SUBHASH JAISWAL ASSOCIATES,BAREILLY vs. PCIT BAREILLY, BAREILLY

“Grounds No.1 The Learned PCIT, Bareilly has erred in initiating and completing the revisionary proceedings u/s 263 of the Act in the hands of the assessee, and setting aside the case to the Assessing officer, with total disregard to the facts and circumstances of the case, and is untenable under the law. Grounds No. 2 The Learned PCIT, Bareilly erred in setting aside the assessment made vide order under section 143(3) dated 15/12/2019 and passing an order under section 263 of the Act on the grounds that the original assessment order passed under section 143(3) was erroneous and prejudicial to the interest of the revenue and directing AO to frame fresh assessment order (de novo) after giving reasonable opportunity of hearing to the appellants.

Page 2 of 37 Grounds No. 3 The Learned PCIT, Bareilly has further failed to appreciate that the original assessment order was passed by the Assessing officer after considering all the issues mentioned in his show cause notice and after making due enquiries, and thus the case was not the one of lack of enquiry by the Assessing officer. Grounds No. 4 The Learned PCIT, Bareilly erred in law as well as on the facts of the case in wrongly setting aside the assessment order dated 15/12/2019 despite there being complete application of mind by the AO on the subjected issues and it was nothing but a case of change of opinion, based on which, assumption of jurisdiction u/s 263 is not permissible. The impugned order dated 21/02/2022 therefore, lacks valid jurisdiction u/s 263 of the Act and hence, the same kindly be quashed. Grounds No. 5 The Learned PCIT, Bareilly further failed to appreciate that where there were two possible views and a logical view had been taken by the Assessing officer in the original assessment proceedings, the revisionary proceedings could not be initiated to substitute his own view. Grounds No. 6 That the finding of Learned PCIT, Bareilly that order of the learned Assessing Officer is erroneous and prejudicial to the interest of revenue is factually incorrect, legally misconceived, contrary to evidence on record; and in any case is vague, based on surmiseful considerations; and therefore unsustainable Grounds No. 7 That the Learned PCIT, Bareilly has erred in holding that it is a case of “lack of enquiry" and, further failing to appreciate that alleged inadequate enquiry in the manner suggested without any independent evidence and, without any further enquiries by him cannot be a basis for assumption of jurisdiction u/s 263 of the Act. Grounds No. 8 The Learned PCIT, Bareilly has without conducting any independent enquiries has held the order to be erroneous and prejudicial to the interest of the revenue, has set aside the assessment back to the file of the Assessing officer with total disregard to the facts and circumstances of the case. The CIT has failed to appreciate that powers of revision u/s 263 cannot be exercised for redoing the investigation, rather the CIT ought to have done the investigation himself before restoring the matter to the AO. Grounds No. 9 The Learned PCIT, Bareilly has further ignored that in view of the provisions of explanation 2 of section 263, it is incumbent to point out what more enquiries would the AO ought to have conducted. Grounds No. 10 That the Learned PCIT, Bareilly has also failed to appreciate that, u/s 263 of the Act, an order of assessment cannot be set- aside to simply to make further enquiries and thereafter pass fresh order of assessment and as such, impugned order is contrary to law and hence, unsustainable. The learned Principal Commissioner of Income Tax has failed to appreciate that surmises, conjecture and suspicion could not be a basis much less a valid basis to invoke section 263 of the Act. Grounds No. 11 That the Learned PCIT, Bareilly has framed the impugned order without granting sufficient opportunity to the appellant and therefore the order made is illegal, invalid and, vitiated order Prayer - It is therefore prayed that, impugned order dated 21.2.2022 under section 263 of the Act Page 3 of 37 be held to be without jurisdiction and, therefore be quashed and appeal of the appellant be allowed. Grounds No. 12 The assessee’s case does not fall within the mischief of section 263 and as such the order is bad in law and the same is liable to be cancelled. Grounds No. 13 That the Appellant craves leave to amend alters, add or forego any of the above grounds.” (A.1) Subsequently, the assessee also filed additional ground of appeal as under: - (B) In this case, assessment order dated 15.12.2019 was passed u/s 143(3) of the Act whereby the assessee’s total income was determined at Rs.97,61,730/- as against the returned income of Rs.94,78,920/-. The Ld PCIT assumed jurisdiction u/s 263 of the Act by issuing show cause notice to the assessee. Subsequently, the Ld. PCIT passed order dated 21.02.2022 under section 263 of the Act whereby the Ld. PCIT set aside the aforesaid assessment order dated 15.12.2019 with the direction to the Assessing Officer to frame de novo assessment order as per law. The order u/s 263 of the Act includes in its, the aforesaid “In this regard, a hearing in the matter is fixed on 07/12/2020 at 10

40. AM. You are requested to attend in person or through an authorized representative to submit your representation, if any alongwith supporting documents/information in support of the issues involved (as mentioned below). If you wish that the Revision proceeding be concluded on the basis of your written submissions/representations filed in this office, on or before the said due date, then your personal attendance is not required. You also have the option to file your submission from the e-filing portal using the link: incometaxindiaefiling.gov.in

2. The case records for the A. Y.2017-18 have been called for and examined by the undersigned. The undersigned considers that the assessment for the A.Y.2017-18, which is completed u/s 143(3) of the Income Tax Act 1961, on 15.12.2019 at total assessed income of Rs. 97,61,730/- is erroneous in so far as it is prejudicial to the interest of the revenue on the following issues :- i. From perusal of records, it is noted that the Assessing officer has not enquired about shop-wise details of purchases, sales and expenses. ii. As per case laws reported in 254 ITR 230 in the case CIT Vs. Rangila Ram and Others, Hon'ble Supreme Court and 408 ITR 402 in the case PCIT v. Chamundi Winery and Distillery, Hon'ble Karnataka High Court have held that the whole income from the liquor business should be taxed in the hands of licencee only and the expenses incurred by other persons should be disallowed. In this case, assessing officer has not asked the assessee to submit the details of licence issued to him for the trading of liquor. iii. The AO has also failed to examine the sales of liquor by assessee with supporting documents such as sales bills/vouchers. Hon'ble Rajasthan High Court in the cases CIT Vs. Ram Singh and Others, 363 ITR 417 and Trilok Chand Girdharilal and Party, 369 ITR 751 has held that non- maintenance of sales vouchers and stock register entails to the rejection of accounts and consequently, estimation of income. The AO has failed to examine the issue on this line. iv. The case pertains to liquor business but the AO has not cared to make any enquiry from excise department regarding the purchases made or excise duty paid. The AO has also not enquired about the source of bidding amount(s) paid by the assessee AOP for obtaining the liquor license. v. The assessee has shown unsecured loan of Rs.2.99 crore during the year. The AO has not made any in-depth enquiry on this issue. He failed to verify the genuineness and creditworthiness of the persons extending unsecured loans to the assessee AOP. vi. The assessee AOP has shown substantial sundry creditors amounting to Rs.2.66 crore but the AO has not made any verification. It is expected from the AO to verify atleast few creditors on test-check basis to ascertain the genuineness and correctness of creditors shown on the liability side of the Balance Sheet.

Page 5 of 37 vii. The assessee has not examined various expenses claimed in the P & L A/c. No documentary evidences have been obtained. No third party verification has been undertaken by the AO. There are many expenses like assessment fees' amounting to Rs. 1,58,27,640/-; 'form fees' amounting to Rs.3,90,54,400/- which have neither been examined nor any documentary evidences have been obtained. viii. The assessee has shown Rs. 1,00, 46, 114/- as 'VAT payable' on the liabilities side of the Balance Sheet. The AO has not examined this issue in context of section 43B of the IT Act, 1961. No documentary evidence has been obtained to verify whether the assessee AOP has paid it before filing of ITR. Besides the assessee as also debited Rs. 1,40,46,274/- on account of VAT in the P & L A/c but no documentary evidences is available on file. Ix. The case was picked up for complete scrutiny. However, besides routine queries made, no concerted effort seems to have been made to examine the Books of accounts. No third party enquiries have been undertaken and the AO has accepted all balances in Balance Sheet and P & L account as submitted by the assessee as true and correct without any verification. x. Thus, during the course of assessment proceedings, the Assessing Officer has not examined /enquired into the details of facts of the case by making the assessment order u/s 143(3) of the IT Act as erroneous in so far as prejudicial to the interest of the revenue as per explanation 2 to section 263 of the IT Act, 1961.

