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TMI Blog2020 (6) TMI 288X X X X Extracts X X X X X X X X Extracts X X X X ..... he foregoing artificial price rigging. The PCIT's revision directions under challenge are therefore reversed on merits as well. The AO's regular assessment dated 11.01.2016 stands restored as a necessary corollary. - Decided in favour of assessee. - ITA No. 958/KOL/2018 - - - Dated:- 10-6-2020 - Sh. S.S. Godara, Judicial Member And Dr. A.L. Saini, Accountant Member For the Appellant : Sh. A.K. Tibrewal, FCA And Sh. Amit Agarwal, Adv. For the Respondent : Sh. Ram Bilash Meena, CIT. ORDER PER SH. S.S.GODARA, JUDICIAL MEMBER This assessee s appeal for AY 2013-14 arises against the order dated 09.08.2017 passed by the Principal Commissioner of Income Tax-12, Kolkata in Appeal No.Pr.CIT-12/Kol/263/Tech/ALCPS0321F/2017-18/884 in proceedings u/s 263 of the Income tax Act, 1961 (in short the Act ). Heard both the parties. Case file(s) perused. 2. The assessee's soul substantive grievance raised in the instant lis challenges correctness of the PCIT's revision order under challenge terming the regular assessment in question dated 11.01.2016 framed in her case as an erroneous one causing prejudice to the interest of the revenue regarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g prejudice to interest of the revenue followed by his directions to the AO to frame a fresh assessment under challenge. The assessee's case accordingly is that as per the jurisdiction history obtained from ITBA portal, it is clear that the DCIT s assessments are beyond the territorial supervision of the PCIT-12, Kolkata. Ld. Counsel has also placed on record the relevant details to this effect that the assessee's jurisdiction; once transferred to Central Circle, Kolkata, does not come under the PCIT-12, Kolkata but lies with the PCIT, Central Circle-1, Kolkata. This clinching aspect of territorial jurisdiction was duly confronted to the CIT(DR) who has to dispute all these factual developments in assessee's case. We thus, are of the view that the PCIT-12, Kolkata has erred on facts and not law in invoking his Section 263 revision jurisdiction in assessee's case since lacking territorial jurisdiction. We quote hon'ble jurisdictional high court's decision of Ramshila Enterprises Pvt. Ltd. vs. PCIT [2016] 68 taxmann.com 270 (Cal) holding similar revision order by a nonjurisdiction Commissioner as a nullity. We accordingly reverse the PCIT-12, Kolkata's rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principles laid down in the judgments as below: 24. In Malabar Industrial Co.Ltd. ( 2 Supra), the Supreme Court held that a bare reading of Sec.263 makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent - if the order of the Income Tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but it is prejudicial to the Revenue - recourse cannot be had to Sec.263 (1) of the Act. It also held at pg-88 as follows: The phrase prejudicial to the interests of the 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 interests of the Revenue. For example, when an Income-tax Officer adopted one of the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble by the Commissioner under the provisions of Sec.263 is supervisory in nature; that an erroneous judgment means one which is not in accordance with law; that if an Income Tax Officer acting in accordance with law 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 differently or more elaborately; that the section does not visualize the substitution of the judgment of the Commissioner for that of the Income Tax Officer, who passed the order unless the decision is not in accordance with the law; that to invoke suo motu 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 enhancement or modification of the assessment or cancellation of the assessment or directions issued for a fresh assessment were called for, and must irresistibly lead to the conclusion that the order of the Income Tax Officer was not only errone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed its explanation. Merely because the Assessing Officer in his order did not make an elaborate discussion in that regard, his order cannot be termed as erroneous. The opinion of the Assessing Officer is one of the possible views and there was no material before the Commissioner to vary that opinion and ask for fresh inquiry. 28. In Gabriel India Ltd. (6 Supra), the Bombay High Court held that a 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. It held that 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 entertain on facts or new versions which they present as to what should be the infere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court that no fair or reasonable opportunity was given to her. Supreme Court held that there was ample material to show that the income tax officer made the assessments in undue hurry; that he had passed a short stereo typed assessment order for each assessment year; that on the face of the record, the orders were pre-judicial to the interest of the Revenue; and no prejudice was caused to the assessee on account of failure of the Commissioner to indicate the results of the enquiry made by him, as she would have a full opportunity for showing to the income tax officer whether he had jurisdiction or not and whether the income tax assessed in the assessment years which were originally passed were correct or not 31. From the above decisions, the following principles as to exercise of jurisdiction by the Commissioner u/s.263 of the Act can be culled out: a) The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If erroneous but is not prejudicial to the Revenue or if it is not erroneous but it is prejudicial to the Revenue - recourse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. g) The power of the Commissioner under Sec.263 (1) is not 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. We now examine the following judgments on this issue:- DIRECTOR OF INCOME TAX vs. JYOTI FOUNDATION 357 ITR 388 (Delhi High Court) It was held that revisionary power u/s 263 is conferred on the Commissioner/Director of Income Tax when an order passed by the lower authority is erroneous and prejudicial to the interest of the Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under s. 