M/S KBR TOWNSHIP PVT. LTD., KOLKATA vs. ITO-4(4), KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH ‘B’, KOLKATA VIRTUAL HEARING [Before Shri J. Sudhakar Reddy, Hon’ble Accountant Member & Shri Aby T. Varkey, Hon’ble Judicial Member] I.T.A. No. 396/Kol/2020 Assessment Year: 2010-11 M/s. KBR Township Pvt. Ltd……………...................…..……………………………………………….…..Appellant Room No. 4 Martin Burn Building 1, R.N. Mukherjee Road Kolkata – 700 001 [PAN : AABCK 0777 A] Vs. Income Tax Officer, Ward-4(4), Kolkata.....................................................................………..Respondent

Appearances by: Shri S.M. Surana, Advocate, appeared on behalf of the assessee. Shri Sandeep Chaube, CIT, D/R. appearing on behalf of the Revenue. Date of concluding the hearing : April 22nd, 2021 Date of pronouncing the order : May 5th, 2021 ORDER Per J. Sudhakar Reddy, AM:- This appeal filed by the assessee is directed against the order of the Learned Principal Commissioner of Income Tax– 2, Kolkata, (hereinafter the “ld. Pr. CIT”), passed u/s. 263 of the Income Tax Act, 1961 (the ‘Act’), dt. 29/05/2020, for the Assessment Year 2010-11. 2. We have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows:- 3. The assessee in this case has disclosed the commodity profit of Rs.21,92,931/- as its income in its return of income and paid taxes. This is clear from the annual accounts. The assessee had original filed its return of income for the Assessment Year 2010-11 on 24/09/2010, declaring income of Rs.4,61,100/-. The Assessing Officer reopened the case u/s 147 of the Act on 30/03/2017. In the reasons for reopening, the Assessing Officer stated as follows:- “Based on the above investigation/enquiry and analysis of trade ledger it was found that trading was done through member/broker of NMCE who was penalized/suspended because they were found to be involved in artificial trading of shares by misuse of NMCE platform. As per above observation, that summons were returned un-served, entities were not found at their address, the entities did not file income tax returns in the concerned A. Y, the entities who filed ITR but not claimed any loss in the financial year, trading was done through suspended /penalized members/brokers, most of the client were found to be dummy/ shell entities and the statement of entry operators/individuals in which they have accepted that the loss was booked was bogus loss to facilitate accommodation bogus loss/profit to the beneficiaries., it is established that many genuine clients used NMCE to book contrived losses through these above mentioned shell/ dummy entities. One of the beneficiary was M/s. KBR Township Pvt Ltd. in respect of whom it has been informed that it had taken entry of bogus profit of Rs. 16.97,650/- through broker RR Consumer during the FY 2009-10.”

2 I.T.A. No. 396/Kol/2020 Assessment Year: 2010-11 M/s. KBR Township Pvt. Ltd.

The Assessing Officer completed the assessment u/s 143(3) r.w.s. 147 of the Act The Assessing Officer completed the assessment u/s 143(3) r.w.s. 147 of the Act The Assessing Officer completed the assessment u/s 143(3) r.w.s. 147 of the Act on 26/07/2017, after examining the necessary documents. The Assessing Officer had on 26/07/2017, after examining the necessary documents. The Assessing Officer had on 26/07/2017, after examining the necessary documents. The Assessing Officer had come to a conclusion that no income had escaped assessment and no addition need to be come to a conclusion that no income had escaped assessment and no addition need to be come to a conclusion that no income had escaped assessment and no addition need to be made on account of commodity transactions. n account of commodity transactions. 4. Para 3 of the impugned order u/s 263 of the Act, reads as follows: Para 3 of the impugned order u/s 263 of the Act, reads as follows: Para 3 of the impugned order u/s 263 of the Act, reads as follows:- “3. Consequence to the above discussion, a notice u/s 263 of the Act was issued to “3. Consequence to the above discussion, a notice u/s 263 of the Act was issued to “3. Consequence to the above discussion, a notice u/s 263 of the Act was issued to the assessee, vide DIN & Letter dated 06/03/2020, as under: the assessee, vide DIN & Letter dated 06/03/2020, as under:- “On examination of the assessment records of above mentioned assessment year 2010 examination of the assessment records of above mentioned assessment year 2010 examination of the assessment records of above mentioned assessment year 2010-11, it appears prima facie that there was failure on part of the A.O. to assessee the income appears prima facie that there was failure on part of the A.O. to assessee the income appears prima facie that there was failure on part of the A.O. to assessee the income correctly and as such, the instant order u/s 143(3) is erroneous is so far as it is p correctly and as such, the instant order u/s 143(3) is erroneous is so far as it is p correctly and as such, the instant order u/s 143(3) is erroneous is so far as it is prejudicial to the interest of the revenue within the ambit of sec. 263 of the Income Tax Act, 1961. to the interest of the revenue within the ambit of sec. 263 of the Income Tax Act, 1961. to the interest of the revenue within the ambit of sec. 263 of the Income Tax Act, 1961. In this regard the following discrepancies have been observed: In this regard the following discrepancies have been observed: “The case was re “The case was re-opened on the basis of Investigation report in regard to opened on the basis of Investigation report in regard to accommodation arrangement by the assessee for showing bogus commodity profit of arrangement by the assessee for showing bogus commodity profit of arrangement by the assessee for showing bogus commodity profit of Rs.21,92,931/-, but claim of the assessee was accepted without making any , but claim of the assessee was accepted without making any , but claim of the assessee was accepted without making any inquiry/verification.”

“24. In Malabar Industrial Co.Ltd. ( 2 Supra), Malabar Industrial Co.Ltd. ( 2 Supra), the Supreme Court held the Supreme Court held that a bare reading of Sec.263 makes it clear that the prerequisite for the that a bare reading of Sec.263 makes it clear that the prerequisite for the that a bare reading of Sec.263 makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suomotu under it, is the order exercise of jurisdiction by the Commissioner suomotu under it, is the order exercise of jurisdiction by the Commissioner suomotu under it, is the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the of the Income Tax Officer is erroneous in so far as it is prejudicial to the of the Income Tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin rests of the Revenue. The Commissioner has to be satisfied of twin rests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be conditions, namely, (i) the order of the Assessing Officer sought to be 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 revised is erroneous; and (ii) it is prejudicial to the interests of the revised is erroneous; and (ii) it is prejudicial to the interests of the

