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Income Tax Appellate Tribunal, LUCKNOW BENCH “B”, LUCKNOW
(A) This is an appeal preferred by the assessee against the order of the Ld. Principal Commissioner of Income Tax [hereinafter referred to as the “PCIT”], Bareilly dated 23.03.2022 for assessment year 2017-18 passed under section 263 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”). The grounds of appeal of the assessee are as under: - “The Learned Commissioner of Income Tax Bareilly has erred in initiating and completing the revisionary proceedings u/s 263 of the Act in the hands of the assessee, and setting aside the case to the Assessing officer, with total disregard to the facts and circumstances of the case, and is untenable under the law. The CIT erred in setting aside the assessment made vide order under section 143(3) dated 18/12/2019 and passing an order under section 263 of the Act on the grounds that the original ‘assessment order passed under section 143(3) was erroneous and prejudicial to the interest of the revenue and directing AO to frame fresh assessment order (de novo) after giving reasonable opportunity of hearing to the appellants.
The Learned Commissioner of Income Tax Bareilly has further failed to appreciate that the original assessment order was passed by the Assessing officer after considering all the issues mentioned in his show cause notice and after making due enquiries, and thus the case was not the one of lack of enquiry by the Assessing officer. The Id. Pr. CIT erred in law as well as on the facts of the case in wrongly setting aside the assessment order dated 18/12/2019 despite there being complete application of mind by the AO on the subjected issues and it was nothing but a case of change of opinion, based on which, assumption of jurisdiction u/s 263 is not permissible. The impugned order dated 23/03/2022 therefore, lacks valid jurisdiction u/s 263 of the Act and hence, the same kindly be quashed. The Learned Commissioner of Income Tax Bareilly further failed to appreciate that where there were two possible views and a logical view had been taken by the Assessing officer in the original assessment proceedings, the revisionary proceedings could not be initiated to Substitute his own view. That the finding of learned Principal Commissioner of Income Tax that order of the learned Assessing Officer is erroneous and prejudicial to the interest of revenue is factually incorrect, legally misconceived, contrary to evidence on record; and in any case is vague, based on Surmiseful considerations; and therefore unsustainable That the learned Principal Commissioner of Income Tax has erred in holding that it is a case of "lack of enquiry" and, further failing to appreciate that alleged inadequate enquiry in the manner suggested without any independent evidence and, without any further enquiries by him cannot be a basis for assumption of jurisdiction u/s 263 of the Act. The Learned Commissioner of Income Tax Bareilly has without conducting any independent enquiries has held the order to be erroneous and prejudicial to the interest of the revenue, has set aside the assessment back to the file of the Assessing officer with total disregard to the facts and circumstances of the case. The CIT has failed to appreciate that powers of revision u/s 263 cannot be exercised for redoing the investigation, rather the CIT ought to have done the investigation himself before restoring the matter to the AO. The Learned CIT has further ignored that in view of the provisions of explanation 2 of section 263, it is incumbent to point out what more enquiries would the AO ought to have conducted. That the learned Pr. Commissioner of Income Tax has also failed to appreciate that, u/s 263 of the Act, an order of assessment cannot be set- aside to simply to make further enquiries and thereafter pass fresh order of assessment and as such, impugned order is contrary to law and hence, unsustainable. The learned Principal Commissioner of Income Tax has failed to appreciate that surmises, conjecture and suspicion could not be a basis much less a valid basis to invoke section 263 of the Act. That the learned Principal Commissioner of Income Tax has framed the impugned order Without granting sufficient opportunity to the appellant and therefore the order made is illegal, invalid and, vitiated order Prayer - It is therefore prayed that, impugned order dated 23.3.2022 under section Page 3 of 33 263 of the Act be held to be without jurisdiction and, therefore be quashed and appeal of the appellant be allowed. The assessee’s case does not fall within the mischief of section 263 and As such the order is bad in law and the same is liable to be cancelled. That the Appellant craves leave to amend alters, add or forego any of the above grounds.” (B) In this case, the assessment order dated 18.12.2019 was passed under section 143(3) of the Act whereby the assessee’s total income was determined at Rs.95,73,830/-. In the assessment order, the following observation was recorded by the Assessing Officer: - “3. In the scrutiny, the point which was identified with regards to real estate business with high closing stock, higher turnover reported in service tax return as compared to ITR, Higher turnover reported in service tax return as compared to ITR, and large increase in unsecured loans during the year. On these points categorical explained was called from the assessee and the same has been submitted by him, which has been placed on record.”
(B.1) Vide impugned order dated 23.03.2022 of the PCIT, the assessment order was set aside to be framed denovo as per law by the Assessing Officer. In the aforesaid order dated 23.03.2022 passed under section 263 of the Act, at paragraph no. 3, the Ld. PCIT has stated that the assessee filed submissions during the proceedings under section 263 of the Act. However, there is no discussion in the aforesaid order about what submissions were made by the assessee, and why the Ld. PCIT did not agree with the submissions. The relevant part of the impugned order dated 23.03.2022 passed under section 263 of the Act is reproduced as under: - “3 Thereafter, on change of incumbency, fresh notices were issued to the assessee. The assessee during the proceedings filed submissions during the proceedings:
Page 4 of 33 4. I have gone through the submissions of the assessee filed in response to the show cause notice issued u/s 263 of the Act and perused the assessment record. Following observations are made with regard to the assessment order passed by the AO...................” (B.2) The present appeal has been filed by the assessee against the aforesaid impugned order dated 23.03.2022 passed under section 263 of the Act. In the course of appellate proceedings in Income Tax Appellate Tribunal (“ITAT” for short), the following particulars were filed from the assessee’s side: - Paper book -I S. No Particulars 1 Copy of Reply filed on 12.12.2019 along with all enclosures (B.2.1) Further, a copy of order dated 09th July, 2013 of Hon'ble High Court of Delhi in the case of DIT v Jyoti Foundation in Income Tax Appeal No. 267/2013 was also filed from the assessee’s side and reliance was placed on it by the Ld. Counsel for assessee. Moreover, a list of following case laws relied upon by Ld. Counsel for the assessee was also filed from the assessee’s side: - (C) At the time of hearing before us, the Ld. Counsel for assessee submitted that the Assessing Officer had conducted all relevant inquiries. He drew our attention to the observation recorded by the Assessing Officer in paragraph no. 3 of the assessment order [already reproduced in foregoing paragraph no. (B) of this order]. Further, he contended that detailed submissions were made by the assessee in the course of assessment proceedings. In this regard, he drew our attention to the paper book containing copies of notice issued by the Assessing Officer and copy of replies filed by the assessee before the Assessing Officer during the assessment proceedings. He further submitted that the relevant queries were made by the Assessing Officer and the replies submitted by the assessee during the assessment proceedings were brought to the knowledge of the Ld. PCIT during the proceedings under section 263 of the Act, and detailed submissions were also submitted in writing as well as at the time of personal hearing. However, he contended the Ld. PCIT passed the order under section 263 of the Act with pre-mediated and biased mind- Page 15 of 33 set against the assessee, which is clearly evidenced by the fact that there is no discussion in the impugned order dated 23.03.2022 passed by the Ld. PCIT under section 263 of the Act on the submissions made from the assessee’s side and there is no discussion in the aforesaid order under section 263 of the Act of Ld. PCIT, why the Ld. PCIT did not agree with the submissions made from the assessee’s side. Further, the Ld. Counsel for assessee submitted that in the absence of any discussion on assessee submission in the impugned order of the Ld. PCIT, the order was non-speaking order, clearly in violation of principle of natural justice and should be quashed in limine. He drew our attention to the written submissions filed by the assessee in the office of the Ld. PCIT during the proceedings under section 263 of the Act which is reproduced as under: - “The Honorable Principal Commissioner of Income Tax Bareilly Respected Sir Ref- In the matter of Horizon Dwellings Private Limited Bareilly Assessment Year 2017-2018 Sub: - Reply to Your Honours show cause notice u/s 263 of the Income Tax Act 1961 With reference to the above and in compliance to Your Honour’s notice dated 03.12.2020 and 18.11.2021 we most respectfully submit as under - At the very outset it may be explained that the assessee is a private limited company which is engaged in the business of construction and sale of properties and flats. During the year under consideration, the assessee company had one project under the name of Kings Court m Bareilly. The Books of accounts are regularly maintained by the assessee company and duly audited as per the statutory provisions contained in section 44AB of the Income Tax Act 1961. Each and every item of income and expenditure is duly vouched and verifiable. Further, the assessee was completed u/s 143(3) of the act by the assessing officer, after making due enquiries and examination by the assessing officer. It may also be appreciated that the main reasons for selection of the case under scrutiny were “Real Estate business with High Closing Stock”, “Higher turnover in ITR as compared to Service Tax” and “Large increase in Unsecured Loans”, and each and every reason was dealt with by the assessing officer during the course of the proceedings. It is further submitted that the assessee is making submission on legal grounds as well as the merits, which are dealt with at the later part of the reply. The assessee’s case was selected for scrutiny and detailed questionnaires were issued to the assessee from time to time by the learned Assessing officer to which detailed replies were furnished by the assessee.