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it cannot be said that the view taken by him is erroneous nor the order of the Assessing Officer in that case can be set aside in revision. It has to be shown unmistakably that the order of the Assessing Officer is unsustainable. Anything short of that would not clothe the CIT with jurisdiction to exercise power under Section 263 of the Act. CIT vs. M. M. Khambhatwala reported in 198 ITR 144; CIT vs. Raison Industries Ltd. reported in 288 ITR 322 (SC), not applicable; Malabar Industrial Co. Ltd. v. CIT reported in 243 ITR 83, relied on. (Para 72) As regard the third question as to whether the assessment order was passed by the Assessing Officer without application of mind, it was held that the Court has to start with the presumption that the assessment order was regularly passed. There is evidence to show that the assessing officer had required the assessee to answer 17 questions and to file documents in regard thereto. It is difficult to proceed on the basis that the 17 questions raised by him did not require application of mind. Without application of mind the questions raised by him in the annexure to notice under Section 142(1) of the Act could not have been formulated. The Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . If that is so, there was no error in the view taken by the AO and no case was made out for invoking jurisdiction under s. 263. COMMISSIONER OF INCOME TAX vs. LEISURE WEAR EXPORTS LTD. 341 ITR 166 (Del) The prerequisite to the exercise of suo motu jurisdiction under s. 263 by the CIT is that the order of the AO is erroneous insofar as it is prejudicial to the interest of the Revenue. Two conditions are to be satisfied, namely, (i) the order of the AO sought to be revised is erroneous; and (ii) the error committed by the AO in the order is prejudicial to the interest of the Revenue. Both these conditions are to be satisfied simultaneously. It is also well-settled principle that provisions of s. 263 would not be invoked merely to correct a mistake or error committed by the AO unless it has caused prejudice to the interest of the Revenue. If an order is based on incorrect assumption of facts or on incorrect application of law or without applying the principles of natural justice and without application of mind, it would be treated as erroneous. Likewise, the expression prejudicial to the interest of the Revenue is of wide import and is not confined to loss of tax. If due to an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvations that the AO was satisfied with making flimsy additions which were deleted by the CIT(A). There is not a whisper as to how this order was prejudicial to the interest of the Revenue. That apart, the approach of the Tribunal in discarding the observation of the CIT about not making proper inquiries in respect of the said four issues is also justified and without blemish. (Paras 12 to 14) First comment of the CIT was in respect of finished goods in the closing stock. The CIT found that these were to the tune of ₹ 5.28 crores. According to the CIT, when the total turnover of the assessee was ₹ 6.13 crores, the AO should have satisfied himself by calling for more details as to how there was closing stock of such a magnitude of ₹ 5.28 crores. Thus, the CIT has not doubted the statement of finished goods in the closing stock furnished by the assessee. He has only remarked that there should have been a deeper probe by calling for more details. This is neither here nor there, when one keeps in view the ingredients of s. 263. (Para 15) Insofar as the insurance claim is concerned, the CIT observed that the assessee had shown receivable on this account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the Tribunal. In the case on hand the Id. CIT finds fault with the AO for not invoking Rule 8D while making disallowance u/s 14A. The Hon ble Delhi High Court in the case of Maxop Investments Ltd. Vs CIT (supra) held that the AO cannot proceed to determine the amount of expenditure incurred in relation to exempt income without recording a finding that he is not satisfied with the correctness of the claim of the assessee. This is a condition precedent while rejecting the claim of the assessee, with regard to incurring of expenditure or no expenditure in relation to exempt income. The AO will have to indicate cogent reasons for the same and Rule 8D comes into play only when the AO records a finding that he is not satisfied with the assessee s method. In the case in hand the AO has not made any such recording of satisfaction and has accepted the disallowance made u/s 14A by the assessee. In such circumstances it is not open for the Id. CIT to come to a conclusion that the AO should have invoked Rule 8D, without himself recording the satisfaction that the calculation given by the assessee in its disallowance made suo moto u/s 14A is not correct. Coming to the other expenses c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble jurisdictional high court s decisions CIT vs. Ratan ITA No. 105/2016, M/s Classic Growers Ltd vs. CIT ITA 129/2012, CIT vs. Lakshmargarh Estate Trading Co. Ltd. (2013) 40 taxman 439 (Cal), CIT vs. Smt. Shreyashi Ganguly ITA 196/2012, CIT vs. Bhagwati Prasad Agarwal (2009/ TMI 34738/Cal in 22/2009 29.04.2009 have accepted genuineness of similar LTCG. Since the issue is covered by all the foregoing decisions of hon'ble jurisdictional high court, we observe that the Assessing Officer had rightly treated the assessee s foregoing LTCG derived from sale of shares to be genuine. That being the case, we hold that PCIT s exercise of revision jurisdiction merely on suspicious circumstances by invoking in sec. 263 Explanation (supra) with effect from 01.06.2015 is not sustaining. We therefore reverse the PCIT s order under challenge and restore the impugned assessment framed by the Assessing Officer on 29.07.2016. It is made clear that we have dealt with an instance of Assessing Officer himself having accepted assessee s LTCG after examining all the relevant facts of the case. We therefore do not deem it appropriate to restore the very issue back to him for yet another r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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