3 I.T.A. No. 396/Kol/2020 Assessment Year: 2010-11 M/s. KBR Township Pvt. Ltd. Revenue. If one of them is absent Revenue. If one of them is absent – if the order of the Income Tax Officer is rder of the Income Tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but erroneous but is not prejudicial to the Revenue or if it is not erroneous but erroneous but is not prejudicial to the Revenue or if it is not erroneous but it is prejudicial to the Revenue it is prejudicial to the Revenue – recourse cannot be had to Sec.263 (1) of recourse cannot be had to Sec.263 (1) of the Act. It also held at pg the Act. It also held at pg-88 as follows: "The phrase "prejudicial "The phrase "prejudicial to the interests of the Revenue" has to be read in to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every conjunction with an erroneous order passed by the Assessing Officer. Every conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer loss of revenue as a consequence of an order of the Assessing Officer loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Rev cannot be treated as prejudicial to the interests of the Rev cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income example, when an Income-tax Officer adopted one of the courses tax Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue: or where two permissible in law and it has resulted in loss of Revenue: or where two permissible in law and it has resulted in loss of Revenue: or where two views are possible and the Income views are possible and the Income-tax Officer has taken one view with tax Officer has taken one view with which the Commissioner does not agree, it which the Commissioner does not agree, it cannot be treated as an cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view erroneous order prejudicial to the interests of the Revenue, unless the view erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income taken by the Income-tax Officer is unsustainable in law. It has been held by tax Officer is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income this Court that where a sum not earned by a person is assessed as income 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 is hands on his so offering, the order passed by the Assessing Officer is hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the accepting the same as such will be erroneous and prejudicial to the accepting the same as such will be erroneous and prejudicial to the interests of the Revenue. RampyarideviSaraogi v. CIT (1968) 67 ITR 84 interests of the Revenue. RampyarideviSaraogi v. CIT (1968) 67 ITR 84 interests of the Revenue. RampyarideviSaraogi v. CIT (1968) 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal V. CIT (197 (SC) and in Smt. Tara Devi Aggarwal V. CIT (1973) 88 ITR 323 (SC)". 3) 88 ITR 323 (SC)". 25. In Max India Ltd. Max India Ltd. (3 Supra), reiterated the view in reiterated the view in Malabar Industrial Co.Ltd. Industrial Co.Ltd. (2 Supra) and observed that every loss of Revenue as a (2 Supra) and observed that every loss of Revenue as a consequence of an order of the Assessing Officer cannot be treated as consequence of an order of the Assessing Officer cannot be treated as consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interes prejudicial to the interests of the Revenue. For example, when an Income ts of the Revenue. For example, when an Income Tax Officer adopted one of the courses permissible in law and it has Tax Officer adopted one of the courses permissible in law and it has 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 resulted in loss of revenue; or where two views are possible and the 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 Income Tax Officer has taken one view with which the Commissioner does 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 not agree, it cannot be treated as an erroneous order prejudicial to the not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income Tax Officer is interests of the Revenue, unless the view taken by the Income Tax Officer is interests of the Revenue, unless the view taken by the Income Tax Officer is unsustainable in law. On the facts of that case, Sec.80HHC(3) as it then unsustainable in law. On the facts of that case, Sec.80HHC(3) as it then unsustainable in law. On the facts of that case, Sec.80HHC(3) as it then stood was interpreted by the Asse stood was interpreted by the Assessing Officer but the Revenue contended ssing Officer but the Revenue contended that in view of the 2005 Amendment which is clarificatory and that in view of the 2005 Amendment which is clarificatory and that in view of the 2005 Amendment which is clarificatory and retrospective in nature, the view of the Assessing Officer was retrospective in nature, the view of the Assessing Officer was retrospective in nature, the view of the Assessing Officer was unsustainable in law and the Commissioner was correct in invoking unsustainable in law and the Commissioner was correct in invoking unsustainable in law and the Commissioner was correct in invoking Sec.263. But the Supreme Sec.263. But the Supreme Court rejected the said contention and held that Court rejected the said contention and held that when the Commissioner passed his order disagreeing with the view of the when the Commissioner passed his order disagreeing with the view of the when the Commissioner passed his order disagreeing with the view of the Assessing Officer, there were two views on the word "profits" in that Assessing Officer, there were two views on the word "profits" in that Assessing Officer, there were two views on the word "profits" in that section; that the said section was amended eleven times; that dif section; that the said section was amended eleven times; that dif section; that the said section was amended eleven times; that different views existed on the day when the Commissioner passed his order; that the views existed on the day when the Commissioner passed his order; that the views existed on the day when the Commissioner passed his order; that the mechanics of the section had become so complicated over the years that mechanics of the section had become so complicated over the years that mechanics of the section had become so complicated over the years that two views were inherently possible; and therefore, the subsequent two views were inherently possible; and therefore, the subsequent two views were inherently possible; and therefore, the subsequent amendment in 2005 even though retrospe amendment in 2005 even though retrospective will not attract the ctive will not attract the provision of Sec.263. provision of Sec.263. 26. In Vikas Polymers Vikas Polymers (4 Supra), the Delhi High Court held that the power (4 Supra), the Delhi High Court held that the power of suomotu revision exercisable by the Commissioner under the provisions of suomotu revision exercisable by the Commissioner under the provisions of suomotu revision exercisable by the Commissioner under the provisions of Sec.263 is supervisory in nature; that an "erroneous jud of Sec.263 is supervisory in nature; that an "erroneous judgment" means gment" means one which is not in accordance with law; that if an Income Tax Officer one which is not in accordance with law; that if an Income Tax Officer one which is not in accordance with law; that if an Income Tax Officer acting in accordance with law makes a certain assessment, the same acting in accordance with law makes a certain assessment, the same acting in accordance with law makes a certain assessment, the same cannot be branded as "erroneous" by the Commissioner simply because, cannot be branded as "erroneous" by the Commissioner simply because, cannot be branded as "erroneous" by the Commissioner simply because, according to him, the order should h according to him, the order should have been written differently or more ave been written differently or more elaborately; that the section does not visualize the substitution of the elaborately; that the section does not visualize the substitution of the elaborately; that the section does not visualize the substitution of the judgment of the Commissioner for that of the Income Tax Officer, who judgment of the Commissioner for that of the Income Tax Officer, who judgment of the Commissioner for that of the Income Tax Officer, who passed the order unless the decision is not in accordance with the law; passed the order unless the decision is not in accordance with the law; passed the order unless the decision is not in accordance with the law; that to invoke suomotu revisional powers to reopen a concluded to invoke suomotu revisional powers to reopen a concluded to invoke suomotu revisional powers to reopen a concluded assessment under Sec.263, the Commissioner must give reasons; that a assessment under Sec.263, the Commissioner must give reasons; that a assessment under Sec.263, the Commissioner must give reasons; that a