As per the above mentioned notices issued by your Honour, it is understood that the proceedings u/s 263 have been initiated on the following issues: a. Lack of examination w.r.t. Percentage of Completion Method applicable as per AS-7 b. Sale of properties done by the company under market value c. Lack of examination of Unsecured Loans of the company. The assessee company filed return of income on 07.11.2017, declaring total income to the tune of Rs. 95,73,830/-. The assessee’s case was selected for scrutiny u/s 143(3) of the Act and during the proceedings, under section 143(3) of the Act; the assessing officer examined the details of various expenses and conducted detailed scrutiny. Your Honours kind attention is drawn to the fact that the Assessing officer has made a detailed inquiry by issuing notices under 142(1) of the Act. The inquiry and the documents demanded by the assessing officer, during the scrutiny proceedings were duly furnished/ produced before the Assessing officer during the course of the assessment proceedings. The necessary documents, evidences and explanations that were demanded by the assessing officer had been submitted by the assessee during the scrutiny proceedings itself. The assessing officer after doing detailed examination of the documents, evidences and explanations, passed the order under section 143(3) of the Act, therefore, the order passed by the assessing officer u/s 143(3) dated 18.12.2019 is neither erroneous nor prejudicial to the interest of the Revenue. The Ld. assessing officer has made every kind of inquiry and detailed examination of each and every aspects of the assessee’s case, therefore, it cannot be said that there is a lack of inquiry on the part of the Ld. assessing officer. Your Honour will further appreciate that the main reasons and heads of expenses for which your kind Honour has exercised his jurisdiction under section 263 of the Act, had been examined by the assessing officer in detail during the assessment proceedings under section 143 (3) of the Act, therefore, there was no lack of or improper inquiry on the part of the assessing officer. It is pertinent to mention here that even if the so-called shortfalls pointed out in 263 notice, may not match in verbatim with the requisitions vide 142(1) notice, but the fact remains that during the course of the assessment proceedings and hearings taken place before the Ld. A.O., the assessee submitted all such information and documents, which were necessary and were duly considered before passing the impugned assessment order. After examining and verifying the evidences/details vis-a-vis the queries made in notice U/s 142(1) of the Act, and after hearing the assessee on various dates, the Ld. Assessing officer as an adjudicator passed the assessment order u/s. 143(3) of the Act, assessing the total income as is evidenced from the assessment order. Your Honour will appreciate that it is within the province and jurisdiction of the Assessing officer to decide which points he wants to take up for enquiry and to what extent and, as such, it is a law that the Learned Commissioner of Income Tax cannot interfere with the same and even if Learned Commissioner has such results of enquiries, the resultant order cannot be subjected to revision proceeding. On the facts of the instant case, it would not be out of the context to state that the impugned scrutiny assessment was not lacking any information, search results and directions from higher authorities, in as much as nothing has been recorded to that effect in the assessment order. The assessee wishes to challenge the initiation of the revisionary proceedings based on the following challenges, which are dealt one at a time for clarity: a. Clarification regarding explanation 2 of Section 263 and difference between lack of enquiry and inadequate enquiry b. Where two views are possible and the AO adopts one view with which the CIT does not agree, the order cannot deemed to be erroneous or prejudicial to the interest of the Revenue even if there is a loss of the revenue c. Powers u/s 263 cannot be invoked merely because the CIT had a different opinion on the matter d. The Assessing officer has complete jurisdiction over the extent of inquiry required to be conducted and the CIT cannot invoke the provisions of Section 263 of the Income Tax Act, 1961 to revise the order passed by the assessing officer simply due to the fact that the CIT has an opinion different from that as passed by the assessing officer. Clarification regarding explanation 2 of Section 263 and difference between lack of enquiry and inadequate enquiry There is a clarification provided in Explanation 2 of Section 263 for revisionary proceedings which highlights the fact that there is a difference between inadequate enquiry and lack of enquiry. The explanation deals with the proceedings u/s 263 being valid when the assessing officer has passed the assessment order without making inquiries in the matter. In the given case, the assessing officer has duly made inquiries as well as examined the case at length. Therefore, it cannot be said that no enquiry has been conducted by the assessing officer. As mentioned above, it is completely up to the jurisdiction and opinion of the assessing officer himself to judge the extent to which he wants to examine an issue. The extent to which a matter is discussed in the assessment order is also a judgment matter since it is not necessary that the assessing officer outlines the entire discussion at length in the assessment order passed by him. It is not necessary that the extent of examination of an issue deemed necessary by the PCIT/ CIT would be the same as the assessing officer who was in charge of the case at the time. Reliance to support the contention of the assessee is placed on the following: Supreme Court in the case of Green world Corporation — [2009] 181 Taxman 111 (SC) "43. As such, considering all the facts of the case and legal position emanating from the aforesaid judicial pronouncements, we are of the considered opinion from the assessment in the present case was made by the Assessing Officer after making proper and adequate enquiries as required in the facts of the case and since the claim of the assessee for deduction w/s 80-IA was allowed by her on proper application of mind to the detailed submissions made on behalf of the assessee as well as the other relevant material including the findings of the survey, there was no error in her order as alleged by the learned CIT. On the other hand, the learned CIT held the said assessment to be erroneous mainly on the basis of surmises and conjectures without there being any material to support and substantiate the same and he having virtually reviewed the assessment order passed by the Assessing Officer applying his mind again to the entire material available on record and by making fresh enquiry brushing aside totally the examination made by the Assessing Officer, we hold that his impugned order passed u/s 263 was not sustainable in law. The same is, therefore, set aside restoring back the order of the Assessing Officer passed u/s 143(3).
