PR. COMMISSIONER OF INCOME TAX (CENTRAL -02) vs. MERA BABA REALITY ASSOCIATES PVT. LTD.

\ ('SCN') were issued by the AO to the Assessee to which replies were furnished by the Assessee. The Assessee furnished details of sundry creditors, copies of invoices, details of unsecured loans outstanding in the financial year but not confirmed, copies of ledger accounts of unsecured loans, copies of agreements etc. The Assessee also replied to a further SCN by its letters dated 14"^ March 2013 and 20"^ March 2013. Summons under Section 131(1) of the Act were issued by the AO to the Director of the Assessee and his statement was also recorded. An assessment order dated 28"" March 2013 was passed assessing the income as returned by the Assessee. 9. It appears that on 5^ June 2013, i.e. within 3 months from the date ofthe assessment order, the AO made a proposal to the CIT for exercise of jurisdiction under Section 263 of the Act regarding the order "erroneously passed" by the AO. In this letter, inter alia, the AO stated that the information regarding the second search in the premises of K.S. Dhingra & G.S. Dhingra Group was forwarded to his office by the Investigation Wing in the month of March 2013. An SCN dated 8"" March 2013 was issued to the Assessee. Further investigation and enquiries in the matter could not be carried out due to late receipt ofinformation and shortage oftime. The reply furnished by the Assessee was not found satisfactory, as they had denied to have paid any interest other than as recorded in their books of account, whereas the seized documents showed interest payment @40% p.a. 10. It is, therefore, clear that the AO had second thoughts on the aspect of payment ofinterest by the Assessee. He then states that, "The addition ofthe ITA637/2017 &connectedmatters Page 4of 7

r differential amount of interest paid could not be made due to oversight/heavy workload. I deeply regret for the error. The copies of DDIT(Inv.) letter, show cause notice issued, and replyfiled by the Assessee are also enclosedfor your kindperusal. " 11. This triggered the exercise ofJurisdiction under Section 263 of the Act by the PCIT. The PCIT did not independently form an opinion about the order of the AO being erroneous. On this basis, nearly two years thereafter, on 2"''February 2015, the PCIT issued an SCN to the Assessee virtually setting out the proposal of the AO and adding, "Thus the assessment order passed in your case is erroneous and prejudicial to the interest of the Revenuefor the reasons stated as above. " 12. In the impugned order, the ITAT, after examining the entire record and the applicable law on the subject, has come to the conclusion that on both the issues, i.e. payment of interest over and above the amount which was recorded m the books of accounts andthe sundry creditors, the Assessee had furnished sufficient details with which the AO was satisfied. This was not a case of lack of enquiry on the part of the AO but, at most, a case of inadequate inquiry, as appeared from the letter dated 5^ June2013 addressed to the PCIT. It was held by the ITAT that the jurisdiction under Section 263 of the Act could not be allowed "merely on the basis that enquiryconducted by the AO was inadequate." 13. Mr. Rahul Chaudhary, learned Senior Standing Counsel for the Revenue, relied on the decision of Calcutta High Court in CIT v Maithan International [2015] 375 ITR 123 where, inter alia, the High Court ITA 637/2017 &connected matters p„g£ 5gf7

> observed that, where the enquiry led to the AO assuming incorrect facts, the exercise of revisionary jurisdiction under Section 263 of the Act by the CIT would be justified. 14. What is interesting in the present case is that this exercise under Section 263 of the Act was undertaken after a full-fledged exercise has already been undertaken by the AO under Section 153A of the Act. Incidentally, it may be mentioned that, from the facts that have emerged, if so-calledincriminating material was found during the course of the search in the case of K.S. Dhingra & G.S. Dhingra Group, the assessment proceeding ought to have been initiated against the Assessee under Section 153C of the Act. The Assessee of course did not question this because the assessment order ultimately was not adverse to the Assessee. The AO had a fiill-fledged opportunity to undertake a detailed enquiiy, and having not done so on account ofpaucity oftime, there cannot beany inference that the inadequate inquiry led to the AO to arrive at incorrect facts. 15. Reliance is also placed by Mr. Rahul Chaudhary on the decision of the Supreme Court in CIT v Amitabh Bachhan [2016] 384 ITR 200 (SC). There the Supreme Court found, on facts, that the Assessee after having claimed an exemption during the course of the assessment proceedings,- withdrew such claims despite which no enquiry was undertaken by the AO into this aspect. This, according to the Supreme Court, ought not to have resulted inthe proceedings simply being dropped by the AO. 16. The facts in the present case, however, are different. As noticed by the ITAT, following the notices issued in the course of the assessment ITA 637/2017 &connected matters Page 6of7

Or proceedings by the AO, on more than one occasion the Assessee furnished the complete details sought. Where the Assessee has in fact furnished the details that are available with him along with explanation to the queries raised by the AO, to permit the exercise ofthe revisionary jurisdiction only on the ground that the AO did not have sufficient time to verify the details furnished would be unfair to the Assessee. The PCIT must be satisfied, after application ofhis mind, that the order ofthe AO was erroneous with respect to the material made available to him. No such application ofmind by the PCIT is evident from the impugned order which was under challenge before the ITAT. 17. Inthe considered view ofthe Court, no substantial question oflaw arises from the impugned order of the ITAT. The appeals are accordingly dismissed but, in the circumstances, no orders as to costs. AUGUST 21, 2017 rd ITA 637/2017 & connected matters S. MURALIDHAR, J. D • ( PRATHIBA M. SINGH, J. Page 7 of 7