4 I.T.A. No. 396/Kol/2020 Assessment Year: 2010-11 M/s. KBR Township Pvt. Ltd. bare reiteration by him that the order of the Income Tax Officer is bare reiteration by him that the order of the Income Tax Officer is bare reiteration by him that the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the interests of erroneous in so far as it is prejudicial to the interests of the Revenue, will the Revenue, will not suffice; that the reasons must be such as to show that the not suffice; that the reasons must be such as to show that the not suffice; that the reasons must be such as to show that the enhancement or modification of the assessment or cancellation of the enhancement or modification of the assessment or cancellation of the enhancement or modification of the assessment or cancellation of the assessment or directions issued for a fresh assessment were called for, and assessment or directions issued for a fresh assessment were called for, and assessment or directions issued for a fresh assessment were called for, and must irresistibly lead to the must irresistibly lead to the conclusion that the order of the Income Tax conclusion that the order of the Income Tax Officer was not only erroneous but was prejudicial to the interests of the Officer was not only erroneous but was prejudicial to the interests of the Officer was not only erroneous but was prejudicial to the interests of the Revenue. Thus, while the Income Tax Officer is not called upon to write an Revenue. Thus, while the Income Tax Officer is not called upon to write an Revenue. Thus, while the Income Tax Officer is not called upon to write an elaborate judgment giving detailed reasons in respect of each elaborate judgment giving detailed reasons in respect of each elaborate judgment giving detailed reasons in respect of each and every disallowance, deduction, etc., it is incumbent upon the Commissioner not disallowance, deduction, etc., it is incumbent upon the Commissioner not disallowance, deduction, etc., it is incumbent upon the Commissioner not to exercise his suomotu revisional powers unless supported by adequate to exercise his suomotu revisional powers unless supported by adequate to exercise his suomotu revisional powers unless supported by adequate reasons for doing so; that if a query is raised during the course of the reasons for doing so; that if a query is raised during the course of the reasons for doing so; that if a query is raised during the course of the scrutiny by the Assessing Off scrutiny by the Assessing Officer, which was answered to the satisfaction icer, which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer were of the Assessing Officer, but neither the query nor the answer were of the Assessing Officer, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the reflected in the assessment order, this would not by itself lead to the reflected in the assessment order, this would not by itself lead to the conclusion that the order of the Assessing Officer called for interfere conclusion that the order of the Assessing Officer called for interfere conclusion that the order of the Assessing Officer called for interference and revision. 27. In Sunbeam Auto Ltd. Sunbeam Auto Ltd.( 5 Supra), the Delhi High Court held that the ( 5 Supra), the Delhi High Court held that the Assessing Officer in the assessment order is not required to give a detailed Assessing Officer in the assessment order is not required to give a detailed Assessing Officer in the assessment order is not required to give a detailed reason in respect of each and every item of deduction, etc.; that whether reason in respect of each and every item of deduction, etc.; that whether reason in respect of each and every item of deduction, etc.; that whether there was appli there was application of mind before allowing the expenditure in question cation of mind before allowing the expenditure in question has to be seen; that if there was an inquiry, even inadequate that would has to be seen; that if there was an inquiry, even inadequate that would has to be seen; that if there was an inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under not by itself give occasion to the Commissioner to pass orders under not by itself give occasion to the Commissioner to pass orders under Sec.263 merely because he has a different opinion in th Sec.263 merely because he has a different opinion in the matter; that it is e matter; that it is only in cases of lack of inquiry that such a course of action would be open; only in cases of lack of inquiry that such a course of action would be open; only in cases of lack of inquiry that such a course of action would be open; that an assessment order made by the Income Tax Officer cannot be that an assessment order made by the Income Tax Officer cannot be that an assessment order made by the Income Tax Officer cannot be branded as erroneous by the Commissioner simply because, according to branded as erroneous by the Commissioner simply because, according to branded as erroneous by the Commissioner simply because, according to him, the order should him, the order should have been written more elaborately; there must be have been written more elaborately; there must be some prima facie material on record to show that the tax which was some prima facie material on record to show that the tax which was some prima facie material on record to show that the tax which was lawfully exigible has not been imposed or that by the application of the lawfully exigible has not been imposed or that by the application of the lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation, a l relevant statute on an incorrect or incomplete interpretation, a l relevant statute on an incorrect or incomplete interpretation, a lesser tax than what was just, has been imposed. In that case, the Delhi High Court than what was just, has been imposed. In that case, the Delhi High Court than what was just, has been imposed. In that case, the Delhi High Court held that the Commissioner in the exercise of revisional power could not held that the Commissioner in the exercise of revisional power could not held that the Commissioner in the exercise of revisional power could not have objected to the finding of the Assessing Officer that expenditure on have objected to the finding of the Assessing Officer that expenditure on have objected to the finding of the Assessing Officer that expenditure on tools and dies by the asse tools and dies by the assessee, a manufacturer of Car parts, is revenue ssee, a manufacturer of Car parts, is revenue expenditure where the said claim was allowed by the latter on being expenditure where the said claim was allowed by the latter on being expenditure where the said claim was allowed by the latter on being satisfied with the explanation of the assessee and where the same satisfied with the explanation of the assessee and where the same satisfied with the explanation of the assessee and where the same accounting practice followed by the assessee for number of years with the accounting practice followed by the assessee for number of years with the accounting practice followed by the assessee for number of years with the approval of the Income Tax Authorities. It held that the Assessing Officer proval of the Income Tax Authorities. It held that the Assessing Officer proval of the Income Tax Authorities. It held that the Assessing Officer had called for explanation on the very item from the assessee and the had called for explanation on the very item from the assessee and the had called for explanation on the very item from the assessee and the assessee had furnished its explanation. Merely because the Assessing assessee had furnished its explanation. Merely because the Assessing assessee had furnished its explanation. Merely because the Assessing Officer in his order did not make an elabora Officer in his order did not make an elaborate discussion in that regard, te discussion in that regard, his order cannot be termed as erroneous. The opinion of the Assessing his order cannot be termed as erroneous. The opinion of the Assessing his order cannot be termed as erroneous. The opinion of the Assessing Officer is one of the possible views and there was no material before the Officer is one of the possible views and there was no material before the Officer is one of the possible views and there was no material before the Commissioner to vary that opinion and ask for fresh inquiry. Commissioner to vary that opinion and ask for fresh inquiry. 28. In Gabriel India Gabriel India Ltd. (6 Supra), the Bombay High Court held that a (6 Supra), the Bombay High Court held that a consideration of the Commissioner as to whether an order is erroneous in consideration of the Commissioner as to whether an order is erroneous in consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on so far as it is prejudicial to the interests of the Revenue, must be based on so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for materials on the record of the proceedings called for by him. If there are by him. If there are no materials on record on the basis of which it can be said that the no materials on record on the basis of which it can be said that the no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a Commissioner acting in a reasonable manner could have come to such a Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and conclusion, the very initiation of proceedings by him will be illegal and conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. I without jurisdiction. It held that the Commissioner cannot initiate t held that the Commissioner cannot initiate proceedings with a view to start fishing and roving inquiries in matters or proceedings with a view to start fishing and roving inquiries in matters or proceedings with a view to start fishing and roving inquiries in matters or

