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PER PARESH M. JOSHI, J.M. : This is an appeal filed by the Assessee for the A.Y 2018-19 corresponding to the previous year period from 01/04/2017 to 31/03/2018. The appeal is filed under section 253 of the Income Tax Act, 1961. The assessee is aggrieved by the order passed under Section 263 of the Act, bearing order no. ITBA/REV/F/REV5/2022 dt. 27/03/2023 which is hereinafter referred to as the impugned order. The impugned order has revised the AO’s order no. ITBA/AST/S/143(3) 2020-21/1027309634(1) dt. 12/06/2020 which is hereinafter referred to as for sake of brevity as “AO order” and Assessing Officer as “AO”.
Factual Matrix 1. The assessee is a partnership firm, which is engaged in the business of development and construction of Real Estate i.e; Construction and Sale of residential Flat. 2. The Return of income was e-filed on 27/09/2018 declaring total income amounting to Rs. 2,72,79,780/-.
The case was selected for scrutiny under CASS, therefore a notice under section 143(2) dt. 22/09/2019 was issued to the assessee and that the same was duly served upon the assessee in time. Reason for scrutiny was “Income from Real Estate Business.”
Thereafter on 14/01/2020 a Notice under section 142(1) of the Act was served on the assessee firm, by virtue of which questionnaire calling basic information and so also other information were sought.
In response to the statutory notices and questionnaire, the assessee firm furnished necessary details on e-proceeding portal which have been examined by AO.
6. That during the year under consideration the assessee has shown income under the head “Profit and Gains from Business or Profession.”
That the details filed by the assessee were examined. After examination of details filed on e-proceedings portal returned income amounting to Rs. 2,72,79,780/- is accepted by “AO” vide “AO” order dt. 12/06/2020.
8. In brief return of income dt. 27/09/2018 was accepted as it is despite notice under section 143(2) dt. 22/09/2019 and a notice under section 142(1) dt. 14/01/2020, 17/02/2020, 09/06/2020. It is required to be noted and appreciated that the assessee firm had given replies to the Notices as aforesaid, before “AO order” dt. 12/06/2020. The copy of aforesaid notices and replies are filed in the paper book which is filed before us in two volumes.
The assessee firm was served with a show cause notice dt. 15/03/2023 in respect of revision proceedings under section 263 of the Income Tax Act, for A.Y. 2018-19 wherein it was stated as under: 4. As per the Explanation 2(a) of section 263 of the Income Tax Act, 1961 if in the opinion of the Pr. Commissioner of Income Tax, the order is passed without making inquiries or verification which should have been made and Explanation 2(b) the order is passed allowing any relief without inquiring into claim, the order passed by the AO shall be deemed to be erroneous as well as prejudicial to the interests of Revenue..
3 5. In view of the above, the order passed by the Assessing Officer prima- facie is erroneous in as well as prejudicial to the interests of the revenue, as the order has been passed in a summary manner without making requisite enquiries or verification which should have been made.
6. You are hereby given an opportunity to explain as to why the assessment order passed u/s 143(3) of the Act dated 12.06.2020 by the AO for the A.Y. 2018- 19 may not be cancelled and the AO may not be directed to make a fresh assessment.
The assessee firm duly replied the aforesaid show cause notice / notice dt. 15/03/2023 wherein they interalia contended amongst other contentions in support of their return of income which was accepted by the Ld. AO, which are as under:
1.
We are submitting that your honour is of the view that the A.O. had not made the requisite enquiries. However, in our reply to the show cause notice, when the assessee had shown from the record that the necessary enquiries were made by the AO and the AO had taken the one of the view and by applying his mind, he passed the order in favor of the assessee and it is not open to the Ld. PCIT to brand the order of the A.O. as erroneous, simply without considering the reply of the assessee and on the assumption that AO has not made any enquiry in relation to the reply of the assessee.
2. Admittedly, the AO asked the assessee to furnish the necessary details from time to time which were duly furnished by the assessee and after considering the same the AO passed the assessment order.
3. We further submit that mere suspicions that no enquiries or verification was made, does not clothe the Pr. CIT with the powers to exercise his Revisionary Powers. In the absence of the same it is an attempt at fishing and roving enquiries by the Pr. CIT.
Reliance was placed on 7 judgments and orders of High Court and ITAT orders of Coordinate Bench, including Chandigarh Benches.
That by impugned order under section 263 the Ld. PCIT has held as follows: 4. The submissions of the assessee have carefully been considered with reference to the facts of the case from the relevant assessment records. The assessee's principal contention through the written contention is that during the course of the assessment proceedings all the requisite documentary evidences were produced before the Assessing Officer. In addition to this, the assessee has also relied on various judgements. 5. The principal issue here is the cryptic nature of the impugned assessment order passed by the AO which is silent on the various material issues that deserved complete and error-free examination. What is sacrosanct in such examination mandated through assessment proceedings is the need to examine the statements of accounts and of computation of income and the various facts/documents appended with the Return of Income in a clear, error-free,
4 comprehensive and inconsistencies-removed fashion. The Cash flow Statements and Trial Balance furnished (or caused to be furnished) by the assessee need such micro-surgical examination. Justice to the cause of Revenue and public interest should not only be done but also demonstrably seen to be done, which the AO has, through his silence, failed to do. Therefore, the AO's silence on the facts/details/particulars of the examination on the issues raised in the Notice u/s 263 of the Act amounts to the clear evidence that no examination has visibly been carried out.
The various arguments and reasoning and judicial ratios cited by the assessee in his long reply to the Show Cause Notice (SCN) issued can be , summed up by the argument/position that the assessee is trying to state that the AO's silence on the various relevant examinations mandated during the assessment proceedings is a willy-nilly acceptance of the assessee's position. That is, he seeks to argue that non-mention of examination amounts to implied acceptance. The Explanation 2 to Section 263 of the Act introduced w.e.f. 01.06.2015, provides unambiguously that an order passed without making inquiries or verifications which should have been made, should be deemed to be erroneous in so far as it was prejudicial to the interests of the Revenue. This statutory position is squarely applicable in the instant case of the assessee. Such gross inadequacy places the case within the ambit of Explanation 2 to Section 263 causing due, proper and detailed examination of these matters on record to be taken up. This is therefore not a case where the Assessing Officer has demonstrably taken one view in favour of the assessee by placing all facts, details, arguments and findings on record, but one where he has not taken any view/opinion or arrived at any finding at all. No statement or consideration has been given by him in his order to any questions raised by him or submissions of the assessee. The actions of the Assessing Officer are therefore not those of a reasonable and prudent officer, particularly in the matter of inquiries or verifications as well as in stating his analysis and findings. The decisions of the Apex Court in Sirpus Raper Mill Limited Vs. CWT (77 ITR 6) (SC) and CIT, Shimla Vs. Green World Corporation (2009) 314 ITR 81 (SC) hold that it is the absolute discretion of the Principal Commissioner or Commissioner to revise an order passed by the Assessing Officer. The only condition is that he/she needs to apply his/her own mind and arrive at a definite conclusion, which is what has been done here. In the instant case, there is no evidence that the Assessing Officer has applied his/her mind on the matters on record that require to be examined. He/she has simply remained a visibly mute spectator and non-commentator on these matters, and has stated no evidence/cause to hold that the inquiries required to be carried out have indeed been carried out. Considering the large number and volume of unexamined matters, this has created an extremely gross and serious case of inadequacy in inquiry when such inquiry is per se mandated on the basis of the record available before the Assessing Officer.