3. Thereafter, on change of incumbency, a fresh notice was sent on 18.11.2021, 10.01.2022, 28.01.2022 and 01.02.2022. The assessee during the proceedings has filed the following submissions: " Respected Sir Ref- In the matter of M/s Subhash Jaiswal Associates Bareilly Assessment Year 2017-2018 Sub- Reply to Your Honours show cause notice u/s 263 of the Income Tax Act 1961 With reference to the above and in compliance to Your Honour" s notice dated 03.12.2020 we most respectfully submit as under: At the very outset it may be explained that the assessee is an Association of persons engaged in the trading of liquor. The assessee operates various liquor vends which are allotted in the name of members. All the investments, inter alia, in the business towards licence fees, purchases etc. is done by the AOP and sales pertain per to the assessee AOP. Accordingly TCS is also collected in the name of the assessee by various parties and deposited to the credit of central government account. The Books of accounts are regularly maintained by the assessee and duly audited as per the statutory provisions contained in section 44AB of the Income Tax Act 1961. Each and every item of income and expenditure is duly vouched and verifiable. Further, the assessee was completed u/s 143(3) of the act by the assessing officer, after making due enquiries and examination by the assessing officer. It may also be appreciated that the Page 6 of 37 main reasons for selection of the case under scrutiny were "Cash Deposited during Demonetization", and each and every reason was dealt with by the assessing officer during the course of the proceedings. It is further submitted that the assessee is making submission on legal grounds as well as the merits, which are dealt with at the later part of the reply. Your Honour will appreciate that it is within the province and jurisdiction of the Assessing officer to decide which points he wants to take up for enquiry and to what extent and, as such, it is a law that the Learned Commissioner of Income Tax cannot interfere with the same and even if Learned Commissioner has such results of enquiries, the resultant order cannot be subjected to revision proceeding. On the facts of the instant case, it would not be out of the context to state that the impugned scrutiny assessment was not lacking any information, search results and directions from higher authorities, in as much as nothing has been recorded to that effect in the assessment order. The assessee wishes to challenge the initiation of the revisionary proceedings based on the following challenges, which are dealt one at a time for clarity: a. Clarification regarding explanation 2 of Section 263 and difference between lack of enquiry and inadequate enquiry b. Where two views are possible and the AO adopts one view with which the CIT does not agree, the order cannot deemed to be erroneous or prejudicial to the interest of the Revenue even if there is a loss of the revenue c. Powers u/s 263 cannot be invoked merely because the CIT had a different opinion on the matter d. The Assessing officer has complete jurisdiction over the extent of inquiry required to be conducted and the CIT cannot invoke the provisions of Section 263 of the Income Tax Act, 1961 to revise the order passed by the assessing officer simply due to the fact that the CIT has an opinion different from that as passed by the assessing officer. Clarification regarding explanation 2 of Section 263 and difference between lack of enquiry and inadequate enquiry: There is a clarification provided in Explanation 2 of Section 263 for revisionary proceedings which highlights the fact that there is a difference between inadequate enquiry and lack of enquiry. The explanation deals with the proceedings u/s 263 being valid when the assessing officer has passed the assessment order without making inquiries in the matter. In the given case, the assessing officer has duly made inquiries as well as examined the case at length. Therefore, it cannot be said that no enquiry has been conducted by the assessing officer. As mentioned above, it is completely up to the jurisdiction and opinion of the assessing officer himself to judge the extent to which he wants to examine an issue. The extent to which a matter is discussed in the assessment order is also a judgment matter since it is not necessary that the assessing officer outlines the entire discussion at length in the assessment order passed by him. It is not necessary that the extent of examination of an issue deemed necessary by the PCIT/ CIT would be the same as the assessing officer who was in charge of the case at the time."

Page 7 of 37 The assessee has also relied on various judicial pronouncements in support of his contention.

4. This case was picked up for complete scrutiny and the CASS selections reason was: a) Large Cash deposited during demonetization period The assessee AOP deals in retail liquor business. On examination of records, it is evident that the said assessment order was passed without proper enquiry with regard to the following points: i) No enquiry made by the AO regarding genuineness of the source of cash deposit in old SBNs of Rs. 6.08 crores during demonetization period. ii) AO did not enquire about the details of license issued to him for the trading of liquor. iii) AO did not examine about genuineness and creditworthiness of the persons who had id given given unsecured unsecured loans of Rs. 2.99 crores to the assessee. Further, no enquiry were made by the AO regarding the genuineness and correctness of sundry creditors amounting Rs.2.66 crore shown in the liabilities of the balance sheet of the assessee. iv) There were many expenses like 'assessment fees' amounting Rs.11,58,27,640/-; 'form fees' amounting Rs.3,90,54,400/- which have not been examined by the AO with regard to genuineness of the expenses claimed nor whether the same were allowable as per provisions of the Act. The Assessing officer has passed the assessment order on 15.12.2019 u/s 143 of the Act without enquiries on the above issues and accepted submissions of the assessee.

5. It is apparent from the submissions filed by the assessee during the proceedings that the assessee has not submitted any reply with regard to specific points raised in the show cause notice issued during proceedings u/s 263, on basis of which it was held by Pr. CIT that the assessment order has been passed by the AO without enquiries on these issues during assessment proceedings.

Page 8 of 37 It was further held by the Hon'ble Court that "The Commissioner may consider an order to be 'erroneous' for the purpose of section 263 even if error of law may not be apparent on the face of the order. The Commissioner may consider an order of the assessing authority to be erroneous not only if it contains some apparent parent error of reason or of law or of fact on the face of it but also because it is stereotype e order order which which simply accepts what the assessee has stated in his report and fails to make inquiry which are called for in circumstances of the case." (ii) Further in the case of Ram Pyari Deri Saraogi v/s CIT(1968) 67 ITR 184, the Hon'ble Apex Court while examining the question of revisional power of the CIT under the old Act held that, "where assessment was completed by the ITO with under haste, without holding necessary enquiry, it is sufficient to hold that the assessment order is erroneous." (iii) In the case of Smt Tara Devi Agarwal v/s CIT(1973) 88 ITR 323(SC), it was held by the Hon'ble Apex Court that, " even where income has not been earned and is not assessable merely because the assessee wants it to be assessed in his or her end in order to assist someone else who would have been assessed to a larger amount, the assessment to made can certainly be erroneous and prejudicial to the interest of revenue." (iv) Hon'ble Delhi High Court in the case of Gee Vee Enterprises v/s Addl.CIT(1975) 99 ITR 375(Delhi) following the aforesaid above two judgements of the Hon'ble Apex Court held that "the position and function of the Income Tax Officer is very different from that of a Civil Court. The statements made in a pleading proved by minimum amount of evidence may be accepted by Civil Court in absence of any rebuttal. The Civil Court is neutral. It simply gives decision on the basis of the pleading and evidences which comes before it." Further, it was held by the Hon'ble Court that: "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 apparent in the order but call for further enquiry. It is his duty to ascertain the e truth of the facts stated in the return when the circumstances of the case are such as to provoke an enquiry. The meaning to be given to the word "erroneous" in section 263 emerges out of its context. It is because it is incumbent on the Income Tax officer to further investigate the facts stated in the return when circumstances would make an enquiry prudent that the word "erroneous" in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an enquiry has not been made and not because there is anything wrong with the order if all facts stated therein are assumed to be correct."

