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TMI Blog2021 (5) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment proceedings, the order does not become erroneous. In adequate enquiry does not warrant invocation of powers u/s. 263 of the Act. Hence we quash the same and allow the appeal of the assessee. - ITA No. 1176/Kol/2019 - - - Dated:- 16-4-2021 - J. Sudhakar Reddy , Member ( A ) and Aby T. Varkey , Member ( J) For the Appellant : Subash Agarwal , Advocate For the Respondents : Anand Kr. Kedia , CI T, D/R ORDER J. Sudhakar Reddy, Member (A) This appeal filed by the assessee is directed against the order of the Learned Pr. Commissioner of Income Tax - 2, (hereinafter the ld. CIT(A) ), passed u/s. 263 of the Income Tax Act, 1961 (the 'Act'), dt. 27/03/2019, for the Assessment Year 2012-13. 2. The assessee is a company and is in the business of dealing in shares and investments. It filed its return of income for the impugned Assessment Year on 26/09/2012, declaring total income of ₹ 50,302/-. The Assessing Officer passed an assessment order u/s. 143(3) of the Act on 15/03/2015 determining the total income of the assessee at ₹ 2,16,73,630/- inter alia making an addition of ₹ 2,16,23,328/- u/s. 68 of the Act as unexplained cash cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record. The said details were examined. The case was discussed heard. Summons u/s. 131 of the IT. Act was issued to the investor companies to prove identity, genuineness, creditworthiness as required by Ld. Pr. CIT-4, Kolkata in his order passed u/s. 263 dated 07/09/2016. Directors of the investor companies to whom summons u/s. 131 were issued had appeared and their statement were recorded u/s. 131 of the I.T. Act on oath along with books of accounts and other relevant documents which were checked and verified. The Directors appearing on behalf of the investor companies confirmed having invested in the assessee company and also submitted copy of investment ledger in their company. It was also submitted that, bank statement and balance sheet have already been submitted at the time of original assessment. The source of fund, identity, genuineness and creditworthiness were verified and found in order. The source of fund was verified and found in order. Total income is computed as below: Total income as per return : ₹ 50,302/- Assessed income : ₹ 50,302/- Rounded Off : ₹ 50,300/- Assessed u/s. 143(3)/263/143(3) as above. Issue copy of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -3 supra as per the directions contained in para 5.6 and 7 supra. Accordingly, I direct the AO to re-assess the income of the assessee for the relevant A.Y. 2012-13, as directed. 3. The ld. Counsel for the assessee submitted that, the Assessing Officer had completed the impugned order passed u/s. 143(3) r.w.s. 263 of the Act, dt. 26/12/2016, after complying with the specific directions given by the ld. Pr. CIT-4, Kolkata, in his order dt. 07/09/2016. The ld. Counsel for the assessee argued that the Assessing Officer could not have travelled beyond the scope of the directions given by the ld. Pr. CIT in his order u/s. 263 of the Act, dt. 07/09/2016, while framing the assessment order u/s. 143(3) of the Act. He submitted that, the ld. Pr. CIT, in his first revisionary order passed u/s. 263 of the Act has recorded that, all the details and documents as required by the Assessing Officer were submitted before the Assessing Officer. He submitted that the Assessing Officer has examined all these documents and evidences that were required to be examined and only then passed the second assessment order on 26/12/2016 and that there was no error whatsoever in that order, which is prejudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The factum of recording of deposition is duly recorded in the order sheet entries and it is also recorded that the directors appeared with their ID proof. Thus, it is apparent that the A.O. had taken a proactive step in making independent enquiries which not only proves the existence of the companies but also existence of all other necessary ingredients of section 68. (iv) A.O. failed to examine the directors as regard the genuineness of controlling interest. It is submitted in this regard that this is neither a relevant issue in the context of addition u/s. 68 nor did the first PCIT had given any such direction in his first 263 order. (v) The A.O. failed to examine the bank statement to trace out the money trail to ascertain the source of funds. It was submitted that the direction of the first PCIT was confined to examination of bank accounts of the investors and to examine the source of share application. It is apparent from the observation of the A.O. in the assessment order that the bank statements have been examined by the A.O. Further, reference to the page no. of the bank statements of the shareholders as available in the record of the A.O., is given in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 68 of the Act, are existing in these transactions. e) That the ld. Pr. CIT has not asked the Assessing Officer to examine the Directors on the issue of genuineness of controlling interest as the same was not relevant. He submitted that the ld. Pr. CIT in the first round has directed the Assessing Officer to examine all the bank accounts of the investors and also to examine the source of share applicant which investigation was done by the Assessing Officer and that there was not direction to trace out the money trails so as to ascertain the source of funds. 