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TMI Blog2015 (8) TMI 713X X X X Extracts X X X X X X X X Extracts X X X X ..... y on certain important issues which have been raised by the CIT in the notice issued to the assessee and impugned order u/s 263 of the Act. Therefore, we reach to a conclusion that the assessment order is not sustainable and in accordance with the provisions of the Act which is not only erroneous but also prejudicial to the interest of the Revenue. Hence, we are inclined to hold that the issuance of notice u/s 263 of the Act and impugned order passed by the CIT u/s 263 of the Act is validly assumed jurisdiction of revisional powers u/s 263 of the Act which cannot be alleged as invalid assumption of jurisdiction or bad in law and we confirm the same. In the result, appeal of the assessee is dismissed. Notice and the impugned order of the CIT u/s 263 of the Act is upheld. - Decided against assessee. - ITA No.2370/Del /2013 - - - Dated:- 14-8-2015 - SHRI J.S. REDDY AND SHRI CHANDRA MOHAN GARG, JJ. For The Assessee : Sri Sunil Kumar, FCA For The Respondent : Sri Vivek Wadekar, CIT. D.R. ORDER PER CHANDRA MOHAN GARG, JUDICIAL MEMBER 1. This appeal by the assessee has been directed against the order of the Commissioner of Income Tax, Meerut dated 25.03.2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of the Income Tax Act, 1961 was passed on 29.12.2010 by the Addl. CIT, Range-2, Meerut at returned income of ₹ 1,06,57,220/- without making any disallowance or additions. Subsequently, the case was picked up by the CIT, Meerut and notice u/s 263 of the Act was issued to the assessee on 12.02.2013 which was replied by the assessee vide letter dated 04.03.2013. Finally, the CIT passed impugned order on 25.03.2013 setting aside the impugned assessment order on three issues for proportionate disallowance on interest paid by the assessee of interest free advances for non business purposes, for verification of TDS on certain payments and to exclude income on sale of shops and FDR interest from business income for the purpose of calculation of deduction u/s 80IB(7A) of the Act. Now the aggrieved assessee is before this Tribunal in this appeal with the grounds as reproduced hereinabove. 4. We have heard the arguments on both the sides and carefully perused the relevant material placed on record. Inter alia, the impugned order of the CIT dated 29.12.2010 passed u/s 263 of the Act contains of the notice paper book 1 and 2 of the assessee containing 37 39 pages and paper book o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the CIT was not correct and justified in directing the AO to disallow the deduction u/s 80IB(7A) of the Act proportionately on profit of sale of shop area of multiplex on interest of FDR in the peculiar facts and circumstances of the present case because these incomes was accrued to the assessee out of active and complex business activities. Ld. Counsel finally prayed that the impugned notice and order u/s 263 of the Act issued and passed by the CIT deserves to be cancelled/annulled on the basis of law, facts and circumstances of the case and therefore, the same may kindly be quashed. 7. Ld. AR placed reliance on the decision of ITAT Kolkatta Bench in the case of PFH Mall Retail Management Ltd. Vs. ITO (2008) 110 ITD 337 and submitted that the rental income earned by the assessee in the business of running multiplex is assessable as business income and not as income from house property. However, Ld. AR fairly submitted that this issue was mentioned by the CIT at serial no.(b) in the notice dated 12.12.2013 issued u/s 263 but in the final order u/s 263 this issue has been dropped and conclusion of the AO has been impliedly accepted by the CIT, Meerut. 8. Replying to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Assessing Officer omits to conduct required examination and investigation on important issues then he (AO) commits an error and the word erroneous includes failure to make the enquiry and in such cases, the order becomes erroneous because enquiry or verification has not been made by the AO and not because a wrong order has been passed on merits. 9. The Ld. AR placed a rejoinder to the above submissions and contention of the DR and kind drawn our attention towards copy of the questionnaire dated 13.07.2010, 16.09.2010 and 11.11.2010 available from pages 28to37 of the assessee s paper book paper book-2 and submitted that the Assessing Officer issued details questionnaire on all the relevant issues which were picked up by the CIT while issuance notice u/s 263 of the Act. That Ld. AR also pointed out that in reply to the query raised by the AO the assessee in its reply dated 16.09.2010 in para 7 submitted all the relevant facts incurred to operational income including income from sale of shops. Ld. AR further pointed out in the same reply dated 16.09.2010 in para 10 the assessee submitted details of advance of ₹ 18,00,000/-given to Rajpur Residency Dehradin and all relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in proportionate disallowance of interest paid by the assessee thereon. On the issue of verification of TDS, on certain payments agitated alleged by the CIT, we note that there is no query in the Addl. CIT s note dated 11.06.2010 issued by the AO and there is no reply or details from the assessee showing the correctness of the TDS and its deposit to the exchequer properly. However, we also note that during the reassessment proceeding, in pursuant to impugned order passed u/s 263 of the Act, the Assessing Officer in the reassessment order dated 18.03.2014 at page 2 in para 4 has noted that the assessee has submitted details of TDS of bill on challan no adverse inference drawn against the assessee on the third issue of exclusion of income on sale of shop and FDR interest from business income for the purpose calculation of deduction u/s 80IB(7A) of the Act. We note that in the questionnaire issued by the AO (supra) there is no specific query about the claim of deduction u/s 80IB(7A) of the Act. However, in reply dated 16.09.2010 at page 2 para 7 the assessee has submitted facts and details pertaining to receipt/income on sale of shops and submitting the entire amount of sale of shop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his regard in the case of CIT Vs. Anil Kumar Shama (supra) their lordship also held that being the position and facts and circumstances of that case would not be held lack of inquiry and even if the inquiry was termed inadequate that would not by itself give occasion to the Commissioner to pass orders u/s 263 of the Act, merely because he has a different opinion in the matter. 