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TMI Blog2015 (2) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... hat:- Where the Commissioner on the perusal of the record, was of the opinion that the estimate made by the Assessing Officer was on the lower side and should have been estimated at a figure higher than the one determined by the Assessing Officer, does not empower the Commissioner to re-examine the accounts and re-determine the estimation in the hands of the assessee, where the Assessing Officer during assessment proceedings had made estimated disallowance.- Decided in favour of assessee. Allowance of depreciation - Held that:- Perusal of the assessment order reflects that the Assessing Officer has not allowed the claim of depreciation to the assessee and had reworked out the depreciation on the assets in the hands of the assessee, as per the special audit report. In view thereof, where the Assessing Officer had not allowed the claim of the assessee on account of depreciation on assets, we find no merit in the order of Commissioner in exercising the jurisdiction under section 263 of the Act.- Decided in favour of assessee. Depreciation on hospital building - Held that:- Assessee had claimed depreciation on building valued at ₹ 21.29 crores, whereas the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng failed to come to the conclusion as to how the disallowance made by the Assessing Officer makes the order prejudicial to the interest of Revenue and merely setting aside the matter to the Assessing Officer for making further enquiries had exceeded his jurisdiction in exercise of the powers under section 263 of the Act. Where the Commissioner has failed to record reasons for holding the order to be erroneous, then the exercise of such powers by the Commissioner are un-sustainable in law. - Decided in favour of assessee. - ITA Nos.1323 to 1329/PN/2011 - - - Dated:- 22-11-2013 - SHRI G.S. PANNU AND MS. SUSHMA CHOWLA, J. For the Appellant : Shri M.K. Kulkarni For the Respondent : Smt. M.S. Verma, CIT ORDER PER SUSHMA CHOWLA, JM: This bunch of appeals filed by the assessee are against consolidated order of CIT(Central), Pune, dated 09.09.2011 relating to assessment years 2000-01 to 2006-07 passed under section 263 of the Income Tax Act. 2. All the appeals relating to the same assessee on similar issue were heard together and are being disposed of by this consolidated order for the sake of convenience. However, reference is being made to the facts in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r under section 263 passed by CIT (Central) be quashed. 6. The appellant craves/leave to add, amend or alter any of the above grounds of appeal. 4. The brief facts of the case are that, order under section 263 of the Act was passed by CIT(Central), Pune relating to assessment years 2000- 01 to 2006-07 on 06.10.2008 wherein the assessment orders passed by the Assessing Officer were held to be both erroneous and prejudicial to the interest of Revenue. The Tribunal in the appeal filed by the assessee against the said order, had set aside the order passed under section 263 of the Act and restored the issue back to the file of Commissioner to decide denovo after providing adequate opportunity of hearing to the assessee. The said order was passed on 31.03.2009. Thereafter, the Commissioner observed that adequate opportunity was provided to the assessee and the case was heard. The Commissioner in the second round of proceedings under section 263 of the Act referred to the earlier order passed under section 263 of the Act, dated 06.10.2008. The first issue considered by the Commissioner in the said order was the expenditure claimed by the assessee on car repairs and maintena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the disposal of Vice President. The Assessing Officer queried as to how many persons were the directors of the assessee company. Similarly, one Mercedes Benz car was purchased in assessment year 2001-02 and was at the disposal of the founder President and one Toyota Camary car was purchased in assessment year 2006-07, which was also used by the President. As per the Commissioner, the Assessing Officer has failed to consider the personal usage of the said cars by the said functionaries of the assessee Trust, which also proved that the vehicles were used for the purpose of the Trust. Another vehicle was placed at the disposal of the Medical Director at Mumbai. The Commissioner questioned the same as it was not clearly mentioned by the Auditor of the assessee Trust whether it had any branches or offices in operation other than the institution of the Trust at Kolhapur. Similar issues were raised in respect of the cars purchased in assessment year 2006-07. The Assessing Officer having disallowed the expenses at a particular percentage which were varying year after year, was found to be without gathering of basic details. Where the car had been admittedly used by the Trustees, the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue shown by the assessee at ₹ 21,29,48,048/-. The Assessing Officer had allowed the depreciation on the value as estimated by the DVO. The case of the assessee however, was that as per the Report of DVO, dated 01.08.2008, the date of commencement