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TMI Blog2020 (10) TMI 249X X X X Extracts X X X X X X X X Extracts X X X X ..... is, the order passed by the AO is also erroneous and prejudicial to the interest of revenue. Income-tax Officer is not only an adjudicator but also an investigator. It is his duty to ascertain the truth of the facts stated in the return. When the circumstances of the case are such so as to provoke an enquiry, it is his duty to make proper enquiry. First he should investigate the matters on the basis of which the assessee has prepared income tax return thereafter he should reach to a logical conclusion that the income shown is as per the Income Tax Act. Failure to make enquiry in such circumstances would make the assessment order erroneous and prejudicial to the interest of the revenue. We concur with the submissions of Ld. CIT-DR that it was a case of lack of inquiry and there was no application of mind by AO on the issues which formed subject matter of revisional jurisdiction u/s 263. Therefore, we do not find any illegality in the action of Ld. Pr. CIT in exercising the said jurisdiction - Decided against assessee. - ITA No.226/CTK/2019 - - - Dated:- 5-10-2020 - Shri C.M. Garg, JM And Shri L.P. Sahu, AM For the Assessee : Shri S.K.Tulsyan/B.K.Tibrewal, ARs For th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Brief facts of the case are that the assessee is an individual deriving income from execution of mining contract works and filed his return of income electronically on 01.05.2015 showing total income at ₹ 10,83,010/-. The return of the assessee was processed u/s.143(1) of the Act. Later on the case was selected through CASS for limited scrutiny. Accordingly, the notice u/s.143(2) of the Act was issued. The reason for selection for limited scrutiny was based the three following points :- i) contract receipts/fees mistmatch ii) sales turnover mismatch iv) tax credit mismatch Thereafter the AO issued notice u/s.142(1) of the Act and completed the assessment u/s.143(3) of the Act assessing total income of assessee at ₹ 12,78,010/- and made additions of ₹ 1,10,000/- under the head repair and maintenance on estimate basis and ₹ 85,000/- under the head stores and spare parts. 6. Subsequently, the Pr.CIT in exercise of statutory powers vested u/s.263 of the Act, called for the assessment records and examined the same. After examination of the assessment records, the Pr.CIT issued show cause notice to the assessee and reasons for exercising powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be shown in the balance sheet of M/s Baba Langaleswar Fuel as 'sundry creditors But the same was not shown as sundry creditors . But. this has been wrongly treated as capital introduced during the year'' in the balance sheet of M/s Baba Langaleswar account. Therefore, the same should have been treated as unexplained income u/s 68 of the l.T. Act, 1S61 and added to the total income of the assessee. But, the Assessing Officer failed to examine these issues, which made the assessment order erroneous and prejudicial to the interest of revenue. 6 On the whole, the Assessing Officer, who is supposed to protect the interest of revenue as a tax collector has not performed his job in the right spin) and has passed the assessment order perfunctorily which shows lack ot application ol mind, failure to conduct due diligence and enquiry before passing the order. Reference in this context is invited to the decision of Delhi High Court in the case of Duggai Co v. CIT(1996) 226 STR456(Dei), wherein it has been held as under: The ITO is not only an adjudicator, but also an investigator. He cannot remain passive in the face of a return which is apparently in order hut ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to submit your written submission by e-mail in a MS-Word editable format at the given mail address above. Yours faithfully, Sd/- ( Debendra Narayan Kar, IRS ) Pr Commissioner of Income Tax Sambalpur. The assessee did not reply the above show cause notice issued by the ld. Pr.CIT, therefore, the ld.Pr.CIT decided the issue on the basis of records available before him after observing as under :- Decision : 8. I have duly considered the provisions of law, the facts of the case, the submissions of the assessee and perused the assessment records. 9. it is noticed from the assessment record that the A.O. had not verified the issue of service tax liability of ₹ 24,66,126/- relating to F.Y.2013-14, which was not paid on or before due date for furnishing the return. Secondly, service tax liability of ₹ 7,28,245/- relating to earlier year was also not paid during the previous year. Both amounts were required to be disallowed u/s.43B of the Act and added to the total income. But the AO had failed to bring the same to tax while completing the assessment for the AY, 2014-15, Thirdly, the assessee had debited an amount of ₹ 27,59,555/- to P L a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder that criterion. 