13. On careful and respectful consideration of these judgments of the Hon ble High Court in our humble understanding we are of the view that these judgments are related to the cases and wherein there was an allegation of inadequate inquiry and the Hon ble High Court held that the assessment order could not be held as erroneous simply because in his order the AO did not make elaborate discussion in that regard. In the case of Anil Kumar Sharma (Supra) their lordship after considering the ratio of its earlier position in the case CIT Vs. Sunbeam Auto Ltd. (Supra) held as follows:- In view of the above discussion, it is apparent that the Tribunal arrived at a conclusive finding that, though the assessment order does not patently indicate that the issue in question had been considered by the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23 (SC) and the judgment of Hon ble Delhi High Court in the case of CIT Vs. Nagesh Knitwears P. Ltd. (Supra) and the judgment in the case of CIT Vs. Sunbeam Auto Ltd.(Supra) and ITO Vs. DG Housing Projects Ltd. (2012) 343 ITR 329 (Delhi) held that in the cases where the bare reading of the order passed by the Commissioner showed that the order passed by the Assessing Officer was erroneous and prejudicial to the interest of Revenue then the Tribunal was wrong in holding that the order passed by the Commissioner u/s 263 of the Act was passed in contrary to the provisions of the Act. The relevant operative part of the order of Hon ble Delhi High Court in the case of CIT Vs. Nagesh Knitwears P. Ltd. (Supra) reads as under:- As far as Section 263 is concerned, we have examined the said Section in depth and detail in ITO Vs. D G Housing Projects Ltd. decided on 1st March, 2012, in ITA No. 179/2011 and observed as under:- The Revenue does not have any right to appeal to the first appellate authority against an order passed by the Assessing Officer. Section 263 has been enacted to empower the CIT to exercise power of revision and revise any order passed by the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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. In the said judgment, Delhi High Court had referred to earlier decisions of the Supreme Court in Rampyari Devi Sarogiv. CIT (1968) 67 ITR 84 (SC) and Tara Devi Aggarwal v. CIT (1973) 88 ITR 323 (SC), wherein it has been held that where Assessing Officer has accepted a particular contention/issue without any enquiry or evidence whatsoever, the order is erroneous and prejudicial to the interest of the Revenue. After reference to these two decisions, the Delhi High Court observed:- These two decisions show that it is not necessary for the Commissioner to make further 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 aforesaid observations have to be understood in the factual background and matrix involved in the said two cases befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tu 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 fulfilment 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 which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. Such decision of the Income-tax Officer cannot be held to be erroneous‟ simply because in his order he did not make an elaborate discussion in that regard. 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the CIT from collecting and relying upon new/additional material/evidence to show and state that the order of the Assessing Officer is erroneous. It is in this context that the Supreme Court in Malabar Industrial Co. Ltd. v. Commissioner of Income Tax, (2000) 243 ITR 83 (SC), had observed that the phrase prejudicial to the interest of Revenue‟ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of Revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of Revenue. Thus, when the Assessing Officer had adopted one of the courses permissible and available to him, and this has resulted in loss to Revenue; or two views were possible and the Assessing Officer has taken one view with which the CIT may not agree; the said orders cannot be treated as an erroneous order prejudicial to the interest of Revenue unless the view taken by the Assessing Officer is unsustainable in law. In such matters, the CIT must give a finding that the view taken by the Assessing Officer is unsustainable in law and, therefore, the order is erroneous. He must also show that prejudice is caused to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-Tax, Delhi-I, (1975) 99 ITR 375, 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 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. 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 inquiry. The order becomes erroneous because such an inquiry has not been made and not becau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgument predicates on the assessment order, which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between lack of inquiry and inadequate inquiry . If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. It is only in cases of lack of inquiry that such a course of action would be open. In Gabriel India Ltd. [1993] 203 ITR 108 (Bom), law on this aspect was discussed in the following manner (page 113): From ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be formed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion 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 Thereafter, it was observed and elucidated in Nagesh Knitwears Private Limited (Supra), when and how power under Section 263 can be exercised where there was no proper or full verification and when the twin pre-conditions are satisfied:- Thus, in cases of wrong opinion or finding o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be passed by the CIT to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore CIT must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law. We may notice that the material which the CIT can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record as it stands at the time of examination by the CIT [see CIT v. 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. It is in this context that the Supreme Court in Malabar Industrial Co. Ltd. v. Commissioner of Income Tax, (2000) 243 ITR 83 (SC), had observed that the phrase pre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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