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TMI Blog2017 (8) TMI 1374X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO and no case was made out for invoking jurisdiction under s. 263. Applying the propositions of law laid down to the facts of this case, we uphold the contention of the assessee that the exercise of powers by the ld. CIT u/s 263 of the Act, is bad in law. Hence, we cancel this order passed under section 263 - Decided in favour of assessee. - I.T.A. No. 744/Kol/2015 - - - Dated:- 25-8-2017 - Sri J. Sudhakar Reddy, Accountant Member Sri S.S. Viswanethra Ravi, Judicial Member Shri Akkal Dudhwewala, AR, appeared on behalf of the assessee. Shri G. Mallikarjuna, CIT, DR, appearing on behalf of the Revenue. O R D E R Per J. Sudhakar Reddy :- This appeal filed by the assessee is directed against the order of the ld. Pr. Commissioner of Income Tax-3, Kolkata (hereinafter the ld. CIT ), passed u/s 263 of the Income Tax Act, 1961 (the Act ), dt. 24/03/2015, revising the order passed by the Assessing Officer, u/s 143(3) for the Assessment Year 201-11 on 07/08/2012. 2. Brief facts of the case:- The assessee company is an authorized dealer of the entire range of vehicles and its allied accessories manufactured by Tata Motors Ltd. The Head Office a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by issuing notice u/s 133(6) and making independent enquiries. The documents filed by the assessee in the form of evidence of payment etc. have been accepted without getting confirmation from M/s Wise Agencies Pvt. Ltd and examining the veracity of the contention of the assessee. Hence, assessment order passed by the AO is erroneous and prejudicial to the interest of revenue. ..I have considered the matter and gone through the relevant records. I am of the opinion that the AO has failed to make necessary enquiries in this case to examine the genuineness of the claim of payment of commission. He has merely accepted the claim of the assessee without verification of the claim an application of mind. The assessment is therefore erroneous and prejudicial to the interest of the revenue. I am of the opinion that the case has to go back to the A.O. for fresh assessment. 5. Aggrieved, the assesse is in appeal before us. 6. The ld. Counsel for the assessee, Shri Akkal Dudhwewala, submitted that the information based on which the notice under section 263 of the Act was given, was allegedly passed by the Assessing Officer of M/s. Wise Agencies Pvt. Ltd., wherein it was alleged tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not come to a conclusion that there is an error, or discrepancy or falsity in the submissions. He argued that without forming an opinion that there is an error, the ld. CIT cannot is set aside the issue to the file of the assessing officer for further enquiry on presumptions and assumptions. For this proposition, he relied on the following case laws:- The Calcutta Stock Exchange Ltd. vs. CIT (ITA No. 268/Kol/2015) (ITAT Kol) DIT vs. Jyoti Foundation (357 ITR 388) (Del HC) CIT vs. Leisure Wear Exports Ltd. (341 ITR 166) (Del HC) ITO vs. D.G. Housing Projects Ltd. (343 ITR 329) (Del HC) Crisil Ltd. vs. Addl. CIT (142 TTJ 62) (ITAT Mum) 6.2. He further relied on the decision of the Hon ble Calcutta High Court in the case of ITAT No. 225 of 2013, Commissioner Of Income Tax, Kolkata-I Versus M/s. Inbuilt Merchant Pvt Ltd, Judgment dt. 14th March, 2014, and submitted that the proposition in these case laws are applicable to the facts of this case. Hence he submitted that the order of the ld. CIT, passed under section 263 of the Act, is bad in law and hence the same be quashed and appeal of the assessee be allowed. 7. The learned DR, on the other hand, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at this is a case where proper enquiry was not done. The assessee claimed huge expenditure and filed its return of income declaring total income of ₹ 1,65,26,376/-. The total commission expenditure paid in excess of ₹ 50,000/- each in aggregate, was to 139 parties amounting to ₹ 2,79,22,412/-. Brokerage paid of less than ₹ 50,000/- to each party, was ₹ 60,98,670/-. The total brokerage expenditure was ₹ 3,40,21,082/-. The impugned expenditure which as per the ld. CIT was not properly enquired was only ₹ 9,25,000/-. The assessee furnished a copy of the invoices raised by the M/s. Wise Agencies Pvt. Ltd. A copy of the lower deduction of tax certificate issued in the case of M/s. Wise Agencies Pvt. Ltd. by the ITO (TDS) u/s 197 of the Act, was also filed before the assessing officer. The assessing officer did not draw any adverse inference and accepted this information as correct. Similar information was also given in the cases of all other parties, to whom commission was paid. The ld. CIT has not raised any objections on those matters. 8.1. Be it as it may, the entire thrust of the ld. CIT is that the enquiries made by the assessing officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trial 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 order prejudicial to the interests of the Revenue, unless the view taken by the Income Tax Officer is unsustainable in law. On the facts of that case, Sec.80HHC(3) as it then stood was interpreted by the Assessing Officer but the Revenue contended that in view of the 2005 Amendment which is clarificatory and retrospective in nature, the view of the Assessing Officer was unsustainable in law and the Commissioner was correct in invoking Sec.263. But the Supreme Court rejected the said contention and held that when the Commissioner passed his order disagreeing with the view of the Assessing Officer, there were two views on the word profits in that section; that the said section was amended eleven times; that different view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer 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 a course of action would be open; that an assessment order made by the Income Tax Officer cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately; there must be some prima facie material on record to show that the 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. In that case, the Delhi High Court held that the Commissioner in the exercise of revisional power could not have objected to the finding of the Assessing Officer that expenditure on tools and dies by the assessee, a manufacturer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 every case and start re-examination and fresh inquiry in matters which have already been concluded under law. 29. In M.S. Raju(15 Supra), this Court has held that the power of the Commissioner under Sec.263 (1) is not limited only to the material which was available before the Assessing Officer and, in order to protect the interests of the Revenue, the Commissioner is entitled to examine any other records which are available at the time of examination by him and to take into consideration even those events which arose subsequent to the order of assessment. 30. In Rampyari Devi Saraogi(21 Supra), the Commissioner in exercise of revisional powers cancelled assessee s assessment for the years 1952- 1953 to 1960-61 be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 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. e) The Commissioner cannot initiate proceedings with a view to start fishing and roving inquiries in matters or orders which are already concluded; that the department cannot be permitted to begin fresh litigation because of new views they entert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Assessing Officer as an adjudicator decides a question or aspect and makes a wrong assessment which is unsustainable in law, it can be corrected by the Commissioner in exercise of revisionary power. As an investigator, it is incumbent upon the Assessing Officer to investigate the facts required to be examined and verified to compute the taxable income. If 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. Thus, in cases of wrong opinion or finding on merits, the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. It may be noticed 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. 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. COMMISSIONER OF INCOME TAX vs. J. L. MORRISON (INDIA) LTD. 366 ITR As regard the submission on behalf of the Revenue that power under Section 263 of the Act can be exercised even in a case where the issue is debatable, it was held that the case of CIT vs. M. M. Kham ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. JCIT, 256 ITR 685; Hindusthan Tin Works Ltd. Vs. CIT, 275 ITR 43 (Del), distinguished. (Paras 90-92, 102) COMMISSIONER OF INCOME TAX vs. SOHANA WOOLLEN MILLS 296 ITR 238 (P H HC) A reference to the provisions of s. 263 shows that jurisdiction thereunder can be exercised if the CIT finds that the order of the AO was erroneous and prejudicial to the interest of Revenue. Mere audit objection and merely because a different view could be taken, were not enough to say that the order of the AO was erroneous or prejudicial to the interest of the Revenue. The jurisdiction could be exercised if the CIT was satisfied that the basis for exercise of jurisdiction existed. No rigid rule could be laid down a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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