12. In this context, reference can also be made to the decisions of Hon'ble Supreme Court in the cases of Ramapyari Devi Saraogi (1988) 67 ITR 84 (SC| and Smt Taradevi Agarwai Vs CfT 88 ITR 323 (SC), wherein the Hon'ble Apex Court has held that lack of enquiry or verification at the relevant time by the AO would constitute prejudice to the interest of revenue and would make such order erroneous . Similarly, the Hon'ble High Court of Orissa in the case of Uma Shankar *Rice Mills v. CIT (1991) 187 ITR 638 (Ori.) has observed that where the Commissioner felt that proper enquiry was not made by the AO during the assessment proceeding, he was justified in invoking the provisions of section 263 in respect of the order passed by the AO. 13. The above views of the Courts have been given statutory approval by the inserting Exptanaiion~2 to Section 283 (1) w.e.f. 01.08.2015, which reads as under:- Explanation 2 to section 263 For the purpose of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if in the opin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer to carry thorough and detailed enquiry. 15, in the light of the above discussion and in exercise of powers available u/s.263 of the Act, I set aside the assessment order dated 19,12,2018 for adjudication of the above issues afresh and direct him to reframe the assessment after proper appreciation of facts in accordance with law and as per the directions given hereunder (i) The AO is required to verify whether service tax liability of Rs,24,86,126/- which was incurred during the year has been paid by due date of filing of the return. Again the AO has to verify whether service tax liability of ₹ 7,08,245/- relating 4o earlier years has been paid during the year. Necessary addition would be made to the extent of nonpayment of service tax liability on or before due date for furnishing the return of income u/s,43B of the Income Tax Act. (ii) The AO is required to verify whether due tax has been deducted at source while making payment to SREI Equipment Finance Pvt. Ltd towards Interest on Equipment Finance of ₹ 27,59,555/- Necessary disallowance u/s 40(a)(ia) of the I.T. Act, 1981 would be made to the extent of payment of Interest on Equipment Finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CPC, Bangalore on 01/06/2015, accepting income shown and raising refund of ₹ 70,330/-. Thereafter, the case was selected through CASS for limited scrutiny (refer pg.l of the assessment order dated 19/12/2016 enclosed at page no.13 of the P/b) and notice u/s.l43(2) of the Act dated 20/09/2016 (enclosed at page nos.3-4 of the P/b) was issued and served on the assessee. Perusal of the above-said notice reveals that the issues for which the limited scrutiny was done related to three points viz. (i) Contract Receipts/Fees Mismatch, (ii) Sales Turnover Mismatch (iii) Tax Credit Mismatch. Subsequently, notice u/s. 142(1) of the Act dated 28/09/2016 and 08/11/2016 were issued and served on the assessee. Copies enclosed at page nos.5-6 of the P b. In response to the notices issued, the assessee filed written submission on 17/11/2016, wherein detailed discussion explaining all the aforementioned points as raised in limited scrutiny, as above were made. Copy of the same enclosed at page nos. 7-9 of the P/b. Further, on 06/12/2016, another written submission, copy of which is enclosed at page nos. 10-11 of the P/h, was filed by the assessee with re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -No.225/26/2006-ITA-H (Pt.)] dated 8th September, 2010 wherein the CBDT has described the procedure for handling limited scrutiny cases wherein the Assessing Officer shall remain confined only to the specific reasons/issues for which case has been picked up for scrutiny. The same is reproduced as under: CBDT CircularF.No.225/26/2006-ITA-H(Pt) dated 8th Sept 2010 Scope of enquiry in the scrutiny cases selected only on the basis of information received through the AIR returns It has been decided that the scrutiny of such cases would be limited only to the aspects of information received through AIR. However, a case may be taken up for wider scrutiny with the approval of the administrative Commissioner, where it is felt that apart from the AIR information there is a potential escapement of income more than ₹ 10 lakhs. It has also been decided that in all the cases which are picked up for scrutinyonly on the basis of AIR information, the notice under Section 143(2) of the lncome Tax Act, 1961 should clearly be stamped with