There is thus, clear failure on the part of the Assessing Officer in framing the assessment order without making the requisite inquiries. There is the imperative legal need in all such inquiries and investigations to comprehensively examine all applicable facts including to the relevant minutiae of their applicability, to reconcile every logical inconsistency in the arguments debated, if and as any, and to ensure total compliance to all statutory provisions, rules, "regulations, instructions, accounting "and other standards and stipulations. It is amply and expressly clear that the investigation/ inquiry carried out by the Assessing Officer is unsatisfactory, superficial and incomplete along several of these matters/dimensions including the due and necessary and complete examination of the documentary particulars/details mandated. A partially driven by whatever reasons - inquiry cannot be held to be a full, proper, satisfactory, compete and 5 therefore statutorily valid inquiry, which partial enquiry as carried out by the Assessing Officer resulting in the impugned assessment order in this case has created a vacuum zone of unexplained facts which constitutes an error on facts. This would be tantamount to a premature, precipitate and erroneous decision not borne out by facts or founded on proper law. Such incomplete inquiry is unacceptable and outside of the pale of law, and inconsistent with the various judicial precedents of the Hon'ble Courts cited later below. This is a clear failure on the part of the Assessing Officer that is being referred to and recognized in this case via this order 07s 263 of the Act. It is such failure which calls for revision of the assessment order u/s 263 of the Act. That such jurisdiction for revision proceedings u/s 263 of the Act by the Commissioner is applicable and called for is held in following cases: - i) Where the Assessing Officer had accepted entry in the statement of account filed by the assessee showing certain income as agricultural income, without making any enquiry, the exercise of jurisdiction by the Commissioner u/s 263(1) would be justified- Malabar Industrial Co. VS CIT [2000] 109 Taxman 66/243 ITR 89 (SC). ii) Not holding an enquiry as is normal and not applying mind to the relevant material would certainly be 'erroneous' assessment warranting exej«1se of revisional jurisdiction. CIT v. Jawahar Bhattacharjee (2012) 2tftaxmann.com 652/342 ITR 74/249 CTR 529 (Gau.)
iii) Where enquiry is warranted but not made, it would certainly constitute prejudice to revenue, so that jurisdiction for the Commissioner is available for remanding the matter for such enquiry. CIT Vs Raja Industries (2012) 340 ITR 344 (P&H). iv). Honble Delhi High Court in Income Tax Officer versus DG Housing Projects Limited (2012) 343 ITR 329 (Delhi) has observed: "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 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 facts required 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 "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 order has been passed on merits." v) Hon'ble Delhi High Court in Gee Vee Enterprises vs. Additional Commissioner of Income-Tax, [1975] 99 ITR 375 (Delhi), has observed as under: "The reason is obvious. The position and function of the Income-Tax Officer is very different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply, gives decision on the basis of pleading and evidence which comes before it. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word "erroneous" in section 263 emerges out of this context. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an 6 inquiry The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct." vi). Hon'ble Rajasthan High Court in the case of Commissioner of Income-Tax vs Emery Stone Manufacturing Company (213 ITR 843) has held as under: "Simply because the facts have been disclosed by the assessee, it does not give immunity from revisional jurisdiction which the Commissioner can exercise u/s 263 and as such even in a case where the facts have been disclosed by the assessee to the Assessing Authority and the correct provisions of law have not been examined by the Assessing Authority, the power u/s 263 can be invoked." vii) Commissioner is free to exercise his jurisdiction on consideration of all relevant facts, provided an opportunity of hearing is afforded to assessee to contest facts on basis of which he had exercised revisional jurisdiction. CIT, Mumbai Vs Amitabh Bachchan [2016]69 taxmann.com 170[SC] viii) Where no inquiry was conducted by the Assessing Officer in passing assessment order after accepting revised return filed by the assessee, Commissioner was well within his powers under Section 263 to direct fresh assessment Virbhadra singh (HUF) vs PCIT [2017] 86 Taxmann.com 113 (Himachal Pradesh). 7 . In view of the discussion above, the assessment order passed u/s 143(3) of the Act dated 12.06.2020 is prima facie erroneous as also prejudicial to the interests of revenue, as the order has not been passed in accordance with the law applicable in the impugned matter, which should have been done. There is thus a failure on the part of the Assessing Officer to act in accordance with law, which has created an error in law. It is such failure which calls for revision of the assessment order u/s 263 of the Act.
Having considered the facts and circumstances of the instant case, I am of the considered opinion that the assessment order u/s 143(3) of the Act dated 12.06.2020 passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of revenue in accordance with the Explanation 2(a) below section 263(1) of the Act, as the order has been passed without making inquiries or verification which should have been made, thus making the assessment order passed not only erroneous but also prejudicial to the interest of revenue. Accordingly the impugned assessment order is set aside with the direction to the Assessing Officer to make requisite inquiries and proper verification with regard to the issues mentioned above. The assessee is at liberty to adduce the facts as deemed relevant before the assessing officer at the time of assessment proceedings in consequence to this order. The Assessing Officer shall allow the assessee adequate opportunity of being heard and to make relevant submissions. It may be ensured that the fresh assessment order is passed within the prescribed time as stipulated under section 153(3) of the Act.
That being aggrieved by the impugned order under section 263 the assessee firm is before us and has raised the following grounds of appeal in Form No. 36 :
1. That the Pr. Commissioner of Income Tax-1 Chandigarh has wrongly and hurriedly passed order under section 263 of Income Tax Act without making any further enquiry during revisionary proceedings and he simply set aside the assessment order for making requisite enquiry.