It is worthwhile to note here that the claim of the assessee for deduction w/s 80-IA was allowed by the Assessing Officer in the immediately preceding years involving identical facts and circumstances and this material and relevant aspect again appears to have been ignored by the learned CIT while exercising his powers conferred u/s 263. On the contrary he directed the Assessing Officer by issuing notices u/s 148 and also directed him to examine the returns filed by the assessee for the subsequent years by his impugned order which was beyond the jurisdiction conferred on him u/s 263 since the same was confined only to the year for which the assessment order was sought to be revised. We, therefore, direct that the said directions pertaining to the years other than the year under consideration as contained in the impugned order be omitted. CIT v. Goyal Private Family Specific Trust, (171 ITR 698) (AIL) “6. There is no finding by the Commissioner that the Income-tax Officer reached an erroneous conclusion and that, on the facts and circumstances of the case, the conclusion would have been different. The orders of the Income-tax Officer may be brief and cryptic, but that by itself is not sufficient reason to brand the assessment orders as erroneous and prejudicial to the interest of the Revenue. Writing an order in detail may be a legal requirement, but the order not fulfilling this requirement, cannot be said to be erroneous and prejudicial to the interest of the Revenue. It was for the Commissioner to point out as to what error was committed by the Income-tax Officer in having reached the conclusion that the income of the trust was exempt in its hands and was assessable only in the hands of the beneficiaries. The Commissioner having failed to point out any error, no error can be inferred from the orders of the Income-tax Officer for the simple reason that they are bereft of details. If the order is not erroneous, then it cannot be prejudicial to the interest of the Revenue. There is nothing to show in the order of the Commissioner that the Income-tax Officer would have reached a different conclusion had he passed a detailed order. So, the conclusion of the Commissioner that the orders of the Income-tax Officer are erroneous and prejudicial to the interest of the Revenue are based merely on suspicion and surmises in the absence of any enquiry having been made by him.
In the income-tax assessments, all questions boil down to this, whether income has been properly determined and whether the correct rate of tax has been applied. The Commissioner does not say that the income was higher or that it was assessed on a wrong entity or at a low rate or that any exemption was wrongly allowed. In the absence of such a finding, the assessment orders cannot be said to be erroneous and prejudicial to the interest of the Revenue.
For the above reasons, we are not inclined to direct the Tribunal to state the case on any question proposed by the Revenue. The applications are, therefore, dismissed, but there will be no order as to costs.” Supreme Court in the case of PCIT vs. Shree Gayatri Associates — [2019] 106 taxmann.com 31 (SC) Where Commissioner passed a revisional order making addition to assessee’s income under section 69A in respect of on-money receipts, however, said order was set aside by Tribunal holding that AO had made detailed enquiries in respect of on- money receipts and said view was also confirmed by High Court, SLP filed against decision of High Court was to be dismissed Supreme Court in the case of PCIT vs. Sumatichand Tolamal Gouti- [2019] 111 taxmann.com 287 (SC) Where High Court upheld Tribunal’s order holding that AO had made detailed enquiries while allowing assessee’s claim for deduction of business expenditure and, thus, revisional order passed by Commissioner was not sustainable, SLP filed against High Court’s order dismissed In Torrent Pharmaceuticals Ltd. v.s. DCIT(2018) 173 ITD 130 (Ahd) (Trib)QTA No. 165/Ahd/2018 dt 8.8.18), the Tribunal has held that although Section 263 is very wide, the revisional power cannot be exercised arbitrarily. That Section 263 has its limits and cannot apply to each and every inadequacy in inquiries or verification by the AO. The scope of CBDT Circular was explained in the order and the Circular notes that the issue of revision under Section 263 is a contentious one and that is why the explanation is introduced to deem certain order to be erroneous and prejudicial to the interests of the Revenue. That the object of insertion of the Explanation is probably to avoid the AO from passing orders of assessment without any inquiry in a routine manner or has not applied his mind on important aspects. That some inquiry is necessary to be done by the CIT before he proposes to revise the order of the AO. In a nutshell, that the inquiry or verification which is not made must have an important bearing on the issue involved in the order of assessment and if certain inquiries not being too relevant are not made that would not per se confer power on the Commissioner to revise the order. CIT vs. Leisure Wear Exports Ltd. [2010] 46 DTR (Del) 97 “Where the assessment order has been passed by the AO after taking, into account assessee's submissions and documents furnished b him and no material is brought on record b the CIT which shows that there was any discrepancy or falsity in the evidence furnished b the assessee the order the AO cannot be set aside or making deep enquiry only on the presumption that something new may come out.” CIT v. Ganpati Ram Bishnoi, (296 ITR 292) (Raj.); “15. Undoubtedly, the jurisdiction under section 263 is wide and is meant to ensure that due revenue ought to reach the public treasury and if it does not reach on account of some mistake of law or fact committed by the assessing officer, the Commissioner of income tax can cancel that order and require the concerned assessing officer to pass a fresh order in accordance with law after holding a detailed enquiry. But when enquiry in fact has been conducted and the assessing officer has reached a particular conclusion, though reference to such enquiries has not been made in the order of assessment, but the same is apparent from record of proceedings, in the present case, without anything to say how and why the enquiry conducted by the assessing officer was not in accordance with law, the invocation of jurisdiction by the Commissioner of income tax was unsustainable. As the exercise of jurisdiction by the Commissioner of income tax is founded on no material liable to be set aside. Jurisdiction under section 263 cannot be invoked for making short enquiries or to go into the process of assessment again and again really merely on the basis that more enquiry or to have been filed conducted to find something.
The finding of the tribunal the income tax officer has passed the assessing over after relevant enquiries and considering the aspect of the matter required by the commissioner of income tax to be considered by him is a finding of fact and on the basis of which the jurisdiction is seen by the Commissioner of income tax being non-existent must be held to be not sustainable. Consequently, the appeal fails and is here by dismissed.” CIT v. Unique Autofelts (P) Ltd., (30 DTR 231) (P&H); “5. From the finding of the Tribunal, it is clear that the assessee had given proper explanation by filing the necessary confirmations. In view of such a finding, the Tribunal rightly held power under section 263 of Income Tax Act could be exercised where view taken by an assessing officer was erroneous. While exercising such power, the commissioner was bound to take into account all relevant facts. If order invoking the said power receipts proceeds on an erroneous assumption, the same could be set aside by the Tribunal. Finding of the tribunal is not shown to be perverse. No substantial question of law rises.