AIR case. In light of the above, it is an undisputed fact that in the instant case, the jurisdiction of the AO was confine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case which is furthermore supported by the decision of the Hon'ble Jurisdictional IT AT in the case of Sanjeev Kr. Khemka vs. Pr. CIT, ITA No.l361/Kol/2016 (order copy enclosed), wherein similar invoking of jurisdiction u/s.263 was held to be bad in law. Relevant extract of the judgement reproduced as under: 4. We have heard the rival contentions of the parties and perused the materials on record. The primary issue in the case on hand revolves whether it is a case selected under CASS for limited scrutiny or regular scrutiny. It can be seen from the grounds of appeal that the\ assessee wants to contend that the very initiation of proceedings u/s 143(3) of the Act on the\ basis of regular scrutiny under the Act was bad in law. The proceedings under section] 143(3) of the Act should have been limited to the extent of the information gathered] through AIR. Accordingly the proceedings u/s 263 of the Act cannot be expanded beyond\ the issue raised in AIR.Thus the order u/s 143(3) of the Act beyond the points of AIR is invalid in law and so the same is with the order passed u/s 263 of the Act. It is the further contention of the assessee that in the items which are n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s.263 of the Act by holding the order of AO as erroneous in so far as prejudicial to the interest of Revenue thereby exceeding his jurisdiction on those items which are not emanating from the AIR. For the above reason, the action of the Ld.PCIT was bereft of jurisdiction. As such, taking into consideration the above, it clearly follows that the Assessment Order dated 19/12/2016 passed by the Ld.AO u/s.143(3) of the Act, is neither erroneous nor prejudicial to the interest of the Revenue. 9. In addition to the written submissions, ld.AR also submitted that the case was selected for limited scrutiny which has been duly examined on the basis of reasons/points raised in the notice u/s.143(2) of the Act by the AO. The assessee has also complied all the requirements on the basis of which the AO satisfied and made addition only of ₹ 1,95,000/-Once the case has been selected under limited scrutiny which has been duly examined by the AO, therefore, ld. Pr.CIT has no jurisdiction u/s.263 of the Act for revisioning the case decided by the AO. It has been brought by the Circular for the benefit of the assessee to avoid the undue harassment by the superior authorities to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO has travelled beyond the points of the AIR on the basis of which the case of scrutiny was selected under CASS module. It is the plea of the assessee that when no addition/disallowance can be made beyond the points mentioned in AIR in the assessment proceedings then same is the case with proceedings initiated u/s 263 of the Act. 4.1 The first aspect which needs to be examined is as to whether the assessee is entitled to challenge the validity of initiation expanded in the proceedings u/s 143(3) of the Act in the present appeals in which he has challenged the validity of expanded order passed u/s 263 of the Act covering the points which are not part of the AIR. The ld. Counsel for the assessee submitted before us that it is open to an assessee in an appeal against the order u/s 263 of the Act which seeks to revise an order passed u/s 143(3) of the Act, to challenge the validity of the expansion of order passed u/s.143(3) of the Act covering the points which are not part of the AIR. In this regard we find that Lucknow Bench of Hon'ble ITAT in the case of Inder Kumar Bachani (HUF) vs ITO 99 ITD 621 (Luck) and ITAT Mumbai 'G' Bench in the case of M/s. Westlife De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of parties. Now coming to the facts of the instant case, we find that the instant case was selected on the basis of AIR Information as evident from the order of AO under section 143(3) of the Act. There is also no whisper in the order of the AO for expanding the scope of limited scrutiny after obtaining the permission from the Administrative CIT. The ld. DR has also failed to bring anything contrary to the argument of the ld. AR. Therefore in our considered view the scrutiny should have been limited only to the information emanating from the AIR. Admittedly, the assessee has claimed to have filed an appeal before Ld. CIT(A) challenging the jurisdiction exceeded by the AO while framing the assessment order u/s 143(3) of the Act. We find that the impugned issue being legal in nature and goes to the root of the matter therefore we are inclined to proceed with this issue first by holding that, from