of construction was 18.01.2001 and date of completion was December, 2003. The total cost of construction for the period of three years was ₹ 18,08,78,703/- and Architects fees of ₹ 40,50,000/- which totals to ₹ 18,48,28,703/-. Another objection raised by Commissioner was that certain expenditure incurred by the assessee on land and building was un-vouched, which was enlisted in Annexure XIX of the Audit Report and total led to ₹ 2,50,50,586/-. As per Commissioner, the same should have been used by the Assessing Officer in support of her stand that the assessee was entitled to lesser depreciation, which was not done by the Assessing Officer. Further, when the building was completed in assessment year 2003-04, where was the question of incurring expenditure in assessment years 2004-05 to 2006-07. This aspect was also found to have not been enquired into by the Assessing Officer, which was prejudicial to the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficate given by the banks to the assessee that too one day before the assessment was getting time barred by limitation of time, the A.O. has accepted this loan as correct. ' In the cash book there is no narration whatsoever of the persons who has advanced the loans. In the first instance, one has to see whether the loan taken from the Banks were in fact given to the assessee. What is the reason that the Trustees who take loans on their own names that too interest bearing and given it interest free to the assessee. Why in the cash book, no name is given from the person from whom loan has been taken. There is no doubt in my mind that the assessment has been framed in a hurried manner which is prejudicial to the interest of Revenue. The assessee is in receipt of unaccounted money and it is clear from the Return of Income filed in response to notice u/s 153A, where heavy surrender has been made in the computation of income. Loans could be another term of bringing the unaccounted income in the books of accounts. 9. The next contention of the Commissioner was as against the loans taken by the assessee totaling to ₹ 57,88,58,629/-. The Assessing Officer had disallowed only pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, the Assessing Officer would be considered to draw conclusion that the assessee had siphoned funds of the Trust and consequently, hit by section 13 of the Act. As per Commissioner, no such exercise had been done by the Assessing Officer and consequently, no such conclusion was drawn. 11. The Commissioner as per para 6.5 observed that the advertisement had been given in the newspapers on the birthdays of the Trustees and the total expenditure was ₹ 13,77,902/- from assessment years 1999- 2000 to 2005-06. Further, the birthdays expenses of the Trustees and their relations as enlisted in Annexure XIII, were made which were payments made to the persons mentioned in section 40A(2)(b) and section 13 of the Act. The year-wise total of ₹ 13,28,020/- is tabulated at para 6.6 of Commissioner s order. The Commissioner was of the view that the Assessing Officer had not examined the said issue in the light of judgment in Agappa Child Centre Vs. CIT reported in 261 ITR 211, wherein the Hon ble Kerala High Court had held that once the Trustees misuses the property of the Trust, they were not entitled to the benefits of sections 11 and 12 of the Act. The Commissioner further held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 153C of the Act was without jurisdiction and void, under which, it was contended that only undisclosed income should be assessed under section 153C of the Act and not regular income. The said contention of the assessee was found to be not acceptable by the Commissioner as both the regular and undisclosed income is to be assessed in a single order and there was no need for two separate assessment orders for assessing regular and undisclosed income. 15. The next contention raised by the assessee was that the Assessing Officer had passed the assessment orders without proper application of mind merely depending on the views expressed by the special auditors under section 142(2A) of the Act, was also rejected by the Commissioner, holding that the assessments were completed under section 153C of the Act by utilizing the report of special auditor and not merely depending on the views expressed by the special auditors. 16. Another objection raised by the assessee was that notice under section 143(2) of the Act had not been served and hence, the proceedings are void. The Commissioner was of the view that even if notice under section 143(2) of the Act was not served, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed was without any jurisdiction. The Commissioner noted that since the CIT(A) had not passed the order, it could not be said that the said issues were considered and decided by the CIT(A). It was further observed by the Commissioner that the CIT applying the ratio laid down by the Hon ble Supreme Court in Malabar Industrial Co. Ltd. Vs. CIT (2000) 243 ITR 83 (SC) held that the assessments for assessment years 2000-01 to 2006-07 were erroneous and prejudicial to the interest of Revenue. In view of the detailed reasons discussed in the original order under section 263 of the Act, dated 06.10.2008, the assessments were held to be erroneous and prejudicial to the interest of Revenue and were set-aside to the file of Assessing Officer to be framed denovo. 