Page 9 of 37 (B.1) The present appeal has been filed by the assessee against the aforesaid order dated 21.02.2022 passed by the Ld. PCIT u/s 263 of the Act. In the course of appellate proceedings in Income Tax Appellate Tribunal (ITAT), a paper book containing the following particulars was filed from the assessee’s side: - (B.1.1) Further, a list of case laws relied upon by the assessee was also filed from the assessee’s side. In the course of appellate proceedings in ITAT, which is reproduced below, for the ease of reference: - Malabar Industrial Co. Ltd. (2000) 243 ITR 83 (SC) The That "a bare reading of this provision makes it clear that the pre- requisite to the exercise of jurisdiction by Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent if the order of the Income-tax Officer is erroneous, but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue recours3 cannot be had to S. 263 (1) of the Act. CIT v. Gabriel India Ltd., 203 ITR 108 Bombay (1993) In this case, the assessee had claimed certain expenses as revenue expenditure. The Income-tax Officer (ITO) sought details of the same and the assessee gave the details and explained the nature of expenditure.

Page 10 of 37 The ITO considered the explanation and allowed the same but did not include the discussion in this regard in the assessment order. The commissioner initiated proceeding u/s 263 on the ground that such expenditure was capital expenditure and as such the order of the ITO was erroneous so as to be prejudicial to the interests of the Revenue. assessee offered the explanation that the issue was examined in detail by the ITO. The CIT passed a order observing that ITO had not discussed the allowability of the expenses in the Assessment Order an this indicated non-application of mind. He cancelled the order of the ITO directing him to make a fresh assessment on the lines indicated by him. CIT V LAND INFRASTRUCTURE DEVELOPMENT PROJECTS LTD. [2013] 357 ITR 763 (Mad) REVISION - COMMISSIONER POWERS CONDITION PRCEDENT - ASSESSMENT ORDER MUST BE ERRONEOUS AND PREJUDICIAL TO REVENUE - BOTH CONDITIONS MUST BE SATISFIED - NO SPECIFIC ERROR IN ASSESSMENT ORDER ODER OF REVISION NOT VALID - INCOME-TAX ACT, 1961, 5.263. Unless the basis of revision satisfying the twin conditions, namely, assessment order erroneous and prejudicial to the interests of the Revenue, are pointed out by the Commissioner in invoking section 263 of the Income-tax Act, 1961, the assessee is entitled to raise the question of jurisdiction. Assumption of revisional jurisdiction can be justified only on the basis of materials indicating the order of assessment as erroneous and prejudicial to the interests of the Revenue. The assessee had borrowed secured loans by issue of redeemable non- convertible debentures to the tune of Rs. 60 crores, but utilized the loans towards investment in shares. The assessee claimed interest and finance charges to the extent of Rs.4.46 crores to pay interest on the debentures issued. Alleging that the Assessing Officer had not considered the provisions of section 14A of the Act in the proper perspective and tat the interest claimed by the assessee was not related to the funds deployed in activities from which income had been shown during the year, the assessment was revised. The Tribunal pointed out that the assessee had borrowed secured loans by issue of redeemable non-convertible debentures to the tune of Rs. 60 crores and there was no material to hold the assessee made any investment from the date of issue of redeemable non-convertible debentures between March 17, 2004, and March 31, 2004. In the circumstances, the assumption that the loan was utilized for non-tax investment was not correct. It set aside the order of revision. Our appeal to the High Court: Held, dismissing the appeal, that the Tribunal, as a matter of fact, found that the redeemable non-convertible debentures were issued between March 17, 2004, and March 31, 2004, and there were no investments made during this period. This being a pure and simple factual finding, which had not been denied by the Revenue, the finding had to be accepted. Hence, there was no specific error in the assessment order. This order could not be revised. CIT v. Max India Limited (2007) 295 ITR282 (SC) Malbar Industries Co. Ltd. v. CIT (2000) 243 ITR 83 (SC)

Page 11 of 37 When the Assessing Officer takes one of the two views permissible in law and which the Commissioner does not agree with and which results in a loss of revenue, it cannot be treated as erroneous order prejudicial to the interest of revenue, unless the view taken by the Assessing Officer is completely unsustainable law. Commissioner of Income Tax v. Sunbeam Auto Ltd. (011) 332 ITR 167(Del), Delhi High Court We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the the exercise of power by Commissioner of Income-tax under section 263 of the Income-tax Act. As noted above, the submission of learned counsel for the Revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicts on the assessment order, which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. It is only in cases of "lack of inquiry" that such a course of action would be open. Income Tax Officer v. Dg. Housing Projects Ltd.

HC of Delhi - Dt. of order 1.3.2012 343 ITR 329(Delhi) In the present case, the findings recorded not gone into and has not given any by the Tribunal are correct as the CIT has reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the CIT is that "order passed by the Assessing Office may be erroneous". The CIT had doubts about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondent's computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment order is "erroneous". The said finding will be correct, if the CIT had examined and verified the said transaction himself and given a finding in merits. As held above, a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order being erroneous and prejudicial to the interest of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits Page 12 of 37 that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In the second set of cases, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not. TAX V FOUNDATION JYOTI [2013] ITR 388 (DELHI) DIRECTOR OF INCOME- scope of section 263 Revision AUTHORITY FEELING REVISING REVISING INQUIRY INADEQUATE AUTHORITY MUST MAKE ENQUIRY AND SHOW THAT ASSESSMENT ORDER WAS ERRONEOUS - REVISING AUTHORITY HAS NO POWER TO REMAND AND DIRECT ASSESSING OFFICER TO CONDUCT ENQUIRY INCOME TAX ACT 1961, S.263. Revisionary power under section 263 the Income-ax Act, 1961, is conferred by the Act on the Commissioner/Director of Income-tax when an order passed by the lower authority is erroneous and prejudicial to the interests of the Revenue. Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interests of the Revenue, but orders which are passed after inquiry investigation on the question/issue are not per se or normally treated as erroneous and prejudicial to the interests of the Revenue because the revisionary authority feels and opines that further inquiry/investigation required or deeper or further scrutiny should be undertaken. In cases where there is inadequate enquiry but not lack of enquiry, the Commissioner must record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the Commissioner and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in law. An order of remit cannot be passed by the Commissioner to ask the Assessing Officer to decide whether the order was erroneous was Held, dismissing he appeal, that inquiries were certainly conducted by the Assessing Officer. It was not a case of no inquiry. The order under section 263 itself recorded that the Director felt that the inquiries were not sufficient and further inquiries or details should have been called for. The inquiry should have been conducted by the Director himself to record the finding that the assessment order was erroneous. He should not have set aside the order and directed the Assessing Officer to conduct the inquiry. CIT v. Vikas Polymers (2010) 194 Taxman 57 (Delhi)(HC) Haryana Coach Body Builders (2006) 10 SOT 736 (Delhi) Mere lack of inquiry by Assessing Officer is not sufficient for revision under section 263. Asstt. Order cannot be held to be erroneous, if in opinion of the CIT order should have been more elaborate or that further enquiry should have been made. Whether what is proper, requisite and desired enquiries in relation to various matters have to be left to best discretion of the AO. CIT v. Mohd. Ishaq Mohd. Gulam 276 ITR 13 (MP)