the above submission and after examining of the records, we find that the Ld. CIT in his impugned order u/s 263 of the Act has exceeded his jurisdiction while holding the order of AO as erroneous in so far prejudicial to the interest of Revenue. In view of the above we hold that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C bank account No. 03151930000609 was duly reflected in his IT return. Therefore, no cause has happened to the Revenue which is prejudicial to the interest of Revenue. ii) The deposit of ₹ 19,73,750/- was duly reflected in the IT return and therefore there was no error which is prejudicial to the interest of Revenue. iii) Regarding the credit card payment, the addition on account of undisclosed cash deposit has already been added by the AO and therefore there is no error causing prejudice to the interest of Revenue. iv) There was no sale of the property and therefore no exemption u/s10(38) of the Act was claimed. However the Ld. CIT after considering the submission of assessee has held the order of AO is error and prejudicial to the interest of Revenue by observing as under:- I have carefully considered the issues with specific reference to the relevant assessment records as well as written submission furnished by the A/R. The AO has not taken cognizance of the following issues, despite being apparent from record:- (1) Addition of ₹ 4 lakhs only was made against total cash deposit of ₹ 17,56,000/- without taking any explanation from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of appeal before the CIT(A), therefore order passed by Pr. CIT-15 is unlawful, beyond provision of law and therefore liable to be quashed. (3) For that the Ld Pr. CIT had alleged arbitrarily irrelevant matters, factual and untrue position in the show cause notice u/s. 263 and therefore order passed by Pr. CIT-15 Kolkata u/s. 263 is nullity and liable to be quashed. (4) For that Ld Pr. CIT has wrongly assumed the jurisdiction u/s. 263 by wrongly mentioning that deposits in HDFC Goa A/c HDFC Porvorim Goa A/c were under-assessed by the AO despite these two a/cs were disclosed in the balance sheet and deposits were explained, therefore allegation so made is bad in law and void ab-initio. (5) For that on the facts in the circumstances of the case Ld Pr. CIT was not justified in initiating proceeding u/s. 263. (6) 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. The ld. AR before us filed two paper books which are running from pages 1 to 27 and 28 to 31. The ld. AR before us submitted that the necessary enquiries were made by the AO at the time of assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is also no whisper in the assessment order for any addition on account of capital gains. Therefore, we find that the allegation of Ld. CIT that AO has not conducted sufficient enquiry in relation to sale of immovable property is not true. 5.1 In view of the above we find that Ld. CIT has passed impugned order u/s. 263 of the Act by holding the order of AO as erroneous in so far as prejudicial to the interest of revenue on account of inadequate enquiry made by AO while passing order u/s. 143(3) of the Act. However, we find that proper and sufficient enquiries were conducted by the AO at the time of assessment as evident from the order of AO. Therefore it cannot be concluded that no proper enquiry has been conducted Mrs. Sonali Hemant Bhavsar by the AO at the time of assessment proceedings. The AO has taken conscious view after considering the facts and circumstances of the case and giving proper opportunity to the assessee. Thus, the view expressed by AO in the form in his assessment order cannot be replaced with the view of Ld. CIT u/s 263 of the Act. In holding so, we find support and guidance from the judgment of Hon'ble jurisdictional High Court in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the assessment order on the subject matter of the scrutiny selection i.e the AO has not applied his mind properly. He is not only an adjudicator but he is also an investigator. Further ld. CIT DR relying on the order of Pr.CIT, submitted that the case law relied on by the ld. AR is not applicable in the present case because the facts involved in the decision relied on by the ld. AR are different to the facts involved in the present case. 11. After hearing both the sides and perusing the entire material available on record and the orders of authorities below, we find that the case of the assessee was selected through CASS for the limited scrutiny purpose for verification on the following three points :- i) contract receipts/fees mistmatch ii) sales turnover mismatch iv) tax credit mismatch On going through the AO s order, we noticed that he has made addition on the claims of the