21. The assessee is in appeal against the order of Commissioner passed under section 263 of the Act. 22. The learned Authorized Representative for the assessee pointed out that the Commissioner opined that enquiries were not conducted, sometimes, he shows that inadequate enquiries were conducted. In respect of section 12A registration of the assessee Trust, it was pointed out by the learned Authorized Representative for the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit under section 142(2A) of the Act, the audit report was submitted by the special auditors and where the assessment had been made on the basis of said audit report of special auditor, there was no scope for invoking of jurisdiction under section 263 of the Act. Reliance in this regard was placed on the observations of the Chaturvedi Pithisaria s Income Tax Law Sixth Edition 2014, Volume 6. 23. The learned Departmental Representative for the Revenue took us through the assessment orders passed in the case, placed in Paper Book I and pointed out that the Commissioner at page 2, para 2 onwards had referred to many facts, which were available on record and which have not been looked into by the Assessing Officer while passing the assessment order. Our attention was drawn to the para 7.5.1 and 7.5.3 of the Commissioner, with regard to the depreciation on assets. With reference to para 3.3 at page 9 of the order of Commissioner, the learned Departmental Representative for the Revenue, pointed out that the additions on car expenses were made on adhoc basis. With regard to the depreciation on hospital building referred to in para 4.1 at page 10, the learned Departmental Representati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner s opinion, but in the case of assessee, it was not mere Commissioner s opinion, but the audit report also. 26. In reply, the learned Authorized Representative for the assessee pointed out that the Hon ble Delhi High Court in ITO Vs. DG Housing Projects Ltd. (supra) in para 19 had considered the whole issue and come to the conclusion that the order passed by the Commissioner was incorrect. Further, it was pointed out by the learned Authorized Representative for the assessee that the Assessing Officer had already disallowed the expenses which were un-vouched. In conclusion, the learned Authorized Representative for the assessee pointed out that the order passed by the Commissioner in the present facts and circumstances, was not valid. The learned Authorized Representative for the assessee further stated that the grounds of appeal Nos.1 and 4 were not pressed and the issue is to be addressed in view of grounds of appeal Nos.2, 3 and 5 raised in the concise grounds of appeal. 27. We have heard the rival contentions and perused the record. The assessee has not pressed the grounds of appeal Nos.1 and 4 and the same are dismissed as not pressed. Further, the assessee vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch on a broad reckoning, the Commissioner might think to be prejudicial to the interests of Revenue administration. In our view, this interpretation is too narrow to merit acceptance. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income-tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue . The phrase prejudicial to the interests 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 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 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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. 32. The Hon ble Bombay High Court in CIT Vs. Gabriel India Ltd. (1993) 203 ITR 108 (Bom) had held as under:- ... From a rending of sub-section (1) of section 263, it is clear that the power of suo motu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue . It is not an arbitrary or unchartered power, it can be exercised only on fulfillment of the requirements laid down in sub-section (1). The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed . . 34. The Hon ble Delhi High Court in ITO Vs. DG Housing Projects Ltd. (supra) further while elaborating on the powers of the Commissioner, observed as under:- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed by the Assessing Officer but also the record as it stands at the time of examination by the CIT [see CIT vs. Shree Manjunathesware Packing Products, 231 ITR 53 (SC)]. Nothing bars/prohibits the CIT from collecting and relying upon new/additional material/evidence to show and state that the order of the Assessing Officer is erroneous. 18 . 