2. That the assessment order having been passed by the Assessing Officer after making due enquiry & due application of mind and taking into
7 consideration, the action restored to by the Pr. CIT 1 Chandigarh for imposing his opinion is unwarranted and uncalled for particularly the order is neither erroneous nor prejudicial to revenue. 3. That the Assessee craves for permission to add, amend, alter or withdraw any grounds of appeal with approval of the hon'ble bench. Record of Hearing
13. The hearing took place before this Tribunal when both the parties were present. They were treated equally and were heard patiently at length on merits of their respective cases. 13.1 The Ld. AR at the outset brought to our notice that consequent assessment order is already passed in pursuance to the impugned order under section 263 of the Ld. PCIT and copy of the said consequential order bearing No. ITBA/AST/S/143(3)/2023-24 / 1063558579(1) dt. 28/03/2024 was placed on record. The Ld. AR then contended that after the original assessment order bearing no. ITBA/AST/S/143(3) 2020-21/1027309634(1) dt. 12/06/2020 under section 143(3) against which Section 263 proceedings are conducted and impugned order is passed there is yet another, an assessment order under section 147 r.w.s. 144 read with section 144B of the Income Tax Act bearing no. ITBA/AST/s/147/2022-23/1051272920(1) dt. 24/03/2023 wherein notice under section 148 dt. 31/03/2022 and notice under section 142(1) dt. 31/10/2022 came to be issued to the assessee firm. Notice under section 142(1) dt. 13/10/2022 was replied by letter dt. 27/10/2022. The issue involved in these proceedings under section 147/148 was with regard to following issue which was identified by the Department which issue as per said order dt. 24/03/2023 is reproduced below:
3.1 Complete description of issues (issue wise) The case of the assessee was reopened for scrutiny to verify that the assessee M/s Exotic Realtors and Developers have made purchases from M/s. Sahibzada Timbers on 11.08.2017, 01.10.2017 and 06.10.2017 and the cash component involved in the bill was Rs.3,50,000/-, Rs.10,000/- and Rs. 22,832/- respectively (total Rs.3,82,832/-).
The synopsis of all submissions of the assessee relating to the issue and indicating the date of submission are as follows as per said order dt. 24/03/2023 (para 3.2) which is as under:
8 Assessee's Details Reply dated 27.10.2022 Purchase Bills, Ledger accounts, bank details for the payments paid and list of sundry creditors along with Audit Report and transactions carried out with Shri Narinder Sandhu, Prop. M/s Sahibzada Timbers.
In para 3.4 Reasons for inference drawn that no variation is required on this issue are as follows:
[1] In this case, assessee firm M/s. Exotic Realtors and Developers, having PAN : AADFE9430F has filed its original return of income for A.Y. 2018-19 on 27.09.2018 declaring total income at Rs.2,72,79,780/-. Subsequently, the case of the assessee was reopened for scrutiny to verify that the assessee has made purchases from M/s. Sahibzada Timbers on 11.08.2017, 01.10.2017 and 06.10.2017 and the cash component involved in the bill was Rs.3,50,000/-, Rs.10,000/- and Rs. 22,832/- respectively (total Rs. 3,82,832/-.) Therefore, sources of cash payments made the assessee are subjected to verification by the Income Tax Department. Therefore, the case was reopened and reasons were recorded and notice u/s.148 of the I.T. Act, 1961 dated 31.03.2022 was issued by the Income-tax Department. In response to the notice u/s 148 of the Act, assessee has filed not Return of income. [2] During the assessment proceedings, all the transactions carried out with Shri Narinder Singh Sandhu, Prop. M/s Sahibzada Timbers have been called for. Assessee has submitted all the details i.e. bills, ledger accounts, bank details for the payments paid and list of sundry creditor along with Audit Report. All the transactions have been checked carried out with Shri Narinder Singh Sandhu, Prop. M/s Sahibzada Timbers i.e. bills, payments paid by cheques and remaining amount as Sundry Creditors. On perusal of ledger account and bank statements, it is noticed that all the transactions have been carried out by cheques. [3] Assessee has submitted all the details which have been verified. Submissions of the assessee have been perused. Submissions / documents uploaded by the assessee have been perused, examined and verified with the selection of reasons. Looking to the submissions, no adverse inference is drawn on this issue. [4] Looking to the facts of the case and data made available on record, total income of the assessee for the year under consideration is computed as under:- 1. Total Income as per original return of Rs. 2,72,79,780/- income filed on 27.09.2018 2. Variation Rs. NIL 3. Total Income: Rs. 2,72,79,780/- [5] Assessed u/s 147 r.w.s. 144 r.w.s. 144B of the Income Tax Act, 1961. Interest charged u/s 234A, 234B & 234C of the Income Tax Act, as applicable. The calculation sheet is enclosed as the part of the assessment order. 13.2 Basis above assessment order dt. 24/03/2023 under section 147 r.w.s 144 read with Section 144B of the Income Tax Act, the Ld. AR vehemently contended that assessee has gone through the rigours of the proceedings under section 143(3) , 147/ 148 by playing two innings as there are two separate independent assessment orders one dt. 12/06/2020 under section 9 143 (3) and another under section 147/148 r.w.s 144 read with section 144B of the Income Tax Act. In addition to this the assessee firm has gone through further rigours of proceedings under section 263. The Ld. AR further contended that in prior A.Y 2017-18 the assessee’s firm was scrutinized too by same officer and nothing adversial was found against them save and except minor addition of rs. 4486/- that too on account of interest on late payment of TDS. This is a relevant factor which must be taken into consideration as there is no change in facts and circumstances of business activities of the assessee or accounting policies and practices followed.