5 I.T.A. No. 396/Kol/2020 Assessment Year: 2010-11 M/s. KBR Township Pvt. Ltd. orders which are already concluded; that the department cannot be orders which are already concluded; that the department cannot be orders which are already concluded; that the department cannot be permitted to begin fresh litigation because of new views they enterta permitted to begin fresh litigation because of new views they enterta permitted to begin fresh litigation because of new views they entertain on facts or new versions which they present as to what should be the facts or new versions which they present as to what should be the facts or new versions which they present as to what should be the inference or proper inference either of the facts disclosed or the weight of inference or proper inference either of the facts disclosed or the weight of inference or proper inference either of the facts disclosed or the weight of the circumstance; that if this is permitted, litigation would have no end the circumstance; that if this is permitted, litigation would have no end the circumstance; that if this is permitted, litigation would have no end except when legal ingenuity is ex except when legal ingenuity is exhausted; that to do so is to divide one hausted; that to do so is to divide one argument into two and multiply the litigation. It held that cases may be argument into two and multiply the litigation. It held that cases may be argument into two and multiply the litigation. It held that cases may be visualized where the Income Tax Officer while making an assessment visualized where the Income Tax Officer while making an assessment visualized where the Income Tax Officer while making an assessment examines the accounts, makes inquiries, applies his mind to the facts and examines the accounts, makes inquiries, applies his mind to the facts and examines the accounts, makes inquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting rcumstances of the case and determines the income either by accepting rcumstances of the case and determines the income either by accepting the account or by making some estimate himself; that the Commissioner, the account or by making some estimate himself; that the Commissioner, the account or by making some estimate himself; that the Commissioner, on perusal of the record, may be of the opinion that the estimate made by on perusal of the record, may be of the opinion that the estimate made by on perusal of the record, may be of the opinion that the estimate made by the Officer concerned was on the lower si the Officer concerned was on the lower side and left to the Commissioner de and left to the Commissioner he would have estimated the income at a figure higher than the one he would have estimated the income at a figure higher than the one he would have estimated the income at a figure higher than the one determined by the Income Tax Officer; but that would not vest the determined by the Income Tax Officer; but that would not vest the determined by the Income Tax Officer; but that would not vest the Commissioner with power to reexamine the accounts and determine the Commissioner with power to reexamine the accounts and determine the Commissioner with power to reexamine the accounts and determine the income himself at a hig income himself at a higher figure; there must be material available on the her figure; there must be material available on the record called for by the Commissioner to satisfy him prima facie that the record called for by the Commissioner to satisfy him prima facie that the record called for by the Commissioner to satisfy him prima facie that the order is both erroneous and prejudicial to the interests of the Revenue. order is both erroneous and prejudicial to the interests of the Revenue. order is both erroneous and prejudicial to the interests of the Revenue. Otherwise, it would amount to giving unbridled and arbitr Otherwise, it would amount to giving unbridled and arbitrary power to ary power to the revising authority to initiate proceedings for revision in every case and the revising authority to initiate proceedings for revision in every case and the revising authority to initiate proceedings for revision in every case and start re-examination and fresh inquiry in matters which have already examination and fresh inquiry in matters which have already examination and fresh inquiry in matters which have already been concluded under law. been concluded under law. 29. In M.S. Raju M.S. Raju(15 Supra), this Court has held that the power of the (15 Supra), this Court has held that the power of the Commissioner under Sec.263 (1) is not limited only to the material which Commissioner under Sec.263 (1) is not limited only to the material which Commissioner under Sec.263 (1) is not limited only to the material which was available before the Assessing Officer and, in order to protect the was available before the Assessing Officer and, in order to protect the was available before the Assessing Officer and, in order to protect the interests of the Revenue, the Commissioner is entitled to examine any interests of the Revenue, the Commissioner is entitled to examine any interests of the Revenue, the Commissioner is entitled to examine any other records which are available at the other records which are available at the time of examination by him and time of examination by him and to take into consideration even those events which arose subsequent to the to take into consideration even those events which arose subsequent to the to take into consideration even those events which arose subsequent to the order of assessment. order of assessment. 30. In Rampyari Devi Saraogi Rampyari Devi Saraogi(21 Supra), the Commissioner in exercise of (21 Supra), the Commissioner in exercise of revisional powers cancelled assessee’s assessment for t revisional powers cancelled assessee’s assessment for the years 1952 he years 1952-1953 to 1960-61 because he found that the income tax officer was not justified 61 because he found that the income tax officer was not justified 61 because he found that the income tax officer was not justified in accepting the initial capital, the gift received and sale of jewellery, the in accepting the initial capital, the gift received and sale of jewellery, the in accepting the initial capital, the gift received and sale of jewellery, the income from business etc., without any enquiry or evidence whatsoever . income from business etc., without any enquiry or evidence whatsoever . income from business etc., without any enquiry or evidence whatsoever . He directed the income tax officer to do fresh assessment after making the income tax officer to do fresh assessment after making the income tax officer to do fresh assessment after making proper enquiry and investigation in regard to the jurisdiction. The proper enquiry and investigation in regard to the jurisdiction. The proper enquiry and investigation in regard to the jurisdiction. The assessee complained before the Supreme Court that no fair or reasonable assessee complained before the Supreme Court that no fair or reasonable assessee complained before the Supreme Court that no fair or reasonable opportunity was given to her. The Supreme Court held that opportunity was given to her. The Supreme Court held that opportunity was given to her. The Supreme Court held that there was ample material to show that the income tax officer made the assessments ample material to show that the income tax officer made the assessments ample material to show that the income tax officer made the assessments in undue hurry; that he had passed a short stereo typed assessment order in undue hurry; that he had passed a short stereo typed assessment order in undue hurry; that he had passed a short stereo typed assessment order for each assessment year; that on the face of the record, the orders were for each assessment year; that on the face of the record, the orders were for each assessment year; that on the face of the record, the orders were pre-judicial to the intere judicial to the interest of the Revenue; and no prejudice was caused to st of the Revenue; and no prejudice was caused to the assessee on account of failure of the Commissioner to indicate the the assessee on account of failure of the Commissioner to indicate the the assessee on account of failure of the Commissioner to indicate the results of the enquiry made by him, as she would have a full opportunity results of the enquiry made by him, as she would have a full opportunity results of the enquiry made by him, as she would have a full opportunity for showing to the income tax officer whether he had jurisdict for showing to the income tax officer whether he had jurisdict for showing to the income tax officer whether he had jurisdiction or not and whether the income tax assessed in the assessment years which were and whether the income tax assessed in the assessment years which were and whether the income tax assessed in the assessment years which were originally passed were correct or not" originally passed were correct or not" 31. From the above decisions, the following principles as to exercise of 31. From the above decisions, the following principles as to exercise of 31. From the above decisions, the following principles as to exercise of jurisdiction by the Commissioner u/s.263 of the Act can be cul jurisdiction by the Commissioner u/s.263 of the Act can be cul jurisdiction by the Commissioner u/s.263 of the Act can be culled out: a) The Commissioner has to be satisfied of twin conditions, namely, (i) the a) The Commissioner has to be satisfied of twin conditions, namely, (i) the a) The 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 order of the Assessing Officer sought to be revised is erroneous; and (ii) it order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If erroneous but is not is prejudicial to the interests of the Revenue. If erroneous but is not is prejudicial to the interests of the Revenue. If erroneous but is not