The appeal was dismissed” Hari lron Trading Co. v. CIT, (263 ITR 437) P&H); “....4 bare perusal of the aforesaid provisions shows that the CIT can exercise powers under Sub-section (1) of Section 263 of the Act only after examining "the record of any proceedings under the Act". The expression 'record' has also been defined in Clause (b) of the Explanation so as to include ail records relating to any proceedings available at the time of examination by the CIT. Thus, it is not only the assessment order but the entire record which has to be examined before arriving at a conclusion as to whether the AO had examined any issue or not. The assessee has no control over the way an assessment order is drafted. The assessee on its part had produced enough material on record to show that the matter had been discussed in detail by the AO. The least that the Tribunal could have done was to refer to the assessment record to verify the contentions of the assessee. Instead of doing that, the Tribunal has merely been swayed by the fact that the AO has not mentioned anything in the assessment order. During the course of assessment proceedings, the AO examines numerous issues. Generally, the issues which are accepted do not find mention in the assessment order and only such points are taken note of on which the assessee's explanations’ are rejected and additions/disallowances are made. As already observed, we have examined the records of the case and find that the AO had made full inquiries before accepting the claim of the AO (assessee) qua the amount of Rs. 10 lacs on account of discrepancy in stock. Not only this, he has even gone a step further and appended an office note with the assessment order to explain why the addition for allegation discrepancy in stock was not being made. In the absence of any suggestion by the CIT as to how the inquiry was not proper, we are unable to uphold the action taken by him under Section 263 of the Act.” Delhi High Court in the case of CIT v. Vodafone Essar South Ltd. — [2012] 28 taxmann.com 273 (Delhi) “10. This Court is conscious that an earlier bench of this Court in CIT Vs. Sunbeam Auto Ltd, (2011) 332 ITR 167, had held that if there is some enquiry by the A.O. in the original proceedings even if inadequate that cannot clothe the Commissioner with jurisdiction under Section 263 merely because he can form another opinion. It was emphasized here that the notice and questionnaire given to the assessee which were duly replied, were evidence of full and due enquiry about this expenditure. After satisfying himself that they were in fact revenue expenditure, the assessees claim was upheld under Section 37. The Court in Sunbeam Auto (supra) held as follows : “Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between “lack of inquiry" and inadequate inquiry". If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under Section 263 of the Act, merely because he has a different opinion in the matter. It is only in cases of "lack of inquiry".
In the present case, the records reveal that the assessee was specifically queried regarding the nature and character of the one-time regulatory fee paid by it as well as the bank and stamp duty charges. A detailed explanation in the form of statements and other documents required of by the Assessing Officer were produced at the stage of original assessment. Clearly this was not a case of "No Enquiry". The lack of any discussion on this cannot lead to the assumption that the Assessing Officer did not apply his mind. The proceeding in fact shows that Assessing Officer directed his mind specifically on this aspect and then concluded that the expenditure was in the revenue field. Moreover the decision in Comsat Max Ltd. (supra) has ruled that the expenditure was revenue, it constituted one plausible or reasonable view. Under these circumstances, the Commissioner could not have validly exercised his supervisory or revisionary power under Section 263. As far as the other issues ie. bank guarantee charges and stamp duty are concerned, this Court is of the opinion that the decision in India Cements Vs. CIT 60 ITR 52 and Jeewan Lal (1929) Limited Vs. CIT 74 ITR 743, conclude the issue. These expenses had to be regarded as falling properly in revenue filed. Report further notices that CIT (Appeals) did not specifically furnish any reasons to say why the original assessment order was unsupportable in law, in the final order made by him on 30.03.2009.
As a result of the above discussion, this Court is of the opinion that the question of law framed has to be answered in favour of the assessee and against the Revenue. The appeal, being meritless, has to fail and is therefore dismissed.” From the above, it may be inferred that lack of enquiry/ no enquiry is different from adequate enquiry and it is only in case of no enquiry by the Assessing Officer that Pr. CIT/CIT can exercise jurisdiction u/s 263 of the Act and not in case where the Assessing Officer has made enquiries as seems appropriate in the facts and circumstances of the case.
There can also exist differing opinions in a matter since it is a proceeding involving the application of mind and judgment on the part of the assessing officer. When the Assessing Officer takes one of the two views permissible in law and which the Commissioner does not agree with and which results in a loss of revenue, it cannot be treated as erroneous order prejudicial to the interest of revenue, unless the view taken by the Assessing Officer is completely unsustainable in law. Where two views are possible and the AO adopts one view with which the CIT does not agree the order cannot deemed to be erroneous or prejudicial to the interest of the Revenue even if there is a loss of the revenue. Supreme Court in the case of PCIT vs. V. Dhana Reddy & Co. — [2018] 100 taxmann.com 358 (SC) Where High Court upheld Tribunal’s order that while determining assessee’s income in respect of godown receipts on estimate basis, AO had adopted a plausible view and, thus, revisional order passed by Commissioner on said issue was not sustainable, SLP filed against decision of High Court was to be dismissed Karnataka High Court in the case of CIT vs. International Society For Krishna Consciousness — [2020] 117 taxmann.com 799 (SC) Where Assessing Officer after making due enquiries found assesee’s claim for exemption of income as correct and, thus, dropped reassessment proceedings, since view taken by him was one of possible views, impugned revisional order passed under section 263 was to be set aside CIT Vs. Honda Siel Power Products Ltd. [(2010) 6 TAXMANN 15] In cases where the Assessing Officer adopts one of the courses permissible in law or where two views are possible and the Income-tax Officer has taken one view, the Commissioner of Income-tax cannot exercise his powers under Section 263 to differ with the view of the Assessing Officer even if there has been a loss of revenue. Of course, if the Assessing Officer takes a view which is patently unsustainable in law, the Commissioner of Income-tax can exercise his powers under Section 263 where a loss of revenue results as a consequence of the view adopted by the Assessing Officer. CIT v. Hindustan Marketing and Advertising Co. Ltd.,(341 ITR 180) (Del.); "The phrase "prejudicial to the interest of the Revenue" has to be read in 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 prejudicial to the interest of the Revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law. It has been held by this court that where as 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 will be erroneous and prejudicial to the interests of the Revenue. Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) and in Smt. Tara Devi v CIT [1973] 88 ITR 323 (SC). CIT Vs Max India Ltd (2007] 295 ITR 282 (SC) 213 CTR 266 (SC) I. In our view at the relevant time two views were possible on the word "profits" in the proviso to Section 80HHC(3). It is true that vide the 2005 amendment the law has been clarified with retrospective effect by insertion of the word "loss" in the new proviso. We express no opinion on the scope of the said amendment of 2005. Suffice it to state that in this particular case when the order of the Commissioner was passed under Section 263 of the Income Tax Act, 1961, two views on the said word "profits" existed. In our view the matter is squarely covered by the judgment of this Court in the case of Malabar Industrial Co. Ltd. y. CIT reported in (2000) 243 ITR 83; as also by the judgment of the Calcutta High Court in the case of Russell Proverties P. Ltd. v, A. Chowdhury, Addl. CIT .