19. In the present case, the findings recorded by the Tribunal are correct as the CIT has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the CIT is that order passed by the Assessing Officer may be erroneous . The CIT had doubts about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondent's computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Erroneous judgment means one rendered according to course and practice of Court; but contrary to law, upon a mistaken view of law or upon an erroneous application of legal principles. An order cannot be termed erroneous unless it can be shown to be an order, which is not in accordance with law. If the ITO, acting in accordance with law, makes certain assessment, the same cannot be termed as erroneous by the CIT merely because, the order, according to the CIT, should have been more elaborate in writing. Sec. 263 does not visualise a case of substitution of the judgment of the CIT for that of the ITO, who makes the assessment, unless the decision of the ITO is held to be an erroneous one. It is an established position of law that the CIT, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and if it was done by the CIT himself, then he would have estimated the income at a figure higher than the one determined by the ITO; but such opinion would not vest in the CIT the power to re-examine the accounts and determine the same at a higher figure. Sec. 263 does not visualise a case of substitution of the judgment of the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record of proceedings, then the invocation of jurisdiction by the Commissioner under such circumstances under section 263 of the Act is not sustainable. In any case as held by the Hon ble Delhi High Court in ITO Vs. DG Housing Projects Ltd. (supra) in cases where there is an inadequate enquiry but not lack of enquiry, then the Commissioner must record a finding that the order / enquiry made by the Assessing Officer was erroneous, which can only happen if an enquiry and verification is conducted by the Commissioner and he is able to establish and show the error or mistake made by the Assessing Officer. The finding of the Commissioner must be clear, un-ambiguous and not debatable. The matter cannot be set-aside to the file of Assessing Officer to make further enquiries without a finding as to the order being erroneous. It has been held by the Hon ble Bombay High Court in CIT Vs. Gabriel India Ltd. (supra) that exercise of jurisdiction under section 263 of the Act cannot be invoked for making short enquiries or to go into the process of assessment again and again merely on the basis that more enquiries ought to have been conducted to find something. In cases where, two views are poss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07 approved the above proposal. Accordingly, the auditor was nominated on 06.12.2007 and the assessee was directed to get its accounts audited. The audit report was submitted on 09.06.2008 and thereafter, a detailed questionnaire was issued to the assessee along with the issues mentioned in the audit report. In response to which, the assessee appeared and submitted the information called for. In between, the assessee was also served with a letter dated 30.07.2007 as to why its income should not be assessed by not applying the provisions of sections 11 to 13 of the Act and treating the assessee as AOP. The Assessing Officer on consideration of the submissions filed by the assessee on 11.10.2007 observed that the assessee had not fulfilled the conditions laid down under section 12A of the Act as it had no registration under section 12AA of the Act. Further, the assessee had not filed any regular returns of income and for the first time, the returns of income were filed after the search action upon the issue. The Assessing Officer after elaborating upon the issue, came to the conclusion that the assessment of the assessee has to be done in the status of AOP treating it as business org ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Benz and Toyota Safari cars repairs and maintenance and the said expenses were debited to Profit Loss Account. The Assessing Officer also noted that during assessment year 2000-01, the assessee had purchased Honda Accent car. The assessee vide letter dated 17.06.2008 was requisitioned to justify that the expenses incurred on the car were incurred for the objects of the Trust. In reply, the assessee submitted that the vehicles were provided to various officials viz. VC, Dean, Medical Superintendent, Directors, Principals and Trustees, etc. who were managing day-to-day affairs of the Trust and various institutions. It was also due to their efforts along with hard work of the President and other Trustees that the Trust and its institutions had received recognition and gained the fame in the world of education. The assessee further stated that the vehicles provided to them were for achieving the objects of the Trust and the facilities were provided as per their professional qualifications, management skills, etc. The said expenditure on providing the facility as per the assessee was a regular expenditure which qualified as a business expenditure and expenditure on the objects of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 15 had dealt with the expenses on car, its repairs and maintenance. During the assessment year 2001-02, the assessee had purchased one Mercedes car and one Toyata Safari car and the assessee was asked to justify the expenditure on the said cars and other cars including their repairs and maintenance. Since the assessee had not maintained car-wise maintenance expenses, the assessee was show caused as to why 40% of the expenditure incurred on maintenance of cars should not be disallowed. Further, the assessee had failed to furnish the facts relating to utilization of Hyundai Ascent car, Mercedes Benz and Toyata Safari and accordingly, it was held that the said cars were used for the personal purposes of the Trustees and not for the purposes of Trust and the depreciation on the said cars and interest paid to the bank on car loans amounting to ₹ 4,33,290/- and ₹ 2,61,957/- was disallowed. 