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Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH
Before: Shri P.M. Jagtap & Shri Siddhartha Nautiyal
आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-
This is an appeal filed by the assessee against the order of the Principal Commissioner of Income Tax, PCIT, Ahmedabad-1 in DIN & Order No. ITBA/REV/F/REV5/2021-22/1040967573(1) vide order dated 17/03/2022 passed for the assessment year 2017-18.
The assessee has raised the following grounds of appeal:-
Page No. 2 Zahurahmed Abdulrazzak Valjiwala
“Your appellant being aggrieved by the Order passed by the learned Pr. Commissioner of Income Tax, Ahmedabad -1, u/s 263 of the Income Tax Act presents this appeal against the same on the following amongst other grounds.
The Ld. Principal Commissioner of Income Tax has erred in passing Order u/s 263 without jurisdiction and appropriate powers available under the Act. It is submitted that the order passed u/s. 263 is bad in law as A.O. has neither committed any error nor it is prejudicial to the interest of revenue. It be held now.
2. The Ld. Principal Commissioner of Income Tax has erred in holding that the Ld. A.O. has not verified the cash deposited during the demonetization period as also has not verified the difference of cash deposit of Rs. 51,22,500/- by agents in the bank account of the appellant. It is submitted that the Income Tax Officer has made full inquiries and the assessee has offered complete details of cash deposits which fully tallies with the cash book and Ld. A.O. had verified the same to his complete satisfaction. The Ld. Principal Commissioner of Income Tax is not at all correct in mentioning that Ld. A.O. did not carry out required inquiry of cash deposited in bank which according to him has resulted in under assessment of income to the tune of Rs. 51,22,500/-. It is submitted that such observation and finding and mentioning that the order of Ld. A.O. is erroneous and prejudicial to the interest of revenue is totally incorrect as no error has been committed by the A.O. He had verified the cash deposited according to the manner and method which he thought perfect and best and came to the satisfaction of the correctness. It is, therefore, submitted that the view so taken of holding that assessment order passed by the Ld. A.O. is an erroneous and prejudicial to the interest of revenue is incorrect and illegal and accordingly, the direction to set aside and to verify this in the manner and method set out by Ld. Principal Commissioner of Income Tax himself is not correct on the facts and law and the same be held now.
3. The Ld. Principal Commissioner of Income Tax has erred in holding that the Ld. A.O. has passed the assessment order under Section 143(3) without ascertaining and verifying lower gross profit and net profit as against the increased receipts and has also not verified the cash expenditure incurred under various heads. It is submitted that this observation of Ld. Principal Commissioner of Income Tax is absolutely incorrect as the Ld. A.O. had verified the complete cash book, bank statement, vouchers, and documents as can be seen from the notice issued by him and submissions made by the appellant. It is therefore submitted that observation that there is non-verification of expenses by the Ld. A.O. is erroneous and prejudicial to the interest of revenue is totally incorrect. It is submitted that Ld. Principal Commissioner of Income Tax cannot Page No. 3 Zahurahmed Abdulrazzak Valjiwala
direct how to carry out the specific inquiries when Ld. A.O. himself made the inquiries and came to the satisfaction and conclusion about correctness of gross profit, net profit, and compliance with regard to Section 40(A)(3) while verifying the expenditure in cash. In view of this, the direction and setting aside of the assessment order holding that order passed is a prejudicial interest of revenue and erroneous as incorrect and the same be held now.
4. The Ld. Principal Commissioner of Income Tax has totally erred in not appreciating the facts that there is no disallowance required under Section 43B of the Act as assessee has never collected the service tax and not provided/debited any liability of service tax in its books of account and claimed in the return of income. In view of this, the observation that service tax liability/payment is required to be taxed under Section 43B is totally incorrect on facts, and setting aside the assessment order on this basis is absolutely incorrect and the same be so held now.
5. The Ld. Principal Commissioner of Income Tax has erred in mentioning that Ld. A.O. has not examined and verified the sundry creditors and holding that they are in the nature of the unsecured loan and A.O. did not call for any details is absolutely incorrect and uncalled for. Sundry creditors are nothing but the amount received in the normal course of travel business which were received in earlier years and from time to time and the same has been verified by the A.O. while issuing a separate notice and verification of books. In view of this, to set aside the order on the direction that Ld. A.O. ought to have examined the provision of Section 269SS and Section 269T and to that extent, the order is prejudicial and erroneous is absolutely incorrect finding. It is submitted that the same be held now.