expenses debited into the profit and loss account under the account head repair and maintenance and spare parts on lumpsum basis of ₹ 1,10,000/- and ₹ 85,000/-, respectively, which is also beyond the purpose for taking limited scrutiny and as per the documents available be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding to the Pr. CIT, the loss on devaluation of rupees on account of loan utilized for fixed capital was not deductible u/s. 37(1) of the Act since the expenditure is capital in nature. Therefore, it was held that the foreign exchange loss claimed as revenue expenditure is to be disallowed in the assessment 3.1 Further, it was noticed that the assessee debited an amount of ₹ 15,83,130/- in its P L account towards provision for doubtful debts. According to the Pr. CIT, this being provision for diminution in value of trade receivables in the balance sheet had to be added to profit for computation of book profit which resulted in short assessment of income under MAT. The Pr. CIT observed that as per clause (1) explanation 1 to section 115JB(2), the provision for doubtful debts being provision for diminution in value of trade receivables, had to be added to profit for computation of book profit for calculation of income under Minimum Alternate Tax. 3.2 The Pr. CIT observed that the Assessing Officer had not considered or had applied his mind to the facts of the case and with regard to the provisions of the Act in respect of the above issues. Therefore, the Pr. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on a particular issue, then Pr.CIT also has no power on that issue u/s 263 of the I.T. Act. In this context, the learned AR relied on the order of the Tribunal in the case of Paul John, Delicious Cashew Co. 94 ITD 131 (Cochin Tribunal), which was upheld by the Hon'ble High Court in the case reported in 200 Taxmann 154. In the case of Paul John, Delicious Cashew Co. (supra) considered by the Cochin Bench of the Tribunal, it was held that the completed assessment cannot be reopened by the A.O. It was further held by the Tribunal that if the Assessing Officer does not have power to reopen an assessment, which is already concluded, the CIT could not have exercised his powers u/s 263 of the I.T. Act directing the A.O. to pass assessment making disallowance. The above view taken by the Tribunal was upheld by the Hon'ble High Court. 4.4 The learned AR further submitted that when the assessment is taken up for `limited scrutiny', the Pr.CIT / CIT cannot hold the assessment order as erroneous and prejudicial to the interest of the revenue in respect of an issue which was not a reason for selection of the case for `limited scrutiny'. In this context, the learned AR had r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e potential escapement of income is far exceeding ₹ 10 lakh prescribed under the above mentioned CBDT Instructions.. Therefore, the Assessing Officer could have converted the limited scrutiny assessment into a complete scrutiny assessment by obtaining approval from the Pr.CIT/DIT concerned. According to the Ld. DR, the Assessing Officer failed to convert the limited scrutiny into a complete scrutiny and thereby, there was escapement of income of more than ₹ 10 lakhs. As such the order of the Assessing Officer is erroneous and prejudicial to the interest of revenue for the Pr.CIT to invoke his jurisdiction u/s 263 of the I.T. Act. 6.2 Further, the Ld. DR submitted that the CBDT Instruction relevant for the period as regards the limited scrutiny assessment is Instruction No.7/2014 dated 26.09.2014. Instruction No.7/2014 reads as follow:- Subject: - Scope of enquiry in cases selected for scrutiny during the Financial Year 2014- 2015 on basis of mis-match-regarding- It has come to the notice of the Board that during the scrutiny assessment proceedings some of the AOs are routinely calling for information which is not relevant, for enquiry into the issues to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the monetary limit shall be ₹ 5 lakhs) on any other issue(s) apart from the information based on which the case was selected under CASS requiring substantial verification, the case may be taken up for comprehensive scrutiny with the approval of the Pr.CIT/DIT concerned. However, such an approval shall be accorded by the Pr. CIT/DIT in writing after being satisfied about merits of the issue(s) necessitating wider and detailed scrutiny in the case. Cases so taken up for detailed scrutiny shall be monitored by the Jt. CIT/Addl. CIT concerned. 5. The contents of this Instruction should be immediately brought to the notice of all concerned for strict compliance. 