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TMI Blog2018 (4) TMI 1207X X X X Extracts X X X X X X X X Extracts X X X X ..... n. However, we find that both these issues were duly examined by the AO vide Questionnaire dated 2.11.2004 to which replies dated 9.12.2004, 20.12.2004 and 6.1.2005 were furnished and, therefore, the finding of the Ld. CIT that the issues were not examined properly was not correct. CIT has not pointed out the definite and specific error in the original assessment order and observed that the inquiry made by the AO was inadequate or improper without first pointing out the error in the original assessment order passed by the AO, particularly because both the aforesaid issues were duly examined at the stage of the original assessment proceedings, hence, the impugned order is beyond jurisdiction, bad in law and void-ab-initio. - Decided in favour of assessee. - I.T.A. NO. 2697/DEL/2007 And I.T.A. NO. 231/DEL/2012 - - - Dated:- 23-4-2018 - SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Assessee : Sh. Sachit Jolly, Adv. For The Department : S h . Sanjit Singh, CIT (DR) ORDER PER H.S. SIDHU : JM These are two appeals filed by the Assessee, which are taken up for hearing together. The first appeal challenges th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , documents and papers as may be considered necessary either before or during the appeal hearing. 3. The grounds raised in ITA NO. 231/DEL/2012 read as under:- 1. That the order dated October 28, 2011 passed by the Ld. CIT(A) is erroneous and bad in law to the extent the same confirms the addition / disallowance / levy of interest made in the assessment year. 2. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in confirming the disallowance of ₹ 2,28,35,593/- being the loss incurred by the appellant on account of cross currency swap arrangement by holding the same as capital loss. 2.1 That the Ld. CIT(A) erred on facts and in law in not appreciating that the cross currency swap arrangement was entered into in respect of loans taken for the purposes of working capital requirements and hence is revenue in nature. The grounds of appeal hereinabove are independent and without prejudice to each other. The appellant craves leave to alter, amend any / or withdraw all or any of the grounds of appeal herein or add any further grounds as may be considered necessary and to submit such statements, documents and papers as may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her held that the AO had not examined the aforesaid two issues properly and, therefore, set aside the issues for further inquiries to be conducted by the AO. He however, submitted that both these issues were duly examined by the AO vide Questionnaire dated 2.3.2004 to which replies dated 9.12.2004, 20.12.2004 and 6.1.2005 were furnished and, therefore, the finding of the Ld. CIT that the issues was not examined properly was factually incorrect. He further stated that since the Ld. CIT has failed to point out the definite and specific error in the original assessment order, it was submitted that the Ld. CIT erred in passing the order dated 22.3.2017 on the ground that the inquiry made by the AO was inadequate or improper without first pointing out the error in the original assessment order passed by the AO, particularly because both the aforesaid issues were duly examined at the stage of the original assessment proceedings, hence, the impugned order is beyond jurisdiction, bad in law and void-ab-initio. He further stated that even otherwise there was no actual loss to the Revenue from the deduction claimed by the assessee since on one issue the assessee has suo moto added back the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The mistake resulted into underassessment of income to the extent of ₹ 1114.68 lakhs. ii) The deduction of ₹ 114.06 lakhs towards loss on interest rate swaps as debited in the profit and loss account was allowed which is not correct. The mistake resulted into underassessment of income to the extent of ₹ 114.06 lakhs. 8.1 In view of above, Ld. CIT-IV observed that assessment order dated 30.3.2005 us. 143(3) of the Act was, prima facie, considered erroneous and prejudicial to the interest of revenue. Accordingly, the notices u/s. 263 of the Act were issued on 27.7.2006, 23.1.2007 and 08.3.2007. In response to these notices, the AR of the assessee appeared before the Ld. CIT-IV and explained the facts of the case and written submissions filed vide letter dated 22.3.2007 have been taken on record. Accordingly, having afforded due opportunity to the assessee company, the Ld. CIT-IV, Delhi vide his Order dated 22 March, 2007 passed under Section 263 of the Act, held that the original assessment order dated 30 March, 2005 under Section 143(3) of the Act for the Assessment Year 2002-03 to be erroneous and prejudicial to the interest of the Revenue because: (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctual loss which is allowable. 8.3 To support our aforesaid view, we draw support from the decision of the Hon ble Jurisdictional High Court in the case of CIT vs. Sunbeam Auto (2011) 332 ITR 167 (Supra) wherein, it has been held that there is a difference between lack of inquiry and inadequate inquiry and also held that in the case of inadequate inquiry, which is the case of the Revenue in the present case, no action under section 263 of the Act can be taken unless the Commissioner records a specific and definite finding regarding the error in the assessment order, which has not done in the present case. We further draw support from the decision of the ITAT C Bench dated 30.10.2015 in the group case of the assessee i.e. GE Money Financial Services Ltd. (Formerly known as GE Countrywide Consumer Financial Services Ltd.) vs. DCIT, Circle 12(1), New Delhi passed in ITA No. 1941/Del/2008 (AY 2003-04) 2123/De/2009 (AY 2004-05) wherein, the Tribunal has held as under:- 8. We now consider the specific arguments on the jurisdiction of the Ld.CIT to invoke the powers u/s 263 of the Act. 8.1. For the A.Y. 2003-04 and 2004- 05, the A.O. has, during the course of assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustry, which had to work on complete accuracy at high speed for a longer period, replacement of the arts at short intervals becomes imperative to retain the accuracy. With the replacement of tools and dies no new asset comes into existence nor was their benefit of enduring nature. They did not even enhance the life of the existing machine of which the tools and dies were only parts. Therefore, the view taken by the AO was one of the possible views and the assessment order passed by him could not be held to be prejudicial to the interests of Revenue. The opinion of the AO in treating the expenditure as revenue expenditure was plausible and thus there was no material before the Ld.CIT to vary that opinion and ask for fresh enquiry. 8.5. The Hon ble High Court in the case of CIT vs. Anil Kumar Sharma reported in 335 ITR 83 (Del) has held as follows. Held, dismissing the appeal, that the present case would not be one of lack of inquiry even if the inquiry was termed inadequate. The Tribunal found that complete details were filed before the AO and that he applied his mind to the relevant material and facts, although such application of mind was not discernible from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re written off as bad debts then 100% of such write off would have to be allowed and that the assessee was conservative in its claim. 9. Applying the propositions laid down in the above judgements to the facts of the case we hold that the invoking of powers u/s 263 of the Act for both the A.Ys is bad in law on the issue of (a) loss on sale of repossessed assets; (b) loss on sale of bad loan portfolio. 10. Coming to the issue that arises, only in the A.Y. 2004-05 i.e. depreciation on improvements to leasehold assets, we find that the Ld.CIT has gone on a wrong presumption that the depreciation is claimed for renovation of building. When the clarification has been given by the assessee that it is only depreciation of furniture and fixtures he remanded the issue to the file of A.O. for verification, without pointing out as to what is the prejudice caused to revenue. This in our opinion is bad in law. 10.1. The Hon ble Delhi High Court in the case of CIT vs. Kelvinator of India Ltd. (2002) reported in 256 ITR p.1.(Del)(FB), held as follows: it is well known that a presumption can also be raised to the effect that in terms of clause (e) on S.114 of the Indian Evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) held as follows. Held, the Commissioner is perfectly competent to exercise his powers u/s 263 whenever he has found, prima facie, that there is need to enquire, if the interest of the revenue has suffered by an order of assessment. In the instant case, he had given certain reasons. The basis for the order of the Commissioner was a question of fact and whether it was correct or not would have to be found out after enquiry by the AO. The Commissioner had found that the AO had omitted to enquire into this question found by the Commissioner implicit in the manner in which the amounts were borrowed and advanced by the assessee company. It was incumbent on the AO to further investigate the facts stated in the return, when circumstances would make such an inquiry prudent and the work erroneous in s.263 included the failure to make such an enquiry. The order became erroneous because such an enquiry had not been made and not because there was anything wrong with the order if all the facts stated therein were assumed to be correct. Thus, the Tribunal was justified in upholding the action of the Commissioner in invoking the provisions of s.263 of the Act and sustaining his ..... X X X X Extracts X X X X X X X X Extracts X X X X
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