4.1. He argued that the Assessing Officer was bound by the directions of the ld. Pr. CIT given in the first round of revisionary proceedings u/s. 263 of the Act and that the Assessing Officer has followed each of these directions and after conducting detailed enquiries and obtaining necessary documents has taken a plausible view and it cannot be said that this is a case where there was lack of enquiry or a case of inadequate enquiry and hence that the ld. Pr. CIT has erred in invoking his powers u/s. 263 of the Act. He relied on a number of case-law for each of the propositions cited by him. He submitted that this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner of Income-tax (supra) and M/s. Omkar Infracon Private vs ITO (supra). He prayed that the order of the ld. Pr. CIT passed u/s. 263 of the Act to be upheld. 5.1. In reply, the ld. Counsel for the assessee, submitted that the judgment of the Hon'ble Supreme Court in the case of NRA Iron Steel (P.) Ltd. (supra), is not applicable as, in that case, the shareholders were not traceable and whereas in the case of hand each of the shareholder companies' representatives appeared before the Assessing Officer in response to summons and that the Assessing Officer recorded statements on oath from them and that they filed all necessary documents including assessment orders passed in their cases u/s. 143(3) of the Act, by the Department in their cases, copies of the final accounts, copies of the returns of income filed by them, copies of the bank account statements and also evidence of sources of investments etc. in support of their identity, creditworthiness and also genuineness of the transactions. He submitted that when the assessments of the share applicant companies have been completed by the Department u/s. 143(3) of the Act, and when nothing adverse was found, no add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iv) details and copy of share applicants; (v) bank statement reflecting the transaction; (vi) records relating to investors in order to establish identity, genuineness and creditworthiness of the share subscribers. 47. We note that the First Ld. Pr. CIT in his first revisional order, found that AO in the first assessment proceedings though has been provided with the aforesaid documents has not examined these documents, which according to him, should have been carried out by the AO. The First Ld. Pr. CIT at para (4) of his first revisional order has clearly made a finding that From the above discussion it is evident that the assessment proceedings in the case of assessee was completed in a very casual manner and hurried manner flouting all established procedures. The assessee had discharged its onus by furnishing/documents before the AO. Further, the First Ld. Pr. CIT mainly found fault with the AO's order for non-issuance of notice u/s. 133(6) of the Act to the shareholders. The First Ld. Pr. CIT found fault with the AO's order in not discussing the basis of evidence on which adverse inference was drawn against the assessee. Moreover, the First Ld. Pr. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c direction of Ld. First Pr. CIT, the Second AO firstly Sl. No . Name of company CIN PAN ITR filed for AY 2012-13 1. M/s. K. R. Overseas Pvt. Ltd. U51109WB1994PTC061965 AACCK0101B yes 2. M/s. Kakrania Trading Pvt. Ltd. U70101WB1994PTC062137 AABCK151611 yes 3. M/s. AmbalaTrafin Pvt. Ltd. U67120WB1995PTCO74397 AACCA1184G yes 4. M/s. Subhiksha Pvt. Ltd. U52190WB2011PTC157073 AAPCS2068E yes 5. M/s. Shivarshi Construction Pvt. Ltd. U45400WB2011PTC170957 AAQCS7848M yes 6. M/s. Shivashiv Pvt. Ltd. U74999WB2012PTC 173749 AARCS0094C yes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olders have filed their respective (i) PAN details, (ii) CIN detail, (iii) Audited Annual Report for FY 2011-12 (AY 2012-13), (iv) ITR acknowledgment for AY 2012-13 which the AO acknowledges that he verified the same and thus we note that the identity of the investors were duly furnished by the assessee's director; and the AO verified the veracity of the same from all the share applicants by issuing notice u/s. 133(6) of the Act and moreover it is common knowledge that in this computer/digital era, the AO on a click of the mouse, could have easily verified the identity of the share applicant which is available in the website of Ministry of Corporate Affairs and the ITR Acknowledgments filed by them, will enable the AO to cross verify and collect details from the AO of the respective share applicants and independently from the Revenue's departmental data base. We note that all the share subscribing parties filed all the documents called for by the AO [PB-2] and were also examined by the AO along with audited accounts from which these details show their identity. 51. Thus, we note that the AO after verification as aforesaid, has not drawn any adverse opinion or doubted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share-holders are regular income tax assessee's. Therefore in the light of the aforesaid documents discussed their identity cannot be disbelieved and the AO's satisfaction in respect of identity of the shareholders is a possible view and cannot be termed as unsustainable in law or facts. 