6.3 It was submitted that the above Instructions have been modified subsequently vide Instruction No.20/2015 dated 29.12.2015 and Instruction No.5/2016 dated 14.07.2016. From para 4 of the above Instruction, it is clear that when potential escapement of income exceeds ₹ 10 lakh on issues other than selected under I.T.A. No.420/Coch/2019 CASS, the Assessing Officer has the power to take up the assessment for comprehensive scrutiny with the approval of the Pr.CIT / DIT concerned. In the instant case, the po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of revenue. 7.1 In the present case, the first issue for our consideration is whether the Assessing Officer having failed to convert limited scrutiny into a complete scrutiny, the assessment order would be rendered erroneous and prejudicial to the interests of the Revenue. 7.2 The Pr. CIT invoked the provisions of section 263 of the Act for considering the following two issues: The assessee had claimed an amount of ₹ 2,08,09,140/- being foreign exchange loss was allowed in assessment The foreign exchange loss on account of foreign currency loan taken for the construction of new and additional equipment. The loss was recognized translating the liabilities at exchange rate in effect at the balance sheet date. The loss on devaluation of rupees on account of loan utilized for fixed capital not deductible u/s. 37(1) of the Act, since the expenditure is capital in nature. Assessee debited an amount of ₹ 15,83,130/- in its P L account towards provision for doubtful debts. This being provision for diminution in value of trade receivables in the balance sheet, had to be added to profit for computation of book profit. This has resulted in short assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal in the case of Maa Tarini Industries Ltd., ITA No.292/CTK/2019, order dated 17.03.2020, wherein the issue of limited scrutiny is involved which is similar to the present case. The relevant observations of the Tribunal are as under :- 25. On careful consideration of the rival submissions, we are of the view that admittedly and undisputedly, from the copy of the notice by the AO u/s. 142(1) of the Act dated 13.1.2015, it is ample clear that the case of the assessee for assessment year 2014-15 was selected for Limited Scrutiny only on two issues i.e. higher turnover report in service tax return compared to ITR and mismatch in amount paid to related persons u/s.40A(2)(b) reported in audit report and ITR. 28 .So far as sufficiency and adequacy of enquiry on the issues of Limited Scrutiny are concerned, we observe that the AO issued notice u/s.143(2) and u/s.142(1) of the Act which were replied by the assessee and copies of these notices and replies have been placed on record at APB pages 42 to 113, which shows that the AO makes some inquiry on the issues picked up by him by way of issuing notices and taking on record replies, explanation and relevant documents submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee had shown Rs. ₹ 8,45,95,617/- as gross value of service provided under the head 00440262 (transport of goods by road) and a sum of ₹ 15,69,31,397/- as gross value of service provided under the head 00440402 (service provided in relation to mining of minerals, oil or gas) as is revealed from service tax return. However, the assessee had not accounted for the receipt of ₹ 8,45,95,617/- in its income. Moreover, this amount of ₹ 8,45,95,617/- had been grouped in note 19 under the head cost of materials consumed . Thus, the income credited to P L account was understated to the tune of ₹ 16,91,91,234/- which were not enquired by the AO. 32. We also observe that the issue of brought forward unabsorbed depreciation of ₹ 1,34,85,465/- and MAT credit of ₹ 26,33,135/- was not under Limited Scrutiny, hence, the AO has not enquired into the matter while passing the assessment order. Although both the issues were not under limited scrutiny but from the spirit and mandate of section 263 of the Act, which provides revisional powers to Pr. CIT/CIT in the cases where the assessment order or any other proceedings under this Act, passed by the AO is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated in the return when circumstances would make such an inquiry prudent that the word erroneous in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct. 34. The Hon ble Delhi High Court also in the case of Duggal Co. vs. CIT [220 ITR 456], held as under: The ITO is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls further enquiry. It is incumbent on the AO to further investigate the facts stated in the return when circumstances would make such an enquiry prudent. The work erroneous in section 263 includes the failure to make such enquiry. 