13.3 The Ld. AR then contended that the Ld. AO, after verifying the detailed explanation given by the assessee (supra), did not find any adverse thereon and accepted the returned income. The Ld. AO had issued all required notices under section 143(2) and under section 142(1) which all were duly replied extensively on all the matters. All are in paper book Volume I & II before the Tribunal. The Ld. AR further submitted that entire records of the case was before the Ld. PCIT under section 263 of the Income Tax Act including assessee’s replies with documents which too were refilled before the Ld. PCIT. In brief he contended that from the copies of notices and replies submitted during the course of assessment proceedings, all issues raised under section 263 order has been verified by AO. The Ld. AR also contended that Ld. PCIT ought to have conducted bare minimal inquiry if PCIT is of the considered opinion that Ld. AO did not conduct any inquiry and verification. He placed reliance on judgment of Hon;ble Delhi High Court in case of PCIT Vs. Delhi Airport Metro Express Private Limited 398 ITR 8 vide order dt. 05/09/2017. 13.4 The Ld. AR contended that no amount whatsoever is specified in the impugned order consequently impugned order is not prejudicial to the interest of Revenue. Both condition of erroneous nature of order and prejudicial to Revenue must be seen by PCIT and that he has miserably failed to do so. According to him PCIT satisfaction under section 263 must be objectively justifiable and cannot be the mere ipse dixit of the Commissioner
10 as held in case of G.M Mittal Stainless Steel (P) Ltd. by Hon’ble Supreme Court of India [ (2003) 263 ITR 255(SC)] [Note:- Ipse Dixit= “He said it himself”] 13.5 The Ld. AR has placed reliance on the judgment of Hon’ble Supreme Court in case of Malabar Industrial Co. Ltd. case reported in 243 ITR 83 (SC).
13.6 Reliance was placed o the judgment of Hon’ble Rajasthan High Court in case of Deepak Real Estate Developers (I) (P) Ltd. 52 Taxmann.com 75 (Rajasthan) where it has been held that where the AO has made necessary enquiry and applied his mind, Commissioner cannot exercise his revisional powers under section 263 of the Act. Basis this the Ld. AR contended that the Ld. AO has examined the material on record, passed assessment order which is well merited.
13.7 The Ld. AR then relied upon decision of Hon’ble Delhi High Court reported in [2011] 335 ITR 83 Delhi [Anil Kumar Sharma case] which speaks of distinction between “ lack of inquiry and inadequate inquiry”.
13.8 The Ld. AR then relied upon decision in case of Vodafone Essar South Ltd. reported in [2012] 28 Taxmann.com 273 Delhi High Court which speaks about even if thee is some inquiry by the AO in the original proceedings even if inadequate that cannot clothe the Commissioner with jurisdiction under section 263 merely because he can form another opinion. In the instant case, the assesse 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, detailed explanation and other documents required by the AO were produced at the stage of original assessment. The Ld. AR basis this further contended that clearly this was not a case of “no enquiry”. The lack of any discussion on this cannot lead to the assumption that the AO did not apply his mind. The proceeding in fact shows that the AO directed his mind specifically on this aspect and then concluded that the expenditure was in the revenue field. Reliance was placed on Ashish Rajpal [2009] 320 ITR 674 (Del)
11 Vikash Polymers [ 2010] 194 Taxmann.com 57 (Del) Krishna Cop Box (P) Ltd. (2015) 60 Taxmann.com 243 (All)
The Ld. AR thus concluded that where the AO has made necessary enquiry and applied his mind, Commissioner or PCIT cannot exercise his revisional powers under section 263 of the Act.
13.9 The Ld. AR then contended that non passing of elaborate order does not tentamount to non application of mind by the AO. The High Court in case of “Design and Automation Engineers” found that the AO examined all the details with respect to assessee’s claim of deduction and held that the order could not be said to be erroneous or was passed without application of mind merely because the same was not an elaborate order.
13.10 The Ld. AR has also contended that it was incumbent upon the Ld. PCIT to identify errors in the assessment order passed by Ld. AO and he ought to have given a categorical finding in this regard and for this purpose he himself has to make enquiries and investigations whatever he deems fit in the circumstances. In the instant case this has not happened. Delhi High Court judgment reported in case of PCIT Vs. Delhi Airport Metro Express P. Ltd 398 ITR 8 relied upon once again, that some minimal inquiry is must on part of Ld. PCIT is mandated. Upon failure CIT is not entitled to exercise power of revision under section 263 by setting aside the orders of Ld. AO. In addition reliance is placed on another judgment of Hon’ble Delhi High Court in case of ITO Vs. DG Housing Projects Ltd. (2012) 343 ITR 329 (Del) wherein Hon’ble High Court has held as follows: 16. Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under Section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is 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 though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had 12 erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under Section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question.
13.11 Reliance was also placed on judgment of Delhi High Court in case of Jyoti Foundation and Sun Beam Auto Ltd. for proposition that where revisionary authority opined that further enquiry was required, such enquiry should have been conducted by the revisionary authority himself to record finding that assessment order passed by the AO was erroneous and prejudicial to the interest of Revenue. In the instant case this has not happened.
13.12 The Ld. AR has fairly contended that in case of no inquiry order can be held as erroneous and not in cases where some inquiry is made by AO. Further however he himself has to bring on record the errors and prejudice through independent verification and enquiry despite presence of explanation 2 in section 263.
13.13 The Ld. AR also submitted that the PCIT has issued show cause notice on 15/03/2023 and date of hearing was fixed on 22/03/2023 and order has been passed on 27/03/2023. This shows perse that PCIT has not made any enquiry and straight away has passed revisionary order hurriedly in mechanical manner with pre determined mind and such order deserves to be quashed.
