SKAN ENTERPRISE,KOLKATA vs. PR.C.I.T.-12, KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘A’ BENCH, KOLKATA (Before Sri J. Sudhakar Reddy, Accountant Member & Sri Aby T. Varkey, Judicial Member) ITA No. 840/Kol/2019 Assessment Year: 2014-15 Skan Enterprise…………………………………………..…..……..................................……………..….......Appellant C/o. Subash Agarwal & Associates, Advocates Siddha Gibson 1, Gibson Lane Suite 213 2nd Floor Kolkata – 700 069 [PAN : AAMFS 2138 P] Vs. Pr. Commissioner of Income Tax-12, Kolkata…………………….…..................….…….....…..Respondent Appearances by: Shri Subash Agarwal, Advocate, appeared on behalf of the assessee. Shri Ram Bilash Meena, CIT, D/R, appearing on behalf of the Revenue. Date of concluding the hearing : March 3rd, 2020 Date of pronouncing the order : March 18th, 2020 ORDER Per J. Sudhakar Reddy, AM :- This appeal filed by the assessee is directed against the order of the Learned Pr. Commissioner of Income Tax – 12, Kolkata, (hereinafter the “ld.CIT(A)”), passed u/s. 263 of the Income Tax Act, 1961 (the ‘Act’), dt. 15/03/2019, for the Assessment Year 2014-15. 2. The assessee is engaged in the business of wholesale trade in electrical goods. It is a partnership firm. The assessee firm also has income from commission and interest. It filed its return of income on 21/11/2014 for the impugned Assessment Year, declaring total income of Rs.7,34,850/-. The Assessing Officer passed an order u/s 143(3) of the Act on 27/12/2016 determining the total income at Rs.48,01,970/- interalia making addition of Rs.29,58,196/- on account of disallowance of expenditure claimed on payment of commission, on ad-hoc basis at the rate of 20% of the total commission payments and Rs.10,45,060/- being 20% of the administrative expenses claimed by the assessee on ad-hoc basis on the ground that supporting details and vouchers were not produced. The ld. Pr. CIT, Kolkata, issued a notice u/s 263 of the Act, dt. 24/09/2018 proposing to revise the order passed by Assessing Officer u/s 143(3) of the Act, on 15/03/2019. The relevant part of the notice is extracted below for ready reference:-

2 ITA No. 840/Kol/2019 Assessment Year: 2014-15 Skan Enterprise “On perusal of the assessment records “On perusal of the assessment records, it was seen that the assessee failed to , it was seen that the assessee failed to substantiate the necessity of payment of large amount of commission in a business of sale substantiate the necessity of payment of large amount of commission in a business of sale substantiate the necessity of payment of large amount of commission in a business of sale of Electric Goods, as well as failed to produce evidence of rendering service. Electric Goods, as well as failed to produce evidence of rendering service. Electric Goods, as well as failed to produce evidence of rendering service. It also transpired from record that details o It also transpired from record that details of the parties to whom commission were f the parties to whom commission were paid were not produced by the assessee. Because of irregular appearance by the paid were not produced by the assessee. Because of irregular appearance by the paid were not produced by the assessee. Because of irregular appearance by the assessee/AR, 20% of the total commission of Rs.1,47,90,981/ assessee/AR, 20% of the total commission of Rs.1,47,90,981/- was disallowed, without any was disallowed, without any proper verification. Apart from this, other CASS r Apart from this, other CASS reasons were not found to be verified properly while easons were not found to be verified properly while passing the order u/s. 143(3). passing the order u/s. 143(3). Absence of the proper examination/verification regarding the above has rendered Absence of the proper examination/verification regarding the above has rendered Absence of the proper examination/verification regarding the above has rendered the assessment erroneous and prejudicial to the interest of the revenue which deserves to the assessment erroneous and prejudicial to the interest of the revenue which deserves to the assessment erroneous and prejudicial to the interest of the revenue which deserves to be revised u/s. 263 of the I.T. Act, 1961.” revised u/s. 263 of the I.T. Act, 1961.” 2.1. The assessee replied as follows: The assessee replied as follows:- “The assessee filed its return for A.Y. 2014 “The assessee filed its return for A.Y. 2014-15 within due time. The case was 15 within due time. The case was assessed u/s 143(3) under CASS. assessed u/s 143(3) under CASS. In the show cause notice issue on the above mentioned issue of In the show cause notice issue on the above mentioned issue of revision of the order revision of the order of the Ld. Income Tax Officer, it has been alleged that the revision is warranted mainly of the Ld. Income Tax Officer, it has been alleged that the revision is warranted mainly of the Ld. Income Tax Officer, it has been alleged that the revision is warranted mainly because of the following: because of the following:- 1. That the assessee has filed to substantiate the necessity for paying large amount of That the assessee has filed to substantiate the necessity for paying large amount of That the assessee has filed to substantiate the necessity for paying large amount of commission in business of sale of commission in business of sale of electric goods as well as failed to produce electric goods as well as failed to produce evidence of rendering of service. evidence of rendering of service. 2. Parties to whom commission was paid were not produced. Parties to whom commission was paid were not produced. 3. Irregular appearance of A/R Irregular appearance of A/R 4. A 20% of total commission of Rs.14790981/ A 20% of total commission of Rs.14790981/- was disallowed without proper was disallowed without proper verification 5. Other CASS were not found to be verified properly, while passing the order. SS were not found to be verified properly, while passing the order. SS were not found to be verified properly, while passing the order. As regards ‘Necessity’ to pay commission, we humbly submit that the assess As regards ‘Necessity’ to pay commission, we humbly submit that the assess As regards ‘Necessity’ to pay commission, we humbly submit that the assessee is doing business in consumer durable Goods segment, which is very competitive and doing business in consumer durable Goods segment, which is very competitive and doing business in consumer durable Goods segment, which is very competitive and therefore every year it has to pay commission. It is not that this year alone, it has paid therefore every year it has to pay commission. It is not that this year alone, it has paid therefore every year it has to pay commission. It is not that this year alone, it has paid commission. Chart showing sales vis a vis commission paid is appended below commission. Chart showing sales vis a vis commission paid is appended below commission. Chart showing sales vis a vis commission paid is appended below Fin Year Sales Sales Commission Rs. In crores Rs. In crores Rs in lacs 09-10 11.49 11.49 26.25 10-11 19.66 19.66 21.65 11-12 28.35 28.35 26.05 12-13 43.00 43.00 84.96 13-14 37.75 37.75 147.9 14-15 42.01 42.01 81.12 15-16 39.02 39.02 41.53 16-17 46.54 46.54 94.44

Your honour will appreciate that the Assessing Officer has clearly mentioned in the Your honour will appreciate that the Assessing Officer has clearly mentioned in the Your honour will appreciate that the Assessing Officer has clearly mentioned in the order that the assessee had submitted the copies of commission bills and I T records of order that the assessee had submitted the copies of commission bills and I T records of order that the assessee had submitted the copies of commission bills and I T records of

3 ITA No. 840/Kol/2019 Assessment Year: 2014-15 Skan Enterprise the payees and a copy of the same in form of a bound book is once again been the payees and a copy of the same in form of a bound book is once again been the payees and a copy of the same in form of a bound book is once again been submitted to you herewith. The Assessing Officer on perusal of these documents and ed to you herewith. The Assessing Officer on perusal of these documents and ed to you herewith. The Assessing Officer on perusal of these documents and may be on perusal of earlier assessment records as well did not ask for production of may be on perusal of earlier assessment records as well did not ask for production of may be on perusal of earlier assessment records as well did not ask for production of any of the payees has also completed all compliances. any of the payees has also completed all compliances.

Your honour will further appreciate th Your honour will further appreciate that the assessee is no position to guide the Ld at the assessee is no position to guide the Ld A O in respect of any matter mentioned here in above. The assessee can just provide the A O in respect of any matter mentioned here in above. The assessee can just provide the A O in respect of any matter mentioned here in above. The assessee can just provide the details as called for and the nature and type of enquiry to be made is totally decided by details as called for and the nature and type of enquiry to be made is totally decided by details as called for and the nature and type of enquiry to be made is totally decided by the A O. Nor was the assessee m the A O. Nor was the assessee made known of the points, which needed to be looked ade known of the points, which needed to be looked into or CASS points involved. into or CASS points involved. It is further submitted that in the instant case, as accepted and admitted in the It is further submitted that in the instant case, as accepted and admitted in the It is further submitted that in the instant case, as accepted and admitted in the order, the A.O. after making proper inquiries in respect of commission, all expenses, all order, the A.O. after making proper inquiries in respect of commission, all expenses, all order, the A.O. after making proper inquiries in respect of commission, all expenses, all books of account, purchase and sale records and bank book and bank statement oks of account, purchase and sale records and bank book and bank statement oks of account, purchase and sale records and bank book and bank statement completed the assessment proceedings by treating the same as genuine. completed the assessment proceedings by treating the same as genuine. completed the assessment proceedings by treating the same as genuine. …..During the course of scrutiny the Ld. Income Tax Officer wanted details of …..During the course of scrutiny the Ld. Income Tax Officer wanted details of …..During the course of scrutiny the Ld. Income Tax Officer wanted details of commission paid to achieve the tu commission paid to achieve the turnover. Proper details with PAN no. and address rnover. Proper details with PAN no. and address were provided to the Ld Income Tax Officer. were provided to the Ld Income Tax Officer. It is submitted that the AO examined all the relevant documents and had It is submitted that the AO examined all the relevant documents and had It is submitted that the AO examined all the relevant documents and had conducted a proper enquiry. Details of commission were made available to him and conducted a proper enquiry. Details of commission were made available to him and conducted a proper enquiry. Details of commission were made available to him and based on his experience in earlier years, he was reasonably satisfied about the based on his experience in earlier years, he was reasonably satisfied about the based on his experience in earlier years, he was reasonably satisfied about the appropriateness of the appropriateness of the commission paid. Other matters were looked into adequately commission paid. Other matters were looked into adequately and appropriately. It is also humbly submitted that since the A.O. had made proper enquiries in It is also humbly submitted that since the A.O. had made proper enquiries in It is also humbly submitted that since the A.O. had made proper enquiries in respect of the commission paid on other issues as well, the order of the A.O. is neither respect of the commission paid on other issues as well, the order of the A.O. is neither respect of the commission paid on other issues as well, the order of the A.O. is neither erroneous nor prejudicial to the interest of the revenue.” or prejudicial to the interest of the revenue.”