40. The Assessing Officer thereafter, considered the next issue i.e. the claim of depreciation and the assessee was asked as to why the depreciation should not be allowed as per depreciation chart mentioned in the audit report under section 142(2A) of the Act. The explanation of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the hospital building was ₹ 18,89,51,000/- as against the value shown by the assessee at ₹ 21,29,48,028/-. The Assessing Officer observed that the building was valued at lesser value by the DVO than the value disclosed by the assessee, which leads to the conclusion that the expenses for Trustees residence were also debited in hospital building expenses. Accordingly, the Assessing Officer was of the view that the assessee was not entitled to the depreciation on the amount which was spent on the residential premises of the Trustees. The assessee was asked to explain the difference in the value and also to explain as to why depreciation on total value should be allowed to the assessee. In reply, the assessee submitted that certain expenses like site development, land leveling, etc. were not considered by the Valuer, which in fact, was debited to the building account by the assessee. The reply of the assessee is reproduced at pages 20 to 25 of the Paper Book, in which it was explained by the assessee that it had also debited the total expenditure incurred on furniture, EPABX system, etc. to the building account. Further, expenditure was incurred on site development work, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered various aspects of objections raised by the assessee regarding the procedure for assessment and the notice issued under section 142(2A) of the Act, which are not pressed by the assessee, and hence not deliberated upon by us. 44. The only issue for adjudication is the observation of Commissioner in paras 7.5.1 to 7.5.3. First observation made by the Commissioner was that the Commissioner can record the order as erroneous on the ground in the circumstances of the case, the Assessing Officer should have been made further enquiries before accepting the submissions made by the assessee in his return. The Commissioner thereafter, made reference to the ratio laid down by the Hon ble Supreme Court in Malabar Industrial Co. Ltd. Vs. CIT (supra) and observed that the assessments for assessment years 2000-01 to 2006-07 were erroneous and prejudicial to the interest of Revenue for not making the proper enquiries. On the perusal of the earlier part of the order passed under section 263 of the Act, where reference was made to extracts of order under section 263 of the Act, dated 06.10.2008 which have been upheld by the CIT, we find no merit in the observations of the Commissioner, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had failed to make enquiries and failed to look into the issue of personal usage. Another aspect of this issue is car placed at disposal of Medical director at Mumbai. The Commissioner had observed that the institution of the Trust was at Kolhapur and the assessee had no branches or offices in operation other than that. However, the Assessing Officer has referred that the assessee was running various institutions at different places and had allowed the expenditure relating to car placed at the disposal of Medical director at Mumbai. The said aspect has been considered by the Assessing Officer and once the Assessing Officer has taken a decision on the issue merely because the Commissioner had contrary view on the said issue, does not make the order passed by the Assessing Officer erroneous and the Commissioner was not justified in invoking the provisions of section 263 of the Act. In the absence of details being maintained and furnished by the assessee vis- -vis each car, the Assessing Officer had no option, but to make an adhoc disallowance on estimate basis. Even the auditor had not given the said details and the Commissioner cannot step into the shows of Assessing Officer and dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment proceedings had made estimated disallowance. Section 263 of the Act does not confer such powers on the Commissioner in exercise of the jurisdiction conferred under section 263 of the Act. In such circumstances, the order passed by the subordinate authorities in accordance with the law, could not be termed as erroneous, merely because the Commissioner is not satisfied with the conclusion reached by the Assessing Officer. In view thereof, we find no merit in the exercise of powers by Commissioner under section 263 of the Act in respect of disallowance on account of car expenses. 