Page 13 of 37 To make further enquiry. CIT v. Ganpat Ram Bishnoi 152 Taxman 242 (Raj) (296 ITR 292) Whether jurisdiction u/s 263 cannot be invoked for making enquiries or to go into process of assessment again and again merely on basis that more enquiry ought to have been conducted to find something. CIT v. Mangilal Didwania 28C ITR 126 (Raj) Whether AO has made proper enquiry. with due application of mind or not, is not the domain of the CIT to judge. The fact that the AO has made enquiries is sufficient itself. Balram Manmani v. ACIT 7 SOT 368 (Lucknow) ITAT Whether since the assessment has been made by the AO after taking into account the submissions as well as evidence filed before him and no material whatsoever had been sought or recorded by CIT which showed that there was any discrepancy or falsity in evidences furnished by assessee order passed by AO cannot be revised. Salora International ACIT (205) 02 SOT (Delhi) Tribunal). 705 Merely because from a perfectionist point of view, it is felt that some more enquiries and verifications could have been made by AO while making assessment, the assessment order cannot be declared to be erroneous and prejudicial to the interest of Revenue. CIT v. Arvind Jewellers, 259 ITR 502 (Guj) The court held that the assessee had produced relevant material and offered The court held that the assessee had explanations in pursuance of the notices issued u/s 142(1) as well as u/s 143 (2) of the Act and after considering the materials and explanations, the Income-tax Officer had come to a definite conclusion. Merely because the Income-tax Officer had taken a particular view with which the Commissioner did not agree cannot form the basis for an action u/s 263 of the Act and as such order of Revision was not justified. The Gujarat High Court applied the principles laid down by the Supreme Court in the case of Malabir Industrial Co. Ltd.'s case mentioned above and decided the case in favour of the assessee. ACIT v. Technip Italy Spa (2006) 150 Taxman 13 (Delhi) (Trib) The error envisaged by Section 263 is not one that depends on possibility or guess work, but it should actually be an error either of fact or of law. Antala Sanjaykumar Ravjibhai v. CIT (2012) 135 ITD 506 (Rajkot) (Trib) Section 263 does not visualize a case of of judgment of substitution Commissioner for that of the Assessing Officer, unless the decision is held to be erroneous. Vijay Kumar Megotia v. CIT (2010) 3 ITR (T) 760 (Pat.) (Trib)

Page 14 of 37 When the Assessing Officer has specifically mentioned in the order that books of accounts along with purchase/sales, invoices, ledgers, bank accounts were examined, verified and test checked, setting aside by Commissioner, in absence of any finding that Assessing Officer's order is factually incorrect, and not justified. Roshan Lal Vegetable Products (P) Ltd., v. Income-tax Officer Appeal No.6(ASR) of 2010 A.Year: 2006-07 Section 263 of the Income-tax Act, 1961 Revision Off orders prejudicial to interest of revenue Assessment year 2006-07 Whether where Assessing Officer having examined material on Fine Jewellery (India) Ltd. vs. Assistant Commissioner of Income- tax:[2012] 19 ITR (Trib) 746 (Mumbai) record in detail, made various disallowances, assessment order so passed by him could not be regarded as erroneous and prejudicial to interest of revenue and, therefore, invocation of jurisdiction under section 263 by Commissioner in such a case could not be The assessee was engaged in the business upheld-Held, yes (in favour of assessee.) of manufacture and export of jewellery. During the course of the assessment proceedings, while examining the details of expenses relating to the head "miscellaneous expenses", the Assessing Officer took the view that expenses on account of repairs and maintenance were capital expenditure and disallowed them. Besides this, he also made a disallowance of section 40(a)(ia) of the Income-ax Act, 1961. This order was revised and cancelled by the Commissioner under Section 263 of the Act on the ground that the expenses claimed for the creation of brand were capital expenditure for creating an intangible asset. On appeal by the assessee: Held, allowing the appeal, that there was a complete application of mind by the Assessing Officer while examining the expenditure under brand promotion and brand building. The expenditure incurred by the assessee was not on creating any enduring benefit an asset but was rather helping the assessee in augmenting its sales and resultantly its profit. Even if it was presumed that the building of brand image was giving advantage of enduring benefit to the assessee, still it would be on revenue account as there was no creation of a tangible or intangible asset of enduring nature to the assessee. expenses had not resulted in any kind of addition or augmentation of any profit-making asset. Thus the view taken by the AO was prima facie correct and, therefore there was no reason to hold that such an order was erroneous or prejudicial to the interest of Revenue. Thus, the order of the Commissioner was to be cancelled. Amrit Singh v. ITO (2003) 127 Taxman (Mag.) (Chd.) (Tribunal) In these cases, it was held that assessment framed under section 143(3) cannot be revised on that desired inquiry was not made. Baljees v. ACIT (2003) 127 Taxman 150 (Mag.) (Chd.) (Tribunal) 22 Ratlam Coal Ash Co. v. CIT 171 ITR 141 (MP) Assessing Officer was prima facie correct and, therefore, there was no reason to hold that such an order was erroneous or prejudicial to the Page 15 of 37 interests of the Revenue. Thus the order of the Commissioner was to be cancelled. In these cases, it was held that assessment 87 framed under section 143(3) cannot be revised on n that desired inquiry was not made. REVISION ORDER OF REVISION BY COMMISSIONER ON THE GROUND THAT ITO HAD NOT MADE PROPER ENQUIRIES - FINDING BY TRIBUNAL THAT ASSESSEE HAD FURNISHED REQUISITE INFORMATION AND ITO HAD CONSIDERED FACTS AND COMPLETED THE ASSESSMENT ORDER OF REVISION NOT VALID INCOME-TAX ACT 1961, S.

4. This assessment was sought to be revised by the Id. PCIT by invoking his revision jurisdiction u/s.263 of the Act on the ground that the Id. AO had not made adequate enquiries with regard to receipt of unsecured loans. The Id. PCIT also observed that out of 79 parties from whom loans were received, the Id. AO had only resorted to make sample verification of 7 parties u/s.133(6) of the Act. In this regard, the assessee submitted that in respect of 72 parties, the assessee had duly proved the creditworthiness of the lenders, identity of lenders and genuineness of transactions before the ld. AO by furnishing the copy of PAN, bank statements and ledger confirmations thereon. The said documents were again re-submitted before the Id. PCIT by the assessee. With regard to 7 parties to whom notices were issued u/s.133(6) of the Act by the Id. AO, the assessee submitted that those parties have directly responded before the Id. AO by furnishing the requisite details u/s.133(6) of the Act by furnishing the requisite documents called for by the Id. AO. Accordingly, the assessee objected before the Id. PCIT that this is not a case where the assessment was completed without making adequate enquiries on the issue subjected to be enquired.

6. With regard to receipt of unsecured loans by the assessee, the Id. PCIT had stated that the ld. AO had not made adequate enquiries while framing the assessment. But from the perusal of the various documents enclosed in the paper book of the assessee, we find that the Id. AO had issued notices u/s.142(1) of the Act on 06/09/2019, 28/11/2019 asking for complete details of unsecured loans received by the assessee in tabular form. We find that these details were furnished by the assessee vide letter dated 19/09/2019,13/11/2019 and 30/11/2019 and copy of these replies were filed in the prescribed tabular form which are enclosed in pages 54-85 of the paper book filed before us. Further from the details submitted by the assessee in the tabular form, the Id. AO had sought to select 7 parties out of the said list and made further examination by issuing notice u/s.133(6) of the Act to those seven parties. All the seven parties duly responded directly before the Id. AO in response to notice u/s.133(6) of the Act by filing all the requisite details called for thereon. We find that the Id. AR had also placed on record the complete copy of the order sheet notings which are enclosed herewith in pages 139-146 of the paper book. In the said order sheet notings, the response filed by the assessee on various dates stated supra were duly noted and acknowledged by the Id. AO. Even the notices issued u/s.133(6) of the Act to various parties, replies received from them were also acknowledged by the Id.AO in the said order sheet noting. Further the Id. AO had also noted in the said order sheets that the notices were issued u/s.133(6) of the Act to certain parties on sample basis and the reply furnished thereon by them were checked and examined by him. All these facts clearly go to prove that adequate and requisite enquiries were indeed carried out by the Id. AO while making the assessment. Even though the case is selected for limited scrutiny to examine the unsecured loans received by the assessee, it is not expected of the Id. AO to carry out 100% verification of receipt of unsecured loans by the assessee especially when the number of parties are huge. In the instant case, as stated earlier, the assessee had furnished the entire details called for by the Id. AO in the requisite tabular form. The Id. AO on perusal of the overall details furnished by the assessee in the tabular form and on the basis of independent verification carried out by him from seven parties u/s.133(6) of the Act on test check basis, was completely satisfied with the replies given thereon. Hence, it could be safely concluded that the Id.AO had indeed taken a possible view in the matter after carrying out the requisite enquiries. The law is very well settled that once the Id. AO takes a possible view on the matter, the same cannot be subjected to revision proceedings u/s.263 of the Act by the Id. PCIT. Reliance in this regard is placed on the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd reported in 243 ITR 83; decision of the Hon'ble Jurisdictional High Court in the case of Nirav Modi reported in 390 ITR 292; and the decision of the Hon'ble Jurisdictional High Court in the case Garbriel India Ltd., reported in 203 ITR 108. In our considered opinion, the Id. PCIT is only trying to disturb the possible view taken by the ld. AO by merely making a bald allegation that no enquiries were carried out by the Id. AO. All the aforesaid facts clearly go to establish that adequate enquiries were indeed carried out by the Id. AO.