6. Without prejudice to the above, the Ld. Principal Commissioner of Income Tax has erred in passing the order u/s 263 of the Act, both on facts and on law, without appreciating the detailed submission filed before the Ld. A.O. as well as filed before him. It is submitted that none of the points stated by the Ld. Principal Commissioner of Income Tax remained unexamined or unverified by the A.O. The Ld. AO had verified all the points referred to in the notice issued u/s 263 in great detail and to his full satisfaction. The Ld. Principal Commissioner of Income Tax has while setting aside the order, directed the Ld. A.O. to examine the same in a different and in detailed manner which cannot be termed as erroneous or prejudicial to the interest of revenue. What kind of inquiry should be made? and what kind of verification should be made? is the sole discretion and decision of Ld. A.O. and Ld. Principal Commissioner of Income Tax cannot replace the same while passing the order u/s 263 of the Act. It is submitted that the same be held now.
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7. The order passed by the Ld. Principal Commissioner of Income Tax is bad in law and contrary to the provision of law and facts. It is submitted that the same be held so now.
8. Your appellant craves leave to add, alter and/or to amend all or any of the grounds before the final hearing.”
The brief facts of the case are that the assessee is an individual carrying on the business as travel agent in the name of M/s Raj Tours and Travels. The assessee E-filed return of income on 30-11-2017 declaring total income of � 12,49,300/-. The case of the assessee was opened for complete scrutiny through CASS in order to verify the following issues:
(i) Large cash deposited during demonetisation and abnormal increase in receipts with decreasing profitability as compared to preceding previous year (ii) Abnormal increase in cash deposited during demonetisation.
Thereafter, the assessment was finalised under section 143(3) of the Act on 30-12-2019 by accepting the returned income filed by the assessee at � 12,49,300/-.
The Principal CIT initiated proceedings under section 263 of the Act on the ground that the AO has failed to make certain enquiries during the course of assessment, which makes the order erroneous and prejudicial to the interest of the revenue. Accordingly, after giving due opportunity of hearing to the assessee, the Principal CIT held that the order passed by the Page No. 5 Zahurahmed Abdulrazzak Valjiwala AO is erroneous and prejudicial to the interest of revenue and is liable to be set aside on the following basis: (I) Unexplained cash deposits during demonetisation amounting to � 51,22,500/-:During the course of 263 proceedings, Principal CIT called for reconciliation for the difference of � 51,22,500/- between cash deposited as per Bank Statement of the assessee and the cash deposited as per Cash book. The details were submitted to the Principal CIT and the Ld. Counsel for the assessee further submitted that this aspect was examined in detail during the course of assessment proceedings, however, according to the Principal Ld. CIT(Appeals), though the assessee has provided explanation for the difference of � 51,22,500/-which is the aggregate amount of cash not routed through the cash book, however, the assessee has not produced further evidences like appointment letters issued to agents, details of commission paid to them, assessee has not given names of passengers with their travel details etc. (II) low gross profit and net profit inspite of increased receipts compared to previous years: In this respect, the assessee submitted that this aspect was examined in detail during the assessment proceedings and duly checked and verified by the AO. Before the principal CIT, the assessee submitted that the main reason for falling GP and NP and increasing expenditure is that during the earlier years, the assessee was doing business without a license as an agent, resulting in a higher gross profit and net profit for the earlier years. However, in assessment year 2017-18, the assessee became full-fledged travel agent with IATA license.