2.2. Thereafter on 5th December, 2018, the assessee replied as follows: December, 2018, the assessee replied as follows: December, 2018, the assessee replied as follows:- “Sub: Written Submission in reply to the show cause notice dated 13.09.2018 issued “Sub: Written Submission in reply to the show cause notice dated 13.09.2018 issued “Sub: Written Submission in reply to the show cause notice dated 13.09.2018 issued to our client- Skan Enterprises for AY 2014 Enterprises for AY 2014-15 further to the hearing on 29-11 11-2018 In accordance to the directions issued and the requisition made in the earlier hearing, we In accordance to the directions issued and the requisition made in the earlier hearing, we In accordance to the directions issued and the requisition made in the earlier hearing, we make the following submissions make the following submissions - 1. We are enclosing herewith the party wise chart showing commiss 1. We are enclosing herewith the party wise chart showing commiss 1. We are enclosing herewith the party wise chart showing commission paid, TDS deducted quarter wise, challans in respect of Tds deposited and also copies of TDS deducted quarter wise, challans in respect of Tds deposited and also copies of TDS deducted quarter wise, challans in respect of Tds deposited and also copies of TDS returns for all the four quarters. Kindly note that an amount of Rs 14790981/ returns for all the four quarters. Kindly note that an amount of Rs 14790981/ returns for all the four quarters. Kindly note that an amount of Rs 14790981/- has been subjected to the deduction of tax as against commission paid amounting been subjected to the deduction of tax as against commission paid amounting been subjected to the deduction of tax as against commission paid amounting to Rs 14790981/-, which means TDS was deducted on whole of the commission paid. , which means TDS was deducted on whole of the commission paid. , which means TDS was deducted on whole of the commission paid. 2. There are no written agreements with the agents. 2. There are no written agreements with the agents. 3. The products dealt with by the assessee demand that the shop keepers in various 3. The products dealt with by the assessee demand that the shop keepers in various 3. The products dealt with by the assessee demand that the shop keepers in various areas keep its products in stock and in areas keep its products in stock and in display and there is a large no of shops display and there is a large no of shops scattered all over west bengal , which it is uneconomical to serve keeping scattered all over west bengal , which it is uneconomical to serve keeping scattered all over west bengal , which it is uneconomical to serve keeping permanent employees. Therefore as a prudent market practice, all distributors and permanent employees. Therefore as a prudent market practice, all distributors and permanent employees. Therefore as a prudent market practice, all distributors and C & F agents resort to the network of agents. These agent C & F agents resort to the network of agents. These agents are mostly people s are mostly people

4 ITA No. 840/Kol/2019 Assessment Year: 2014-15 Skan Enterprise having contacts with shops and they have a good face value when it comes to having contacts with shops and they have a good face value when it comes to having contacts with shops and they have a good face value when it comes to selling goods through that shop. selling goods through that shop. Under these circumstances. the assessee also en Under these circumstances. the assessee also engaged these agents ents. 4. There is nothing on record that whether the agent appro There is nothing on record that whether the agent approached the assessee or ached the assessee or the assessee approached him. It happens both ways but no records have been kept the assessee approached him. It happens both ways but no records have been kept the assessee approached him. It happens both ways but no records have been kept to show who was engaged in which way. to show who was engaged in which way. 5. Rate of commission varied from case to case depending upon the various factors Rate of commission varied from case to case depending upon the various factors Rate of commission varied from case to case depending upon the various factors such as – Quantum of off take/sal Quantum of off take/sale Need to sell in that area Need to sell in that area Payment terms Market report/credential of that particular agent Market report/credential of that particular agent Selling rate Therefore there are no fix norms, nor is there any specific market rate but most of Therefore there are no fix norms, nor is there any specific market rate but most of Therefore there are no fix norms, nor is there any specific market rate but most of the distributors follow the same pattern and therefore in way. It the distributors follow the same pattern and therefore in way. It the distributors follow the same pattern and therefore in way. It can be said that the assessee has followed the market patterns.” the assessee has followed the market patterns.” 3. The ld. Pr. CIT was not satisfied with these replies. At para 5 of his order, he held The ld. Pr. CIT was not satisfied with these replies. At para 5 of his order, he held The ld. Pr. CIT was not satisfied with these replies. At para 5 of his order, he held as follows:-

“5. The above submissions of the assessee were given a thoughtful consideration by me. “5. The above submissions of the assessee were given a thoughtful consideration by me. “5. The above submissions of the assessee were given a thoughtful consideration by me. Before delving into the merits of the case, it would be appropriate to throw some light on fore delving into the merits of the case, it would be appropriate to throw some light on fore delving into the merits of the case, it would be appropriate to throw some light on the facts which confer jurisdiction on the Principal CIT to act under 263 of the Act. the facts which confer jurisdiction on the Principal CIT to act under 263 of the Act. the facts which confer jurisdiction on the Principal CIT to act under 263 of the Act. Daring the hearing held by the undersigned with the Assessee's A/R, copy of Quar Daring the hearing held by the undersigned with the Assessee's A/R, copy of Quar Daring the hearing held by the undersigned with the Assessee's A/R, copy of Quarterly TDS Statement, challans for TDS on commission, the details of parties to whom commission was Statement, challans for TDS on commission, the details of parties to whom commission was Statement, challans for TDS on commission, the details of parties to whom commission was paid etc. were produced for verification which matches with the observation of the A.O. paid etc. were produced for verification which matches with the observation of the A.O. paid etc. were produced for verification which matches with the observation of the A.O. under para 4 of its order where he remarked." under para 4 of its order where he remarked." QUOTED:- The submission of the assessee is considered but the contention of reply is not tenable as the on of the assessee is considered but the contention of reply is not tenable as the on of the assessee is considered but the contention of reply is not tenable as the assessee failed, to furnish full details in support of commission paid Of Rs.1,47,90,981/ assessee failed, to furnish full details in support of commission paid Of Rs.1,47,90,981/ assessee failed, to furnish full details in support of commission paid Of Rs.1,47,90,981/ -. However, the A/R was asked why the commission will not be disallowed as per U/s. A/R was asked why the commission will not be disallowed as per U/s. 37 of the I.T. Act. 1961. Though 37 of the I.T. Act. 1961. Though u/s. 37 dearly defines In (Explanation u/s. 37 dearly defines In (Explanation-1) for the removal of doubt. It is hereby declared that any 1) for the removal of doubt. It is hereby declared that any expenditure Incurred by an assessee for any purpose which is offence or which is prohibited by law expenditure Incurred by an assessee for any purpose which is offence or which is prohibited by law expenditure Incurred by an assessee for any purpose which is offence or which is prohibited by law shall not be deemed to law been incurred by purpose of business and no deduction or allowances shall aw been incurred by purpose of business and no deduction or allowances shall aw been incurred by purpose of business and no deduction or allowances shall be made in respect of such expenditure. be made in respect of such expenditure. In the instant case, it is observed that the assessee paid Rs.1,47,90,981/ In the instant case, it is observed that the assessee paid Rs.1,47,90,981/ In the instant case, it is observed that the assessee paid Rs.1,47,90,981/- as commission is excessively higher in comparison to assessee’ excessively higher in comparison to assessee’s sales during the financial year 2013 s sales during the financial year 2013-14. However, evidences of such payments could not be verified fully due to inaccurate particulars. Hence, 20% of evidences of such payments could not be verified fully due to inaccurate particulars. Hence, 20% of evidences of such payments could not be verified fully due to inaccurate particulars. Hence, 20% of commission paid i.e., Rs.29,58,196/ commission paid i.e., Rs.29,58,196/- is disallowed and added back to assessee’s total income. Penalty is disallowed and added back to assessee’s total income. Penalty proceedings u/s. 271(1)(c) of the Income Tax Act, 1961 is initiated separately for concealment of oceedings u/s. 271(1)(c) of the Income Tax Act, 1961 is initiated separately for concealment of oceedings u/s. 271(1)(c) of the Income Tax Act, 1961 is initiated separately for concealment of income by claiming of excess expenditure under this head. [Addition: Rs.29,58,196/ income by claiming of excess expenditure under this head. [Addition: Rs.29,58,196/ income by claiming of excess expenditure under this head. [Addition: Rs.29,58,196/-] UNQUOTED:-