At this stage we may clarify that under paragraph 10 of the judgment in the case of Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 this Court has taken the view that the phrase judicial to the interests o the revenue " under Section 263 has to be read in conjunction with the expression "erroneous" order the assessing officer. Ever loss o revenue as a consequence o an order o 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 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 which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue , unless the view taken by the Income Tax Officer is unsustainable in law. According to the learned Additional Solicitor General, on an interpretation of the provision of Section 8OHHC 3 as it then stood the view taken by the assessing officer was unsustainable in law and therefore the Commissioner was right in invoking Section 263 of the Income Tax Act. In this connection, he has further submitted that in fact the 2005 amendment which is clarificatory and retrospective in nature itself indicates that the view taken by the assessing officer at the relevant time was unsustainable in law. We find no merit in the said contentions. Firstly, it is not in dispute that when the order of the Commissioner was passed there were two views on the word "profits" in that section. The problem with Section 80HHC is that it has been amended eleven times. Different views existed on the day when the Commissioner passed the above order. Moreover, the mechanics of the section have become so complicated over the years that two views were inherently possible. Therefore, subsequent amendment in 2005 even though retrospective will not attract the provision of Section 263 particularly when as stated above we have to take into account the position of law as it stood on the date when the Commissioner passed the order dated March 5,1997, in purported exercise of his powers under Section 263 of the Income Tax Act.
3. For the above reasons, civil appeals filed by the department stand dismissed. Malabar Industrial Co. Ltd. Vs Commissioner of Income Tax (2000), “where two views are possible and the AO has taken one view with which the Commissioner does not agree, that cannot be treated as erroneous order prejudicial to the interest of the Revenue. It has to be shown that the order of the AO was not in accordance with law, to term it as erroneous. It is also the principle of law, now well accepted, that an order passed by the AO cannot be set aside for making roving inquiry without pointing out any error in his order. The Commissioner has to specifically demonstrate that the order of the AO is erroneous. The power of revision is not meant to be exercised for the purpose of directing the AO to hold another investigation without describing as to how the order of the AO is erroneous, From this it also follows that where the assessment order has been passed by the AO after taking into account the assessee"'s submissions and documents furnished by him and no material whatsoever has been brought on record by the Commissioner which showed that there was any discrepancy or falsity in evidences furnished by the assessee, the order of the AO cannot be set aside for making deep inquiry only on the presumption and assumption that something new may come out. For making a valid order under Section 263 it is essential that the Commissioner has to record an express finding to the effect that order passed by the AO is erroneous which has caused loss to the Revenue. Furthermore, where acting in accordance with law the AO frames certain assessment order, same cannot be branded as erroneous simply because according to the Commissioner, the order should be written more elaborately. All these principles are highlighted in the judgments noted hereinafter."
Powers u/s 263 cannot be invoked merely because the CIT had a different opinion on the matter Ramakant Singh Vs CIT [2011] 8 ITR (Trib) 403 (Pat) It was held, that the questionnaire issued by the Assessing Officer covered all the points raised by the Commissioner in his show cause notice and in the order passed under section 263 and on all these points, reply along with necessary details and evidence was furnished by the assessee before the Assessing Officer in the course of assessment proceedings and hence, it had to be accepted that the Assessing Officer had applied his mind on all these issues and even if such enquiry was inadequate in the opinion of the Commissioner, this did not give power to the Commissioner to pass order under section 263 merely because he had a different opinion on the matter. The order of the Commissioner under section 263 was not sustainable. There is a difference between ‘lack of enquiry’ and ‘inadequate inquiry’. CIT Vs Hero Auto Ltd. (343 ITR 342) If there was inquiry, even inadequate, that would not by itself give occasion to the Commissioner to pass order under section 263 of the Act merely because he has a difference of opinion in the matter. It is only the cases of ‘lack of inquiry’ that such a course of action would be open. The objective of scrutiny assessment u/s. 143(3) is to confirm that the taxpayer has not understated the income or has not computed excessive loss or had not underpaid the tax in any manner. To confirm the above, the Assessing officer carried out a detailed scrutiny of the return of income, as deemed fit, and satisfied himself regarding various claims, deductions etc. made by an assessee in the return of income. Therefore, the exercise aimed at ascertaining the correct income of the assessee has been fulfilled by the Ld. A.O. by exercising his quasi-judicial functions vis-a-vis passing the assessment order u/s. 143(3) of the Act. Therefore, certainly it is not a case wherein adequate enquiries at the assessment stage were not carried out or assessment was made in haste. An opinion formed as a result of these enquiries and verification of the materials is something which is in exclusive domain of the Assessing officer, and it is held in many cases that even if Commissioner does not agree with the results of such enquiries, the resultant order cannot be subjected to revision proceedings. For this, we rely on the decision of Kolkata Bench of Tribunal in the case of Smt. Juthika Kar vs. ITO {I.T.A. No.1128/Kol/2009, wherein it has been held as under Here is a case in which sufficient enquiries were conducted. As learned brother has rightly noted, the Assessing officer called for specific details, confirmations and even copies of bills. It could not, therefore, be said that sufficient enquiries were not conducted. However, what is opinion formed as a result of these enquiries is something which is in exclusive domain of the Assessing officer, and even if Commissioner has such results of enquiries, the resultant order cannot be subjected to revision proceedings. The conclusions arrived at as a result of enquiries cannot be tinkered with in the revision proceedings. The conclusions being drawn up as a result of enquiry is a highly subjective exercise and as to what is appropriate conclusion is something on which perceptions vary from person to persons. These variations in the perceptions of the Assessing officer vis-a-vis that 0 the Commissioner cannot render an order erroneous and prejudicial to the interest o the revenue. The aforesaid position gets further strength from the decision of Hon'ble Calcutta High Court in the case of CIT vs. J.L. Morrison (India) Ltd. (2014) 366 ITR 593 (Cal), the relevant finding of which is applicable to the facts of the present assessee are given below: "85. Whether the assessment order dated March 28, 2008, was passed without application of mind is basically a question of fact. The learned Tribunal has held that the assessment order was not passed without application of mind. The records of the assessment including the order sheets go to show that appropriate enquiry was made and the Assessee was heard from time to time. In deciding the question, the court has to bear in mind the presumption in law laid down in section 114 clause (e) of the Evidence Act: "that judicial and official acts have been regularly performed.