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Further, this being the first year as authorized agent, assessee had to attract more passengers and clients in the competitive market and therefore gave higher discounts, resulting in lower profit margins. However, Principal CIT rejected the assessee’s argument on the ground that though the assessee has filed copies of expenses for major items before him, the same appears to have not been verified by the AO. Since, there is non-verification of expenses with reference to nature of business, the number of passengers on which the direct expenses were incurred and claimed, the assessment order passed was held to be erroneous and prejudicial to the interests of the revenue. (III) Service tax applicability for travel business: The Principal CIT asked the assessee to furnish details of service tax collected on services rendered during the year. The assessee submitted that the assessee has opted for Sabka Vishwas scheme introduced by the Government and paid service tax towards total liability of � 45,54, 994/- for various assessment years, including assessment year 2017-18. The Principal CIT held that on perusal of the service tax liability, certain payments were not paid before the due date of filing of the return of income, therefore, the same are required to be offered to taxed under section 43B of the Act. Accordingly, the assessment order was set aside as erroneous on this issue as well. (IV) Sundry creditors: During the 263 proceedings, the assessee was asked to furnish specific details of outstanding sundry creditors. The principal CIT Page No. 7 Zahurahmed Abdulrazzak Valjiwala observed that on perusal of details furnished, he observed that most of the creditors are for loans obtained by the assessee and not for expenses incurred by him, accordingly, there is a mis-classification by the assessee. However, the assessing officer erred in not calling for details of such persons during assessment proceedings and there is an omission on the part of the AO to verify the issue of sundry creditors.
4.1 Accordingly, the principal CIT set aside the assessment order and directed the AO to frame fresh assessment after conducting proper enquiry and after giving opportunity of being heard to the assessee.
The assessee is in appeal before us against the aforesaid order passed under section 263 of the Act. The primary contention of the assessee is that the AO during the course of assessment issued as many as seven notices to the assessee, and detailed inquiries were made during the course of assessment proceedings itself, in which all aspects/ issues in respect of which 263 proceedings were issued had been examined.
Regarding the issue of cash deposits during demonetisation period, the counsel for the assessee invited our attention to notice under section 142(1) of the Act issued by the AO dated 08-07-2019 (query 7 of the said notice) at page 2 of the paper book. Further, the counsel for the assessee invited our attention to pages 107-111 of the paper book (specifically from page 109 onwards), where the assessee had given complete details of cash deposited during the demonetisation. Further, the counsel for the assessee Page No. 8 Zahurahmed Abdulrazzak Valjiwala also submitted that from 112 onwards of the paper book, the supporting documents were also furnished by the assessee before the AO for his consideration. Further, the counsel for the assessee invited our attention to notice under section 142(1) of the Act dated 29-10-2019 (query number 15) at page 8 of the paper book and reply of the assessee dated 17-12-2017 at pages 340 and 341 of the paper book. Accordingly, details of cash deposits were duly enquired by the AO and explained by the assessee during the course of assessment proceedings.
Regarding the issue of shortfall in gross profit and net profit during the year under consideration, the counsel for the assessee drew our attention to notice under section 142(1) of the Act dated 29-10-2019 (query number 5), in which, the AO had specifically inquired into this aspect during the course of assessment proceedings. Further, the counsel for the assessee invited our attention to pages 340-341 of the paper book, wherein the assessee had given explanation regarding the low GP/NP during the year under consideration. Further, the counsel for the assessee also submitted that by way of notice dated 29-10-2019, the AO had enquired into the details of expenditure incurred in foreign currency, for which the assessee had filed reply dated 30-12-2019 at pages 107-111 of the paper book. The Ld. Counsel for the assessee also submitted that detailed explanation was furnished on the issue of low GP and NP rate was given during the course of 263 proceedings, which was ignored by Principal Ld. CIT(Appeals), who ordered further/ additional enquiry on this aspect, which is beyond the scope of 263 proceedings.
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Regarding the query with respect to service tax liability, the counsel for the assessee invited our attention to notice u/s 142(1) of the Act dated 29-10-2019 (at query number 3 of the said notice), wherein the AO had specifically inquired into the aspect of service tax liability of the assessee during the year under consideration. He further invited our attention to reply of the assessee dated 17-12- 2019 at pages 340-341 of the paper book, and submitted that the assessee had filed reply in respect of the same. Accordingly, the Ld. Counsel for the assessee submitted that this aspect was enquired to during the course of assessment proceedings, and the assessee had furnished reply to the same.
Regarding the details of sundry creditors, the counsel for the assessee invited our attention to notice 142(1) of the Act dated 29-10-2019 (at query number 7 of the said notice), wherein the AO had specifically inquired into the aspect of sundry creditors, to which the assessee had filed reply dated 17-12-2019 at pages 340-341 of the paper book, giving details of sundry creditors as requisitioned by the assessing officer.