35. In the case of Tarajan Tea Co. Pvt. Ltd. vs. CIT [205 ITR 45], the Hon ble Gauhati High Court held as under :- that it was not quite certain whether the tress sold in the previous year relevant to the assessment year were trees standing at the time of acquisition or trees which grew on roots and trunk existing on the date of acquisition or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e power of revision by the Commissioner is whether the order of the Assessing Officer can be regarded as erroneous and prejudicial to the interests of the Revenue. It may be erroneous in law or in fact. It may be erroneous in the sense that the Income-tax Officer had passed the order without properly conducting the inquiry in completion of the assessment and the order may also be erroneous when the expenditure allowed was against the provisions of law. 38. From the reading of all the above decisions of Hon ble High Courts, it is evident that their Lordships have taken the unanimous view that the Income-tax Officer is not only an adjudicator but also an investigator. It is his duty to ascertain the truth of the facts stated in the return. When the circumstances of the case are such so as to provoke an enquiry, it is his duty to make proper enquiry. Failure to make enquiry in such circumstances would make the assessment order erroneous and prejudicial to the interest of the revenue. we concur with the submissions of Ld. CIT-DR that it was a case of lack of inquiry and there was no application of mind by AO on the issues which formed subject matter of revisional jurisdiction u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the return of income. From the reply dated 19.1.2017, we clearly note that the assessee submitted copy of audit report, complete ITR form profit and loss account to substantiate sales turnover figure which was accepted by the AO in the assessment order after due deliberation done at page 1 para 3 4 of the assessment order. Further from para 5 of the assessment order, we also gather that the AO, as a result of enquiry and verification made by him, noted that the assessee has adopted percentage completion method and has estimated profit @ 3.24% of the turnover and most of the inventory was not sold and was in stock, the work-in-progress as on 31.3.2015 was thus on a higher side. In view of above, we are satisfied that the AO has made enquiry, verification and examination on both the points for which the case was selected for limited scrutiny and from the impugned order passed by ld Pr. CIT u/s.263 of the Act, it is also ample clear that there is no allegation by him against the assessment order that the AO has not made any enquiry on any of the issues for which the case was selected for limited scrutiny. 17. In view of foregoing discussion, we reach to a logical conclus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pr. CIT, Sambalpur. The ld. Pr. CIT has approved the proposal given by ld ACIT on the same date i.e. 14.1.2019 and thereafter notice u/s.263 of the Act has been issued on the very same date to the assessee show causing for initiation of revisional proceedings u/s.263 of the Act. For proper adjudication of this contention, we find it necessary and appropriate to reproduce the provisions of section 263 of the Act, which reads as follows: 263. (1) The Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. 20. From the spirit and mandate of section 263 of the Act, which provides revisional powers to Pr. CIT/CIT in the cases where the assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vouchers, details of documents of sale of flats but the assessee failed to submit the same before the AO during the scrutiny assessment. Therefore, he alleged that in real estate business with high closing stock, the information about estimated cost of construction of the project, estimated sale value of the project, selling price of individual flats, period of construction etc should have been examined before completion of scrutiny assessment but the ld ACIT failed to consider that it was a case of limited scrutiny only on two points and from the assessment order dated 21.3.2017, it is clearly discernible that the AO has made enquiry and deliberation on both the points and as per CBDT Circulars (supra), he is not allowed to travel beyond the ambit of the points for which, case was selected for limited scrutiny. Therefore, the ld ACIT, who was not having revisional power u/s.263 wrongly alleged that the AO has not made enquiry on certain points. Therefore, we are unable to agree with the conclusions drawn by ld PCIT in paras 10 11 of the impugned order and hold that the assessment order is neither erroneous nor prejudicial to the interests of the revenue and the AO has made suffi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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