Therefore, the court has to start with the presumption that the assessment order dated March 28, 2008, was regularly passed. There is evidence to show that the Assessing officer had required the Assessee to answer 17 questions and to file documents in regard thereto. If the A.O. cannot be shown to have violated an any form prescribed for writing an assessment order it would not be correct to hold that he acted illegally or without applying his mind". The revisionary proceedings in the instant case are proposed to be initiated on the ground that the assessment was completed without proper enquiries & verification and without examination of books of accounts & other records. It is evident that your Honour has not denied enquiry conducted by the A.O., rather it is stated that not much investigation which should have been done by the A.O. Therefore, the requisite enquiries conducted by the Ld. A.O. would not definitely go to establish that the assessment order has been found to be passed without proper enquiry and in haste, more so as would be evident from the detailed questionnaires issued by the Assessing officer who after thorough examinations of the details and documents and explanations submitted by the assessee passed the assessment order. Therefore, it is not a case on inadequate scrutiny, for that we rely on the judgment of Hon'ble Delhi High Court in the case of CIT vs. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del), wherein it was held that: “if there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Income-tax Act, 1961, merely because he has a different opinion in the matter. It is only in cases of lack of inquiry that such a course of action would be open." On the same facts we also rely on the judgment of the Kolkata Bench of this Tribunal in the case of Chroma Business Ltd. vs. DCIT 82 TTJ 540 (Cal). Further our view is fortified by the decision of the Hon'ble Delhi High Court in the case of CIT vs. Vikas Polymers 341 ITR 537 (Del). Relevant part of the observation in this regard reads as under: "This is for the reason that if a query is raised during the course of scrutiny by the Assessing officer which was answered to the satisfaction of the Assessing officer but neither the query nor the answer was reflected in the assessment order that would not by itself lead to the conclusion that the order of the Assessing officer called for interference and revision." Your Honour will appreciate the fact that provisions of section 263 of the Act do not permit substituting one opinion by another opinion. Placing reliance on the decision of Hon’b le Supreme Court in the case of Gee Vee Enterprises vs ACIT(1975) 99 ITR 375 (SC), where it is held that the Commissioner can regard the order as erroneous on the ground that in the circumstances of the case, the ITO should have made further inquiries before accepting the statement made by the assessee in his return but merely on the basis that some more was to be conducted the assessment order cannot be held as erroneous and prejudicial to the interest of revenue. Hon'ble Allahabad High Court in the case of Krishna Capbox (P) Ltd - [2015] 60 taxmann.com 243 - order pronounced on 23.02.2015 - HEAD NOTE - "Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue (erroneous order) - Assessment year 2008-09 - Assessee filed its return - Case was selected for scrutiny and statutory notice was issued - Assessing Officer made certain queries, which were replied by assessee and after inquiry, being satisfied in respect to queries replied by assessee, Assessing Officer accepted declared income and passed assessment order - Commissioner, however, issued a notice under section 263 on ground that Assessing Officer had not made inquiry on certain aspects and accepted version of assessee without making any inquiry or verification, which was substantially prejudicial to revenue - Accordingly, he partly set aside assessment - Tribunal held that once inquiry was made, a mere non- discussion or non-mention thereof in assessment order could not lead to assumption that Assessing' Officer did not apply his mind or that he had not made inquiry on subject and this would not justify interference by Commissioner issuing notice under section 263 - Whether since department could not place anything to show that findings recorded by Tribunal were perverse or contrary to record invoking revision proceedings was unjustified - Held, yes [Para 13] [In favour of assessee]" Further reliance is placed on the decision of Hon’ble High Court of Delhi in the case of CIT vs Anil Kumar Sinha reported in 335 ITR 83 (Del) wherein it has been held there is a distinction between “lack of inquiry” and “inadequate inquiry”, if there was any inquiry even inadequate, that would not itself give right or occasion to the Commissioner to pass order u/s 263 of the Act merely because he has different opinion in the matter. Further reliance is placed on the decision of Hon’ble High Court of Delhi in the case of CIT vs Hindustan Marketing & Advertising Co. Ltd. Reported in 341 ITR 180 (Del) wherein it has been held that the revisional powers of the Commissioner u/s 263 of the Act are limited and when assessment has been framed after inquiry and there is no error in the order, then the order cannot be revised on the ground that inquiry should have been more detailed or elaborate. Hon'ble Delhi High Court in the case of Ashish Rajpal - [2009] 320 ITR 674 - order pronounced on 14.05.2009 - HEAD NOTE - "Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue - Assessment year 2002-03 - Whether merely because an assessment order does not refer to queries raised by Assessing Officer during course of scrutiny and response of assessee thereto, it can be said that there has been no enquiry and, hence, assessment is erroneous and prejudicial to interest of revenue - Held, no Hon'ble Bench of Indore ITAT in the case of Narottam Mishra reported in 225 ITJ 206, held that "Even this is not the case of the Ld. CIT that certain evidences were overlooked which was very much on record or in the knowledge of the AO. Even this is not the case of Ld. CIT that certain new facts or evidences were brought to the notice of the Revenue Department which were having a direct impact on the income assessed by the AO. Neither there was an escapement of evidence nor there was any evidence now brought to the notice of the revenue department, therefore if that was not the position, then we are not inclined to give our approval to such directions." "It is well settled that if the same inquiry by the Assessing Officer in all original proceedings even if it inadequate that cannot flout the Commissioner with jurisdiction u/s 263 merely because he can form another opinion." The Assessing officer has complete jurisdiction over the extent of inquiry required to be conducted and the CIT cannot invoke the provisions of Section 263 of the Income Tax Act 1961 to revise the order passed by the assessing officer simply due to the fact that the CIT has an opinion different from that as passed by the assessing officer. Reliance for the above mentioned fact is placed on the following: Om Foregoing & Engineering Pvt.Ltd. vs PCIT-1, Kolkata (2017) 12 TMI 100 ITAT, Kolkata: “26.The CIT has made reference to Explanation 2 to sec. 263 of the Act introduced by the Finance Act, 2015. Explanation-2 so introduced sets out cases in which order of the AO can be deemed as erroneous. The said explanation does not dispense with compliance or existence of (i) there being no enquiry made by the Ld. AO; (ii) the AO’s conclusion being contrary to CBDT Circular or (iii) against decision of jurisdictional High Court or Supreme Court. In the present case the CIT in the impugned order has not brought facts to show the existence of absence of enquiry especially when the AO has already concluded that the purchases by the assessee from Jour parties mentioned by the DIT (Investigation) Mumbai in its report were bogus. The decision of the Mumbai and Delhi ITAT in the case of M/s. Shri Narayan Tatu Rane (supra) and M/s. Amira Pure Foods (P) Ltd. (supra) cited by the Ld. AR clearly supports the view that Explanation-2 to sec. 263 of the Act will not be of any assistance to the plea of the revenue unless the facts and circumstances set out there in exists in a given case.” Hon'ble Bombay High Court in the case of CIT vs Gabriel India Ltd held that: "11.The power of suo motu revision under sub-s. (1) of s. 263 is in the nature of supervisory Jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of revision under this sub-section, viz., (i) the order is erroneous; (ii) by virtue of the order being erroneous prejudice has been caused to the interest of the Revenue. It has, therefore, to be considered firstly as to when an order can be said to be erroneous. An order cannot be termed as erroneous unless it is not in accordance with law. If an ITO acting in accordance with law makes certain assessment, the same cannot be branded as erroneous by the Commissioner simply because according to him the order should have been written more elaborately. This section does not visualise a case of substitution of judgment of the Commissioner for that of the ITO, who passed the order, unless the decision is held to be erroneous. Cases may be visualised where ITO while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimates himself