52. Coming to the creditworthiness of the shareholders, our attention was drawn to the balance sheet of the shareholders (PB- 2) which was filed before the AO and the Ld. Pr. CIT and we note that their source of investment and net worth as per balance sheet as on 31.03.2012 as well as the sum invested by them in the assessee is discernible as under: Name Source of investment Capital Reserves Sum invested in assessee s business M/s. K. R. Overseas Pvt. Ltd. Page 8 Paper Book-2 ₹ 66,77,47,921 (page 22 PB-2 ) ₹ 1,30,000/- M/s. Kakrania Trading Pvt. Ltd. Page 45Paper Book-2 ₹ 66,52,71,914 (page 62 PB-2 ) ₹ 1,3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invest in the assessee company and the share subscribing companies pursuant to the AO's notice u/s. 133(6) of the Act have furnished their respective audited accounts from which the aforesaid facts are clearly discernible and moreover the share subscribers have also filed before the second AO the source from which they subscribed to shares of assessee (though not required as per law in force for AY 2012-13), bank statement, audited balance sheet etc except M/s. Maharaja and M/s. Sristi Sales. Thus the assessee had discharged the onus on it about the creditworthiness of the share- holders. So we note that the source of the investments has been clearly brought to the notice of the second AO during the assessment/reassessment proceedings. Further, the bank statements of all the shareholders as well as that of assessee were filed before the AO, which revealed that the share capital and premium have been subscribed by them through banking channel (NEFT or cheque) which goes on to show that the assessee has discharged the onus in respect of genuineness of the transaction. Based on the documents and materials called for by the AO who accepted the same after verification is an act of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 66,52,71,914/- (PB-page 62) and investment made in the assessee company is to the tune of ₹ 1,39,00,000/- and this share applicant has made the transaction through banking channel four times on 01.03.2012 ₹ 30,00,000 through NEFT; and by cheque on 02.03.2012 a sum of ₹ 59,00,000/-; and on 7.3.2012 and by cheque on 12.3.2012 ₹ 25 lakh each. There is board resolution for investment in assessee's company and Share Application Form, Bank statement, ITR acknowledgement, and explanation of source of fund as well as financial statement available in the PB-page 39 to 77. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed financial statements and thus we note that the assessee had duly discharged its onus to prove the identity of the share applicant by adducing PAN as well as income-tax returns. The financial statement shows that the share applicants had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Further, it is noted that the share applicant had furnished the source of investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed financial statements and thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Further, it is noted that the share applicants had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act. (v) We note from a perusal of the paper book-2, pages 138 to 159 the details of share applicant M/s. Shivarshi Construction Pvt. Ltd. It is a Private Limited Company which has a PAN AAQCS7848M and its CIN number is U45400WB2011PTC170957 and the net worth of this company as on 31.3.2012 ₹ 53,89,95,046/- (PB-page 153) and investment made in the assessee company is to the tune of ₹ 4,66,00,000/- and this share applicant has made the transaction through banking channel on 29.03.2012 ₹ 4,66, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany and the transaction has happened through banking channel. Thus the assessee has discharged the onus to prove the identity, creditworthiness and genuineness of the transactions. Further, it is noted that the share applicants had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act. (vii) We note from a perusal of the paper book-2, pages 185 to 206 the details of share applicant M/s. Flowtop Agency Pvt. Ltd. It is a Private Limited Company which has a PAN AABCF9036D and its CIN number is U52190WB2012PTC 173352 and the net worth of this company as on 31.3.2012 ₹ 15,38,94,946/- (PB-page 200) and investment made in the assessee company is to the tune of ₹ 4,49,00,000/- and this share applicant has made the transaction through banking channel on 30.03.2012 ₹ 4,49,00,000/- through Cheque.. There is board resolution for investment in assessee's company and Share Application Form, Bank statement, ITR acknowledgement, explanation of source of fund as well as financial statement available in the PB-page 186 to 206 n the PB. This share applicant regularly filed Income Tax Return (ITR) and it has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch has a PAN AAECK6810D and its CIN number is U45400WB2011 PTC 170944 and the net worth of this company as on 31.3.2012 ₹ 56,18,94,080/- and investment made in the assessee company is to the tune of ₹ 12,54,00,000/- and this share applicant has made the transaction through banking channel on 31.03.2012 ₹ 12,54,00,000/- through NEFT. There is board resolution for investment in assessee's company and Share Application Form, Bank statement, ITR acknowledgement, explanation of source of fund as well as financial statement available in the PB-page 228 to 261 in the PB. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed financial statements. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed financial statements. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Thus the assessee has discharged the onus to prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement available in the PB-page 285-303 in the PB. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed financial statements. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Thus the assessee has discharged the onus to prove the identity, creditworthiness and genuineness of the transactions. Further, it is noted that the share applicants had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act. (xii) We note from a perusal of the paper book-2, pages 304 to 326 the details of share applicant M/s. Maharaja Merchants Pvt. Ltd. It is a Private Limited Company which has a PAN AAECM224E and its CIN number is U51109WB2005PTC102343 and the net worth of this company as on 31.3.2012 ₹ 1,54,58,399/- (page 313 of P.B-2)and investment made in the assessee company is to the tune of ₹ 50 lakhs and this share applicant has made the transaction through banking channel on 28.02. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stigator and enquired as per the direction of the First Ld. Pr. CIT dated 23.08.2016 u/s. 263 of the Act (First 263 order) and further we note that the Second Ld. Pr. CIT while issuing the Show Cause Notice while exercising his revisional jurisdiction for second time has not made even a single allegation about the non-compliance/failure on the part of Second AO in respect of the specific direction given by the First Ld. Pr. CIT dated 23.08.2016 while setting aside the original assessment order passed by the AO dated 26.03.2016. In other words, in the impugned order the second Ld. Pr. CIT has not found fault with the action of the second AO in giving effect to the specific directions given by him while passing the first revisional order on 23.08.2016. Thus, we note that when the second AO while framing the reassessment order pursuant to the specific direction of the First Ld. Pr. CIT's order dated 23.08.2016 (first revisional order) has complied with the specific directions of the First Ld. Pr. CIT and based on the inquiry conducted and after perusal of the documents running more than 352 pages which reveals the identity, creditworthiness and genuineness of the share capital and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isdiction u/s. 263 of the Act, he has to show that the enquiry conducted by AO was flawed or the enquiry conducted by AO was on a wrong direction or on wrong assumption of fact/law or that the AO misdirected himself in factual investigation or applied the law erroneously in respect of the facts collected by him. For doing so, in the facts discussed supra, he second (Ld. Pr. CIT) should himself had conducted an enquiry or at least conducted a preliminary enquiry and was able to bring some evidence/material on record to upset the AO's satisfaction in respect of identity, creditworthiness or genuineness of the share subscribers and thus recorded a finding of fact that the decision of AO's enquiry was faulted or wrong and in that process tried to show that it has resulted in a view which is unsustainable in law which would have justified his action of passing the impugned order u/s. 263 of the Act, which unfortunately is not the case. Since the AO's view on the facts collected and discussed is definitely a possible view, so in the factual background discussed in detail, we are of the considered opinion that Ld. second Pr. CIT ought not to have interfered with the AO's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercise or even spelled out in his impugned order, which all documents the second AO failed to collect for considering the total facts; and even if we presume he has conducted such an exercise, then he has not been able to bring out any adverse factual finding to upset the view of Second AO. So we find no merit in the vague allegation of second Pr. CIT that the second AO has not collected the full facts necessary to decide the issue of share capital premium. So we note that the Second AO, the assessing authority who is a quasi- judicial office has discharged his dual role as an investigator as well as an adjudicator. Looking from another angle of doctrine of merger canvassed before us, we note from the facts of this case that the second Ld. Pr. CIT - 4 by passing the second revisional order dated 14.03.2019 has substituted the First Pr. CIT's order passed u/s. 263 of the Act dated 23.08.2016 with his own order which he cannot do since the second assessment order/re-assessment of the Second AO dated 07.12.2016 was pursuant to the first revisional order of the First Ld. Pr. CIT and on the very same subject matter on which specific directions/instructions were given by the First ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to all the shareholders. And we note that all of them responded and duly appeared before the AO and their statements were recorded and only one shareholder an individual was new and all the shareholder's companies were group companies and the new individual share subscriber was father of a director. (b). We note that next fault pointed out by the Ld. Pr. CIT was the AO failed to carryout detailed investigation as to how they decided to invest in a company at premium which was never a known company . According to us, the Ld. Pr. CIT did not appreciate the facts in the proper perspective and did not had taken notice of the important fact that these were the promoters who started the company in the year 2010 for the business of making ash-fly bricks and the only new shareholder individual was father of an existing director; and the assessee company