5 ITA No. 840/Kol/2019 Assessment Year: 2014-15 Skan Enterprise From a plain and simple reading of the relevant part of the as From a plain and simple reading of the relevant part of the as From a plain and simple reading of the relevant part of the assessment order as abstracted above it, It shall be clear that enquiries were not at all made by the A.O. In abstracted above it, It shall be clear that enquiries were not at all made by the A.O. In abstracted above it, It shall be clear that enquiries were not at all made by the A.O. In relation to the genuineness of the commissions paid allegedly. The assessment order as relation to the genuineness of the commissions paid allegedly. The assessment order as relation to the genuineness of the commissions paid allegedly. The assessment order as well as the assessment records bear testimony to this fact. E well as the assessment records bear testimony to this fact. Even the assessment records ven the assessment records revealed that the Assessing Officer had only brought on record the documents of revealed that the Assessing Officer had only brought on record the documents of revealed that the Assessing Officer had only brought on record the documents of commission payments as available in its records/ books of accounts. No enquiries were commission payments as available in its records/ books of accounts. No enquiries were commission payments as available in its records/ books of accounts. No enquiries were made from the third parties i.e. commission agents to whom comm made from the third parties i.e. commission agents to whom commissions were paid by the issions were paid by the Assessing Officer. Chapter and verse there was complete lack of enquiry on this aspect of Assessing Officer. Chapter and verse there was complete lack of enquiry on this aspect of Assessing Officer. Chapter and verse there was complete lack of enquiry on this aspect of the matter rendering the decision taken by the Assessing Officer nugatory. Therefore, the the matter rendering the decision taken by the Assessing Officer nugatory. Therefore, the the matter rendering the decision taken by the Assessing Officer nugatory. Therefore, the circumstances justify setting aside of the order pa circumstances justify setting aside of the order passed by the Assessing Officer under: ssed by the Assessing Officer under: section 143(3) on 27/12/2016. The A.O. is directed to verify the genuineness of the section 143(3) on 27/12/2016. The A.O. is directed to verify the genuineness of the section 143(3) on 27/12/2016. The A.O. is directed to verify the genuineness of the commissions paid by the assessee to the various commission agents by having recourse to commissions paid by the assessee to the various commission agents by having recourse to commissions paid by the assessee to the various commission agents by having recourse to various measures of enquiries prescribed under various measures of enquiries prescribed under the Income Tax Act, 1961. The Assessing the Income Tax Act, 1961. The Assessing Officer shall pass a reasoned and speaking order after strictly adhering to the principles of Officer shall pass a reasoned and speaking order after strictly adhering to the principles of Officer shall pass a reasoned and speaking order after strictly adhering to the principles of natural justice. The case is disposed off in the above terms.” natural justice. The case is disposed off in the above terms.” 4. Aggrieved the assessee is in appeal before us. Aggrieved the assessee is in appeal before us. 5. The ld. Counsel for the assessee submitted that, in the original assessment . Counsel for the assessee submitted that, in the original assessment . Counsel for the assessee submitted that, in the original assessment proceedings, the Assessing Officer had raised queries on this issue of allowability of proceedings, the Assessing Officer had raised queries on this issue of allowability of proceedings, the Assessing Officer had raised queries on this issue of allowability of commission expenditure and the assessee has filed all necessary details in this regard. commission expenditure and the assessee has filed all necessary details in this regard. commission expenditure and the assessee has filed all necessary details in this regard. He filed a paper book running into 500 pages, which consisted of the copies of all the paper book running into 500 pages, which consisted of the copies of all the paper book running into 500 pages, which consisted of the copies of all the details filed by the assessee (pg. 22 to 50), in support of the genuineness of details filed by the assessee (pg. 22 to 50), in support of the genuineness of details filed by the assessee (pg. 22 to 50), in support of the genuineness of the claim of payment of commission, which was filed before the Assessing Officer. He submitted that payment of commission, which was filed before the Assessing Officer. He submitted that payment of commission, which was filed before the Assessing Officer. He submitted that the ld. Pr. CIT was wrong in concluding that the assessee has not filed all relevant the ld. Pr. CIT was wrong in concluding that the assessee has not filed all relevant the ld. Pr. CIT was wrong in concluding that the assessee has not filed all relevant details and documents before the Assessing Officer and the Assessing Officer has not examined documents before the Assessing Officer and the Assessing Officer has not examined documents before the Assessing Officer and the Assessing Officer has not examined the same. He submitted that this is factually incorrect and took this Bench t same. He submitted that this is factually incorrect and took this Bench t same. He submitted that this is factually incorrect and took this Bench through the various evidences filed by the assessee before the Assessing Officer in support of his various evidences filed by the assessee before the Assessing Officer in support of his various evidences filed by the assessee before the Assessing Officer in support of his claims of allowability account of commission payment, which included: account of commission payment, which included: account of commission payment, which included:- a) Ledger accounts of the parties Ledger accounts of the parties b) Details of tax deducted at source from these parties on Details of tax deducted at source from these parties on Details of tax deducted at source from these parties on commission payments. c) Annexures of bills raised by those parties giving the items of sale on Annexures of bills raised by those parties giving the items of sale on Annexures of bills raised by those parties giving the items of sale on which a claim of commission was made. which a claim of commission was made. d) Copy of the account Copy of the account of the assessee firm, in the books of the commission in the books of the commission agents. e) Copy of form no. 16A etc. Copy of form no. 16A etc.

6 ITA No. 840/Kol/2019 Assessment Year: 2014-15 Skan Enterprise 5.1. He submitted that the commission was claimed by these agents on sale of each He submitted that the commission was claimed by these agents on sale of each He submitted that the commission was claimed by these agents on sale of each item of electric goods, the details of which were furnished. He submitted that the item of electric goods, the details of which were furnished. He submitted that the item of electric goods, the details of which were furnished. He submitted that the Assessing Officer has examined these documents and thereafter chose to disallow on Assessing Officer has examined these documents and thereafter chose to disallow on Assessing Officer has examined these documents and thereafter chose to disallow on adhoc basis @ 20% of the expenditure claimed 20% of the expenditure claimed as commission payments. He pointed out commission payments. He pointed out that the ld. Pr. CIT alleges that the Assessing Officer has not made proper enquiries and that the ld. Pr. CIT alleges that the Assessing Officer has not made proper enquiries and that the ld. Pr. CIT alleges that the Assessing Officer has not made proper enquiries and argued that the extent of enquiry to be made is to be determined by the Assessing that the extent of enquiry to be made is to be determined by the Assessing that the extent of enquiry to be made is to be determined by the Assessing Officer and cannot be a ground of revision by the ld. Pr. CIT. He further submitted that annot be a ground of revision by the ld. Pr. CIT. He further submitted that annot be a ground of revision by the ld. Pr. CIT. He further submitted that not making enquiries from third parties by the Assessing Officer, cannot also be a not making enquiries from third parties by the Assessing Officer, cannot also be a not making enquiries from third parties by the Assessing Officer, cannot also be a ground for revision u/s 263 of the Act and it cannot be classified as a case of lack of ground for revision u/s 263 of the Act and it cannot be classified as a case of lack of ground for revision u/s 263 of the Act and it cannot be classified as a case of lack of enquiry. He vehemently conten He vehemently contended that the ld. Pr. CIT, is wrong in exercising his powers ded that the ld. Pr. CIT, is wrong in exercising his powers u/s 263 of the Act, for the sole purpose of directing the Assessing Officer that enquiries u/s 263 of the Act, for the sole purpose of directing the Assessing Officer that enquiries u/s 263 of the Act, for the sole purpose of directing the Assessing Officer that enquiries have to be made on this issue, only in a particular manner have to be made on this issue, only in a particular manner as the ld. Pr. CIT things as the ld. Pr. CIT things fit. He argued that the Assessing Officer conducted detailed examination of the issue during argued that the Assessing Officer conducted detailed examination of the issue during argued that the Assessing Officer conducted detailed examination of the issue during the course of assessment proceedings and has come to a possible view and disallowed the course of assessment proceedings and has come to a possible view and disallowed the course of assessment proceedings and has come to a possible view and disallowed 20% of the expenditure claimed as excessive. 20% of the expenditure claimed as excessive. He pointed out that similar paymen He pointed out that similar payments were being made to the very same parties in the earlier Assessment Years as well as in were being made to the very same parties in the earlier Assessment Years as well as in were being made to the very same parties in the earlier Assessment Years as well as in the subsequent Assessment Years and that the Assessing Officer has accepted the same the subsequent Assessment Years and that the Assessing Officer has accepted the same the subsequent Assessment Years and that the Assessing Officer has accepted the same in those Assessment Years. 5.2. The ld. Counsel for the assessee submitted that t The ld. Counsel for the assessee submitted that the assessee had carried the he assessee had carried the matter of disallowance of 20% of the expenditure claimed on commission payments by matter of disallowance of 20% of the expenditure claimed on commission payments by matter of disallowance of 20% of the expenditure claimed on commission payments by the Assessing Officer in the assessment order the Assessing Officer in the assessment order, in appeal before the ld. CIT(A) and the in appeal before the ld. CIT(A) and the same is pending disposal and under those circumstances, th same is pending disposal and under those circumstances, the ld. Pr. CIT cannot exercise e ld. Pr. CIT cannot exercise his powers u/s 263 of the Act on the very same issue which is before the ld. CIT(A). He his powers u/s 263 of the Act on the very same issue which is before the ld. CIT(A). He his powers u/s 263 of the Act on the very same issue which is before the ld. CIT(A). He relied on the following case law in support of his contention that the reopening is bad in relied on the following case law in support of his contention that the reopening is bad in relied on the following case law in support of his contention that the reopening is bad in law:-  Smt. Renuka Philip vs. Income Smt. Renuka Philip vs. Income-tax Officer, Business Ward-XV(2)Chennai XV(2)Chennai [2018] 409 ITR 567 (Madras) [2018] 409 ITR 567 (Madras)  Commissioner of Income Commissioner of Income-tax (Central), Ludhiana vs. Max India Ltd tax (Central), Ludhiana vs. Max India Ltd. [2007] 295 ITR 282 (SC) 295 ITR 282 (SC) 5.3. On the issue of allowability of claim On the issue of allowability of claim of expenditure on commission payments of expenditure on commission payments. He relied on the following judgments of the Hon’ble Jurisdictional High Court: judgments of the Hon’ble Jurisdictional High Court: judgments of the Hon’ble Jurisdictional High Court:-

7 ITA No. 840/Kol/2019 Assessment Year: 2014-15 Skan Enterprise

 Commissioner of Income Commissioner of Income-tax vs. M/s. Inbuilt Merchant Pvt. Ltd.in ITAT No. tax vs. M/s. Inbuilt Merchant Pvt. Ltd.in ITAT No. 225 of 2013, G.A. No. 3825 of 2013, judgment dt. 14/03/2014 225 of 2013, G.A. No. 3825 of 2013, judgment dt. 14/03/2014 225 of 2013, G.A. No. 3825 of 2013, judgment dt. 14/03/2014  CIT vs. Alpha Hydronics Pvt. Ltd. in ITA No. 549 of 2004, judgment CIT vs. Alpha Hydronics Pvt. Ltd. in ITA No. 549 of 2004, judgment CIT vs. Alpha Hydronics Pvt. Ltd. in ITA No. 549 of 2004, judgment dt. 10/11/2014 5.4. He prayed for relief.

