiry”) from one (i) where there is enquiry but the findings are erroneous; and (ii) where there is failure to make proper or full verification or enquiry (“inadequate inquiry”). The fact that the assessment order does not give any reasons for allowing the claim is not by itself indicative of the fact that the AO has not applied his mind on the issue. All the circumstances have to be seen. A case of lack of enquiry would by itself render the order being erroneous and prejudicial to the interest of the revenue. In a case where there is inquiry by the AO, even if inadequate, the CIT would not be entitled to revise u/s 263 on the ground that he has a different opinion in the matter. Also, in a case where the AO has formed a 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 before passing the Sec. 263 order. The CIT is entitled to collect new material to show how the order of the AO is erroneous. The CIT cannot remand the matter to the AO for further enquiries or to decide whether the findings recorded are erroneous without a finding that the order is erroneous and how that is so. A mere remand to the AO implies that the CIT has not decided whether the order is erroneous but has directed the AO to decide the aspect which is not permissible. On facts, as the CIT had doubts about the valuation and sale consideration received, he ought to have examined the said aspect himself and given a finding on the merits on how the consideration was understated. The ratio of this decision squarely applies to the facts of present case before us and duly supports the case of the assessee against impugned revisionary order.

Therefore, on the given facts, the impugned revision of assessment order could not be sustained in law. We order so. The assessment as framed by Ld. AO stand restored back.

The appeal stands allowed in terms of our above order. Order pronounced on 14/10/2025 Sd/- Sd/- (RAJPAL YADAV) (MANOJ KUMAR AGGARWAL) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 14/10/2025 आदेश की �ितिलिप अ�ेिषत /Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF ASSISTANT REGISTRAR