Page 22 of 37 7. Moreover, we find that in the show-cause notice dated 02/03/2022 issued by the Id. PCIT, there was no whisper of the Id. PCIT trying to invoke provisions of Explanation 2 to Section 263 of the Act which came into effect from 01/06/2015 onwards. However, the same is used by him only in the revision order passed u/s.263 of the Act. This goes to prove that the assessee was never given an opportunity to address the applicability of provisions of Explanation 2 to Section 263 of the Act during the course of revision proceedings before the Id. PCIT. Hence, in our considered opinion, applying the Explanation 2 to Section 263 of the Act would be bad in law in the facts and circumstances of the instant case. Reliance in this regard is placed on the decision of the Hon'ble Gujarat High Court in the case of PCIT vs. Shreeji Prints (P) Ltd., reported in 130 taxmann.com 293 (Guj) wherein it was held as under:- "5 The Tribunal has found that in the order passed by the PCIT, Explanation 2 of section 263 of the Act, 1961 is made applicable. The Tribunal observed that the PCIT has not mentioned in the show cause notice to invoke the Explanation 2 of section 263 of the Act 1961. Therefore, by invocation of Explanation in the order without confronting the assessee and giving an opportunity of being heard to the assessee is not appropriate and sustainable in law." 7.1. It is pertinent to note that the Special Leave Petition preferred by the Revenue against the judgement of the Hon'ble Supreme Court is dismissed by the Hon'ble Supreme Court which is reported in 130 taxmann.com 294. Hence, applying the provisions of Explanation 2 to Section 263 of the Act in the instant appeal would be bad in law.

Page 23 of 37 PCIT erred in invoking revision jurisdiction u/s.263 of the Act in the instant case and the same is hereby quashed. Accordingly, the grounds raised by the assessee are allowed.

10. In the result, appeal of the assessee is allowed.

Ltd. 160 Pr. CIT vs. Clix Finance India (P) taxmann.com 357 (Delhi) Order dt. March 01, 2024. Section 37(1) of the Income-tax Act, 1961 Business expenditure - Allowability of (Loss on sale of loan portfolio) Assessment year 2010-11 - Assessee had sold loan portfolio in favour of a company and differential between value of financial receivables and consideration received from said company was sought to be claimed by assessee as loss on revenue account Assessing Officer being of view that assessee had not transferred loan facilities in totality made an addition Tribunal, however, had deleted impugned addition holding that transaction had taken place during year under consideration and loss had crystallized during year under consideration and, thus, assessee was entitled for claim of loss in year under Britannia Industries Ltd. vs. Pr. CIT 161 taxmann.com 705 (Kolkata-Trib.) Order dt. 06.03.2024 consideration itself Whether no question of law arose for consideration -Held, yes [Para 13] [In favour of assessee] 54.Section 263, read with section 143, of the Income-tax Act, 1961 Revision - Of orders prejudicial to interest of revenue (General) 2018-19 and Pr. Assessment year Whether where jurisdiction under section 263 had been invoked by Pr. Commissioner at instance of Assessing Officer Commissioner had failed to apply his mind objectively and record a finding of his own to conclude that due to certain discrepancies/omissions on part of Assessing Officer assessment so framed had been rendered erroneous in so far as prejudicial to interest of revenue, revisional jurisdiction exercised by Pr. Commissioner was bad in law Held, yes [Para 13.3] [In favour of assessee] II. Section 56, read with section 263, of the Income-tax Act, 1961-Income from other sources Chargeable as (Immovable property) Assessment year 2018-19 acquired had leasehold/freehold land and building from BDMC and had filed its return of income - Assessing Officer had passed an assessment order under section 143(3) -Pr. Commissioner was of view that provisions of section 56(2)(x) were applicable to acquisition of leasehold interest in land and building as well as freehold land parcel Accordingly, he assuming jurisdiction under section 263 remanded matter to Assessing Officer holding that assessment order was erroneous and prejudicial to interest of revenue - It was noted that assessee had furnished valuation reports before NFAC and NFAC had not referred matter to DVO for valuation Further, assessee had acquired leasehold/freehold land setting and building for up mega industrial unit which was eligible for several incentives under Government of Maharashtra's Package Scheme of Incentives-2013 Whether since assessee's claim was allowed by Assessing Officer after conducting necessary enquiry and application of mind, Pr. Commissioner was not justified in exercising revisionary jurisdiction under section 263 and setting aside assessment to Assessing Officer for fresh examination Held, Page 24 of 37 yes Whether jurisdiction under section 263 is not available to Pr. Commissioner merely for restoring issue to file of Assessing Officer where he had not recorded any clear-cut finding as to how assessment was erroneous - Held, yes Whether, even otherwise, provisions of section 56(2)(x) were not applicable to acquisition of leasehold rights in land and building Held, yes [Paras 16, 17 and 18] [In favour of assessee] III. Section 43B of the Income-tax Act, 1961 Business disallowance Certain deductions to be allowed only on actual payment (Illustrations) - Assessment year 2018-19 Assessing Officer had passed an assessment order under section 143(3) allowing deduction claimed by assessee in respect of reversal/writing back of provision for liabilities under section 43B created in the earlier assessment years - Pr. Commissioner assuming jurisdiction under section 263 had restored issue to Assessing Officer treating assessment order as erroneous as well as prejudicial to interest of revenue - It was observed that assessee had not claimed deduction as an expense in year of creation of these provisions High in Pr. CIT v. Court [ITAT Eveready Industries India Ltd. No. 96 (Kol.) of 2017, dated 29-11- 2021] had held that statutory liabilities, which were earlier disallowed under section 43B were to be excluded and allowed as deduction in year of reversal/write back Whether, therefore, revisionary jurisdiction Commissioner exercised by Pr. invalid and, was therefore, order passed under section 263 could not be sustained - Held, yes [Para 20] [In favour of assessee] Pr. ITA CIT 3391/Del/2018 dt.08.01.2019. Arun Kumar Garg HUF vs. No. order This is assessee's appeal preferred against the order dated 12.03.2018 passed u/s 263 of the Income Tax Act, 1961 (hereinafter called 'the Act') by the Ld. Pr. C.I.T., Delhi-13 for assessment year 2013-14. The Ld. Pr.CIT, in the impugned order, has held that the not conduct Assessing Officer did inquiries/verification that he should have done before passing the original assessment order u/s 143(3) on 14.03.2016. It has been held by the Ld. Pr.CIT that the original assessment order is erroneous inasmuch as it is prejudicial to the interest of revenue. Vide the impugned order, the Ld. Pr. CIT has cancelled original Assessment year 2014-15 assessment and has directed the Assessing Officer to make fresh assessment after making proper inquiries with respect to certain suspicious transactions relating to long term capital gains on shares. 2.0 Brief facts of the case are that in this case the return of income was filed declaring total income at Rs.5,55,100/-. The case was selected for scrutiny under CASS and vide order dated 14.03.2016, the Assessing Officer accepted the returned income which included income from long term capital gains and income from other sources. Subsequently, a show cause notice was issued u/s 263 of the Act on 19.12.2017 by the Ld. Pr. CIT stating that the Assessing Officer did not make proper inquiries nor he investigated/verified the various details filed and even omitted issues specially with respect to suspicious transactions relating to long term capital gain in shares, rendering the assessment so made to be erroneous and prejudicial to the interest of the revenue. The assessee was asked to show cause as to why the original assessment order passed on 14.03.2016 u/s 143(3) of the Act not be revised. In response, the assessee submitted before the Ld. Pr.CIT that the assessee had filed all the requisite details and information regarding the nature and source Assessment year 2014-15 of capital gains along with documentary evidences during the course of assessment proceedings. It was submitted Page 25 of 37 that the Assessing Officer had reached a conclusion after verifying and examining all the information and details and, therefore, the action of the Assessing Officer could not be the basis for initiating revisionary proceedings u/s 263 of the Act. However, the Ld. Pr.CIT was of the opinion that since the law had been amended and Explanation 2 had been introduced below section 263 which specified that the order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the revenue if in the opinion of the Pr. Commissioner or the Commissioner, the order has been passed without making any inquiries or verification which should have been made by the Assessing Officer. The Ld. Pr.CIT was of the opinion that since the Assessing Officer had not carried out the investigation/inquiry which he should have, the order is to be deemed to be erroneous inasmuch as it is prejudicial to the interest of the revenue. The Ld. Pr.CIT proceeded to cancel the assessment and directed the Assessing Officer to frame fresh assessment after conducting appropriate inquiry. Aggrieved by Assessment year 2014-15 this order of the Ld. Pr.CIT, the assessee is now in appeal before the ITAT. 3.0 The Ld. AR submitted that it is not the case of the Ld. Pr.CIT that no inquiry was conducted by the Assessing Officer during the course of original assessment proceedings. He drew our attention to the copy of notice u/s 143(2) of the Act dated 24.09.2015 issued during the course of original assessment proceedings and also a copy of questionnaire dated 04.04.2015 wherein the Assessing Officer had required the assessee to submit details of and substantiate long term capital gain. Our attention was also drawn to copy of replies submitted to the Assessing Officer in this regard along with copies of ledger accounts of the assessee in the books of the share brokers along with contract notes and also copies of purchase bills of shares and share certificates to substantiate that all the transactions were genuine and had been duly inquired into by the Assessing Officer. It was also submitted by the Ld. AR that the Ld. Pr.CIT had not made any inquiries on his own but had directed the Assessing Officer to conduct inquiries which was against the law laid down by the Hon'ble Delhi High Court in the case of CIT vs. Goetze India Ltd. reported in 361 ITR 505 (Del). It was also Assessment year 2014-15 submitted that the insertion of Explanation 2 to section 263 of the Act was prospective in nature and, therefore, would not apply in assessment year 2014-15. 4.0 In response, the L.d. CIT DR vehemently supported the order of the Ld. Pr.CIT and submitted that since the Assessing Officer had not made any inquiry regarding the long term capital gains, the exercise of revisionary jurisdiction by the Ld. Pr.CIT was justified. The Ld. CTI DR also placed reliance on the following case laws to support her contention that the action of the Ld. Pr.CIT in invoking the provisions of section 263 of the Act was justified:- 1. Malabar Industrial Co. Ltd. vs. CIT Supreme Court 2000, 109 Taxman 66 2. CIT vs. Ashok Logani, Delhi High Court, 2011, 11 taxmann.com 208