in this assessment year had started expansion activities of the business of making/manufacturing fly ash bricks. We note that the share capital infused into the company has yielded result. And moreover the investor companies were group companies and shares allotted this year was to existing shareholders and only new share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny adverse observation against it. So, Ld. Pr. CIT's allegation in respect of non examination of bank accounts are baseless and deserves to be rejected. (f) The other fault pointed out by the Ld. Pr. CIT is that the AO failed to trace out the money trail We note that the assessee company is into manufacturing of bricks using fly ash and had set up its factory and the share holder are the promoters/group companies and no allegation has been levelled against the shareholders that they are entry providers. We note that earlier contribution made by them have been accepted in previous years, and also the fact remains that the earlier years of assessment have not been reopened though there was sufficient time for the same. In the light of the documents discussed supra, we are of the opinion that assessee has discharged the onus on it. (g) The last fault taken note by the Ld. Pr. CIT is that the reassessment order prima facie suffers from independent and adequate enquiry. We do not countenance this allegation of the Ld. Pr. CIT. We have already discussed in detail about how the AO has called the individual share holders and the directors of the corporate shareholde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e specific direction of the Ld. Pr. CIT's order dated 10.06.2016 (first revisional order) has complied with the specific directions of Ld. Pr. CIT and based on the inquiry conducted and after perusal of the documents running more than 794 pages which reveals the identity, creditworthiness and genuineness of the share capital and premium collected by the assessee from the share subscribers, the satisfaction of AO as envisaged in sec. 68 of the Act is a plausible view and the share subscribers/directors participating in the reassessment proceedings along with the audited financial statements and other documents referred supra, the assessee had discharged the onus on it about the identity, creditworthiness and genuineness of the share capital and premium collected by the assessee from the respective share subscribers. Since the aforesaid exercise was carried out by the AO in the original as well as reassessment proceedings and the documents are in the assessment folder and the statements have been recorded of the individual share subscribers and directors of the Group company share subscribers, the Ld. Pr. CIT erred in holding the reassessment order of the AO in respect of share c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icable on all fours, to the case on hand. 9. In the case on hand, we find that Section 143(3) orders have been passed by the revenue in the case of following share applicant companies:- M/s. Rohan Finance Securities Ltd. M/s. Swastik Securities and Finance Ltd. M/s. Visudh Marketing Pvt. Ltd. M/s. Goldline Comtrade Private Limited M/s. Gajbandan Barter Pvt. Ltd., assessment order 25/03/2015 9.1. When the assessment orders of the share applicant companies have been passed u/s. 143(3) of the Act, by the Department, it cannot be said that the identity and creditworthiness of the share applicant companies have not been proved. It is so held by the ITAT Kolkata Bench in the following cases:- 1) M/s. Omkar Infracon (P) Ltd. vs. ITO in ITA No. 896/Kol/2019, Assessment Year: 2012-13, order dt. 18/03/2020 2) Amritrashi Infra Private Ltd. vs. Pr. CIT in ITA No. 838/Kol/2019, Assessment Year: 2012-13, order dt. 12/08/2020 9.2. Persons representing the share applicant companies have appeared before the Assessing Officer in the second round of assessment proceedings, in response to notice u/s. 131 of the Act, and their statements were recorded on oa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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. Rampyaridevi Saraogi 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. (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 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 suo motu 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he inference or proper inference either of the facts disclosed or the weight of the circumstance; 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue - recourse cannot be had to Sec. 263 (1) of the Act. b) 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. c) 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 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 elabor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erroneous and prejudicial to the interest of the Revenue. Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interest 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 LTD 343 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 deviatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. This distinction 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 142 (1) of the Act could not have been formulated. The Assessing Officer was required to examine the return filed by the assessee in order to ascertain his income and to levy appropriate 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 R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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