47. The next aspect of the order passed under section 263 of the Act is vis- -vis the claim of depreciation on assets. The Commissioner had held the order of Assessing Officer to be erroneous and prejudicial to the interest of Revenue because of the allowance of depreciation. However, the perusal of the assessment order reflects that the Assessing Officer has not allowed the claim of depreciation to the assessee and had reworked out the depreciation on the assets in the hands of the assessee, as per the special audit report. In view thereof, where the Assessing Officer had not allowed the claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the facts of the present case, the assessments for assessment years 2000-01 to 2006-07 were erroneous and prejudicial to the interest of the Revenue and reference was made to the detailed reasons discussed in the original order passed under section 263 of the Act, dated 06.10.2008. However, in the said order passed under section 263 of the Act, which was basis for passing the present order under section 263 of the Act, there was no finding of the Commissioner that the order of Assessing Officer is erroneous. On this account also, the order of Commissioner fails. 50. The next issue considered by the Commissioner was vis- -vis unsecured loans raised by the assessee. The special auditor in the audit report had identified the said loans. The Assessing Officer during the course of assessment proceedings had asked the assessee to establish the genuineness of the transaction and also to prove the credit worthiness of the loan creditors. However, the assessee failed to do the needful and in the absence of same, the Assessing Officer treated the said unsecured loans to be income of the assessee and addition, in this regard was made from year to year. There were certain loans relatable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a finding to the said extent that the deductions under sections 11 and 12 of the Act were not to be allowed to the assessee, then there was no merit in the reference made by the Commissioner to the report of special auditor that the Trustees were running the Trust like a proprietary concern. We further find no merit in the observations of Commissioner in para 6.1 that the Assessing Officer should have marshaled the facts as thrown up by the special auditor to show that the Trust has been freely violating the provisions of section 13 of the Act year after year. Once the Assessing Officer had come to a finding that the assessee was not entitled to the exemptions under sections 11 and 12 of the Act as it had no registration under section 12A of the Act, the violation of provisions of section 13 of the Act becomes immaterial as the said provisions of the Act are not applicable while computing income in normal course of business. Accordingly, we find no merit in the observations of the Commissioner in holding the assessment order to be prejudicial to the interest of Revenue and we reverse the same. 53. The next point considered by the Commissioner was the unvouched revenue and capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 263 of the Act, is not sustainable. It is paramount that the Commissioner must hold and record reasons as to why the order of assessment passed by the Assessing Officer was erroneous. Where the Commissioner has failed to record reasons for holding the order to be erroneous, then the exercise of such powers by the Commissioner are un-sustainable in law. 55. Now, we shall consider the various case laws relied upon by the Revenue. The learned Departmental Representative for the Revenue placed reliance on the ratio laid down by the Hon ble Supreme Court in Rampyari Devi Saraogi Vs. CIT (supra). The ratio laid down in the said decision was on its own facts and cannot be applied universally to uphold the order of Revision passed by the Commissioner under section 263 of the Act in all cases. We find no merit in the said reliance placed upon by the learned Departmental Representative for the Revenue. 56. The learned Departmental Representative for the Revenue further placed reliance on the ratio laid down by the Mumbai Bench of the Tribunal in Arvee International Vs. Addl.CIT (supra), wherein it was held that where the assessment order was mechanically passed by the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the Assessing Officer had failed to hold any enquiries and had not applied his mind to the relevant material. The Assessing Officer in the present case before us had after verifying the return of income and the complexity of accounts of the assessee referred the matter for special audit under section 142(2A) of the Act and after audit report furnished by the Special Auditor, the issues were elaborately considered by the Assessing Officer and suitable disallowances were made. Merely because the Commissioner was of the view that the disallowances made by the Assessing Officer were not sufficient without coming to any finding, does not warrant the exercise of power under section 263 of the Act. Consequently, we find no merit in the said reliance placed upon by the learned Departmental Representative for the Revenue as the facts of the present case are at variance. 59. Another reliance placed by the learned Departmental Representative for the Revenue on the decision of Hon ble Delhi High Court in CIT Vs. Nalva Investments Ltd. (supra) was on its own facts, wherein the business loss brought forward from earlier years were adjusted against dividend income without any discussion ..... X X X X Extracts X X X X X X X X Extracts X X X X
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