Accordingly, the counsel for the assessee submitted that that it cannot be said in the instant facts that no “proper enquiry” was conducted by the AO, and whether the enquiries are proper is a purely subjective matter looking into facts of the case. In the instant set of facts, the AO issued as many as seven notices to the assessee, and all the issues which were raised by the PCIT in the 263 proceedings, were already enquired into by the AO during the course of assessment proceedings and assessee had also replied to Page No. 10 Zahurahmed Abdulrazzak Valjiwala the same. Therefore, it cannot be said in the instant facts that there was no enquiry or lack of enquiry as stated in the 263 proceedings.
In response, the DR submitted that on perusal of page 6 of the paper book, queries 11 to 15, wherein the AO had called for certain details, and the reply filed by the assessee at pages 340-341 of the paper book, it is seen that the assessee has given only incomplete replies, which have been accepted by the AO during the course of assessment proceedings. The DR further invited our attention to page 11 of the paper book (notice dated 19-12-2019) and submitted that the last reply filed by the assessee was dated 17-12-2019 and therefore the queries asked by way of the above notice were not replied to by the assessee/remain un-complied with. Accordingly, the above facts point out to the fact that the assessee had given incomplete replies in response to certain queries and for notice dated 19-12-2019, no response was filed by the assessee. Accordingly, the assessment order suffers from lack of enquiries/answers and hence the PCIT is correct in law in holding that in the instant set of facts the order passed by the assessing officer is erroneous and prejudicial to the interest of the revenue and hence, liable to be set aside.
We have heard the rival contentions and perused the material on record. The issue for consideration before us is the scope of enquiry under Explanation 2(a) to section 263 and whether in the instant facts can it be said that the order is passed by Ld. AO is without making inquiries or verification which should have been made, and hence erroneous and thus requiring revision by Pr. CIT u/s 263 of the Act.
Page No. 11 Zahurahmed Abdulrazzak Valjiwala 12.1 An inquiry made by the Assessing Officer, considered inadequate by the Commissioner of Income Tax, cannot make the order of the Assessing Officer erroneous. In our view, the order can be erroneous if the Assessing Officer fails to apply the law rightly on the facts of the case. As far as adequacy of inquiry is considered, there is no law which provides the extent of inquiries to be made by the Assessing Officer. It is Assessing Officer’s prerogative to make inquiry to the extent he feels proper. The Commissioner of Income Tax by invoking revisionary powers under section 263 of the Act cannot impose his own understanding of the extent of inquiry. There were a number of judgments by various High Courts in this regard.
12.2 Delhi High Court in the case of CIT Vs. Sunbeam Auto 332 ITR 167 (Del.), made a distinction between lack of inquiry and inadequate inquiry. The Hon’ble court held that where the AO has made inquiry prior to the completion of assessment, the same cannot be set aside u/s 263 on the ground of inadequate inquiry
“12.….. 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 Page No. 12 Zahurahmed Abdulrazzak Valjiwala the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of “lack of inquiry”, that such a course of action would be open. ——— From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Income- tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, 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-examine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at conclusion and such a conclusion cannot be termed to be erroneous Page No. 13 Zahurahmed Abdulrazzak Valjiwala simply because the Commissioner does not feel satisfied with the conclusion. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed.
Thus, even the Commissioner conceded the position that the Assessing Officer made the inquiries, elicited replies and thereafter passed the assessment order. The grievance of the Commissioner was that the Assessing Officer should have made further inquires rather than accepting the explanation. Therefore, it cannot be said that it is a case of ‘lack of inquiry’.”
12.3 In Gabriel India Ltd. [1993] 203 ITR 108 (Bom), law on this aspect was discussed in the following manner (page 113)
“The 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 materials on the record of the proceedings called for by him. If there are 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 conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well- Page No. 14 Zahurahmed Abdulrazzak Valjiwala accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity.
12.4 The Mumbai ITAT in the case of Sh. Narayan Tatu Rane Vs. ITO, dt. 06.05.2016 examined the scope of enquiry under Explanation 2(a) to section 263 in the following words:
“20. Further clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provision shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. CIT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO vis-à-vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying our enquiries or verification, which a reasonable and prudent officer would have carried out or not. It does not authorise or give unfettered powers to the Ld Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have Page No. 15 Zahurahmed Abdulrazzak Valjiwala been made. In our view, it is the responsibility of the Ld Pr. CIT to show that the enquiries or verification conducted by the AO was not in accordance with the enquries or verification that would have been carried out by a prudent officer. Hence, in our view, the question as to whether the amendment brought in by way of Explanation 2(a) shall have retrospective or prospective application shall not be relevant.
