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TMI Blog2018 (4) TMI 1428X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of manufacturing of Ferro Alloys. It filed its return of income on 27/09/2012, declaring total income of Rs. 1,34,05,730/-. The Assessing Officer completed assessment u/s 143(3) on 31/03/2015, determining total income at Rs. 1,51,47,818/-. 3. The ld. Pr. CIT, proposed to invoke his powers u/s 263 of the Act, by issuing a showcause notice dt. 27/01/2017. The relevant portion is extracted for ready reference:- "Whereas the Jurisdictional Pr. Commissioner of Income Tax had called for and examined the record of your case and he considered that the impugned assessment order passed u/s 143(3) of the I T Act, 1961 by the DCIT,Cir-3(1), - Kolkata on 17.03.2015 for A.Y. 2012-13 is, prima facie, erroneous in so far as it is prejudicial to the interests of the revenue for the following reasons:- 2. It was observed from the assessment records that during, the relevant previous year assessee received 'Loans & Advances' of Rs. 1,81,15,655/- from "Shraddha Vyapaar Private Limited". Further it was also noticed that the assessee held 9,52,520 nos of unquoted shares of Shraddha Vyapaar Private Limited out of total of 19,34,520 nos of issued subscribed and paid up shares i.e, 49.24% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and this money has been lent in the ordinary course of its business to the assessee and hence Section 2(22)(e) of the Act, is not attracted. (c) That the Assessing Officer during the course of assessment had enquired into this issue of Inter Corporate loan taken from SVPL and the assessee had filed all the relevant details and that the Assessing Officer had taken a possible view. A number of case-law were relied upon and factual data in support of the contentions was furnished. 4.1. The ld. Pr. CIT rejected these contentions of the assessee and held that the Assessing Officer has not enquired into this aspect of applicability of Section 2(22)(e) of the Act, during the course of assessment proceedings. He relied on the amendment made to Section 263 of the Act, w.e.f. 01/06/2015 and held that the Assessing Officer , not making adequate and relevant enquiries, would deem the assessment order to be erroneous and prejudicial to the interest of the revenue. He set aside this issue to the file of the Assessing Officer for fresh adjudication, in accordance with law. 5. Aggrieved the assessee is in appeal before us, on the following grounds:- "1. The Hon'ble CIT erred in law and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der u/s 263 of the Act merely on a change of opinion without considering the facts that the relevant particulars and documents filed along with copy of MOA, NBFC Certificate and Audited a/cs of the Lender company declaring / disclosing its money lending business activities were duly examined and settled by the AD during the course of the original assessment without requiring to make any enquiry & verification as section 2(22)( e) of the Act was found by him not applicable in view of the exclusive clause (ii) of section 2(22) of the Act. 7. For that your petitioner craves the right to put additional grounds and / or to alter / amend / modify the present grounds before or at the time of hearing." 6. The ld. Counsel for the assessee, Shri Siddharta Jhajaria, submitted that the ld. Pr. CIT had not considered the reply given by the assessee to the showcause notice issued by the ld. Pr. CIT, in a legal and judicial manner and that the ld. Pr. CIT has not considered and followed the decisions of the Jurisdictional High Court in the matter. He argued that the loan taken by the assessee was an Inter Corporate Deposits from a NBFC, whose substantial part of business is lending of money. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the factual reply by the assessee is wrong after examining the issue. He further relied on the decision of circular of the CBDT for the proposition that when the transaction is a commercial transaction Section 2(22)(e) of the Act, does not apply. He prayed that the order of the ld. Pr. CIT, be quashed. 7. The ld. D/R, Shri Goulen Hangshing, on the other hand, opposed the contentions of the assessee and submitted that the Assessing Officer has not verified the loan taken from a related party from the angle of taxability u/s 2(22)(e) of the Act. He argued that routine questions were asked to the assessee, by way of a questionnaire by the Assessing Officer, during the course of assessment proceedings and these routine questions were replied to by the assessee and no further enquiry was made by the Assessing Officer. He submitted that such raising of routine question and replies given, does not tantamount to examination of the issue by the Assessing Officer. He referred to the showcause notice and submitted that the ld. Pr. CIT had in this notice stated that the Assessing Officer had passed the impugned assessment order without verification and hence he proposed to treat the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 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. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue. RampyarideviSaraogi v. CIT (1968) 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal V. CIT (1973) 88 ITR 323 (SC)". 25. In Max India Ltd. (3 Supra), reiterated the view in Malabar Industrial Co.Ltd. (2 Supra) and observed that 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax Officer is not called upon to write an elaborate judgment giving detailed reasons in respect of each and every disallowance, deduction, etc., it is incumbent upon the Commissioner not to exercise his suomotu revisional powers unless supported by adequate reasons for doing so; that if a query is raised during the course of the scrutiny by the Assessing Officer, which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the Assessing Officer called for interference and revision. 27. In Sunbeam Auto Ltd.( 5 Supra), the Delhi High Court held that the Assessing Officer in the assessment order is not required to give a detailed reason in respect of each and every item of deduction, etc.; that whether there was application of mind before allowing the expenditure in question has to be seen; that if there was an inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under Sec.263 merely because he has a different opinion in the matter; that it is only in cases of lack of inquiry that such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mstance; that if this is permitted, litigation would have no end except when legal ingenuity is exhausted; that to do so is to divide one argument into two and multiply the litigation. It held that cases may be visualized where the Income Tax Officer while making an assessment examines the accounts, makes inquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the account or by making some estimate himself; that the Commissioner, on perusal of the record, 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; but that would not vest the Commissioner with power to reexamine the accounts and determine the income himself at a higher figure; there must be material available on the record called for by the Commissioner to satisfy him prima facie that the order is both erroneous and prejudicial to the interests of the Revenue. Otherwise, it would amount to giving unbridled and arbitrary power to the revising authority to initiate proceedings for revision in ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. c) To invoke suomotu revisional powers to reopen a concluded assessment under Sec.263, the Commissioner must give reasons; that a bare reiteration by him that the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, will not suffice; that the reasons must be such as to show that the and must irresistibly lead to the conclusion that the order of the Income Tax Officer was not only erroneous but was prejudicial to the interests of the Revenue. Thus, while the Income Tax Officer is not called upon to write an elaborate judgment giving detailed reasons in respect of each and every disallowance, deduction, etc., it is incumbent u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest of the Revenue, but orders which are passed after inquiry/investigation on the question/issue are not per se or normally treated as erroneous and prejudicial to the interest of the Revenue because the revisionary authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken. INCOME TAX OFFICER vs. DG HOUSING PROJECTS LTD343 ITR 329 (Delhi) Revenue does not have any right to appeal to the first appellate authority against an order passed by the Assessing Officer. S. 263 has been enacted to empower the CIT to exercise power of revision and revise any order passed by the Assessing Officer, if two cumulative conditions are satisfied. Firstly, the order sought to be revised should be erroneous and secondly, it should be prejudicial to the interest of the Revenue. The expression "prejudicial to the interest of the Revenue" is of wide import and is not confined to merely loss of tax. The term "erroneous" means a wrong/incorrect decision deviating from law. This expression postulates an error which makes an order unsustainable in law. The Assessing Officer is both an investigator and an adjudicator. If the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on must be kept in mind by the CIT while exercising jurisdiction under s. 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of alleged "inadequate investigation", it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te tax on that basis. When the Assessing Officer was satisfied that the return, filed by the assessee, was in accordance with law, he was under no obligation to justify as to why was he satisfied. On the top of that the Assessing Officer by his order dated 28th March, 2008 did not adversely affect any right of the assessee nor was any civil right of the assessee prejudiced. He was as such under no obligation in law to give reasons. The fact, that all requisite papers were summoned and thereafter the matter was heard from time to time coupled with the fact that the view taken by him is not shown by the revenue to be erroneous and was also considered both by the Tribunal as also by us to be a possible view, strengthens the presumption under Clause (e) of Section 114 of the Evidence Act. A prima facie evidence, on the basis of the aforesaid presumption, is thus converted into a conclusive proof of the fact that the order was passed by the assessing officer after due application of mind. Meerut Roller Flour Mills Pvt. Ltd. vs. C.I.T., ITA No. 116 /Coch/ 2012; CIT vs. Infosys Technologies Ltd., 341 ITR 293 (Karnataka); S.N. Mukherjee vs. Union of India, AIR 1990 SC 1984; A. A. Doshi vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the ld. Assessing Officer has not recorded that he had examined the transaction from the angle of Section 2(22)(e) of the Act. 10. Be it as it may, when the assessee has submitted that what was given was an Inter Corporate Loan and that it carried interest and that it was not a gratuitous loan and SVPL is a NBFC and that substantial part of its business, in fact more than 90 per cent of its business is lending money i.e. giving loan and advances and when the judgement of the Hon'ble Jurisdictional High Court and the Tribunals which had laid down propositions of law on this issues are placed before the ld. Pr. CIT, to come to a conclusion, contrary to these judgments cannot be countenanced. The submissions made by the assessee either on facts or on law has not been controverted by the ld. Pr. CIT. The ld. Pr. CIT is bound by the proposition of law laid down by the Hon'ble Jurisdictional High Court. Ignoring the same makes the order bad in law. 11. The assessee has given the following table in support of his contentions that substantial part of the business of SVPL, which is a NBFC, is lending of money:- Particulars of income/asset As on 31.3.2011 (in Rs.) As on 31.03.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reads as follows:- "Section 2(22) clause (e) of the Income-tax Act, 196) (the Act) provides that "dividend" includes any payment by a company, not being a company in which the public are substantially interested, of any sum by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits. 2. The Board has observed that some Courts in the recent past have held that trade advances in the nature of commercial transactions would not fall within the ambit of the provisions of section 2(22) (e) of the Act. Such views have attained finality. 2.1 Some illustrations/examples of trade advances/commercial transactions held to be not covered u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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