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TMI Blog2014 (7) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... at the expenditure was incurred by the lessor in the first instance, and subsequently reimbursed by the assessee - the issue as to the nature of the expenditure, explained as non-regular or accumulated repairs, may be relevant from the stand-point of its allowability, including the provision of law under which it is - A finding of a business purpose as well as the provision under which it is allowable must precede and inform the assessment, and on which we observe no enquiry by the AO – the present case is one of lack of or absence of enquiry by the AO, so that the revision jurisdiction in relation the deduction of the expenditure in assessment stands validly assumed by the competent authority – the direction for fresh adjudication after examining the facts, and upon allowing proper opportunity to the assessee is consistent with the finding of the non-application of mind, necessitating fresh determination of the matter – thus, there was no infirmity in the order – Decided against Assessee. - ITA No. 1593/Mum/2013 - - - Dated:- 27-6-2014 - Sanjay Arora And Vivek Varma, JJ. For the Appellant : Shri J P Bairagra For the Respondent : Shri K C P Patnaik ORDER:- P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er inquiries before cancelling the assessment order of the Income-tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income Tax Officer should have made further inquiries before accepting the statements made by the assessee in his return. 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 the 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. 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 erroneo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dequate enquiry , etc., is only the manifestation of the error, i.e., non-application of mind, per se erroneous and prejudicial to the interest of the Revenue, which permeates or characterizes the enquiry, though would need to be shown to exist despite the enquiry to the extent made; b) the A.O. has adopted one of the courses permissible in law, which has though resulted in a loss to the Revenue, or where two views are possible and the A.O. has taken one view, which though in view of the ld. CIT is not correct. 3.3 The matter, thus, becomes primary factual, so that it would, in each case, be required to be seen if the A.O. has considered all the materials, or that there has been a proper examination and verification by him, demonstrating application of mind, in adopting a considered view and, thus, eschew the charge of non-application of mind. It is this variation in the fact-situation of different cases, which also explains the divergent results of the decisions by the hon ble courts, i.e., in the wake of the well settled law. What, then, is required is an examination of the facts of the case to arrive at a finding of fact as to an application or otherwise of mind by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. Though in our view it is not necessary to do so, i.e., strictly speaking, given the legal position as delineated hereinabove, so that non-application of mind itself connotes the resulting order as erroneous and prejudicial to the interest of Revenue, liable to revision, we do so as the assessee has relied on case law to the effect that the revision is in such a case, i.e., non-application of mind, subject to it being further shown that a prejudice to the interest of the Revenue has been caused or suffered thus. (refer: CIT vs. Mepco Industries Ltd. [2007] 294 ITR 121 (Mad)). The same, in the context of the facts of the present case, is self-evident. The deduction of the impugned expenditure, allowed by the A.O, hinges crucially on the fact whether the assessee was under the terms of the lease agreement liable for the same. The explanation furnished to us, and even to the revisionary authority by the assessee, posits on the allowability of the expenditure, even as that is precisely what was required to be examined by the AO; rather, exhibits lack of enquiry by him. In fact, other collateral and pertinent questions arise on the perusal of the said contract, viz. why would the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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