The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and, left to the Commissioner, he would have estimated the income at a higher figure than the one determined by the ITO. That would not vest the Commissioner with power to reexamine the accounts and determine the income himself at a higher figure. It is because the ITO has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interest of the Revenue. But that by itself will not be enough to vest the Commissioner with the power of suo motu revision because the first requirement, namely, the order is erroneous, is absent. Similarly if an order is erroneous but not prejudicial to the interest of the Revenue, then also the power of suo motu revision cannot be exercised. Any and every erroneous order cannot be subject-matter of revision because the second requirement also must be fulfilled. There must be some prima facie material on record to show that tax which was law fully eligible has not been imposed or that b the a:slication o the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. There must be material available on record called or by the Commissioner to satisfy him, prima facie, that the aforesaid two requisites are present. If not he has no authority to initiate proceedings or revision. Exercise of power of suo motu revision under such circumstances will amount to arbitrary exercise of power. It is well-settled that when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on records to satisfy it in that regard. Casa Builders Pvt.Ltd. vs PCIT-6 ITAT, Mumbai held that: “11. The phrase ‘prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the AO. Every loss of revenue as a consequence of an order of AO cannot be treated as prejudicial to the interests of the Revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the CiT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the ITO is unsustainable in law. An order of assessment passed by the ITO without making necessary enquiries on certain important points connected with the assessment would be erroneous and prejudicial to the interests of the Revenue When the ITO is expected to make an enquiry of a particular item of income and he does not make an enquiry as expected, that would be a ground for the CIT to interfere with the order passed by the ITO since such an order passed by the ITO is erroneous and prejudicial to the interests of Revenue. Where the ITO had made enquiries in regard to the nature of the credit received by the assessee who had given detailed explanation in that regard by a letter in writing and all these are part of the record of the case and the claim was allowed by the ITO on being satisfied with the explanation of the assessee such decision of the ITO cannot be held to be erroneous simply because in his order he did not make an elaborate discussion in that regard.” Dena Bank Vs PCIT (ITAT Mumbai)
(Mum.) of 2018 Held that; “PCIT had revised assessment order passed u/s 143(3) on four issues. PCIT had questioned deductions allowed towards bad debt written off under the provision of section 36(1)(vii) & (vila), including newly inserted Explanation (2) to section 36(1)(vii); payment towards contribution to gratuity fund and deduction claimed u/s 43B, amount paid to RBI towards penalty for violation of KYC norms and deduction claimed towards provision for wage arrears. According to PCIT, AO had not conducted required enquiries to be conducted under respective provisions of the Act, which rendered the assessment order erroneous, insofar as it was prejudicial to the interest of the revenue. It was held that the conditions to invoke the powers u/s 263 were not satisfied and hence, PCIT was erred in invoking the scope of provisions of 263. Further, assuming for a moment, but not accepting in order to invoke 263, the other conditions, which was to be satisfied was that the order should be prejudicial to the interest of the revenue, because in respect of bad debts claim, if any deduction allowed u/s 36(1) (vii), then when the recovery of the same in subsequent years needed to be offered to tax w/s 41(4). In respect of payment towards contribution to the gratuity fund, whether or not deduction was allowed in full on payment basis in this year, but the same needed to be allowed in subsequent years, if said payment was not allowed during the year under consideration. Likewise, provision for wage arrears was also liable to be allowed, when the actual payment had been made. In this case, assessee had made payment in the subsequent years. Therefore, invocation of jurisdiction u/s 263 on these issues was also incorrect. The assessment order passed by AO was neither erroneous, nor prejudicial to the interest of the revenue.” WITHOUT PREJUDICE TO THE ABOVE MENTIONED LEGAL CHALLENGE, we would also like to furnish point wise response to your Honour on the basis of merit as well. The same is as under:
1. 1. POCM Method justification and working: The detailed working for the Percentage Completion method was provided during assessment on 08.12.2019 in a detailed reply in which the method was explained in Point No. 1.
2. Comparison chart of sale consideration with market value of properties sold during the year The assessee company has made sale of three flats during the year under assessment and the details of the same are as under:
The evidence in the form of sale deeds being too voluminous in size were not able to be uploaded on the e-filing portal due to limitation of size of file allowed to be uploaded with submissions since compression of file size disturbed the clarity of the document to be compressed greatly and hence the same were produced before the assessing officer physically. The assessing officer had made due examination of all the documents and then framed his assessment accordingly. Further, no property has been sold for a consideration less than the market value and hence the provisions of Section 43CA were not attracted. The same fact was explained to the assessing officer during the course of the assessment proceedings.
Details of Unsecured Loans for Rs. 22.90 Crores. The assessee company has shown Unsecured Loans amounting to Rs. 22,90,24,953/- as shown in the Balance Sheet and the Unsecured Loans have been obtained from various entities during the year. Out of the total Unsecured Loans, there were various loans that were merely opening balance from previous years and no transaction between them and the assessee for the year under consideration, the same are as follows:
The above loans were taken purely for the purpose of business and for further working in the business exclusively. The Confirmations, ITR and bank statements of the lenders which transacted during the year under consideration were duly produced before the assessing officer during the course of the proceedings and the same details are being furnished to your Honour for your perusal and ready reference as well. Each and every transaction was through banking channels only. The assessing officer in this case did not feel the need to make third party queries on this point since the evidences produced before the assessing officer during the course of the assessment proceedings were satisfactory, genuine and conclusive of the fact that the submissions given by the assessee were true and correct and were supported by the necessary documentary evidences and the assessee had duly discharged the onus u/s 68 of the Income Tax Act, 1961. Your Honour will appreciate that the assessing officer had duly issued detailed notice to the assessee calling for details, compliance of which was made to the assessing officer. The assessing officer had duly applied his mind to the details furnished/produced before him which after thorough application of mind were accepted by the Assessing officer during the course of the assessment proceedings. Thus there was a judicious application of mind. In the instant case it may be submitted that it is not a case where the Assessing officer has not applied his mind at all. There may be a number of ways to look at a case and the said way may differ from the way your Honour wishes it to be seen. There may be a different way of cross verifying Unsecured Loans/ Revenue Recognition/ Advances, like the Assessing officer did by verifying the identity, genuineness and credit worthiness of the lenders in the form of supporting evidences/ written explanations and party confirmations. It all depends upon the satisfaction of the Assessing officer. Based on the above explanations and citations, it is hoped that your Honour accepts the response of the assessee in the positive sense and does not draw any adverse inference on the assessee and resultantly drops the proceedings u/s 263. Thanking Your Honour Page 29 of 33 Yours Faithfully” (C.1) The Ld. Counsel for the assessee also placed reliance on the aforesaid precedents referred to in foregoing paragraph no. 3 of this order and submitted that impugned order dated 23.03.2022 of the Ld. PCIT passed under section 263 of the Act should be quashed even on merits.
(C.1.1) The Ld. Departmental Representative for Revenue relied on order passed by the Ld. PCIT. However, he did not dispute the fact claimed by the Ld. Counsel for the assessee and also did not bring any additional material for our consideration in support of the impugned order dated 23.03.2022 passed by the Ld. PCIT under section 263 of the Act.