8 ITA No. 840/Kol/2019 Assessment Year: 2014-15 Skan Enterprise commission was claimed was commission was claimed was placed before the Assessing Officer as well as the ld. Pr. before the Assessing Officer as well as the ld. Pr. CIT. This is also a fact that the assessee has been paying and claiming as a deduction CIT. This is also a fact that the assessee has been paying and claiming as a deduction CIT. This is also a fact that the assessee has been paying and claiming as a deduction commission paid to agents, , for all the previous Assessment Years as well as for the for all the previous Assessment Years as well as for the subsequent Assessment Years. It is common knowledge that in subsequent Assessment Years. It is common knowledge that in this segment of business, segment of business, the competition is severe and requires special measures to boost sales. The payment of is severe and requires special measures to boost sales. The payment of is severe and requires special measures to boost sales. The payment of commission has been accepted ted as genuine by the revenue in the earlier years by the revenue in the earlier years as well as in the subsequent Assessment Years. in the subsequent Assessment Years. 8.1. The Hon’ble Calcutta High Court in the case of The Hon’ble Calcutta High Court in the case of Commissioner of Income Commissioner of Income-tax vs. M/s. Inbuilt Merchant Pvt. Ltd. (supra) M/s. Inbuilt Merchant Pvt. Ltd. (supra) has held as follows:- “The views expressed by the Assessing Officer are erroneous in law. The Assessing Officer xpressed by the Assessing Officer are erroneous in law. The Assessing Officer xpressed by the Assessing Officer are erroneous in law. The Assessing Officer has overlooked the importance of the books of accounts maintained in the ordinary has overlooked the importance of the books of accounts maintained in the ordinary has overlooked the importance of the books of accounts maintained in the ordinary course of business. Reference in this regard may be made to sub course of business. Reference in this regard may be made to sub-section (2) of section (2) of Section 32 of the Indian Evidence Act, 1872. The books of accounts maintained in the ordinary of the Indian Evidence Act, 1872. The books of accounts maintained in the ordinary of the Indian Evidence Act, 1872. The books of accounts maintained in the ordinary course of business are relevant and they cannot be discarded in the absence of course of business are relevant and they cannot be discarded in the absence of course of business are relevant and they cannot be discarded in the absence of appropriate reasons. The mere fact that recipient did not reply in some cases or they appropriate reasons. The mere fact that recipient did not reply in some cases or they appropriate reasons. The mere fact that recipient did not reply in some cases or they were not found at the address furnished by the assessee does not in the least prove the t found at the address furnished by the assessee does not in the least prove the t found at the address furnished by the assessee does not in the least prove the fact that they were non existent or that the payments shown to have been made by the fact that they were non existent or that the payments shown to have been made by the fact that they were non existent or that the payments shown to have been made by the assessee were imaginary. With the advancement of technology, it has become possible to assessee were imaginary. With the advancement of technology, it has become possible to assessee were imaginary. With the advancement of technology, it has become possible to sell goods throughout the country through the internet. For that purpose, agents are l goods throughout the country through the internet. For that purpose, agents are l goods throughout the country through the internet. For that purpose, agents are required throughout the country. The mechanism in that regard has been disclosed by required throughout the country. The mechanism in that regard has been disclosed by required throughout the country. The mechanism in that regard has been disclosed by the assessee and has been recorded in the order of the CIT (Appeals). For the purpose of the assessee and has been recorded in the order of the CIT (Appeals). For the purpose of the assessee and has been recorded in the order of the CIT (Appeals). For the purpose of carrying on its business, the assessee has to recruit the agents. It may not be possible for arrying on its business, the assessee has to recruit the agents. It may not be possible for arrying on its business, the assessee has to recruit the agents. It may not be possible for the assessee to know them personally. Whatever address was furnished to the assessee, the assessee to know them personally. Whatever address was furnished to the assessee, the assessee to know them personally. Whatever address was furnished to the assessee, has been disclosed to the Income has been disclosed to the Income-tax Department. Payments were admittedly made tax Department. Payments were admittedly made by cheque after deduction of tax. The tax deducted as source has duly been deposited. The cheque after deduction of tax. The tax deducted as source has duly been deposited. The cheque after deduction of tax. The tax deducted as source has duly been deposited. The judgment in the case of judgment in the case of CIT vs. Precision Finance Pvt. Ltd. reported in 208 ITR 465 relied . reported in 208 ITR 465 relied upon by Mr. Bhowmick do upon by Mr. Bhowmick does not really assist him. The aforesaid judgment is an es not really assist him. The aforesaid judgment is an authority for the proposition that mere payment by account payee cheque cannot authority for the proposition that mere payment by account payee cheque cannot authority for the proposition that mere payment by account payee cheque cannot establish that the transaction was genuine, but in the case before us, besides the fact establish that the transaction was genuine, but in the case before us, besides the fact establish that the transaction was genuine, but in the case before us, besides the fact that payment was made by cheque, t that payment was made by cheque, there are other pieces of evidence available which here are other pieces of evidence available which are as follows: a) Books of Accounts maintained by the assessee in the ordinary course of business; a) Books of Accounts maintained by the assessee in the ordinary course of business; a) Books of Accounts maintained by the assessee in the ordinary course of business; b) Deduction of Tax at source; b) Deduction of Tax at source; c) Deposit of the money deducted at source; c) Deposit of the money deducted at source; d) Particulars of the recipient were duly furnished; Particulars of the recipient were duly furnished;

We are, as such, of the opinion that the views expressed by the learned Tribunal are We are, as such, of the opinion that the views expressed by the learned Tribunal are We are, as such, of the opinion that the views expressed by the learned Tribunal are unexceptionable. We, therefore refuse to admit the appeal. The appeal is thus unexceptionable. We, therefore refuse to admit the appeal. The appeal is thus unexceptionable. We, therefore refuse to admit the appeal. The appeal is thus dismissed.” 8.2. Similarly, the Hon’ble Similarly, the Hon’ble Jurisdictional High Court in the case of Jurisdictional High Court in the case of CIT vs. Alpha Hydronics Pvt. Ltd. (supra), held as follows: , held as follows:-

9 ITA No. 840/Kol/2019 Assessment Year: 2014-15 Skan Enterprise “We find that the Tribunal while allowing the appeal of the assessee and held as under : “We find that the Tribunal while allowing the appeal of the assessee and held as under : “We find that the Tribunal while allowing the appeal of the assessee and held as under : "We have considered the rival submissions and gone through the facts of the "We have considered the rival submissions and gone through the facts of the "We have considered the rival submissions and gone through the facts of the case. We find that in the present case there is a binding contract between the case. We find that in the present case there is a binding contract between the case. We find that in the present case there is a binding contract between the parties by which the parties by which the \recipients of the commission had the right to enforce recipients of the commission had the right to enforce realisation of commission realisation of commission stipulated between the parties. We also find from the stipulated between the parties. We also find from the communication between the parties that the payment was duly received by the communication between the parties that the payment was duly received by the communication between the parties that the payment was duly received by the parties and paid by the assessee by account payee cheques. The revenue has not parties and paid by the assessee by account payee cheques. The revenue has not parties and paid by the assessee by account payee cheques. The revenue has not alleged that the parties to the transactions a alleged that the parties to the transactions are related to each other or that the re related to each other or that the payments are not genujine or that the payments having been made by the payments are not genujine or that the payments having been made by the payments are not genujine or that the payments having been made by the assessee to the recipients have found their way back to the assessee some way assessee to the recipients have found their way back to the assessee some way assessee to the recipients have found their way back to the assessee some way or the other. Such being the case, we find that the authorities below or the other. Such being the case, we find that the authorities below or the other. Such being the case, we find that the authorities below were not justified in rejecting the claim of the assessee for payment of commission. Since justified in rejecting the claim of the assessee for payment of commission. Since justified in rejecting the claim of the assessee for payment of commission. Since all the ingredients necessary for genuine business transaction exist in this case, all the ingredients necessary for genuine business transaction exist in this case, all the ingredients necessary for genuine business transaction exist in this case, we do not find any merit in the addition made by the AO and in the action of the we do not find any merit in the addition made by the AO and in the action of the we do not find any merit in the addition made by the AO and in the action of the CIT(A) in confirming the same. In reversing their orders, and respectfully IT(A) in confirming the same. In reversing their orders, and respectfully IT(A) in confirming the same. In reversing their orders, and respectfully following the decision of the Hon'ble Caalcutta High Court in the case of following the decision of the Hon'ble Caalcutta High Court in the case of following the decision of the Hon'ble Caalcutta High Court in the case of Masther & plant (India) Ltd. (Supra) and the case of the Tribunal, Mumbai Masther & plant (India) Ltd. (Supra) and the case of the Tribunal, Mumbai Masther & plant (India) Ltd. (Supra) and the case of the Tribunal, Mumbai Bench (Third Member) discussed her Bench (Third Member) discussed herein above, we allow the appeal of the ein above, we allow the appeal of the assessee." Heard Mr. Das, learned advocate appearing for the appellant revenue and Mr. J. P. Khaitan, Heard Mr. Das, learned advocate appearing for the appellant revenue and Mr. J. P. Khaitan, Heard Mr. Das, learned advocate appearing for the appellant revenue and Mr. J. P. Khaitan, learned senior advocate appearing for the respondent assessee. Before us the revenue could not learned senior advocate appearing for the respondent assessee. Before us the revenue could not learned senior advocate appearing for the respondent assessee. Before us the revenue could not demonstrate either the money was not paid or the money was paid and routed back to the he money was not paid or the money was paid and routed back to the he money was not paid or the money was paid and routed back to the assessee. In the circumstances interference with the order of the Tribunal is not warranted. No assessee. In the circumstances interference with the order of the Tribunal is not warranted. No assessee. In the circumstances interference with the order of the Tribunal is not warranted. No question arise for adjudication. The application and the appeal are dismissed.” question arise for adjudication. The application and the appeal are dismissed.” question arise for adjudication. The application and the appeal are dismissed.” 9. Applying the propositions of law laid down in the above case law to the facts of this he propositions of law laid down in the above case law to the facts of this he propositions of law laid down in the above case law to the facts of this case, we come to the conclusion that the Assessing Officer has taken a possible view that case, we come to the conclusion that the Assessing Officer has taken a possible view that case, we come to the conclusion that the Assessing Officer has taken a possible view that the expenditure in question claimed by the assessee estion claimed by the assessee as commission payment, is allowable as commission payment, is allowable in part. This cannot be a case of lack of enquiry . This cannot be a case of lack of enquiry or non-application of mind application of mind. The issue whether third party enquiries have to be made whether third party enquiries have to be made or not during the course of investigation, or not during the course of investigation, is the prerogative of the Assessing Off the prerogative of the Assessing Officer, as he is the investigator. T icer, as he is the investigator. The type, nature and extent of investigation is the the prerogative of the Assessing Officer. The ld. Pr. CIT, cannot, in . The ld. Pr. CIT, cannot, in our view, invoke his power u/s 263 of the Act for revising an order passed u/s 143(3) of our view, invoke his power u/s 263 of the Act for revising an order passed u/s 143(3) of our view, invoke his power u/s 263 of the Act for revising an order passed u/s 143(3) of the Act for the reason that in his view, the investigation the Act for the reason that in his view, the investigation/enquiry should be conducted in a /enquiry should be conducted in a particular manner or to a particular extent. Inadequate enquiry particular manner or to a particular extent. Inadequate enquiry cannot be a ground of cannot be a ground of revision. 9.1. On facts, this is a case where an enquiry was conducted and a possible view taken On facts, this is a case where an enquiry was conducted and a possible view taken On facts, this is a case where an enquiry was conducted and a possible view taken based on the examination of the materials available on record. based on the examination of the materials available on record. The Hone’ble Andhra The Hone’ble Andhra Pradesh High Court in the case of Pradesh High Court in the case of Spectra Shares and Scrips Pvt. Ltd. V CIT (AP) 354 ITR 35 Spectra Shares and Scrips Pvt. Ltd. V CIT (AP) 354 ITR 35 had considered a number of judgments on this issue of exercise of jurisdiction u/s 263 of had considered a number of judgments on this issue of exercise of jurisdiction u/s 263 of had considered a number of judgments on this issue of exercise of jurisdiction u/s 263 of the Act by the Principal Commissioner of Income Tax and culled the principles laid down in the Act by the Principal Commissioner of Income Tax and culled the principles laid down in the Act by the Principal Commissioner of Income Tax and culled the principles laid down in the judgments as below :