6 I.T.A. No. 396/Kol/2020 Assessment Year: 2010-11 M/s. KBR Township Pvt. Ltd. prejudicial to the Re prejudicial to the Revenue or if it is not erroneous but it is prejudicial to venue or if it is not erroneous but it is prejudicial to the Revenue – recourse cannot be had to Sec.263 (1) of the Act. recourse cannot be had to Sec.263 (1) of the Act. b) Every loss of revenue as a consequence of an order of the Assessing b) Every loss of revenue as a consequence of an order of the Assessing b) Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income example, when an Income-tax Officer adopted one of the courses tax Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue: or where two permissible in law and it has resulted in loss of Revenue: or where two permissible in law and it has resulted in loss of Revenue: or where two views are possible and the Income views are possible and the Income-tax Officer has taken one view with tax Officer has taken one view with which the Commissioner does not agree which the Commissioner does not agree, it cannot be treated as an , it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view erroneous order prejudicial to the interests of the Revenue, unless the view erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income taken by the Income-tax Officer is unsustainable in law. c) To invoke suomotu revisional powers to reopen a concluded assessment c) To invoke suomotu revisional powers to reopen a concluded assessment c) To invoke suomotu revisional powers to reopen a concluded assessment under Sec.263, the Co under Sec.263, the Commissioner must give reasons; that a bare mmissioner must give reasons; that a bare reiteration by him that the order of the Income Tax Officer is erroneous in reiteration by him that the order of the Income Tax Officer is erroneous in reiteration by him that the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, will not suffice; so far as it is prejudicial to the interests of the Revenue, will not suffice; so far as it is prejudicial to the interests of the Revenue, will not suffice; that the reasons must be such as to show that the and must that the reasons must be such as to show that the and must that the reasons must be such as to show that the and must irresistibly lead to the conclusion that the order of the Income Tax Officer was not lead to the conclusion that the order of the Income Tax Officer was not lead to the conclusion that the order of the Income Tax Officer was not only erroneous but was prejudicial to the interests of the Revenue. Thus, only erroneous but was prejudicial to the interests of the Revenue. Thus, only erroneous but was prejudicial to the interests of the Revenue. Thus, while the Income Tax Officer is not called upon to write an elaborate while the Income Tax Officer is not called upon to write an elaborate while the Income Tax Officer is not called upon to write an elaborate judgment giving detailed re judgment giving detailed reasons in respect of each and every asons in respect of each and every disallowance, deduction, etc., it is incumbent upon the Commissioner not disallowance, deduction, etc., it is incumbent upon the Commissioner not disallowance, deduction, etc., it is incumbent upon the Commissioner not to exercise his suomotu revisional powers unless supported by adequate to exercise his suomotu revisional powers unless supported by adequate to exercise his suomotu revisional powers unless supported by adequate reasons for doing so; that if a query is raised during the course of the reasons for doing so; that if a query is raised during the course of the reasons for doing so; that if a query is raised during the course of the scrutiny by the Assessing Officer, which was answered to the satisfaction tiny by the Assessing Officer, which was answered to the satisfaction tiny by the Assessing Officer, which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer were of the Assessing Officer, but neither the query nor the answer were of the Assessing Officer, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the reflected in the assessment order, this would not by itself lead to the reflected in the assessment order, this would not by itself lead to the conclusion that the order of the Assessing Off conclusion that the order of the Assessing Officer called for interference icer called for interference and revision. e) The Commissioner cannot initiate proceedings with a view to start e) The Commissioner cannot initiate proceedings with a view to start e) The Commissioner cannot initiate proceedings with a view to start fishing and roving inquiries in matters or orders which are already fishing and roving inquiries in matters or orders which are already fishing and roving inquiries in matters or orders which are already concluded; that the department cannot be permitted to begin fresh concluded; that the department cannot be permitted to begin fresh concluded; that the department cannot be permitted to begin fresh litigation because of new views they entertain on facts or new because of new views they entertain on facts or new because of new views they entertain on facts or new circumstance; that if this is permitted, litigation would have no end except circumstance; that if this is permitted, litigation would have no end except circumstance; that if this is permitted, litigation would have no end except when legal ingenuity is exhausted when legal ingenuity is exhausted f) Whether there was application of mind before allowing the expenditure f) Whether there was application of mind before allowing the expenditure f) Whether there was application of mind before allowing the expenditure in question has to in question has to be seen; that if there was an inquiry, even inadequate be seen; that if there was an inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders that would not by itself give occasion to the Commissioner to pass orders that would not by itself give occasion to the Commissioner to pass orders under Sec.263 merely because he has a different opinion in the matter; under Sec.263 merely because he has a different opinion in the matter; under Sec.263 merely because he has a different opinion in the matter; that it is only in cases of lack of inquiry that such a that it is only in cases of lack of inquiry that such a course of action would course of action would be open; that an assessment order made by the Income Tax Officer cannot be open; that an assessment order made by the Income Tax Officer cannot be open; that an assessment order made by the Income Tax Officer cannot be branded as erroneous by the Commissioner simply because, according be branded as erroneous by the Commissioner simply because, according be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately; there must to him, the order should have been written more elaborately; there must to him, the order should have been written more elaborately; there must be some prima facie be some prima facie material on record to show that the tax which was material on record to show that the tax which was lawfully exigible has not been imposed or that by the application of the lawfully exigible has not been imposed or that by the application of the lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation, a lesser tax relevant statute on an incorrect or incomplete interpretation, a lesser tax relevant statute on an incorrect or incomplete interpretation, a lesser tax than what was just, has been imposed. than what was just, has been imposed. g) The power of th g) The power of the Commissioner under Sec.263 (1) is not Commissioner e Commissioner under Sec.263 (1) is not Commissioner is entitled to examine any other records which are available at the time of is entitled to examine any other records which are available at the time of is entitled to examine any other records which are available at the time of examination by him and to take into consideration even those events examination by him and to take into consideration even those events examination by him and to take into consideration even those events which arose subsequent to the order of assessment. which arose subsequent to the order of assessment.