3. Surya Jyoti Software Pvt. Ltd. vs. PCIT, ITAT Delhi, 2017, Page 26 of 37 4. Surya Financial Services Ltd. vs. PCIT, ITAT Delhi 2018, 2018-TIOL-74- ITAT-DEL 5.0 We have heard the rival submissions and perused the material available on record. From the records produced before us, it is very much evident that the Assessing Officer had made Assessment year 2014-15 detailed inquiries regarding the assessee's claim of long term capital gain and, thereafter, after considering the reply submitted by the assessee, the Assessing Officer had made further inquiries also which is evident from the copy of questionnaire as well as the reply thereto which has been placed in the Paper Book filed by the assessee before us. Thus, in view of the documentary evidences as called for and examined by the Assessing Officer, it is very much evident that the Assessing Officer had applied his mind to the issue of long term capital gains and it was only after having been satisfied with the correctness of the claim that he accepted the return filed by the assessee. Therefore, we can safely conclude that proper inquiries had been made by the Assessing Officer while accepting the claim of the assessee and, therefore, the contention of the Ld. Pr.CIT that no inquiry was made by the Assessing Officer is factually incorrect. It is not the case where no inquiry has been made by the Assessing Officer. Merely because the Ld. Pr. CIT felt that further inquiry should have been made does not make the order of the Assessing Officer erroneous and prejudicial to the interest of the revenue. 5.1 It is further seen that the assessee had made detailed submissions before the Ld. Pr.CIT in response to the notice u/s 263 of the Act stating that all the issues raised by the Ld. Pr. CIT had been duly examined by the Assessing Officer during the course of assessment. However, the Ld. Pr.CIT has ignored the replies of the assessee and he has not discussed as to why he does not agree with the contentions of the assessee. The Ld. Pr.CIT has merely remitted the matter back to the Assessing Officer without making any inquiry himself. It is apparent that no independent inquiries have been made by the Ld. Pr.CIT although it was incumbent upon him to make such inquiry so as to reach the conclusion that the order of the Assessing Officer was erroneous and prejudicial to the interest of the revenue, 5.2 The Hon'ble Delhi High Court in the case of Pr.CIT vs. Delhi Airport Metro Express Pvt. Ltd. in has categorically held that for the purpose of exercising jurisdiction u/s 263 of the Act and reaching a conclusion that the order is erroneous in so far as being prejudicial to the interest of the revenue, the CIT has to make some minimal inquiry and where the CIT is of the view that the Assessing Officer had not undertaken any inquiry, it becomes incumbent upon the CIT to conduct such inquiry. We are afraid that in the present case the Ld. Pr.CIT has not conducted any such inquiry. Assessment year 2014-15 5.3 Further, the Hon'ble Delhi High Court in the case of Pr.CIT vs. Modicare Ltd. in ITA 759/2017 has held that the exercise of jurisdiction u/s 263 of the Act cannot be outsourced by the Ld. Pr.CIT to the Assessing Officer and therefore, the Ld. Pr.CIT cannot direct the Assessing Officer to provide details of the facts on the basis of which proceedings u/s 263 could have been initiated. 5.4 In the present case, it is apparent that the Ld. Pr.CIT, unmindful of the inquiries conducted by the Assessing Officer during the course of assessment proceedings and the submissions made by the assessee in response to notice u/s 263 of the Act, has merely observed that the assessment order was passed without making proper inquiries and it is a matter of record that the Ld. Pr.CIT has himself not undertaken any Page 27 of 37 inquiry to reach a conclusion that the order is erroneous and prejudicial to the interest of the revenue. 5.5 We may further add that there is a difference between lack of inquiry and inadequate inquiry and it is for the Assessing Officer to decide the extent of inquiry to be made and it is his satisfaction which is required under the law. The Hon'ble Delhi High Court in the case of Commissioner of Income Tax vs. Assessment year 2014-15 Sunbeam Auto Ltd reported in (2010) reported in 332 ITR 167 (Delhi) has held that if there was any inquiry, even inadequate, that would by itself not give occasion to the Commissioner to pass order u/s 263 of the Act merely because the Commissioner had a different opinion in the matter. It is a settled law that the Ld. Pr.CIT cannot pass the order u/s 263 on the ground that thorough inquiry should have been made by the Assessing Officer. 5.6 Although, there has been an amendment in the provisions of section 263 of the Act by which Explanation 2 has been inserted w.e.f. 1.6.2015 but the same does not give unfettered powers to the Commissioner to assume jurisdiction under section 263 to revise every order of the Assessing Officer to re-examine the issues already examined of assessment during the course proceedings. The Mumbai ITAT Bench has dealt with Explanation 2 as inserted by Finance Act, 2015 in the case of Narayan Tatu Rane vs. ПО reported in (2016) 70 taxman.com 227 to hold that the said Explanation cannot be said to have overridden the liability as interpreted by Hon'ble Delhi High Court, according to which the Commissioner has to conduct the inquiry and verification to establish and show that the Assessment year 2014-15 assessment order was unsustainable in law. The ITAT Mumbai Bench has further held that the intention of the legislature could not have been to enable the CIT to find fault with each and every assessment order without conducting any inquiry or verification in order to establish that the assessment order is not sustainable in law, since such an interpretation will lead to unending litigation and there would not be any point of finality in the legal proceedings. The ITAT Mumbai Bench of the Tribunal went on to hold that the opinion of the Commissioner referred to in section 263 of the Act has to be understood as legal and judicious opinion and not arbitrary opinion. 5.7 We also note that it has been held by the ITAT Mumbai Bench in the case of M/s Indus Best Hospitality & Realtors Pvt. Ltd. in vide order dated 19.01.2018 that Explanation 2 to Section 263 of the Act introduced by Finance Act, 2015 is retrospective in nature. Since the year under consideration is AY 2014-15, we are afraid that Explanation 2 to section 263 will not come to the aid of the department in this case. Similar view has been taken by the various Coordinate Benches of the ITAT in the following cases:- (a) AV Industries v. ACIT [ITA No. 3469/Mu m/2010] dated 06.11.2015 (b) Metacaps Engineering and Mahendra Constructions Co. (JV) v. CIT [ITA No. 2895/Mum/2014] dated 11.09.2017 (c) Reliance Money Infrastructure Ltd. v. PCIT [ITA No. 3259/Mum/2017] dated 06.10.2017.