10 ITA No. 840/Kol/2019 Assessment Year: 2014-15 Skan Enterprise

“24. In Malabar Industrial Co.Ltd. ( 2 Supra), Malabar Industrial Co.Ltd. ( 2 Supra), the Supreme Court held that a he Supreme Court held that a bare reading of Sec.263 makes it clear that the prerequisite for the exercise of bare reading of Sec.263 makes it clear that the prerequisite for the exercise of 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 of the Income Tax jurisdiction by the Commissioner suomotu under it, is the order of the Income Tax 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 inter Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The ests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Commissioner has to be satisfied of twin conditions, namely, (i) the order of 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 is prejudicial to the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent interests of the Revenue. If one of them is absent – if the order of the Income Tax der of the Income Tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but it is prejudicial to the Revenue but it is prejudicial to the Revenue – recourse cannot be had to Sec.263 (1) of the recourse cannot be had to Sec.263 (1) of the Act. It also held at pg Act. It also held at pg-88 as follows: "The phrase "prejudicial t "The phrase "prejudicial to the interests of the Revenue" has to be read in o the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of conjunction with an erroneous order passed by the Assessing Officer. Every loss of conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as revenue as a consequence of an order of the Assessing Officer cannot be treated as revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Reve prejudicial to the interests of the Revenue. For example, when an Income nue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of Officer adopted one of the courses permissible in law and it has resulted in loss of Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue: or where two views are possible and the Income Revenue: or where two views are possible and the Income-tax Officer has taken tax Officer has taken one view with which the Commissioner does not agree, it one view with 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 taken erroneous order prejudicial to the interests of the Revenue, unless the view taken erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law. It has been held by this Court tax Officer is unsustainable in law. It has been held by this Court 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 in hi that where a sum not earned by a person is assessed as income in hi that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such so offering, the order passed by the Assessing Officer accepting the same as such so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue. will be erroneous and prejudicial to the interests of the Revenue. will be erroneous and prejudicial to the interests of the Revenue. RampyarideviSaraogi v. CIT (1968) 67 ITR 84 (SC) and in Smt. Tara Devi RampyarideviSaraogi v. CIT (1968) 67 ITR 84 (SC) and in Smt. Tara Devi RampyarideviSaraogi v. CIT (1968) 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal V. CIT (1973 Aggarwal V. CIT (1973) 88 ITR 323 (SC)". 25. In Max India Ltd. Max India Ltd. (3 Supra), reiterated the view in Malabar Industrial Malabar Industrial Co.Ltd. (2 Supra) and observed that every loss of Revenue as a consequence of an (2 Supra) and observed that every loss of Revenue as a consequence of an (2 Supra) and observed that every loss of Revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest order of the Assessing Officer cannot be treated as prejudicial to the interest order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income Tax Officer adopted one of the courses the Revenue. For example, when an Income Tax Officer adopted one of the courses the Revenue. For example, when an Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are permissible in law and it has resulted in loss of revenue; or where two views are permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income Tax Officer has taken one view with which the possible and the Income Tax Officer has taken one view with which the possible and the Income Tax Officer has taken one view with which the Commissioner does n Commissioner does not agree, it cannot be treated as an erroneous order ot agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income prejudicial to the interests of the Revenue, unless the view taken by the Income prejudicial to the 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 Tax Officer is unsustainable in law. On the facts of that case, Sec.80HHC(3) as it Tax Officer is unsustainable in law. On the facts of that case, Sec.80HHC(3) as it then stood was interpreted by the Asses then stood was interpreted by the Assessing Officer but the Revenue contended sing Officer but the Revenue contended that in view of the 2005 Amendment which is clarificatory and retrospective in that in view of the 2005 Amendment which is clarificatory and retrospective in that in view of the 2005 Amendment which is clarificatory and retrospective in nature, the view of the Assessing Officer was unsustainable in law and the nature, the view of the Assessing Officer was unsustainable in law and the nature, the view of the Assessing Officer was unsustainable in law and the Commissioner was correct in invoking Sec.263. But the Supreme C Commissioner was correct in invoking Sec.263. But the Supreme C Commissioner was correct in invoking Sec.263. But the Supreme Court rejected the said contention and held that when the Commissioner passed his order the said contention and held that when the Commissioner passed his order the said contention and held that when the Commissioner passed his order disagreeing with the view of the Assessing Officer, there were two views on the disagreeing with the view of the Assessing Officer, there were two views on the disagreeing with the view of the Assessing Officer, there were two views on the word "profits" in that section; that the said section was amended eleven times; word "profits" in that section; that the said section was amended eleven times; word "profits" in that section; that the said section was amended eleven times; that different views existed on the day when the Commissioner passed his order; erent views existed on the day when the Commissioner passed his order; erent 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 that the mechanics of the section had become so complicated over the years that that the mechanics of the section had become so complicated over the years that two views were inherently possible; and therefore, the subsequent amendment in two views were inherently possible; and therefore, the subsequent amendment in two views were inherently possible; and therefore, the subsequent amendment in 2005 even though retrospec 2005 even though retrospective will not attract the provision of Sec.263. tive will not attract the provision of Sec.263. 26. In Vikas Polymers Vikas Polymers (4 Supra), the Delhi High Court held that the power of (4 Supra), the Delhi High Court held that the power of suomotu revision exercisable by the Commissioner under the provisions of Sec.263 suomotu revision exercisable by the Commissioner under the provisions of Sec.263 suomotu revision exercisable by the Commissioner under the provisions of Sec.263 is supervisory in nature; that an "erroneous judg is supervisory in nature; that an "erroneous judgment" means one which is not in ment" means one which is not in accordance with law; that if an Income Tax Officer acting in accordance with law accordance with law; that if an Income Tax Officer acting in accordance with law accordance with law; that if an Income Tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as "erroneous" by the makes a certain assessment, the same cannot be branded as "erroneous" by the makes a certain assessment, the same cannot be branded as "erroneous" by the Commissioner simply because, according to him, the order should ha Commissioner simply because, according to him, the order should ha Commissioner simply because, according to him, the order should have been

11 ITA No. 840/Kol/2019 Assessment Year: 2014-15 Skan Enterprise written differently or more elaborately; that the section does not visualize the written differently or more elaborately; that the section does not visualize the written differently or more elaborately; that the section does not visualize the substitution of the judgment of the Commissioner for that of the Income Tax substitution of the judgment of the Commissioner for that of the Income Tax substitution of the judgment of the Commissioner for that of the Income Tax Officer, who passed the order unless the decision is not in accordance with the Officer, who passed the order unless the decision is not in accordance with the Officer, who passed the order unless the decision is not in accordance with the law; that to invoke suomotu revisional powers to reopen a concluded assessment o invoke suomotu revisional powers to reopen a concluded assessment o invoke suomotu revisional powers to reopen a concluded assessment under Sec.263, the Commissioner must give reasons; that a bare reiteration by under Sec.263, the Commissioner must give reasons; that a bare reiteration by under Sec.263, the Commissioner must give reasons; that a bare reiteration by him that the order of the Income Tax Officer is erroneous in so far as it is him that the order of the Income Tax Officer is erroneous in so far as it is him that the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the interests of t prejudicial to the interests of the Revenue, will not suffice; that the reasons must he Revenue, will not suffice; that the reasons must be such as to show that the enhancement or modification of the assessment or be such as to show that the enhancement or modification of the assessment or be such as to show that the enhancement or modification of the assessment or cancellation of the assessment or directions issued for a fresh assessment were cancellation of the assessment or directions issued for a fresh assessment were cancellation of the assessment or directions issued for a fresh assessment were called for, and must irresistibly lead to the c called for, and must irresistibly lead to the conclusion that the order of the onclusion that the order of the Income Tax Officer was not only erroneous but was prejudicial to the interests of Income Tax Officer was not only erroneous but was prejudicial to the interests of Income Tax 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 the Revenue. Thus, while the Income Tax Officer is not called upon to write an the Revenue. Thus, while the Income Tax Officer is not called upon to write an elaborate judgment giving detailed reasons in respect of each a elaborate judgment giving detailed reasons in respect of each a elaborate judgment giving detailed reasons in respect of each and every disallowance, deduction, etc., it is incumbent upon the Commissioner not to disallowance, deduction, etc., it is incumbent upon the Commissioner not to disallowance, deduction, etc., it is incumbent upon the Commissioner not to exercise his suomotu revisional powers unless supported by adequate reasons for exercise his suomotu revisional powers unless supported by adequate reasons for exercise his suomotu revisional powers unless supported by adequate reasons for doing so; that if a query is raised during the course of the scrutiny by the doing so; that if a query is raised during the course of the scrutiny by the doing so; that if a query is raised during the course of the scrutiny by the Assessing Officer, which was answered to the satisfaction of the Assessing Officer, cer, which was answered to the satisfaction of the Assessing Officer, cer, which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer were reflected in the assessment order, this but neither the query nor the answer were reflected in the assessment order, this but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the Assessing Officer would not by itself lead to the conclusion that the order of the Assessing Officer would not by itself lead to the conclusion that the order of the Assessing Officer called for interference and revision. ce and revision. 27. In Sunbeam Auto Ltd. Sunbeam Auto Ltd.( 5 Supra), the Delhi High Court held that the Assessing ( 5 Supra), the Delhi High Court held that the Assessing Officer in the assessment order is not required to give a detailed reason in respect Officer in the assessment order is not required to give a detailed reason in respect 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 there was applic of each and every item of deduction, etc.; that whether there was applic of each and every item of deduction, etc.; that whether there was application of mind before allowing the expenditure in question has to be seen; that if there was mind before allowing the expenditure in question has to be seen; that if there was mind before allowing the expenditure in question has to be seen; that if there was an inquiry, even inadequate that would not by itself give occasion to the an inquiry, even inadequate that would not by itself give occasion to the an inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under Sec.263 merely because he has a different Commissioner to pass orders under Sec.263 merely because he has a different Commissioner to pass orders 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 course matter; that it is only in cases of lack of inquiry that such a course matter; that it is 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 of action would be open; that an assessment order made by the Income Tax of action would be open; that an assessment order made by the Income Tax Officer cannot be branded as erroneous by the Commissioner simply because, Officer cannot be branded as erroneous by the Commissioner simply because, Officer 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 more elaborately; there ave been written more elaborately; there must be some prima facie material on record to show that the tax which was must be some prima facie material on record to show that the tax which was must be 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 relevant lawfully exigible has not been imposed or that by the application of the relevant lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation, a le statute on an incorrect or incomplete interpretation, a lesser tax than what was sser tax than what was just, has been imposed. In that case, the Delhi High Court held that the just, has been imposed. In that case, the Delhi High Court held that the just, has been imposed. In that case, the Delhi High Court held that the Commissioner in the exercise of revisional power could not have objected to the Commissioner in the exercise of revisional power could not have objected to the Commissioner in the exercise of revisional power could not have objected to the finding of the Assessing Officer that expenditure on tools and dies by the asses finding of the Assessing Officer that expenditure on tools and dies by the asses finding of the Assessing Officer that expenditure on tools and dies by the assessee, a manufacturer of Car parts, is revenue expenditure where the said claim was a manufacturer of Car parts, is revenue expenditure where the said claim was a manufacturer of Car parts, is revenue expenditure where the said claim was allowed by the latter on being satisfied with the explanation of the assessee and allowed by the latter on being satisfied with the explanation of the assessee and allowed by the latter on being satisfied with the explanation of the assessee and where the same accounting practice followed by the assessee for number of years where the same accounting practice followed by the assessee for number of years where the same accounting practice followed by the assessee for number of years with the approval of the Income Tax Authorities. It held that the Assessing Officer roval of the Income Tax Authorities. It held that the Assessing Officer roval of the Income Tax Authorities. It held that the Assessing Officer had called for explanation on the very item from the assessee and the assessee had called for explanation on the very item from the assessee and the assessee had called for explanation on the very item from the assessee and the assessee had furnished its explanation. Merely because the Assessing Officer in his order had furnished its explanation. Merely because the Assessing Officer in his order had furnished its explanation. Merely because the Assessing Officer in his order did not make an elaborat did not make an elaborate discussion in that regard, his order cannot be termed e discussion in that regard, his order cannot be termed as erroneous. The opinion of the Assessing Officer is one of the possible views and as erroneous. The opinion of the Assessing Officer is one of the possible views and as erroneous. The opinion of the Assessing Officer is one of the possible views and there was no material before the Commissioner to vary that opinion and ask for there was no material before the Commissioner to vary that opinion and ask for there was no material before the Commissioner to vary that opinion and ask for fresh inquiry. 28. In Gabriel India Ltd. 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 so far consideration of the Commissioner as to whether an order is erroneous in so far 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 as it is prejudicial to the interests of the Revenue, must be based on materials on as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceeding the record of the proceedings called for by him. If there are no materials on s called for by him. If there are no materials on