10.1. Now we examine Now we examine the principles laid down in the following the following judgements. :-

DIRECTOR OF INCOME TAX vs. JYOTI FOUNDATION 357 ITR 388 (Delhi High Court ) DIRECTOR OF INCOME TAX vs. JYOTI FOUNDATION 357 ITR 388 (Delhi High Court )

7 I.T.A. No. 396/Kol/2020 Assessment Year: 2010-11 M/s. KBR Township Pvt. Ltd. It It It was held that revisionary power was held that revisionary power was held that revisionary power u/s 263 u/s 263 u/s 263 is conferred on the is conferred on the is conferred on the Commissioner/Director of Income Tax when an order passed by the lower Commissioner/Director of Income Tax when an order passed by the lower Commissioner/Director of Income Tax when an order passed by the lower authority is erroneous and prejudicial to the interest of the Revenue. authority is erroneous and prejudicial to the interest of the Revenue. authority is erroneous and prejudicial to the interest of the Revenue. Orders which are passed without inquiry or investiga are passed without inquiry or investigation are treated as erroneous and tion are treated as erroneous and prejudicial to the interest of the Revenue, but orders which are passed after prejudicial to the interest of the Revenue, but orders which are passed after prejudicial to the interest of the Revenue, but orders which are passed after inquiry/investigation on the question/issue are not per se or normally treated as inquiry/investigation on the question/issue are not per se or normally treated as inquiry/investigation on the question/issue are not per se or normally treated as erroneous and prejudicial to the interest of the Revenue becau erroneous and prejudicial to the interest of the Revenue because the revisionary se the revisionary authority feels and opines that further inquiry/investigation was required or authority feels and opines that further inquiry/investigation was required or authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken. deeper or further scrutiny should be undertaken. INCOME TAX OFFICER vs. DG HOUSING PROJECTS LTD343 ITR 329 (Delhi) INCOME TAX OFFICER vs. DG HOUSING PROJECTS LTD343 ITR 329 (Delhi) Revenue does not have any right to appeal Revenue does not have any right to appeal to the first appellate authority against to the first appellate authority against an order passed by the Assessing Officer. S. 263 has been enacted to empower the an order passed by the Assessing Officer. S. 263 has been enacted to empower the an order passed by the Assessing Officer. S. 263 has been enacted to empower the CIT to exercise power of revision and revise any order passed by the Assessing CIT to exercise power of revision and revise any order passed by the Assessing CIT to exercise power of revision and revise any order passed by the Assessing Officer, if two cumulative conditions are satisfied. Fi Officer, if two cumulative conditions are satisfied. Firstly, the order sought to be rstly, the order sought to be revised should be erroneous and secondly, it should be prejudicial to the interest revised should be erroneous and secondly, it should be prejudicial to the interest revised should be erroneous and secondly, it should be prejudicial to the interest of the Revenue. The expression "prejudicial to the interest of the Revenue" is of of the Revenue. The expression "prejudicial to the interest of the Revenue" is of of the Revenue. The expression "prejudicial to the interest of the Revenue" is of wide import and is not confined to merely loss of tax. The te wide import and is not confined to merely loss of tax. The term "erroneous" means rm "erroneous" means a wrong/incorrect decision deviating from law. This expression postulates an a wrong/incorrect decision deviating from law. This expression postulates an a wrong/incorrect decision deviating from law. This expression postulates an error which makes an order unsustainable in law. error which makes an order unsustainable in law. The Assessing Officer is both an investigator and an adjudicator. If the Assessing The Assessing Officer is both an investigator and an adjudicator. If the Assessing The Assessing Officer is both an investigator and an adjudicator. If the Assessing Officer as an adjudicator Officer as an adjudicator decides a question or aspect and makes a wrong decides a question or aspect and makes a wrong assessment which is unsustainable in law, it can be corrected by the assessment which is unsustainable in law, it can be corrected by the assessment which is unsustainable in law, it can be corrected by the Commissioner in exercise of revisionary power. As an investigator, it is incumbent Commissioner in exercise of revisionary power. As an investigator, it is incumbent Commissioner in exercise of revisionary power. As an investigator, it is incumbent upon the Assessing Officer to investigate the facts requi upon the Assessing Officer to investigate the facts required to be examined and red to be examined and verified to compute the taxable income. If the Assessing Officer fails to conduct the verified to compute the taxable income. If the Assessing Officer fails to conduct the verified to compute the taxable income. If the Assessing Officer fails to conduct the said investigation, he commits an error and the word "erroneous" includes failure said investigation, he commits an error and the word "erroneous" includes failure said investigation, he commits an error and the word "erroneous" includes failure to make the enquiry. In such cases, the order becomes erroneous b to make the enquiry. In such cases, the order becomes erroneous because enquiry ecause enquiry or verification has not been made and not because a wrong order has been passed or verification has not been made and not because a wrong order has been passed or verification has not been made and not because a wrong order has been passed on merits. Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the Thus, 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 conclusion and himself decide that the order is erroneous, by conducting conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under s. 263 is necessary enquiry, if required and necessary, before the order under s. 263 is necessary enquiry, if required and necessary, before the order under s. 263 is passed. In such cases, passed. In such cases, the order of the Assessing Officer will be erroneous because 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. the order passed is not sustainable in law and the said finding must be recorded. 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 CIT cannot remand the matter to the Assessing Officer to decide whether the CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. findings recorded are erroneous. In cases where there is inadequate enquiry but ases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the not lack of enquiry, again the CIT must give and record a finding that the not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is order/inquiry made is erroneous. This can happen if an enquiry and verification is order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and sh conducted by the CIT and he is able to establish and show the error or mistake ow the error or mistake made by the Assessing Officer, making the order unsustainable in Law. In some made by the Assessing Officer, making the order unsustainable in Law. In some made by the Assessing Officer, making the order unsustainable in Law. In some cases possibly though rarely, the CIT can also show and establish that the facts on cases possibly though rarely, the CIT can also show and establish that the facts on cases possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se record or inferences drawn from facts on record per se justified and m justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not further enquiry or investigation but the Assessing Officer had erroneously not further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and undertaken the same. However, the said finding must be clear, unambiguous and undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing The matter cannot be remitted for a fresh decision to the Assessing The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. to conduct further enquiries without a finding that the order is erroneous. to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be Finding that the order is erroneous is a condition or requirement which must be Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under s. 263 of the Act. In such matters, to satisfied for exercise of jurisdiction under s. 263 of the Act. In such matters, to satisfied for exercise of jurisdiction under s. 263 of the Act. In such matters, to remand the matte remand the matter/issue to the Assessing Officer would imply and mean the CIT r/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has has not examined and decided whether or not the order is erroneous but has has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. directed the Assessing Officer to decide the aspect/question. This distinction must be kept in mind by the CIT while ex This distinction must be kept in mind by the CIT while exercising jurisdiction ercising jurisdiction under s. 263 of the Act and in the absence of the finding that the order is under s. 263 of the Act and in the absence of the finding that the order is under s. 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction under erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction under erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction under the said section is not sustainable. the said section is not sustainable. In most cases of alleged "inadequate In most cases of alleged "inadequate investigation", it will be difficult to hold that the order of the Assessing Officer, investigation", it will be difficult to hold that the order of the Assessing Officer, investigation", it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, who had conducted enquiries and had acted as an investigator, is erroneous, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/inquiry. The order of the Assessing Officer without CIT conducting verification/inquiry. The order of the Assessing Officer without CIT conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. but only when the order is erroneous. An order of remit cannot be passed by the An order of remit cannot be passed by the