Page 28 of 37 (d) Shantikrupa Estate Pvt. Ltd. [IT'A No. 1252/Ahd/2015] dated 09.09.2016 (e) Amira Pure Foods Pvt. Ltd. v. PCIT [ITA No. 451/Del/2017] dated 29.11.2017. 5.8 Accordingly, respectfully following the ratio of the various judgments as referred to in the preceding paragraphs, we have no hesitation in holding that the Ld. Pr.CIT had wrongly invoked the revisionary powers u/s 263 of the Act and we have no option but to quash the same. It is so ordered accordingly. 6.0 In the result, the appeal of the assessee stands allowed. [2024] 159 taxmann.com 347 (Rajkot - Trib.) Kutch District Co-op. Milk Producers' Union Ltd. Section 80P, read with section 263, of the Income-tax Act, 1961 - Deductions - Income of co-operative societies (Revision) Assessment year 2017-18 operative society filed return of income and Assessee co- assessment was completed under section 143(3) accepting returned income - Principal Commissioner observed that assessee having received interest income from cooperative banks, interest income was required to be taxed and benefit of deduction claimed by assessee society under section 80P(2)(d) should have been disallowed However, Officer while Assessing completing assessment had not examined facts of case and issue under consideration, therefore, Principal Commissioner held that said order was erroneous as well as prejudicial to interest of revenue - However, it was found that Assessing Officer had made due enquiries with respect to details of interest received from cooperative banks by assessee on which deduction under section 80P was claimed during course of assessment proceedings and had taken a view, which was a legally possible view Whether therefore, Principal Commissioner could not have resorted to section 263 proceedings only to supplant his own view with view taken by Assessing Officer -Held. yes Whether Principal Commissioner had also factually erred in observing that there was no enquiry by Assessing Officer on this aspect Held, yes Whether thus, order passed by Principal Commissioner under section 263 was liable to be set aside - Held. yes [Para 13] [In favour of assessee] 37. [2024] 160 taxmann.com (Ahmedabad - Trib.) Gujarat Energy Transmission Corporation Ltd. vs.Principal Commissioner of Income-tax 1039 Section 194C, read with sections 40(a)(ia) and 263, of the Income-Tax Act, 1961 - Deduction of tax at source Contractors/sub- contractors, payments to (Revision) Assessment year 2010-11 Assessee, a Government of Gujarat undertaking, was engaged in transmission of power Assessing Officer passed assessment order under section 143(3) Subsequently, Principal Commissioner observed that assessee had credited payments to accounts of contractors without deduction of tax al source He thus invoked revisionary proceedings and directed Assessing Officer to invoke provisions of section 40(a)(ia) and disallow the impugned payment made to these two contractor - Assessee contended that said contractors were listed in annexure furnished during assessment Page 29 of 37 proceedings, however, it was a clerical error as payments were actually made in subsequent financial year and TDS was deducted on same - It was noted that assessee had demonstrated that invoices were raised and payments were mentioned parties during subsequent financial year, for which TDS was duly deducted and remitted to Government Whether since details furnished indicated that work carried out by two parties was quantified and crystalized during subsequent year and genuine admission of assessee of inadvertently including names of aforementioned parties in list of entities with no TDS deduction, made to Held, had hat there on this order which was duly recognized by Assessing Officer during framing of assessment under section 143(3), there was no justifiable ground for Principal Commissioner to invoke power under section 263 - Held, yes [Paras 9 and 10] [In favour of assessee] 2024] 159 taxmann.com 29 (Delhi - Trib.) Vaaan Infra (P.) Ltd. v. Principal Commissioner of Income-tax Section 56, read with section 263, of the Income-tax Act, 1961 and rule 11UA of the Income-tax Rules, 1962-Income from other sources - Chargeable as (Share, valuation of) Assessment year 2015-16 Assessee's case was selected for scrutiny where one reason for selection was large share premium received during relevant assessment year -However, Assessing Officer passed assessment by making disallowance under section 36(1)(va) on account of late payment of ESI/PF Principal Commissioner observed that Assessing Officer had made no enquiry with respect to valuation of shares and merely accepted assessee's claim of share premium He, thus, passed revision order setting aside assessment - It was noted that assessee had produced valuation report prepared under rule 11UA Also a notice under section 142(1) was issued wherein assessee was specifically asked questionnaire on said issue - Whether since assessee had already produced all details in respect of issue of large share premium received during year under consideration at time of original assessment proceedings itself which had been already dealt by Assessing Officer, order of revisional authority was to be set aside Held, yes [Para 9] [In favour of assessee] [2024] 162 taxmann.com 759 (Delhi - Trib.) Ahlcon Parenterals (India) vs Commissioner of Income-tax. Ltd. Section 263 of the Income-tax Act, 1961 Revision - Of orders prejudicial to interest of revenue (Proposal of AO) - Assessment year 2015-16 Assessing Officer made two additions in hands of assessee Principal Commissioner issued notice under section 263 It was noted that contents of notice were similar to proposal of Assessing Officer which was based on audit report - Whether since on basis of audit objections and proposal only, jurisdiction under section 263 was invoked and exercised by Principal Commissioner to hold assessment order to be erroneous, it established non-application of independent mind and, thus, impugned order was to be set aside - Held, yes [Para 10] [In favour of assessee] (Kolkata - Trib.) [2024] 163 taxmann.com 574 Rajesh Kumar Jalan vs. Principal Commissioner of Income-tax. Section 68, read with section 263, of the Income-tax Act, 1961 Cash credit (Revision) Assessment year 2015-16 and 2016-17 Assessee engaged in trading of cloth, filed his return under section 44AD -On basis of Page 30 of 37 information from Bureau of Investigation, Commercial taxes, that there were certain deposits in bank account of assessee in name of his proprietary concern, Assessing Officer reopened assessment in both assessment years - Assessee submitted that he had not opened any of Bank accounts and that might have been done by some unknown person by using fake identity of assessee - Assessing Officer was not satisfied with submissions of assessee and he was of view that said sum was to be treated as unaccounted sales of assessee and he assumed this figure as turnover of assessee and estimated profit at 8% and estimated unexplained investment - Appeal was filed against said assessment order - Meanwhile, Additional Commissioner forwarded a proposal to CIT for initiating proceedings under section 263 against assessee issued a notice under section 263 and observed that alleged credit of sales ought to be treated as unexplained cash credit against name of assessee and Assessing Officer had erred in treating it as a gross turnover CIT vs. Uma Glass Works vs. PCIT, ΠΑΤ Delhi "DB" Bench, Delhi. Whether since Commissioner had just reproduced proposal sent by Additional CIT and there was no independent application of mind at his end for taking cognizance under section 263, order passed under section 263 was to be quashed, particularly when said issue was pending in appeal before Commissioner (Appeals) - Held, yes [Paras 21 to 23] [In favour of assessee] 24. We also further observe from the order of the Ld. PCIT the assessment order passed by the Assessing Officer was held to be erroneous and prejudicial to the interest of the Revenue stating that the AO has not made enquiries. The Ld. PCIT is also of the view that the difference in closing stock should have been added as income u/s 68 of the Act.