12 ITA No. 840/Kol/2019 Assessment Year: 2014-15 Skan Enterprise record on the basis of which it can be said that the Commissioner acting in a record on the basis of which it can be said that the Commissioner acting in a 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 reasonable manner could have come to such a conclusion, the very initiation of reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without ju proceedings by him will be illegal and without jurisdiction. It held that the risdiction. It held that the Commissioner cannot initiate proceedings with a view to start fishing and roving Commissioner cannot initiate proceedings with a view to start fishing and roving Commissioner cannot initiate proceedings with a view to start fishing and roving inquiries in matters or orders which are already concluded; that the department inquiries in matters or orders which are already concluded; that the department inquiries in matters or orders which are already concluded; that the department cannot be permitted to begin fresh litigation because of new views cannot be 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 inference or on facts or new versions which they present as to what should be the inference or on 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 the circumstance; proper inference either of the facts disclosed or the weight of the circumstance; proper inference either of the facts disclosed or the weight of the circumstance; that if this is permitted, litigation would have no end except when legal in that if this is permitted, litigation would have no end except when legal in that if this is permitted, litigation would have no end except when legal ingenuity is exhausted; that to do so is to divide one argument into two and multiply the is exhausted; that to do so is to divide one argument into two and multiply the is exhausted; that to do so is to divide one argument into two and multiply the litigation. It held that cases may be visualized where the Income Tax Officer while litigation. It held that cases may be visualized where the Income Tax Officer while litigation. It held that cases may be visualized where the Income Tax Officer while making an assessment examines the accounts, makes inquiries, applies his mind making an assessment examines the accounts, makes inquiries, applies his mind making an assessment examines the accounts, makes inquiries, applies his mind to the facts and circumstances of the case and determines the income either by facts and circumstances of the case and determines the income either by facts and circumstances of the case and determines the income either by accepting the account or by making some estimate himself; that the accepting the account or by making some estimate himself; that the accepting the account or by making some estimate himself; that the Commissioner, on perusal of the record, may be of the opinion that the estimate Commissioner, on perusal of the record, may be of the opinion that the estimate Commissioner, on perusal of the record, may be of the opinion that the estimate made by the Officer concerned was on made by the Officer concerned was on the lower side and left to the Commissioner the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined he would have estimated the income at a figure higher than the one determined 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 Commissioner with power by the Income Tax Officer; but that would not vest the Commissioner with power by the Income Tax Officer; but that would not vest the Commissioner with power to reexamine the accounts and determine the income him to reexamine the accounts and determine the income himself at a higher figure; self at a higher figure; there must be material available on the record called for by the Commissioner to there must be material available on the record called for by the Commissioner to there must be material available on the record called for by the Commissioner to satisfy him prima facie that the order is both erroneous and prejudicial to the satisfy him prima facie that the order is both erroneous and prejudicial to the satisfy him prima facie that the order is both erroneous and prejudicial to the interests of the Revenue. Otherwise, it would amount to giving unbridl interests of the Revenue. Otherwise, it would amount to giving unbridl interests of the Revenue. Otherwise, it would amount to giving unbridled and arbitrary power to the revising authority to initiate proceedings for revision in arbitrary power to the revising authority to initiate proceedings for revision in arbitrary power to the revising authority to initiate proceedings for revision in every case and start re every case and start re-examination and fresh inquiry in matters which have examination and fresh inquiry in matters which have already been concluded under law. already been concluded under law. 29. In M.S. Raju(15 Supra), this Court has held that the (15 Supra), this Court has held that the power of the power of the Commissioner under Sec.263 (1) is not limited only to the material which was Commissioner under Sec.263 (1) is not limited only to the material which was 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 interests of the available before the Assessing Officer and, in order to protect the interests of the available before the Assessing Officer and, in order to protect the interests of the Revenue, the Commissioner is entitled to examine any other records which are Revenue, the Commissioner is entitled to examine any other records which are Revenue, the Commissioner is entitled to examine any other records which are available at the time of examination by him and to take into consideration even ilable at the time of examination by him and to take into consideration even ilable at the time of examination by him and to take into consideration even those events which arose subsequent to the order of assessment. those events which arose subsequent to the 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 ass revisional powers cancelled assessee’s assessment for the years 1952 essment for the years 1952-1953 to 1960-61 because he found that the income tax officer was not justified in 61 because he found that the income tax officer was not justified in 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 income accepting the initial capital, the gift received and sale of jewellery, the income accepting the initial capital, the gift received and sale of jewellery, the income from business etc., without any enquiry or evidence whatsoever . from business etc., without any enquiry or evidence whatsoever . He directed the He directed the income tax officer to do fresh assessment after making proper enquiry and income tax officer to do fresh assessment after making proper enquiry and income tax officer to do fresh assessment after making proper enquiry and investigation in regard to the jurisdiction. The assessee complained before the investigation in regard to the jurisdiction. The assessee complained before the investigation in regard to the jurisdiction. The assessee complained before the Supreme Court that no fair or reasonable opportunity was given to her. The Supreme Court that no fair or reasonable opportunity was given to her. The Supreme Court that no fair or reasonable opportunity was given to her. The Supreme Court held that there was ample material to show that the income tax urt held that there was ample material to show that the income tax urt held that there was ample material to show that the income tax officer made the assessments in undue hurry; that he had passed a short stereo officer made the assessments in undue hurry; that he had passed a short stereo officer made the assessments in undue hurry; that he had passed a short stereo typed assessment order for each assessment year; that on the face of the record, typed assessment order for each assessment year; that on the face of the record, typed assessment order for each assessment year; that on the face of the record, the orders were pre- -judicial to the interest of the Revenue; and no prejudice was to the interest of the Revenue; and no prejudice was caused to the assessee on account of failure of the Commissioner to indicate the caused to the assessee on account of failure of the Commissioner to indicate the caused to 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 for results of the enquiry made by him, as she would have a full opportunity for results of the enquiry made by him, as she would have a full opportunity for showing to the income tax officer whether he showing to the income tax officer whether he had jurisdiction or not and whether had jurisdiction or not and whether the income tax assessed in the assessment years which were originally passed the income tax assessed in the assessment years which were originally passed the income tax assessed in the assessment years which were originally passed were correct or not" were correct or not" 31. From the above decisions, the following principles as to exercise of jurisdiction 31. From the above decisions, the following principles as to exercise of jurisdiction 31. From the above decisions, the following principles as to exercise of jurisdiction by the Commissioner u/s.263 of the A by the Commissioner u/s.263 of the Act can be culled out:

13 ITA No. 840/Kol/2019 Assessment Year: 2014-15 Skan Enterprise a) The Commissioner has to be satisfied of twin conditions, namely, (i) the order a) The Commissioner has to be satisfied of twin conditions, namely, (i) the order 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 is prejudicial of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial 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 prejudic to the interests of the Revenue. If erroneous but is not prejudicial to the Revenue ial to the Revenue or if it is not erroneous but it is prejudicial to the Revenue or if it is not erroneous but it is prejudicial to the Revenue – recourse cannot be recourse cannot be had to Sec.263 (1) of the Act. had to Sec.263 (1) of the Act. b) Every loss of revenue as a consequence of an order of the Assessing Officer b) Every loss of revenue as a consequence of an order of the Assessing Officer b) Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the int cannot be treated as prejudicial to the interests of the Revenue. For example, erests of the Revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it tax Officer adopted one of the courses permissible in law and it tax Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue: or where two views are possible and the Income has resulted in loss of Revenue: or where two views are possible and the Income has resulted in loss of Revenue: or where two views are possible and the Income- tax Officer has taken one view with which the Commissioner d tax Officer has taken one view with which the Commissioner does not agree, it oes not agree, it cannot be treated as an erroneous order prejudicial to the interests of the cannot be treated as an erroneous order prejudicial to the interests of the cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income Revenue, unless the view taken by the Income-tax Officer is unsustainable in law. tax Officer is unsustainable in law. c) To invoke suomotu revisional powers to reopen a concluded assessment under c) To invoke suomotu revisional powers to reopen a concluded assessment under c) To invoke suomotu revisional powers to reopen a concluded assessment under Sec.263, the Commissioner must give reasons; that a bare reiteration by him that c.263, the Commissioner must give reasons; that a bare reiteration by him that c.263, the Commissioner must give reasons; that a bare reiteration by him that the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the 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; that the reasons must be such as to show interests of the Revenue, will not suffice; that the reasons must be such as to show interests of the Revenue, will not suffice; that the reasons must be such as to show that the and must irresistibly lead to the conclusion that the order of the Income the and must irresistibly lead to the conclusion that the order of the Income the and must irresistibly lead to the conclusion that the order of the Income Tax Officer was not only erroneous but was prejudicial to the interests of the Tax Officer was not only erroneous but was prejudicial to the interests of the Tax 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 givin elaborate judgment giving detailed reasons in respect of each and every g detailed reasons in respect of each and every disallowance, deduction, etc., it is incumbent upon the Commissioner not to disallowance, deduction, etc., it is incumbent upon the Commissioner not to disallowance, deduction, etc., it is incumbent upon the Commissioner not to exercise his suomotu revisional powers unless supported by adequate reasons for exercise his suomotu revisional powers unless supported by adequate reasons for exercise his suomotu revisional powers unless supported by adequate reasons for doing so; that if a query is raised during the cours doing so; that if a query is raised during the course of the scrutiny by the e of the scrutiny by the Assessing Officer, which was answered to the satisfaction of the Assessing Officer, Assessing Officer, which was answered to the satisfaction of the Assessing Officer, Assessing Officer, which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer were reflected in the assessment order, this but neither the query nor the answer were reflected in the assessment order, this but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the would not by itself lead to the conclusion that the order of the Assessing Officer Assessing Officer called for interference and revision. called for interference and revision. e) The Commissioner cannot initiate proceedings with a view to start fishing and e) The Commissioner cannot initiate proceedings with a view to start fishing and e) The Commissioner cannot initiate proceedings with a view to start fishing and roving inquiries in matters or orders which are already concluded; that the roving inquiries in matters or orders which are already concluded; that the roving inquiries in matters or orders which are already concluded; that the department cannot be permitted to begin department cannot be permitted to begin fresh litigation because of new views fresh litigation because of new views they entertain on facts or new circumstance; that if this is permitted, litigation they entertain on facts or new circumstance; that if this is permitted, litigation they entertain on facts or new circumstance; that if this is permitted, litigation would have no end except when legal ingenuity is exhausted would have no end except when legal ingenuity is exhausted f) Whether there was application of mind before allowing the expenditure in f) Whether there was application of mind before allowing the expenditure in f) Whether there was application of mind before allowing the expenditure in question has to be seen; that if there was an inquiry, even inadequate that would question has to be seen; that if there was an inquiry, even inadequate that would question 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 Sec.263 not by itself give occasion to the Commissioner to pass orders under Sec.263 not by itself give occasion to the Commissioner to pass orders under Sec.263 merely because he has a different opinion in the matter; that it is only in cases of merely because he has a different opinion in the matter; that it is only in cases of merely because he has a different opinion in the matter; that it is only in cases of lack of inquiry that such a course of action would be open; that an assessment iry that such a course of action would be open; that an assessment iry that such a course of action would be open; that an assessment order made by the Income Tax Officer cannot be branded as erroneous by the order made by the Income Tax Officer cannot be branded as erroneous by the order made by the Income Tax Officer cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been Commissioner simply because, according to him, the order should have been Commissioner simply because, according to him, the order should have been written more elaborately; there must be written more elaborately; there must be some prima facie material on record to some prima facie material on record to show that the tax which was lawfully exigible has not been imposed or that by the show that the tax which was lawfully exigible has not been imposed or that by the show that the 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 application of the relevant statute on an incorrect or incomplete interpretation, a application of the relevant statute on an incorrect or incomplete interpretation, a lesser tax than what was just, has been imposed. lesser tax than what was just, has been imposed. g) The power of the Commissioner under Sec.263 (1) is not Commissioner is The power of the Commissioner under Sec.263 (1) is not Commissioner is The power of the Commissioner under Sec.263 (1) is not Commissioner is entitled to examine any other records which are available at the time of entitled to examine any other records which are available at the time of entitled to examine any other records which are available at the time of examination by him and to take into consideration even those events which arose examination by him and to take into consideration even those events which arose examination by him and to take into consideration even those events which arose subsequent to the order of asse subsequent to the order of assessment.

9.2. Now we examine the following judgements Now we examine 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 )

14 ITA No. 840/Kol/2019 Assessment Year: 2014-15 Skan Enterprise It was held that revisionary power u/s 263 is conferred on the Commissioner/Director of It was held that revisionary power u/s 263 is conferred on the Commissioner/Director of It was held that revisionary power u/s 263 is conferred on the Commissioner/Director of Income Tax when an order passed by the lower authority is erroneous and prejudicial to Income Tax when an order passed by the lower authority is erroneous and prejudicial to Income Tax when an order passed by the lower authority is erroneous and prejudicial to the interest of the Revenue. the interest of the Revenue. Orders which are passed without inquiry or investiga Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interest of the Revenue, but orders which are treated as erroneous and prejudicial to the interest of the Revenue, but orders which are treated as erroneous and 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 passed after inquiry/investigation on the question/issue are not per se or normally treated passed after inquiry/investigation on the question/issue are not per se or normally treated as erroneous and prejudicial to the interest of the Revenue becau as 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 deeper or authority feels and opines that further inquiry/investigation was required or deeper or authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken. 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 an to the first appellate authority against an order passed by the Assessing Officer. S. 263 has been enacted to empower the CIT to order passed by the Assessing Officer. S. 263 has been enacted to empower the CIT to 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 Officer, if two exercise power of revision and revise any order passed by the Assessing Officer, if two exercise power of revision and revise any order passed by the Assessing Officer, if two cumulative conditions are satisfied. Fi cumulative conditions are satisfied. Firstly, the order sought to be revised should be rstly, the order sought to be revised should be erroneous and secondly, it should be prejudicial to the interest of the Revenue. The erroneous and secondly, it should be prejudicial to the interest of the Revenue. The erroneous and secondly, it should be prejudicial to the interest of the Revenue. The expression "prejudicial to the interest of the Revenue" is of wide import and is not expression "prejudicial to the interest of the Revenue" is of wide import and is not expression "prejudicial to the interest of the Revenue" is of wide import and is not confined to merely loss of tax. The te confined to merely loss of tax. The term "erroneous" means a wrong/incorrect decision rm "erroneous" means a wrong/incorrect decision deviating from law. This expression postulates an error which makes an order deviating from law. This expression postulates an error which makes an order deviating from law. This expression postulates an error which makes an order unsustainable in law. The Assessing Officer is both an investigator and an adjudicator. If the Assessing Officer as The Assessing Officer is both an investigator and an adjudicator. If the Assessing Officer as The Assessing Officer is both an investigator and an adjudicator. If the Assessing Officer as an adjudicator decides a question or aspect and makes a wrong assessment which is decides a question or aspect and makes a wrong assessment which is decides a question or aspect and makes a wrong assessment which is unsustainable in law, it can be corrected by the Commissioner in exercise of revisionary unsustainable in law, it can be corrected by the Commissioner in exercise of revisionary unsustainable in law, it can be corrected by the Commissioner in exercise of revisionary power. As an investigator, it is incumbent upon the Assessing Officer to investigate the power. As an investigator, it is incumbent upon the Assessing Officer to investigate the power. As an investigator, it is incumbent upon the Assessing Officer to investigate the facts required to be examined and verified to compute the taxable income. If the Assessing red to be examined and verified to compute the taxable income. If the Assessing red to be examined and verified to compute the taxable income. If the Assessing Officer fails to conduct the said investigation, he commits an error and the word Officer fails to conduct the said investigation, he commits an error and the word Officer fails to conduct the said investigation, he commits an error and the word "erroneous" includes failure to make the enquiry. In such cases, the order becomes "erroneous" includes failure to make the enquiry. In such cases, the order becomes "erroneous" includes failure to make the enquiry. In such cases, the order becomes erroneous because enquiry or verification has not been made and not because a wrong ecause enquiry or verification has not been made and not because a wrong ecause enquiry or verification has not been made and not because a wrong order has been passed on merits order has been passed on merits. Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion 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 conduct and himself decide that the order is erroneous, by conducting necessary enquiry, if ing necessary enquiry, if required and necessary, before the order under s. 263 is passed. In such cases, the order of required and necessary, before the order under s. 263 is passed. In such cases, the order of required and necessary, before the order under s. 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law the Assessing Officer will be erroneous because the order passed is not sustainable in law the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT can and the said finding must be recorded. CIT cannot remand the matter to the Assessing not remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. Officer to decide whether the findings recorded are erroneous. In cases where there is In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. that the order/inquiry made is erroneous. This can happen if an enquiry and verification This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by is conducted by the CIT and he is able to establish and show the error or mistake made by is conducted by the CIT and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in Law. In some cases possibly the Assessing Officer, making the order unsustainable in Law. In some cases possibly the Assessing Officer, making the order unsustainable in Law. In some cases possibly though rarely, the CIT can also s though rarely, the CIT can also show and establish that the facts on record or inferences how and establish that the facts on record or inferences drawn from facts on record per se drawn from facts on record per se justified and mandated further enquiry or investigation justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said but the Assessing Officer had erroneously not undertaken the same. However, the said but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, u finding must be clear, unambiguous and not debatable. The matter cannot be remitted for The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding a fresh decision to the Assessing Officer to conduct further enquiries without a finding a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. that the order is erroneous. Finding that the order is erroneous is a condition or 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 requirement which must be satisfied for exercise of jurisdiction under s. 263 of the Act. In requirement which must be satisfied for exercise of jurisdiction under s. 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean such matters, to remand the matter/issue to the Assessing Officer would imply and mean such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not exami the CIT has not examined and decided whether or not the order is erroneous but has ned 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 exercising jurisdiction under s. 263 This distinction must be kept in mind by the CIT while exercising jurisdiction under s. 263 This distinction must be kept in mind by the CIT while exercising jurisdiction under s. 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to of the Act and in the absence of the finding that the order is erroneous and prejudicial to 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 the said section the interest of Revenue, exercise of jurisdiction under the said section is not sustainable. is not sustainable. In most cases of alleged "inadequate investigation", it will be difficult to hold that the order most cases of alleged "inadequate investigation", it will be difficult to hold that the order most cases of alleged "inadequate 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 of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/ erroneous, without CIT conducting verification/inquiry. The order of the Assessing Officer inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only may be or may not be wrong. CIT cannot direct reconsideration on this ground but only may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. when the order is erroneous. An order of remit cannot be passed by the CIT to ask the An order of remit cannot be passed by the CIT to ask the Assessing Officer to decide whether the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order was erroneous. This is not permissible. An