8 I.T.A. No. 396/Kol/2020 Assessment Year: 2010-11 M/s. KBR Township Pvt. Ltd. CIT to ask the Assessing Officer to decide whether the order was erroneous. This is CIT to ask the Assessing Officer to decide whether the order was erroneous. This is CIT to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not permissible. An order is not erroneous, unless the CIT hold and records not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on remit, reasons why it is erroneous. An order will not become erroneous because on remit, reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore CIT must the Assessing Officer may decide that the order is erroneous. Therefore CIT must the Assessing Officer may decide that the order is erroneous. Therefore CIT must after recording reasons hold that the order i after recording reasons hold that the order is erroneous. The jurisdictional s erroneous. The jurisdictional precondition stipulated is that the CIT must come to the conclusion that the order precondition stipulated is that the CIT must come to the conclusion that the order precondition stipulated is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law. It may be noticed that the material is erroneous and is unsustainable in law. It may be noticed that the material is erroneous and is unsustainable in law. It may be noticed that the material which the CIT can rely includes not only the record as it stand which the CIT can rely includes not only the record as it stands at the time when s at the time when the order in question was passed by the Assessing Officer but also the record as it the order in question was passed by the Assessing Officer but also the record as it the order in question was passed by the Assessing Officer but also the record as it stands at the time of examination by the CIT. Nothing bars/prohibits the CIT from stands at the time of examination by the CIT. Nothing bars/prohibits the CIT from stands at the time of examination by the CIT. Nothing bars/prohibits the CIT from collecting and relying upon new/additional material/evidence to show an collecting and relying upon new/additional material/evidence to show an collecting and relying upon new/additional material/evidence to show and state that the order of the Assessing Officer is erroneous. that the order of the Assessing Officer is erroneous. COMMISSIONER OF INCOME TAX vs. J. L. MORRISON (INDIA) LTD. 366 ITR COMMISSIONER OF INCOME TAX vs. J. L. MORRISON (INDIA) LTD. 366 ITR 593 As regard the submission on behalf of the Revenue that power under Section 263 As regard the submission on behalf of the Revenue that power under Section 263 As regard the submission on behalf of the Revenue that power under Section 263 of the Act can be exercised even in a case of the Act can be exercised even in a case where the issue is debatable, it was held where the issue is debatable, it was held that the case of CIT vs. M. M. Khambhatwala was not applicable. The observation that the case of CIT vs. M. M. Khambhatwala was not applicable. The observation that the case of CIT vs. M. M. Khambhatwala was not applicable. The observation that the Commissioner can exercise power under Section 263 of the Act even in a that the Commissioner can exercise power under Section 263 of the Act even in a that the Commissioner can exercise power under Section 263 of the Act even in a case were the issue is debatable was a mere passing r case were the issue is debatable was a mere passing remark which is again emark which is again contrary to the view taken by the Apex Court in thecase of Malabar Industrial contrary to the view taken by the Apex Court in thecase of Malabar Industrial contrary to the view taken by the Apex Court in thecase of Malabar Industrial Company Ltd. & Max India Ltd. If the Assessing Officer has taken a possible view, it Company Ltd. & Max India Ltd. If the Assessing Officer has taken a possible view, it Company Ltd. & Max India Ltd. If the Assessing Officer has taken a possible view, it cannot be said that the view taken by him is erroneous nor the order of cannot be said that the view taken by him is erroneous nor the order of cannot be said that the view taken by him is erroneous nor the order of the Assessing Officer in that case can be set aside in revision. It has to be shown Assessing Officer in that case can be set aside in revision. It has to be shown Assessing Officer in that case can be set aside in revision. It has to be shown unmistakably that the order of the Assessing Officer is unsustainable. Anything unmistakably that the order of the Assessing Officer is unsustainable. Anything unmistakably that the order of the Assessing Officer is unsustainable. Anything short of that would not clothe the CIT with jurisdiction to exercise power under short of that would not clothe the CIT with jurisdiction to exercise power under short of that would not clothe the CIT with jurisdiction to exercise power under Section 263 of the Act. CIT vs. M. M. Khambhatwala reported in 198 ITR 144; CIT of the Act. CIT vs. M. M. Khambhatwala reported in 198 ITR 144; CIT of the Act. CIT vs. M. M. Khambhatwala reported in 198 ITR 144; CIT vs. Ralson Industries Ltd. reported in 288 ITR 322 (SC), not applicable; Malabar vs. Ralson Industries Ltd. reported in 288 ITR 322 (SC), not applicable; Malabar vs. Ralson Industries Ltd. reported in 288 ITR 322 (SC), not applicable; Malabar Industrial Co. Ltd. v. CIT reported in 243 ITR 83, relied on. Industrial Co. Ltd. v. CIT reported in 243 ITR 83, relied on. (Para 72) As regard the third question as to As regard the third question as to whether the assessment order was passed by whether the assessment order was passed by the Assessing Officer without application of mind, it was held that the Court has to the Assessing Officer without application of mind, it was held that the Court has to the Assessing Officer without application of mind, it was held that the Court has to start with the presumption that the assessment order was regularly passed. There start with the presumption that the assessment order was regularly passed. There start with the presumption that the assessment order was regularly passed. There is evidence to show that the assessing officer is evidence to show that the assessing officer had required the assessee to answer had required the assessee to answer 17 questions and to file documents in regard thereto. It is difficult to proceed on 17 questions and to file documents in regard thereto. It is difficult to proceed on 17 questions and to file documents in regard thereto. It is difficult to proceed on the basis that the 17 questions raised by him did not require application of mind. the basis that the 17 questions raised by him did not require application of mind. the basis that the 17 questions raised by him did not require application of mind. Without application of mind the questions raised by Without application of mind the questions raised by him in the annexure to notice him in the annexure to notice under Section 142 (1) of the Act could not have been formulated. The Assessing under Section 142 (1) of the Act could not have been formulated. The Assessing under Section 142 (1) of the Act could not have been formulated. The Assessing Officer was required to examine the return filed by the assessee in order to Officer was required to examine the return filed by the assessee in order to Officer was required to examine the return filed by the assessee in order to ascertain his income and to levy appropriate tax on that basis. When t ascertain his income and to levy appropriate tax on that basis. When t ascertain his income and to levy appropriate tax on that basis. When the Assessing Officer was satisfied that the return, filed by the assessee, was in Assessing Officer was satisfied that the return, filed by the assessee, was in Assessing Officer was satisfied that the return, filed by the assessee, was in accordance with law, he was under no obligation to justify as to why was he accordance with law, he was under no obligation to justify as to why was he accordance with law, he was under no obligation to justify as to why was he satisfied. On the top of that the Assessing Officer by his order dated 28 satisfied. On the top of that the Assessing Officer by his order dated 28 satisfied. On the top of that the Assessing Officer by his order dated 28th March, 2008 did not ad 2008 did not adversely affect any right of the assessee nor was any civil right of versely affect any right of the assessee nor was any civil right of the assessee prejudiced. He was as such under no obligation in law to give the assessee prejudiced. He was as such under no obligation in law to give the assessee prejudiced. He was as such under no obligation in law to give reasons. The fact, that all requisite papers were summoned and thereafter the reasons. The fact, that all requisite papers were summoned and thereafter the reasons. The fact, that all requisite papers were summoned and thereafter the matter was heard from time to time matter was heard from time to time coupled with the fact that the view taken by coupled with the fact that the view taken by him is not shown by the revenue to be erroneous and was also considered both by him is not shown by the revenue to be erroneous and was also considered both by him is not shown by the revenue to be erroneous and was also considered both by the Tribunal as also by us to be a possible view, strengthens the presumption the Tribunal as also by us to be a possible view, strengthens the presumption the Tribunal as also by us to be a possible view, strengthens the presumption under Clause (e) of Section 114 of the Evidence Act. under Clause (e) of Section 114 of the Evidence Act. A prima facie evidence, on the A prima facie evidence, on the basis of the aforesaid presumption, is thus converted into a conclusive proof of the basis of the aforesaid presumption, is thus converted into a conclusive proof of the basis of the aforesaid presumption, is thus converted into a conclusive proof of the fact that the order was passed by the assessing officer after due application of fact that the order was passed by the assessing officer after due application of fact that the order was passed by the assessing officer after due application of mind. Meerut Roller Flour Mills Pvt. Ltd. vs. C.I.T., ITA N mind. Meerut Roller Flour Mills Pvt. Ltd. vs. C.I.T., ITA No. 116 /Coch/ 2012; CIT o. 116 /Coch/ 2012; CIT vs. Infosys Technologies Ltd., 341 ITR 293 (Karnataka); S.N. Mukherjee vs. Union vs. Infosys Technologies Ltd., 341 ITR 293 (Karnataka); S.N. Mukherjee vs. Union vs. Infosys Technologies Ltd., 341 ITR 293 (Karnataka); S.N. Mukherjee vs. Union of India, AIR 1990 SC 1984; A. A. Doshi vs. JCIT, 256 ITR 685; Hindusthan Tin of India, AIR 1990 SC 1984; A. A. Doshi vs. JCIT, 256 ITR 685; Hindusthan Tin of India, AIR 1990 SC 1984; A. A. Doshi vs. JCIT, 256 ITR 685; Hindusthan Tin Works Ltd. Vs. CIT, 275 ITR 43 (Del), distinguished. Works Ltd. Vs. CIT, 275 ITR 43 (Del), distinguished. (Paras 90-92, 102) 92, 102) COMMISSIONER OF INCOME TAX vs. SOHANA WOOLLEN MILLS 296 ITR 238 (P&H HC) COMMISSIONER OF INCOME TAX vs. SOHANA WOOLLEN MILLS 296 ITR 238 (P&H HC) COMMISSIONER OF INCOME TAX vs. SOHANA WOOLLEN MILLS 296 ITR 238 (P&H HC) A reference to the provisions of s. 263 shows that jurisdiction thereunder can be A reference to the provisions of s. 263 shows that jurisdiction thereunder can be A reference to the provisions of s. 263 shows that jurisdiction thereunder can be exercised if the CIT finds that the order of the AO was erroneous and prejudicial to exercised if the CIT finds that the order of the AO was erroneous and prejudicial to exercised if the CIT finds that the order of the AO was erroneous and prejudicial to