13.14 The Ld. AR has relied upon following orders of ITAT: (i) Sh. Narayan Tatu Rane Vs. ITO, dt. 06.05.2016 "20. Further clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been-passed without making enquiries or verification, which should have been made. In our considered view, this provision shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. CIT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO vis-a-vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying our enquiries or verification, which a 13 reasonable and prudent officer would have carried out or not. It does not authorise or give unfettered powers to the Ld. Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made. In our view, it is the responsibility of the Ld Pr. CIT to show that the enquiries or verification conducted by the AO was not in accordance with the enquries or verification that would have been carried out by a prudent officer. Hence, in our view, the question as to whether the amendment brought in by way of Explanation 2(a) shall have retrospective or prospective application shall not be relevant.” (ii) M/S Arun Kumar Garg HUF vs. PCIT, /del/2018, dt. 08.01.2019
"5.6 Although, there has been an amendment in the provisions of section 263 of the Act by which Explanation 2 has been inserted w.e.f. 1.6.2015 but the same does not give unfettered powers to the Commissioner to assume jurisdiction under section 263 to revise every order of the Assessing Officer to re-examine the issues already examined during the course of assessment proceedings. The Mumbai IT AT Bench has dealt with Explanation 2 as inserted by Finance Act, 2015 in the case of Narayan Tatu Kane vs. ITO reported in (2016) 70 taxman.com 227 to hold that the said Explanation cannot be said to have overridden the liability as interpreted by Hon 'ble Delhi High Court, according to which the Commissioner has to conduct the inquiry and verification to establish and show that the assessment order was unsustainable in law. The IT AT Mumbai Bench has further held that the intention of the legislature could not have been to enable the C1T to find fault with each and every assessment order without conducting any inquiry or verification in order to establish that the assessment order is not sustainable in law, since such an interpretation will lead to unending litigation and there would not be any point of finality in the legal proceedings. The IT AT Mumbai Bench of the Tribunal went on to hold that the opinion of the Commissioner referred to in section 263 of the Act has to be understood as legal and judicious opinion and not arbitrary opinion. (iii) Rajgul Credit Invest P. Ltd. Vs. PCIT, dt. 19.09.2019 "We further note that Explanation to section 263 of the Act does not change the scope of section 263 of the Act, the Mumbai Tribunal in the case of Narayan Tatu Rane vs. ITO reported in 70 taxmann.com 227 has also held that in a case where learned Pr. CIT has not brought any material on record by making enquiries or verifications to substantiate his inference, the learned PCIT is not justified in holding that the impugned assessment order was erroneous. The relevant portion of the decision is as under:- "21. In the instant case, as noticed earlier, the AO has accepted the explanations of the assessee, since there is no fool proof evidence to link the assessee with the document and Mis RNS Infrastructure Ltd, from whose hands it was seized, also did not implicate the assessee. Thus, the assessee has been expected to prove a negative fact, which is humanely not possible. No other corroborative material was available with the department to show that the explanations given by the assessee were wrong or incorrect. Under these set of facts, the AO appears to have been satisfied with the explanations given by the assessee and did not make any addition. We have noticed that the Hon'ble Supreme Court has held in the case of Central Bureau of Investigation (supra) that the entries in the books of account by themselves are not sufficient to charge any person with liability. Hence, in our view, it cannot be held that the assessing officer did not carry out enquiry or verification which should have been done, since the facts and circumstances of the case and the incriminating document was not considered to be strong by the AO to implicate the assessee. Thus, we are of the view that the assessing officer has taken a plausible view in the facts and circumstances of the case. Even though the Ld Pr. CIT has drawn certain adverse inferences from the document, yet it can seen that they are debatable in nature. Further, as noticed earlier, the Ld Pr. CIT has not brought any material on record by making enquiries or verifications to substantiate his inferences. He has also not shown that the view taken by him is not sustainable in law. Thus, we are of the view that the Ld Pro CIT has passed the impugned revision orders only to carry out fishing and roving enquiries with the objective of substituting his views with that of the AO. Hence we are of the view that the Ld Pr. CIT was not justified was not correct in law in holding that the impugned assessment orders were erroneous."
14 5.4.1 In view of above, we note that notice u/s. 263 of the Act issued by the Pr. CIT is vague and only for making deeper enquiry and re-considering the evidences already on record duly considered during assessment proceedings based on purported proposal that fresh facts have been emerged subsequent to the order of assessment which is factually incorrect and untenable and the conditions or the factors enabling the Ld. Pr. CIT to invoke his jurisdiction uls 263 have not been satisfied." Though it can be said that the Explanation provides for an extra discretionary power to the Commissioner in his revisionary powers under section 263 of the Act. However, this discretion cannot be assumed arbitrarily by the Commissioner. At least something he should bring on record to show the error and the prejudice to revenue caused by that error while assuming jurisdiction under section 263 of the Act. This can be done to the least by him by making independent inquiry/ investigation to conclusively bring on record such error and also the prejudice.
Per contra the Ld. DR has supported the impugned order of Ld. PCIT as legal and proper. The Ld. DR contended that assessment order of Ld. AO was silent on conclusions hence invocation of Section 263 is justifiable. The Ld. DR vehemently opposed the contention of Ld. AR that since in earlier A.Y 2017- 18 the assessee firm was scrutined is no ground to hold that in A.Y. 2018-19 the assessee too should be exonerated even if officer is same as principle of resjudicata are not applicable to fiscal statue. That Ld. DR contended that irrespective of nature of assessment proceedings the assessment order should not be silent on conclusions reached.
Upon a query by Bench whether order of Ld. AO can be said to be a non speaking order on merits of case under section 143(3) even if no addition is made both side agreed to give a small write upon the query with this final note hearing was concluded. Observations, Findings & Conclusions 16. We now have to decide legality, validity and propritory of the impugned order in light of Facts and Circumstances as aforesaid. 16.1 We observe that consequential order in pursuance to impugned order is already passed as brought to our notice at the outset and threshold by the Ld. AR. Be that as it may we are mandated to decide the present appeal in accordance with the provisions of law and binding judicial precedents provided they are applicable to the facts and circumstances of the instant case in hand. We are also mandated to follow broad propositions of law as determined by Supreme Court and jurisdictional High Court / Other High Courts.
15 16.2 At the outset and at threshold we hold that assessment order dt. 12/06/2020 basis which revisionary proceedings were initiated under section 263 culminating into the impugned order has accepted the return of income amounting to Rs. 2,72,79,780/- dt. 27/09/2018 . The said acceptance of returned income is arrived after a proper inquiry and verification because prior to thereto notices under section 143(2) and 142(1) were duly served to the assessee firm and that they were suitably replied with all material information so that computation of income is done in just and proper way for purpose of levy of tax on it. We have minutely perused the notices and replies which are more than two to three and it contains and answers all query of Ld. AO. We also hold that notice dt. 14/01/2020 under section 142(1) is appropriately answered with relevant enclosure by the assessee firm. We have seen both the notice and reply from pape book volume II. Further we notice that vide notice under section 142(1) dt. 17/02/2020 the Ld. AO raised few more query and that the same were replied by the assessee. We have perused the further query and reply from paper book Volume II.
16.3 Further we notice that vide notice under section 142(1)( dt. 09/06/2020 the Ld. AO raised few more query and that the same were replied by the assessee. We have perused such further more query and reply from paper book Vol. III. 16.4 We therefore basis above hold that the Ld. AO has applied his mind and have enquired and verified the state of affairs of the assessee firm and has passed the assessment order dt. 12/06/2020 in a manner know to law. We further hold that raising query after query periodically while the assessment proceedings are going on shows proper application of mind coupled with due inquiry and verification. The Ld. AO has examined all the papers and proceedings of the case and has accepted the return under section 143(3) after due diligence. The assessee thus has gone through rigor’s of law; during the scrutiny proceedings.