(C.1.2) We have heard both sides. We have perused the materials on record. It is not in dispute that the Assessing Officer has recorded in paragraph no. 3 of the assessment order, that explanation was called for the assessee on all the points on which the case was selected for scrutiny, which has been placed on record. It is also not in dispute that the Assessing Officer made inquiries with the assessee through notices issued under section 142(1) of the Act dated 30.09.2018, 06.09.2018 and 13.10.2018 and that the assessee responded to these notices by way of written submissions which at pages from 101 to 106 of paper book (dated 07.06.2023) and at pages from 1 to 42 of paper book (dated 16.12.2024). Further, it is found that the detailed submissions made by the assessee before the Ld. PCIT in the course of proceedings under section 263 of the Act have been acknowledged by the Ld. PCIT in his impugned order dated 23.03.2022 at paragraph no. 3 but the Ld. PCIT failed to consider the submissions made by the assessee and also failed to pass a Page 30 of 33 speaking order on why the submissions made by the assessee were not considered satisfactory.
(C.2) In the case of CIT v Max India Limited (2007) 295 ITR 282 (SC): it was held that when the Assessing Officer takes one of the two view permissible in law and which the Commissioner does not agree with and which resulted in a loss of Revenue, it cannot be treated as erroneous order prejudicial to the interest of Revenue, unless the view taken by the Assessing Officer is completely unsustainable in law. In the case of Malabar Industrial Co. Ltd (2000) 243 ITR 83, it was held as under: - it was held by Hon'ble Supreme Court that the Commissioner has to be satisfied of two conditions cumulatively, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interest of the Revenue. If one of the absent, Hon'ble Supreme Court held, i.e. if the order of the Assessing Officer is either not erroneous or to the prejudicial to the Revenue, re-cours cannot be had to Section 263 of the Act. In the case of CIT v Gabriel India Ltd, 203 ITR 108 (Bom); it was held as under: - it was held by Hon'ble High Court that substitution of judgment of Commissioner for that of the Assessing Officer is not permissible under section 263 of the Act, unless decision of the Assessing Officer is erroneous and the order of the Assessing Officer cannot be termed as erroneous unless which is not in accordance with law. The Hon'ble Court further held that Section 263 of the Act does not permit substitution of the judgment of the Commissioner for that of the Assessing Officer who pass the assessment order, unless order of the Assessing Officer is erroneous. In the case of CIT v Land Infrastructure Development Projects Ltd (2013) 357 ITR 763 (Mad):
It was held by Hon'ble High Court that whether adequate inquiries were made by the Assessing Officer was pure and simple factual finding. It was also held that the assumption of revisional jurisdiction can be justified only on the basis of materials indicating that the order of the assessment was payable of erroneous and prejudicial to the interest of the Revenue. In the case of CIT vs Sunbeam Auto Ltd (011) 332 ITR 167 (Del): it was held by Hon'ble High Court that there are judgments galore laying down the principle that the Assessing Officer in the assessment order is Page 31 of 33 not required to give detailed reason in respect of each and every item of deduction, etc. It was further held that one has to keep in mind the distinction between “lack of inquiry” and “inadequate inquiry”. The Hon'ble Court held if there is any inquiry even inadequate that would not by itself give occasion to the Commission to pass orders under section 263 of the Act, merely because he has a different opinion of “lack of inquiry” that action under section 263 of the Act would be open. In the case of CIT v Vikas Polymers (2010) 194 Taxman 57 (Del):
Hon'ble High Court held that mere lack of inquiry by Assessing Officer is not sufficient for revision under section 263 of the Act. In the case of CIT v Ganpat Ram Bishnoi 152 Taxman 242 (Raj): it was held that jurisdiction under section 263 of the Act cannot be invoked for making enquiries or to go into process of assessment again and again merely on basis that more enquiry ought to have been conducted to find to find something. Hon'ble Rajasthan High Court held in the case of CIT vs Mangilal Didwani 286 ITR 126 (Raj) that whether Assessing Officer has made proper enquiry with due application of kind or not, is not the domain of the CIT to judge and further held that the fact that the Assessing Officer has made enquiries is sufficient itself. In the case of CIT vs Arvind Jewellers, 259 ITR 502 (Guj):
Hon'ble Gujarat High Court held merely because the Assessing Officer had taken a particular view with which the Commissioner did not agree cannot form the basis for an action under section 263 of the Act. The Hon'ble Gujarat High Court applied the principles laid down by the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd (supra). In the case of Ratlam Coal Ash co. v CIT 171 ITR 141 (MP): it was held that the order under section 263 of the Act could not be made when the assessee had furnished requisite information and Assessing Officer completed the assessment after considering the facts. In the case of CIT vs Associated Food Products P. Ltd 280 ITR 377 (MP): it was held by Hon'ble High Court that jurisdiction under section 263 of the Act cannot be invoked merely on the ground that the assessment order was completed in a haste. In the case of Goyal Family Trust Vs. CIT 171 ITR 698 (All):
Page 32 of 33 it was held by jurisdictional High Court that merely because the assessment is brief and cryptic that itself would not be a case for revisional under section 263 of the Act. In the case of Hari Iron Trading Co. Vs. CIT 263 ITR 437 (P & H):
Hon'ble High Court held that A bare perusal of the aforesaid provision shows that the Commissioner can exercise powers under sub-section (1) of section 263 of the Act only after examining “the record of any proceedings under the Act”. The expression “record” has also been defined in clause (b) of the Explanation so as to include the Commissioner. Thus, it is not only the assessment order but the entire record which has to be examined before arriving at a conclusion as to Whether control over the way an assessment order is drafted. The assessee on its part had produced enough material on record to show that the matter had been discussed in detail by the Assessing Officer. The least that the Tribunal could have done was to refer to the assessment record to verify the contentions of the assessee. Instead of doing that, the Tribunal has merely been swayed by the fact that the Assessing Officer has not mentioned anything in the assessment order. During the course of assessment proceedings, the Assessing Officer examines numerous issues. Generally, the issues which are accepted do not find mention in the assessment order and on assessee’s explanations are rejected and additional disallowances are made. As already observed, we have examined the records of the case and find that the Assessing Officer had made full inquiries before accepting the claim of the assessee qua the amount of Rs. 10 lakhs on account of discrepancy in stock. Not only this, he has even gone a step further and appended an office note with the assessment order to explain why the addition for alleged discrepancy in stock was not being made. In the absence of any suggestion by the Commissioner as to how the inquiry was not roper, we are unable to uphold the action taken by him under section 263 of the Act. Another fact which deserves mention in this case is that in response to the show cause notice, the assessee had raised a legal issue pointing out that the assessment in its case had been made under effective monitoring of the Commissioner of Income-tax and had been finalized with his approval. As already observed, the Commissioner of Income-tax has not bothered to examine the specific objections raised by the assessee in its reply in the impugned order and the Tribunal has rejected the same summarily by observing that the objections were not supported by any material. Both the authorities have failed to take the trouble of even referring to the assessment record. (C.2.1) In view of the foregoing, and having regard to the submissions made by the assessee during proceedings under section 263 of the Act, and earlier during assessment proceedings; and with deference and respect for case laws relied upon by Ld. Counsel for the assessee (mentioned in earlier in this order in foregoing paragraph no. (B.2.1); it is held that the Ld. PCIT failed to make a case for action under section 263 of the Act. Accordingly, the impugned order dated 23.03.2022 of the Ld.
Page 33 of 33 PCIT passed under section 263 of the Act is set aside and the aforesaid assessment order dated 18.12.2019 is restored.
(E) In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 06/01/2025.