Page 31 of 37 27. In view of what is discussed above, we hold that the assumption of jurisdiction u/s 263 by the Ld. PCIT is bad in law and accordingly the order of the Ld. PCIT is set aside. Pr. CIT vs. Delhi Airport Metro Express Pvt. Ltd. ITANo. 705/2017 Order dt. 05.09.2017 10. jurisdiction under Section 263 of the Act, the For the purposes of exercising conclusion that the order of the AO is erroneous and prejudicial to the interests of the Revenue has to be preceded by some minimal inquiry. In fact, if the PCIT is of the view that the AO did not undertake any inquiry, it becomes incumbent on the PCIT to conduct such inquiry. All that PCIT has done in the impugned order is to refer to the Circular of the CBDT and conclude that "in the case of the Assessee company, the AO was duty bound to calculate and allow depreciation on the BOT in conformity of the CBDT Circular 9/2014 but the AO failed to do so. Therefore, the order of the AO is erroneous insofar as prejudicial to the interest of revenue".

3. Facts in brief indicated that the assessee was an individual on income from salary. The case of the petitioner was taken up for scrutiny under CASS for verifying the reasons for "cash deposits during demonetization period". Pursuant proceedings under sec.143 of the Income-tax Act, and on satisfaction thereof, assessment order was passed. 3.1 It appears that in exercise of powers under Sec.263 of the Income-tax Act, the Office of the Principal Commissioner of Income Tax, took up the issue for revision. In the perception of the CIT, the Assessing Officer had not examined the sources of cash in hand and that the possibilities of introducing unaccounted income could not be ruled out. It was the case of the revisional authority that in failing to examine and compare the figures of cash deposits made by the assessee in the corresponding period of the preceding year, to judge the genuineness of the cash deposits, the Assessing Officer ought to have compared the figures of the cash deposits made in the demonetization period with the rest period of the year under consideration. 3.2 On the respondent carrying the matter further in appeal to the Income- tax Appellate Tribunal, the Tribunal, after examining the question of law and referring to various decisions on the scope of inquiry under sec.263(A) of the Act, held as under: "6.9 Now coming to the facts before us, from the records we observe that the issue regarding the cash deposited by the assessee during the demonetization period has been discussed in detail during the course of assessment proceedings. The assessment proceedings were initiated specifically for the reason "verifying the cash deposited during demonetization period". Accordingly, the AO issued notice for verifying the cash deposits made by the assessee, in response to which the assessee furnished the details which have been mentioned in the preceding paragraphs. Therefore, this is not a case where no enquiry was made by the AO during the course of assessment proceedings. Further, we also observe that the assessee also duly filed his reply in response to the notice issued by the AO and various details like Certificates from Lakshmi Vilas bank and Certificate from Allahabad Bank, bank statements of Lakshmi Vilas Bank and Allahabad Bank, cash book for financial year 2016-17, VAT returns for financial year 2016-17 etc were submitted before the AO in response to this query regarding the cash deposits made by the assessee during the demonetization period. We further observe that it is also not the case of the Principal CIT that the AO has taken a view which is legally impermissible. Therefore, from the above facts, we are of the considered view that the AO had made enquiries into the aspect of cash deposit in the bank accounts of the assessee during demonetization period, and after due consideration of the assessee and did not make any addition to the returned income. Accordingly, in our view, this is not a case where no enquiry has been made by the Assessing Officer during the course of assessment proceedings. In our view, Pr.CIT has incorrectly observed in the instant facts that the Ld. AO failed to apply his mind to the issues on hand or he had omitted to make Page 33 of 37 enquiries altogether or had taken a view which was not legally plausible in the instant facts. As hely by various Courts, Principal CIT cannot in 263 proceedings set aside an assessment order merely because he has different opinion in the matter. In our view, s.263 of the Act does not visualize a case of substitution of the judgment of the Principal CIT for that of the Assessing Officer who passed the order unless the decision is held to be wholly erroneous. As noted in various judicial precedents highlighted above, the Principal CIT, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re-visit the entire assessment and determine the income himself at a higher figure." 3.3 Perusal of the order would indicate that the Income-tax Appellate Tribunal and in our opinion rightly came to the conclusion that since the assessment proceedings were specifically undertaken for the reason of verifying the cash deposits during the demonetization period, it was not the case where no enquiry was made by the A.O the course of assessment during proceedings. 3.4 Perusal of the order and reasons would indicate that these are finding of facts arrived at by the Tribunal. Having found that in response to the notice issued by the A.O, details were supplied such as Certificates from the Lakshmi Vilas Bank, certificate from the Allahabad Bank, Bank Statements of the banks concerned, cash books for the financial year 2016-17 etc., based on which the A.O had taken a decision, the Income- tax Tribunal allowed the appeal of the assessee.

(C.1) In his oral submissions, at the time of hearing, the Ld. Counsel submitted that the Assessing Officer had passed the assessment order dated 15.12.2019 after carrying out all necessary inquiries. He took us through the paper book referred to in foregoing paragraph no. (B.1) of this order and further he placed reliance on the decided precedents as referred to the preceding paragraphs (B.1.1), (B.1.2) and (B.3) of this order. He contended, based on aforesaid submissions that the opinion expressed by the Ld. PCIT (in the order dated 21.02.2022 passed under section 263 of the Act) that the Assessing Officer had not examined or inquired into the relevant facts is patently incorrect in the facts and circumstances of the present case. The Ld. (C) We have heard both sides. We have perused the materials available on record. The paper book filed by the assessee, as referred to in paragraph no.(B.1) of this order, contains the details furnished by the assessee in response to the various notices issued by the Ld. Assessing Officer. Upon perusal of the same, we are satisfied that the Assessing Officer conducted all relevant inquiries necessary in the facts and circumstances of the case, having due regard to the nature and scale of the assessee’s business and other pertinent factors. Accordingly, we concur with the submissions of the Ld. Counsel for the assessee that the opinion expressed by the Ld. PCIT (that the Assessing Officer had not examined or inquired into the relevant facts) is factually incorrect in the present case. In view of the above, we set aside the impugned order u/s 263 of the Act and restore the aforesaid assessment order dated 21.02.2022. The appeal of the assessee is allowed. All the grounds of appeal are treated as disposed off in accordance with the aforesaid order.

In the result, for statistical purposes, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 11/12/2025.