16.5 We hold that it is only after the proper inquiry and verification that the Ld. AO has accepted the returned income. The documents on record speaks
16 for it as query’s were raised and answered according to law. We also hold that under Income Tax Act besides being practice that whenever any addition / disallowances are made an opportunity is given to the assessee to show cause why addition / disallowance should not be made. In so far as income and its components are concerned which are untainted are normally accepted as it is. We are fortified by the judgement of the jurisdictional High Court in the case of Hari Iron Trading Company Vs. CIT reported in 2003(5) TMI 48 (P&H) wherein it has been held as follows: “A bare perusal of the aforesaid provision shows that the Commissioner can exercise powers under subsection (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 all records relating to any proceedings available at the time of examination by 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 the Assessing Officer 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 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 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 Assessing Officer had made full inquiries before accepting the claim ofthe 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 proper, we are unable to uphold the action taken by him under section 263 of the Act. 16.6 We further hold that by virtue of Government of India, Ministry of Finance, Department of Revenue (CBDT) Instructin NO. 8/2017 dt. 23/09/2017 at para 5.1 - Enquiry before assessment in electronic mode a particular methodology is prescribed which has been followed. The assessee has righly relied upon it to demonstrate that due enquiry before assessment was done. The AO has made enquiries on all the matters from notices issued under section 142(1) and that the assessee has filed submission on the questions in the notices issued by AO from time to time. The assessee therefore has rightly submitted that the enquiries has been made as per provision of Section 142(iii) of the Income Tax Act, 1961 and that AO framed the assessment after
17 considering the replies submitted by assessee during the course of assessment proceedings. We further hold that AO has applied his mind irrespective of the fact that issues were not discussed in the assessment order for which reliance is rightly placed on the judgment of jurisdictional High Court in case of Hari Iron Trading Co. Vs. CIT (supra). 16.7 We once repeat and reiterate that during the course of assessment proceedings, the AO examine 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. The CIT DR despite opportunity by this Hon’ble Tribunal at fag end of the hearing or later by extra submissions post hearing for which opportunity was given has not brought any SOP or instruction which has not been followed by AO while framing the assessment order under section 143 (3) dt. 12/06/2020. However, the Ld. DR by extra written submissions dt. 22/07/2024 has placed reliance on Special Bench judgement of ITAT in case of Rajalakshmi Mills Ltd. Vs. ITO, Company Circle-III, Coimbatore reported in [2009] 121 ITD 343 (Chennai) to demonstrate that it is not necessary under section 263 for PCIT to make any enquiry before cancelling the assessment order. The reliance was placed on para 3 wherein it is held that “ It is not necessary for the Commissioner of Income Tax to make further enquiries before cancelling the assessment orders of the Assessing Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Assessing Officer should have made further inquiries before accepting the statements made by the assessee in his return.” In the instant case we hold that by issuing notices periodically and after perusing the reply to such notices the Ld. AO has accepted the return of the assessee. He has not accepted the return blindly. The queries were raised from time to time and were duly answered therefore, it cannot be said in law that no inquiry was conducted by the Ld. AO. The issue here is that whether it is incumbent upon the Ld. PCIT to conduct the inquiry at least primafacie or bare minimum before passing the impugned order under section 263 to which we hold that it is but incumbent upon the Ld. PCIT to 18 hold bare minimum inquiry before passing the impugned order which in the instant case has not happened. The Ld. DR has also placed reliance on order of Coordinate Bench in case of Bassera Realtors (P.) Ltd. Vs. CIT reported in [2015] 55 taxmann.com 327 wherein in para 28 it has been held that “ The next thrust of the contention is that Ld. Commissioner has issued a show cause notice which is a verbatim copy of the proposal given by the Assessing Officer which has been done without examination and any application of his mind. As observed earlier at the stage of issuance of notice, detailed examination is not required. What is required is prima facie satisfaction on the part of the Commissioner that a particular assessment order is erroneous and prejudicial to the interest of Revenue.” We hold that in view of the orders of the Higher Courts as discussed in this order, the views of Coordinate Bench by following the doctrine of judicial discipline / precedent, we respectfully disagree with such view and observation.
Per contra, the Ld. AR in response to further written submissions dt. 22/07/2024 of the Ld. DR has by way of a written note has placed reliance on the order of Coordinate Bench in case of Shri Varinder Kumar Gupta Vs. The ITO, Ward-5, Panchkula reported in 2020(5) TMI 189 wherein it has been held that “notices issued by the AO and replies thereto furnished by the assessee reveals that all the queries raised by the AO including about source of deposits were duly answered by the assessee supported with documentary evidence. PCIT was of the view that the AO had not made the requisite enquiries. However, in reply to the show cause notice, when the assessee had shown from the record that the necessary enquiries were made by the AO and the AO had applied his mind and the view adopted by him was one of the possible views, then without considering the reply of the assessee and without recording his reasoned disagreement / dissatisfaction thereto, it was not open to the Ld. PCIT to brand the order of the AO as erroneous.
Admittedly, the AO asked the assessee to furnish the necessary details from time to time which were duly furnished by the assessee and after considering the same the AO passed the assessment order.
19 Second step for the Ld. PCIT, as per the provisions of section 263 before passing an order of modifying, enhancing or cancelling the assessment, he was supposed either to himself make or cause to make such an enquiry as he deems necessary.
The words "as he deems necessary", in our view, do not mean that the Ld. PCIT was left with a choice either to make or not to make an enquiry. As per the relevant provisions of section 263, it was incumbent upon the Ld. PCIT to make or cause to make an enquiry. So far as the words "as he deems necessary" are concerned, the said words suggest that the enquiries which are necessary to form a view as to whether the order of the AO is erroneous and prejudicial to the interest of Revenue or not?
PCIT did not even bother to consider reply and details furnished by the assessee what to say of calling for any enquiry etc. PCIT has directed the A. O. to make further fishing and roving enquiries which even do not germane from the facts and issues involved. Even we find that the Ld. PCIT has directed the A.O. to make further fishing and roving enquiries which even do not germane from the facts and issues involved.” The Ld. AR has further relied upon the following order:
PR. COMMISSIONER OF INCOME TAX - 3, NEW DELHI VERSUS DELHI AIRPORT METRO EXPRESS PVT. LTD. COURT [2017] 398 ITR 8 DELHI HIGH wherein it has been held that – “In the context of the present case if, as urged by the Revenue, the Assessee has wrongly claimed depreciation on assets like land and building, it was incumbent upon the PCIT to undertake an inquiry as regards which of the assets were purchased and installed by the Assessee out of its own funds during the AY in question and, which were those assets that were handed over to it by the DMRC. That basic exercise of determining to what extent the depreciation was claimed in excess has not been undertaken by the PCIT.”