12.5 Before deciding the issue, it would be useful to refer to some Supreme Court decisions on this subject which would throw useful light on the scope of enquiry under Explanation (a) to section 263 of the Act.
12.6 Recently the Supreme Court of India in the case of Principal Commissioner of Income-tax, Surat-2 v. Shreeji Prints (P.) Ltd.[2021] 130 taxmann.com 294 (SC) dismissed SLP filed by the assessee against order passed by High Court holding that where assessee-company had received unsecured loans from two different companies and Assessing Officer had made inquires in detail and accepted genuineness of same, such view of Assessing Officer being a plausible view could not be considered erroneous or prejudicial to interest of revenue. The facts of this case were that respondent assessee has filed its return of income showing total income of Rs. 62,55,900/- which was assessed under section 143(3) of the Act, 1961 by an assessment order dated 14th March 2016. The respondent company received unsecured loans from M/s. Georgett Tradecom Pvt Ltd and M/s. Purba Agro Food Pvt. Ltd amounting to Rs. 2.49 Crore and the Assessing Officer allowed these unsecured loans. The Principal Commissioner of Page No. 16 Zahurahmed Abdulrazzak Valjiwala Income-tax invoked section 263 of the Act, 1961 for revising the assessed income of the respondent assessee. It was noticed by the PCIT that the unsecured loans obtained by the respondent assessee are shown as investment in the name of the assessee in the share application as well as in the balance sheet of the respective companies. The PCIT passed an order under section 263 of the Act directing the Assessing Officer to pass fresh assessment order under section 143(3) of the Act, 1961 on the aspect of unsecured loans shown by the respondent assessee. The Hon’ble Supreme Court made the following observation while deciding in favour of the assessee:
“Thus, the Tribunal has considered in detail the aspect of revisional power to be exercised by the PCIT in the facts of the case and has given a finding of facts that the Assessing Officer has made inquiries in detail and after applying mind, accepted the genuineness of loans received by the respondent assessee from the aforesaid two companies and such view of the Assessing Officer is a plausible view, and therefore, the same cannot be said to be erroneous or prejudicial to the interest of the Revenue.”
12.7 The Supreme Court in another recent case of Principal Commissioner of Income-tax 2 v. Shree Gayatri Associates*[2019] 106 taxmann.com 31 (SC), held that where Pr. CIT passed a revisional order making addition to assessee's income under section 69A in respect of on- money receipts, however, said order was set aside by Tribunal holding that AO had made detailed enquiries in respect of on-money receipts and said Page No. 17 Zahurahmed Abdulrazzak Valjiwala view was also confirmed by High Court, SLP filed against decision of High Court was liable to be dismissed. The facts of this case were that pursuant to search proceedings, assessee filed its return declaring certain unaccounted income. The Assessing Officer completed assessment by making addition of said amount to assessee's income. The Principal Commissioner passed a revisional order under section 263 on ground that Assessing Officer had failed to carry out proper inquiries with respect to assessee's on money receipt. In appeal, the Tribunal took a view that Assessing Officer had carried out detailed inquiries which included assessee's onmoney transactions and Tribunal thus set aside revisional order passed by Commissioner. The High Court upheld Tribunal's order. The Supreme Court while dismissing the SLP filed by the Department held as under:
“We have heard learned counsel for the Revenue and perused the documents on record. In particular, the Tribunal has in the impugned judgment referred to the detailed correspondence between Assessing Officer and the assessee during the course of assessment proceedings to come to a conclusion that the Assessing Officer had carried out detailed inquiries which includes assessee's on-money transactions. It was on account of these findings that the Tribunal was prompted to reverse the order of revision. No question of law arises. Tax Appeal is dismissed”
12.8 The Supreme Court in the recent case of Principal Commissioner of Income-tax-2, Meerut v. Canara Bank Securities Ltd[2020] 114 taxmann.com 545 (SC), dismissed the Revenue’s SLP holding that 263 Page No. 18 Zahurahmed Abdulrazzak Valjiwala proceedings are invalid when AO had made enquiries and taken a plausible view in law, with the following observations:
“Having heard learned counsel for the parties and having perused the documents on record, we see no reason to interfere with the view of the Tribunal. The question whether the income should be taxed as business income or as arising from the other source was a debatable issue. The Assessing Officer has taken a plausible view. More importantly, if the Commissioner was of the opinion that on the available facts from record it could be conclusively held that income arose from other sources, he could and ought to have so held in the order of revision. There was simply no necessity to remand the proceedings to the Assessing Officer when no further inquiries were called for or directed”
12.9 The Supreme Court in the case of Principal Commissioner of Income-tax--8 Mumbai v. Sumatichand Tolamal Gouti [2019] 111 taxmann.com 287 (SC) held that where High Court upheld Tribunal's order holding that AO had made detailed enquiries while allowing assessee's claim for deduction of business expenditure and, thus, revisional order passed by Commissioner was not sustainable, SLP filed against High Court's order was liable to be dismissed. The facts of this case were that in course of assessment, Assessing Officer allowed assessee's claim for deduction of certain expenditure on purchase of CDs on Jain Religion by expending an amount of Rs. 10.4 crores, after due examination. The Commissioner passed revisional order holding that Assessing Officer had not carried out any Page No. 19 Zahurahmed Abdulrazzak Valjiwala enquiries as to nature of expenditure being capital or not. The Tribunal, however, allowed assessee's appeal holding that Assessing Officer had carried out detailed enquiries and taken a view which was a plausible view. Accordingly, Tribunal set aside revisional order passed by Commissioner. The High Court upheld order passed by Tribunal. The Supreme Court on consideration of above facts held that SLP filed against High Court's order was to liable to be dismissed. The Supreme Court made the following observations, while passing the order:
“It is by now well settled that, the Commissioner can exercise revisional powers under Section 263 of the Act only when it is found that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue. In the present case, the Tribunal noted the observations of the Assessing Officer in the order of remand to the effect that Jain munis do not advocate spread of religion through use of computers, source of electronic media is usually shunned, very small section of the community uses computer technology for religious purposes as plenty of printed literature is available in the market. All these factors led to the market value of the CDs declining dramatically. It was on account of these reasons, that the assessee had incurred substantial loss arising out of reduction in the value of stock lying at the end of the year. The Tribunal, therefore noted that the Assessing Officer had carried out detailed enquiries and taken a plausible view.”
Page No. 20 Zahurahmed Abdulrazzak Valjiwala 12.10 We note that during the course of assessment proceedings, the Ld. AO had issued several notices and had made enquiries on the issue of cash deposited during demonetization period, issue regarding low GP/NP rate, details of sundry creditors, details of service tax deposited etc. in the notices mentioned in the preceding paragraphs, to which the assessee had also replied. So, in our view, this is not a case where no enquiry has been made by the assessee officer during the course of assessment proceedings. It is also not the case of the Pr. CIT that the Ld. AO failed to apply his mind to the issues on hand or he had omitted to make enquiries altogether or had taken a view which was not legally plausible in the instant facts. As held by various Courts, s 263 of the Act does not visualise 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. Now on the issue that the Ld. AO passed a cryptic order and did not discuss in detail regarding assessee’s submissions on various queries raised vide the various notices, in our view it is a well settled position of law that if from the assessment records, it is evident that the Ld. AO has made due enquiries in response to which assessee has filed its submissions, then even if the assessment order does not discuss all aspects in detail with regards to claim of the assessee, it cannot be held that the order is erroneous Page No. 21 Zahurahmed Abdulrazzak Valjiwala and prejudicial to the interests of the Revenue. The above proposition has been upheld in the case of CIT v. Reliance Communication 69 taxmann.com 109 (Bombay), Smt. Anupama Bharat Gupta v. ITO in ITA 1685/Ahd/ 2018, Goyal Private Family Specific Trust [1988] 171 ITR 698, CIT v. Mahendra Kumar Bansal [2008] 297 ITR 99 (All.) (para 10) etc. We thus find no error in the order of Ld. AO so as to justify initiation of 263 proceedings by the Ld. Pr. CIT. The Grounds of appeal raised by the assessee are thus allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 10-11-2022 Sd/- Sd/- (P.M. JAGTAP) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad : Dated 10/11/2022 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद