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TMI Blog2018 (6) TMI 1312X X X X Extracts X X X X X X X X Extracts X X X X ..... o suggest that the claims of the assessee were right. Assessing Officer is required to cause enquiries with regard to the claims of the assessee. As such, the CIT is justified in remitting this issue to the file of the Assessing Officer for de novo consideration by invoking the provisions of sec. 263 of the Act. Accordingly, this ground of appeal of the assessee is dismissed. - I.T.A. No. 255/Coch/2017 And I.T.A. No. 309/Coch/2017 - - - Dated:- 18-6-2018 - SHRI CHANDRA POOJARI, AM AND GEORGE GEORGE K., JM For The Revenue : Shri A. Dhanaraj, Sr. DR For The Assessee : Shri K. Gopi, CA ORDER Per CHANDRA POOJARI, ACCOUNTANT MEMBER: These are cross appeals, one filed by the assessee is directed against the order of the CIT, Kochi passed u/s. 263 of the Income Tax Act dated 24/03/2017 for the assessment year 2012-13 and the other filed by the Revenue is directed against the order of the CIT(A)-I, Kochi dated 31-03-17 for the assessment year 2010-11. 2. The assessee raised the following grounds: 1) The learned Commissioner of Income tax has erred in setting aside the impugned proceedings u/s 143(3) on 27.03.2015. 2) There was no error prejudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as it was prejudicial to the interests of the Revenue for the reasons mentioned below: i) Omission to consider by AO the disallowance on belated payments of employees contribution of EPF and ESI as envisaged u/s. 2(24)(x) r.w.s. 36(1)(va) of the Income Tax Act. ii) Omission by the AO to consider the issue on account of dormant scheme of spraying on coconut trees against the attack of eriophyd mite amounting to ₹ 22.5 lakhs. Accordingly, he set aside the assessment order passed u/s. 143(3) of the Act dated 27/03/2015 by the Assessing Officer for the assessment year 2012-13 for de nova examination and pass a detailed speaking order in respect of the above issues. 4. Against this, the assessee is in appeal before us. Regarding the first issue of direction of the CIT to disallow the payment of employees contribution to EPF and ESI after the specified date prescribed under the respective Act, the contention of the Ld. AR is that the issue was held in favour of the assessee in assessee s own case for the assessment years 2003-04 and 2004-05 by the judgment of the Jurisdictional High Court in ITA No. 280/2010 dated 13/08/2010. According to him, in view of the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 263 are co-exists. Sometimes the order passed by the A.O. may be erroneous but it may not be of prejudicial to the interest of the revenue. Therefore, invoke the jurisdiction u/s 263, the CIT has to point out how the assessment order passed by the A.O. is erroneous insofar as it is prejudicial to the interest of the revenue. In this case, on perusal of the details filed by the assessee, we find that the issue of belated payment of employees contribution to PF has been examined by the A.O. in assessment proceedings by issuing a specific questionnaire dated 13.01.2015 for which the assessee has filed a letter dated 16.02.2015 explaining the reason for delay in payment of PF. The assessee has also explained in the light of the decision of the Hon ble Kerala High Court in the case of Kerala State Warehousing Corporation Limited (supra) and argued that the employees contribution remitted after due date prescribed under respective Acts, but before the date of filing of return of income as per section 139(1) of the Income-tax Act, 1961, cannot be disallowed in view of the amended provisions of section 43B of the I.T.Act. The A.O. after considering the explanation of the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CIT v. Gabriel India Ltd. [(1993) 71 Taxman 585 (Bom.)] observed that once the A.O. has considered the issue and allowed the claim, then the CIT cannot assume jurisdiction to revise the assessment order on the guise of inadequate inquiry or lack of inquiry. Therefore, we are of the view that, the CIT was incorrect in coming to the conclusion that the order of the A.O. is erroneous insofar as it is prejudicial to the interest of revenue. 10. Coming to the case laws relied upon by the assessee, the assessee has relied upon the decision of the Hon ble Karnataka High Court in the case of CIT v. Saravana Developers [(2016) 68 taxmann.com 148 (Kar.)], wherein the Hon ble Court observed that where the Assessing Officer found to have applied his mind before accepting valuation declared by the assessee in workin- progress report and the Commissioner failed to satisfy that valuation report accepted was erroneous, the order passed u/s 263 by the Commissioner setting aside the assessment was bad in law. The relevant portion of the order is extracted below:- The Commissioner has invoked the provisions of section 263 only for the reason that the Assessing Officer has not spelt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e declared by the assessee in the work-in-progress report. Such an order cannot be held to be erroneous and prejudicial to the interest of the revenue. It is not a case of 'lack of inquiry'. Further, inquiry ordered by the Commissioner would amount to fishing/rowing inquiry in the matter already concluded. [Para 19] The assessee placed reliance on the judgment of this Court in the case of CIT v. Dr. L. Narendra Prasad [IT Appeal No. 473 of 2009, dated 18-8-2015 to contend that generally in the business of real estate, the net profit would be 8 per cent as accepted by the department. In the instant case, the profit declared by the assessee works out to more than 8 per cent that is normally adopted and accepted by the department. However, in the computation of work-in-progress made by the Appellate Commissioner, the profit margin works out to more than 31.8 per cent which is practicably not acceptable. Accordingly, on this count also, the order passed by the Commissioner computing the margin at more than 31 per cent which is not normally workable in the business of real estate could not be accepted. This view is also supported by the Division Bench judgment of this Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the ITO, who passed the order, unless the decision is held to be erroneous. Cases may be visualised where the ITO while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of 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 ITO. 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 ITO has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad given a detailed explanation in that regard by a letter in writing. All these were part of the record of the case. Evidently, the claim was allowed by the ITO on being satisfied with the explanation of the assessee. This decision of the ITO could not be held to be 'erroneous' simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the ITO to re-examine the matter. That was not permissible. Hence, the provisions of section 263 were not applicable to the instant case and, therefore, the Commissioner was not justified in setting aside the assessment order. 12. In this view of the matter and considering the ratios of case laws discussed above, we are of the view that the assessment order passed by the A.O. is neither erroneous nor prejudicial to the interests of the revenue. Therefore, we set aside the order passed by the CIT u/s 263 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts stated and the genuineness of the claims made in the return. The order passed by the Assessing Officer becomes erroneous when an enquiry has not been made or genuineness of the claim has not been examined.. The Commissioner may consider an order of the Assessing Officer to be erroneous not only when it contains some apparent error of reasoning or of law or of fact on the face of it but also when the Assessing Officer fails to make enquiries or examine the genuineness of the claims of the assessee. In taking the aforesaid view, we are supported by the decisions of the Hon'ble Supreme Court in Rampyari Devi Saraogi v. CIT (67 ITR 84) (SC), Smt. Tara Devi Aggarwal v. CIT (88 ITR 323) (SC), and Malabar Industrial Co. Ltd's case ( 243 ITR 83) (SC). 6.1 In view of the foregoing, it can safely be said that an order passed by the Assessing Officer becomes erroneous and prejudicial to the interests of the Revenue under Section 263 in the following cases: (i) The order sought to be revised contains error of reasoning or of law or of fact on the face of it. (ii) The order sought to be revised proceeds on incorrect assumption of facts or incorrect application of law. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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