Mr. Asheesh Jain then volunteered that the PCIT had exercised the second option available to him under Section 263 (1) of the Act by sending the entire
20 matter back to the AO for a fresh assessment. That option, in the considered view of the Court, can be exercised only after the PCIT undertakes an inquiry himself in the manner indicated hereinbefore. That is missing in the present case.
We concur with the additional written submission made by Ld. AR citing the above order of ITAT and that of Hon’ble Delhi High Court. We regret to note that we had asked for whether the conclusions drawn by the Ld. AO by accepting the return as it is should accompany reasons or not ? Unfortunately we have not been assisted in this regard.
16.8 We hold that due process as enshrined under the Income Tax Act, 1961 was duly followed, queries were raised and matter was inquired into by the Ld. AO by applying his mind to the all issues. The Ld. PCIT is wrong in passing the impugned order under section 263 as while exercising the power he has infact ordered a review in exercise of supervisory power as Section 263 can be invoked and employed only for the purpose of setting right distortion and prejudices to the revenue. Under Section 263 favourable orders cannot be set side. Section is not meant to get back sheer escapement of revenue. It is taken care of by other provisions of the Act. The Ld. PCIT has not taken a conspectus view of the entire record of the case which is mandated by law and instead has confined himself to the Ld. AO’s assessment order. Under section 263 entire records of the case are required to be taken into consideration. Examination cannot be confined only to order of Ld. AO. Section 263 speaks for itself. The Ld. PCIT in the impugned order has failed to see the entire records of the case and has focussed only on Ld. AO’s order while passing the impugned order which is irregular exercise of power of revision. There is vast difference between a review and a revision / revisionary power particularly under section 263 of the Act.
16.9 The Ld. PCIT ought to have appreciated before passing the impugned order dt. 27/03/2023 under section 263 of the Act that there was yet another assessmet order in respect of same return of income which was filed on 27/09/2018 passed under section 147 r.w.s 144 read with section 144B of the 21 Income Tax Act dt. 24/03/2023 much before the impugned order dt. 27/03/2023 whereby even under section 147, the return of income of the assessee firm was accepted as it is and no addition / disallowance was made. Since this assessment order under section 147 dt. 24/03/2023 was available; it became part of record and by virtue of Section 263(1)(b) the word “record” [shall include and shall be deemed always to have included) all records relating to any proceeding under this Act available at the time of examination by the PCIT. Since this order dt. 24/03/2023 was available before date of impugned order dt. 27/03/2023 the Ld. PCIT should have considered the same as it become part of record within the meaning of Section 263 (1)(b) of the Act, failure due to non examination of order dt. 24/03/2023 vitiates the impugned order of Ld. PCIT and makes it illegal, not proper and contrary to law.
16.10 We hold that by virtue of the meaning of the word “ Record “ as assigned under section 263 which includes all records relating to any proceedings under the Act available at the time of examination makes it incumbent upon PCIT to examine the record including order dt. 24/03/2023 under section 147 of the Act; and so also all notices and replies filed relating to all assessments be it under section 143(3) or 147. In this instant case there are two orders of assessment (supra) and it was incumbent upon him to have at least examined order under section 147 dt. 24/03/2023 which was before impugned order dt. 27/03/2023. We therefore hold that impugned order under section 263 is bad in law and illegal. It is not proper and fair. Further notices and replies ought to have been perused carefully by Ld. PCIT and basis that he ought to have held that order is erroneous and prejudicial instead silence on the facts / details/ particulars have been made a ground an approach wholly untenable in law. Basis silence on all issues have been held to be erroneous and prejudicial which approach is contrary to the judgements of jurisdictional High Court (supra)
16.11 We also hold that by virtue of Section 263 it is incumbent upon the Ld. PCIT while exercising supervisory / Revisionary jurisdiction to at least carry out
22 a bare minimum inquiry himself before terming the order of AO as erroneous and prejudicial to the interest of Revenue. In the instant case that has not happened. Our view is fortified by the judgement of Hon’ble Delhi High Court in case of PCIT Vs. Delhi Airport Metro Express Pvt. Ltd. reported in 398 ITR 8 wherein Hon’ble Delhi High Court has held as follows: “Mr. Asheesh Jain then volunteered that the PCIT had exercised the second option available to him under Section 263 (1) of the Act by sending the entire matter back to the AO for a fresh assessment. That option, in the considered view of the Court, can be exercised only after the PCIT undertakes an inquiry himself in the manner indicated hereinbefore. That is missing in the present case.”
16.12 And further by another judgement of the Hon’ble Delhi High Court in case of ITO Vs. DG Housing Projects Ltd. reported in (2012) 343 ITR 329 (Delhi) wherein in Para 16 it was held as under: “Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under Section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is 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 though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under Section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question.
Even ITAT in following cases have taken similar stand which are as under: (i) Shri Narayan Tatu Ran eVs. ITO, dt. 06/05/2016 (ii) M/s Arun Kumar Garg HUF Vs. PCIT, ITA No. 3391/Del/2018, dt. 08/01/2019 (iii) Rajgul Credit Invest P. Ltd. Vs. PCIT, ITA No. 2519/Del/2019, dt. 19/09/2019 Following aforesaid we hold that impugned order of PCIT is not proper just and fair and in accordance with law as Ld. PCIT has not made any minimal inquiry before holding that Ld. AO has not made any inquiry and therefore
23 order is erroneous and prejudicial to the interest of the Revenue. We hold that the Ld. PCIT ought not to have passed the impugned order. 16.12 We hold that assessment order of Ld. AO is not erroneous and prejudicial to the interest of Revenue simply because while accepting the return as it is he has not given any reasons in support of his said conclusions. A bare and careful perusal of the assessment order of Ld. AO speaks for itself that within the parameter of Section 143(3) he has passed the assessment order dt. 12/06/2020 as requisite notice under section 143(2) of the Act dt. 22/09/2019 was issued to the assessee firm and that the same was served upon the assessee in time.
16.13 Section 143(2) contemplates a notice which in the instant case has been given within time. The notice is dt. 22/09/2019 which is at page 379 of the paper book. It is titled scrutiny (Computer aided Scrutiny Selection). Reason for selection is “ Income from Real Estate Business”.