15 ITA No. 840/Kol/2019 Assessment Year: 2014-15 Skan Enterprise order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that order will not become erroneous because on remit, the Assessing Officer may decide that order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefo the order is erroneous. Therefore CIT must after recording reasons hold that the order is re CIT must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the CIT must come to the erroneous. The jurisdictional precondition stipulated is that the CIT must come to the erroneous. The jurisdictional 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 conclusion that the order is erroneous and is unsustainable in law. It may be noticed that conclusion that the order 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 stands at the time the CIT can rely includes not only the record as it stands at the time the CIT can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record as it when the order in question was passed by the Assessing Officer but also the record as it when 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 and state that the relying upon new/additional material/evidence to show and state that the relying upon new/additional material/evidence to show and state that the order of the Assessing Officer is erroneous. 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 As regard the submission on behalf of the Revenue that power under S As regard the submission on behalf of the Revenue that power under Section 263 of the ection 263 of the Act can be exercised even in a case where the issue is debatable, it was held that the case Act can be exercised even in a case where the issue is debatable, it was held that the case Act can be exercised even in a case where the issue is debatable, it was held that the case of CIT vs. M. M. Khambhatwala was not applicable. The observation that the of CIT vs. M. M. Khambhatwala was not applicable. The observation that the 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 Commissioner can exercise power under Section 263 of the Act even in a Commissioner can exercise power under Section 263 of the Act even in a case were the issue is debatable was a mere passing remark which is again contrary to the view taken issue is debatable was a mere passing remark which is again contrary to the view taken issue is debatable was a mere passing remark which is again contrary to the view taken by the Apex Court in thecase of Malabar Industrial Company Ltd. & Max India Ltd. If the by the Apex Court in thecase of Malabar Industrial Company Ltd. & Max India Ltd. If the by the Apex Court in thecase of Malabar Industrial Company Ltd. & Max India Ltd. If the Assessing Officer has taken a possible view, it cannot be said that Assessing Officer has taken a possible view, it cannot be said that the view taken by him is the view taken by him is erroneous nor the order of the Assessing Officer in that case can be set aside in revision. It erroneous nor the order of the Assessing Officer in that case can be set aside in revision. It erroneous nor the order of the 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. has to be shown unmistakably that the order of the Assessing Officer is unsustainable. has to be shown unmistakably that the order of the Assessing Officer is unsustainable. Anything short of that would not clothe the CIT Anything short of that would not clothe the CIT with jurisdiction to exercise power under with jurisdiction to exercise power under Section 263 of the Act. CIT vs. M. M. Khambhatwala reported in 198 ITR 144; CIT vs. Section 263 of the Act. CIT vs. M. M. Khambhatwala reported in 198 ITR 144; CIT vs. Section 263 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 Industrial Ralson Industries Ltd. reported in 288 ITR 322 (SC), not applicable; Malabar Industrial Ralson Industries Ltd. reported in 288 ITR 322 (SC), not applicable; Malabar Industrial Co. Ltd. v. CIT reported in 243 ITR 83, re Co. Ltd. v. CIT reported in 243 ITR 83, relied on. (Para 72) As regard the third question as to whether the assessment order was passed by the As regard the third question as to whether the assessment order was passed by the As regard the third question as to whether the assessment order was passed by the Assessing Officer without application of mind, it was held that the Court has to start with Assessing Officer without application of mind, it was held that the Court has to start with 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. the presumption that the assessment order was regularly passed. There is evidence to There is evidence to show that the assessing officer had required the assessee to answer 17 questions and to show that the assessing officer had required the assessee to answer 17 questions and to show that the assessing officer had required the assessee to answer 17 questions and to file documents in regard thereto. It is difficult to proceed on the basis that the 17 file documents in regard thereto. It is difficult to proceed on the basis that the 17 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. questions raised by him did not require application of mind. Without application of mind Without application of mind the questions raised by him in the annexure to notice under Section 142 (1) of the Act the questions raised by him in the annexure to notice under Section 142 (1) of the Act the questions raised by him in the annexure to notice under Section 142 (1) of the Act could not have been formulated. The Assessing Officer was required to examine the return could not have been formulated. The Assessing Officer was required to examine the return could not have been formulated. The Assessing Officer was required to examine the return filed by the assessee in order to ascertain his inc filed by the assessee in order to ascertain his income and to levy appropriate tax on that ome and to levy appropriate tax on that basis. When the Assessing Officer was satisfied that the return, filed by the assessee, was in basis. When the Assessing Officer was satisfied that the return, filed by the assessee, was in basis. When the 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 satisfied. On accordance with law, he was under no obligation to justify as to why was he satisfied. On accordance with law, he was under no obligation to justify as to why was he satisfied. On the top of that the Assessing O the top of that the Assessing Officer by his order dated 28th March, 2008 did not adversely March, 2008 did not adversely affect any right of the assessee nor was any civil right of the assessee prejudiced. He was affect any right of the assessee nor was any civil right of the assessee prejudiced. He was 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 reasons. The fact, that all requisite papers were as such under no obligation in law to give reasons. The fact, that all requisite papers were as such under no obligation in law to give reasons. The fact, that all requisite papers were summoned and thereafter the matter was heard from time to time coupled with the fact nd thereafter the matter was heard from time to time coupled with the fact nd thereafter the matter was heard from time to time coupled with the fact that the view taken by him is not shown by the revenue to be erroneous and was also that the view taken by him is not shown by the revenue to be erroneous and was also that the view taken 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 considered both by the Tribunal as also by us to be a possible view, strengthens the considered both by the Tribunal as also by us to be a possible view, strengthens the presumption under Clause (e) of Section 114 of the Evidence Act. A prima facie evidence, under Clause (e) of Section 114 of the Evidence Act. A prima facie evidence, under Clause (e) of Section 114 of the Evidence Act. A prima facie evidence, on the basis of the aforesaid presumption, is thus converted into a conclusive proof of the on the basis of the aforesaid presumption, is thus converted into a conclusive proof of the on 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 mind. fact that the order was passed by the assessing officer after due application of mind. 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 No. 116 /Coch/ 2012; CIT vs. Infosys Meerut Roller Flour Mills Pvt. Ltd. vs. C.I.T., ITA No. 116 /Coch/ 2012; CIT vs. Infosys Meerut Roller Flour Mills Pvt. Ltd. vs. C.I.T., ITA No. 116 /Coch/ 2012; CIT vs. Infosys Technologies Ltd., 341 ITR 293 (Karnataka); S.N. Mukherjee vs. Union of India, AIR 1990 Technologies Ltd., 341 ITR 293 (Karnataka); S.N. Mukherjee vs. Union of India, AIR 1990 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 Works Ltd. Vs. CIT, SC 1984; A. A. Doshi vs. JCIT, 256 ITR 685; Hindusthan Tin Works Ltd. Vs. CIT, SC 1984; A. A. Doshi vs. JCIT, 256 ITR 685; Hindusthan Tin Works Ltd. Vs. CIT, 275 ITR 43 (Del), distinguished. (Paras 90-92, 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) A reference to the provisions of s. 263 shows that jurisdiction thereunder can be exercised A reference to the provisions of s. 263 shows that jurisdiction thereunder can be exercised A reference to the provisions of s. 263 shows that jurisdiction thereunder can be exercised if the CIT finds that the order of th if the CIT finds that the order of the AO was erroneous and prejudicial to the interest of e AO was erroneous and prejudicial to the interest of

16 ITA No. 840/Kol/2019 Assessment Year: 2014-15 Skan Enterprise Revenue. Mere audit objection and merely because a different view could be taken, were Revenue. Mere audit objection and merely because a different view could be taken, were 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 prejudicial to the interest of not enough to say that the order of the AO was erroneous or prejudicial to the interest of not enough to say that the order of the AO was erroneous or prejudicial to the interest of the Revenue. The jurisdi the Revenue. The jurisdiction could be exercised if the CIT was satisfied that the basis for ction could be exercised if the CIT was satisfied that the basis for exercise of jurisdiction existed. No rigid rule could be laid down about the situation when exercise of jurisdiction existed. No rigid rule could be laid down about the situation when exercise of jurisdiction existed. No rigid rule could be laid down about the situation when the jurisdiction can be exercised. Whether satisfaction of the CIT for exercising the jurisdiction can be exercised. Whether satisfaction of the CIT for exercising the jurisdiction can be exercised. Whether satisfaction of the CIT for exercising jurisdiction was called for or not, has to be decided having regard to a given fact was called for or not, has to be decided having regard to a given fact was called for or not, has to be decided having regard to a given fact situation. In the present case, the Tribunal has held that the assessee had disclosed that situation. In the present case, the Tribunal has held that the assessee had disclosed that situation. In the present case, the 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 out of sale consideration, a sum of Rs. 1 lakh was to be received for sale of permit. If 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 error in the view taken by the AO and no case was made out for invoking so, there was no error in the view taken by the AO and no case was made out for invoking so, there was no error in the view taken by the AO and no case was made out for invoking jurisdiction under s. 263. jurisdiction under s. 263. 10. In view of the above discussion and applying the proposition of law laid down in In view of the above discussion and applying the proposition of law laid down in In view of the above discussion and applying the proposition of law laid down in the above case law to the facts of the case on the above case law to the facts of the case on hand, we have to necessarily hold that the hand, we have to necessarily hold that the exercise of revisionary power by the ld. Pr. CIT, u/s 263 of the Act, is bad in law. Hence exercise of revisionary power by the ld. Pr. CIT, u/s 263 of the Act, is bad in law. Hence exercise of revisionary power by the ld. Pr. CIT, u/s 263 of the Act, is bad in law. Hence we quash the same.

Kolkata, the Kolkata, the 18th day of March, 2020. .

Sd/- Sd/- [Aby T. Varkey] [J. Sudhakar Reddy J. Sudhakar Reddy] Judicial Member Accountant Member Accountant Member Dated : 18.03.2020 {SC SPS}

ITA No. 840/Kol/2019 Assessment Year: 2014-15 Skan Enterprise Copy of the order forwarded to: 1. Skan Enterprise C/o. Subash Agarwal & Associates, Advocates C/o. Subash Agarwal & Associates, Advocates Siddha Gibson 1, Gibson Lane Suite 213 2nd Floor Kolkata – 700 069 2. Pr. Commissioner of Income Tax Pr. Commissioner of Income Tax-12, Kolkata 3.CIT(A)- 4. CIT- , 5. CIT(DR), Kolkata Benches, Kolkata.