9 I.T.A. No. 396/Kol/2020 Assessment Year: 2010-11 M/s. KBR Township Pvt. Ltd. the interest of Revenue. Mere audit objection and merely because a different view the interest of Revenue. Mere audit objection and merely because a different view the interest of Revenue. Mere audit objection and merely because a different view could be taken, were not enough to say that the order of the AO was erroneous or could be taken, were not enough to say that the order of the AO was erroneous or could be taken, were not enough to say that the order of the AO was erroneous or prejudicial to the interest of the Revenue. The jurisdiction could be exercised if the prejudicial to the interest of the Revenue. The jurisdiction could be exercised if the prejudicial to the interest of the Revenue. The jurisdiction could be exercised if the CIT was satisfied that the basis for exercise of jurisdiction existed. No rigid rule s satisfied that the basis for exercise of jurisdiction existed. No rigid rule s satisfied that the basis for exercise of jurisdiction existed. No rigid rule could be laid down about the situation when the jurisdiction can be exercised. could be laid down about the situation when the jurisdiction can be exercised. could be laid down about the situation when the jurisdiction can be exercised. Whether satisfaction of the CIT for exercising jurisdiction was called for or not, Whether satisfaction of the CIT for exercising jurisdiction was called for or not, Whether satisfaction of the CIT for exercising jurisdiction was called for or not, has to be decided having regard to a given fact situation. In the present case, the ed having regard to a given fact situation. In the present case, the ed having regard to a given fact situation. In the present case, the Tribunal has held that the assessee had disclosed that out of sale consideration, a Tribunal has held that the assessee had disclosed that out of sale consideration, a Tribunal has held that the assessee had disclosed that out of sale consideration, a sum of Rs. 1 lakh was to be received for sale of permit. If that is so, there was no sum of Rs. 1 lakh was to be received for sale of permit. If that is so, there was no sum of Rs. 1 lakh was to be received for sale of permit. If that is so, there was no error in the view error in the view taken by the AO and no case was made out for invoking taken by the AO and no case was made out for invoking jurisdiction under s. 263. jurisdiction under s. 263.

Kolkata, the Kolkata, the 5th day of May, 2021 Sd/- Sd d/- [Aby T. Varkey] [J. Sudhakar Reddy J. Sudhakar Reddy] Judicial Member Accountant Member Accountant Member Dated : 05.05.2021 {SC SPS}

Copy of the order forwarded to: py of the order forwarded to: 1. M/s. KBR Township Pvt. Ltd Room No. 4 Martin Burn Building 1, R.N. Mukherjee Road Kolkata – 700 001 2. Income Tax Officer, Ward-4(4), Kolkata 4(4), Kolkata 3. CIT(A)- 4. CIT- , 5. CIT(DR), Kolkata Benches, Kolkata. . CIT(DR), Kolkata Benches, Kolkata.