Thereafter a notice under section 142(1) of the Act dt. 14/01/2020 is too served calling upon the assessee firm to furnish the accounts and documents specified from Serial No. 1 to 19, pages 383 to 386 of paper book. The assesse firm complies with the requisition so made pages 387 to 556 of paper book. Thereafter again a notice is served upon the assessee firm dt. 17/02/2020 under section 142(1) of the Act wherein few more additional requisitions are made which too are complied with pages 557 to 630. Furthermore another notice dt. 09/06/2020 is served to the assessee firm wherein a query is made to provide “Details of percentage of completion of various projects undertaken by the firm during the year (project wise) and how many units were ready for possession and out fo these in how many units the possession was given to the purchaser during the year (project wise)” the necessary reply to query raised was given too pages 631 to 634 of paper book. On page 634 we notice that assessee firm has averred that “ In addition to our above reply, if any kind of information is required by your side will be our pleasure to submit.”
24 16.14 In view of the aforesaid the assessee firm has furnished in timely manner all necessary information and all the query which were raised too were promptly attended to with a rider that if Department wants any other information they would be pleased to do the needful in pleasurable manner.
16.15 The Ld. AO in the assessment proceedings examined all these paper and accepts the return of income as it is. The fact that from time tot time the Ld. AO has sought more and more details and have raised queries clearly goes to show that assessment was not done by him blindly but with open eyes. A person or AO would raise a query or queries provided he has applied his mind. Assessing Officer’s do not get dreams to raise a query or queries. They always and generally keeps their eyes and ears open while doing assessments. The task of AO’s in the Income Tax Department is more difficult than of others. Needless to say they are burdened too as they have a duty cast upon them to bring Revenue for exchequer for nation building. Their task is very onerous. Be that as it may we are of the considered view that the instant assessment or income was not done blindly but as per procedure prescribed(supra). The conclusion drawn in the assessment order is logically made by following due process. In an e-assessment a methodology is derived to compute the income of real estate business.
16.16 In spite of above, another assessment order dt. 24/03/2023 supra was made wherein the reassessment proceedings took place under section 147 of the act and issue therein was that an information was available with the Department that the assessee M/s Exotic Realtors and Developers have made purchases from M/s Sahibzada Timbers on 11/08/2017, 01/10/2017 and 06/10/2017 and cash component in the bill was found at Rs. 3,50,000/-, 10,000/- and Rs. 22,832/- respectively (total Rs. 3,82,832/-). Therefore, verification of cash payment amounting to Rs. 3,82,832/- is required.
16.17 In view of two assessment orders one under 143(3) and another under section 147 its is not open for the PCIT to hold that one under section 143(3) is erroneous and prejudicial. The later order dt. 24/03/2023 under section 147 was much prior to impugned order dt. 27/03/2023 it was part of record under 25 section 263 the studded silence of PCIT in the impugned order shows that impugned order under section 263 is passed in a mechanical manner. The finding of no inquiry and verification is ipse Dixit.
16.18 With regard to assessment order dt. 22/11/2019 for A.Y. 2017-18 done by same AO which was also sheet anchor of argument of Ld. AR we respectfully disagree with his contention and agree with the contention of ld. DR supra.
16.19 With regard to shot gap between time of reply and passing of impugned order leading AO to contend that impugned order is passed in hurry we refrain from passing any order on it as that we feel is not relevant to decide legality or otherwise of the impugned order.
16.20 We hold that if we take into consideration both the assessment order one under 143(3) and another under section 147 it emerges crystal clear from “Records” before us is that during the course of assessment two major queries were raised one relating to percentage of completion of various projects by the assessee, how many units were ready for possession and out of these how many units the possession was given to the purchaser (page 632 of paper book Vol-II) and the another was purchase made from M/s Sahibzada Timbers. Hence inquiry was held and it cannot be said in law that the assessment in case of assessee firm was made without conducting any inquiry or no inquiry. It is now well settled law that inadequate inquiry or insufficient inquiry cannot be a ground to order revision of assessment under section 263. PCIT Vs. M/s Clix Finance India Pvt. Ltd. 2024 (3) THI 157-Delhi High Court.
16.21 The Ld. PCIT has held the assessment order to be erroneous and prejudicial to the interest of Revenue that assessment order is cryptic and silent on various material issue that deserved complete and error free examination what is sacrosanct in such examination mandated through assessment proceedings is the need to examine the statement of accounts, computation of income and various facts / documents appended with ROI,
26 in a clear, error free, comprehensive and inconsistencies removed fashion. The cash how statements and trial balance furnished by the assessee need such micro surgical examination. Justice to the cause of Revenue and Public Interest should not only be done but also demonstrating seen to be done which the AO has through his silence, failed to do so. Therefore the AO’s silence on the facts / details/particulars of the examination on the issues raised in the notice under section 263 of the Act amounts to clear evidence that no examination has visibly been carried out.
16.22 In brief the Ld. PCIT is trying to say that order of Ld. AO ought to have been a speaking order even if no addition / disallowance is made and whatever inquiry he has done should too be reflected in the assessment order. Since it is not there the order of AO is erroneous and prejudicial.
16.23 We have already said aforesaid that queries were made before assessment order was passed. The judgement of jurisdictional High Court in case of Hari Iron Trading Co. Vs. CIT 2003 (263) ITR 437 (P&H) supra answers everything about assessment order. In CIT Vs. Sun Beam Auto Ltd. (2009 SCC on line Delhi High Court-4237] Hon’ble Delhi High Court in para 17 has held that there are judgements galore laying down the principle that the AO in the assessment order is not required to give detailed reason in respect of each and every item of deduction etc. One has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Even if there was inadequate inquiry besides two queries supra that would not give PCIT to pass an order under section 263. We have seen both queries supra and notices and reply supra during course of assessment proceedings and we hold that this is not a fit case to exercise revisionary power under section 263.
16.24 We hold impugned order to be not proper and hold Ld. AO order to be proper and in accordance with law which cannot be labelled as erroneous and prejudicial under section 263. We also hold enough inquiries as the AO deemed fit and proper had been made on more than one occasion supra. It is not a case of no inquiry the impugned order is therefore without jurisdiction
27 and / or in excess of jurisdiction and / or in irregular exercise of jurisdiction and is null and void. It is illegal and not proper. It is in irregular exercise of supervisory / revisionary jurisdiction under section 263 of the Act and therefore bad in law. The Ld. PCIT’s impugned order is bad in law as he has not laid down any points for determination for the purpose of fresh assessment to be done by Ld. AO nor has laid down any points for treating the order as erroneous and prejudicial to Revenue such an approach we hold as wholly untenable in law.
In the result, appeal of the assessee is allowed.
Order pronounced in the open Court on 26/07/2024