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TMI Blog2021 (6) TMI 133X X X X Extracts X X X X X X X X Extracts X X X X ..... tting it aside for fresh assessment and has also erred in setting aside the order which were outside the preview of limited scrutiny. 2. The learned CIT has erred to hold that the assessment order was erroneous and prejudicial to the interest of revenue on issue of disproportionate Quantum of expenses debited to the post-survey P & 1 a/c as compared to pre-survey P & I a/c and the learned CIT has erred to hold that there was no inquiry for correctness of claim regarding expenses. 3. The learned CIT has erred to treat the orders as erroneous and prejudicial to revenue on issue of revenue recognition and to hold that the ITO has not examined the revenue recognition method and applicability of AS-9 which is mandatory. 4. The learned CIT has erred to treat the orders as erroneous and prejudicial to revenue on issue of all unsecured loan generally without specifying circumstances of each party and the learned CIT has erred to held that there is complete absence of cursory inquiry by the A. 0. on the ground that the loan confirmations obtained during the assessment proceedings and as well as during the current proceedings are incomplete in nature merely on the ground that the confi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led to give the directions to how extent order is to be revised and on what issues and has erred to set aside on the issues which are outside the preview of limited scrutiny. 11. Your appellant prays that the order of CIT u/s 263 may be set aside for all issues or issues which are not treated as erroneous and prejudicial to the interest of revenue. 12. The Appellant craves leave to add, amend, alter or delete any or all the above grounds of appeal at the time of regular hearing and all grounds are without prejudice to each other." 2. At the outset, on hearing the learned authorised representative (ld.AR) of the assessee submits that while revising the assessment order Ld. PCIT identified seven issues for revision of assessment order, however, the AO in the order giving effect has accepted the explanation furnished by assessee on all the issues except on Ground No.5 and 8, therefore, he is confining his submission on Ground No.5 and 8 only. Considering the submissions of ld. AR for the assessee, other grounds of appeals except ground No. 5 & 8 are dismissed as infractious. Therefore, we are proceeding to deal with the facts qua ground No. 5 & 8 only. 3. Brief facts of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eptember 2014. Therefore, there was no transaction of sale and purchase. The Ld. PCIT held that advances were given without any agreement. The AO failed to make minimum enquiries about the purpose of advance and evidence thereof and held that the assessment order erroneous and as well as prejudicial to the interest of the Revenue. Similarly, for commission payment to Deepakbhai M. Dama & Shri Manjibhai L. Bhanushali of Rs. 4,10,400/- to each, the ld PCIT held that the assessee in his reply tried to justify that payment of commission on the basis of quantum of sale. The claim needs to be verified by calling and placing on record the exact details of services rendered by them, work done, visit by these parties and sales made on different dates. It was also held that these details were not called by AO and the assessee had not submitted the same voluntarily, is not denied. On the basis of his aforesaid observation the ld. PCIT held that there is a complete absence of enquiry on these two commission payment to these parties, which makes the assessment order erroneous as well as prejudicial to the interest of the Revenue. The Ld. PCIT while referring various decisions in his order set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 012] 343 ITR 329 (Delhi HC), * Jyoti Foundation, 357 ITR 3858 (Delhi HC.), * CIT - Vs. Leisure wear Exports Ltd., 341 ITR 166 (Delhi HC.), * CIT vs. Sunbeam Auto Ltd. 332 ITR 167 (Delhi HC), * CIT vs. DLF Power Ltd. 329 ITR 289 (Delhi HC), * CIT vs. Max India Ltd. 295 ITR 282 (SC), * ITA NO.3206/DEL/2017 Amira Enterprises ltd Vs PCIT, * CIT Vs Arvind Jewellers (259 ITR 502 GUJ HC), * CIT Vs R. K. Construction Co. (313 ITR 65), * Indus Best Hospitality ITA No. 3125/MUM/2017" 7. On ground No.8, the ld.AR submits that the commission of Rs. 4.10 lakhs each was paid to Deepakbhai M. Dama & Shri Manjibhai L. Bhanushali. The ld. PCIT in his show cause notice stated that nature of services rendered by parties is not examined, and the names of parties suggest that they are related party. The ld.AR for the assessee submits that before the AO, the assessee provided all evidence and contribution of both the parties vide reply through letter dated 16.12.2016 along with the copy of sales register, Profit and Loss account and confirmation of parties. The ld.AR for the assessee further submits that before the Ld. PCIT all details were again furnished in the revision proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... language employed in the section, apparently it is a consideration, which he exercised by calling for and examining the record as indicated above. If after calling the record or examining it, Ld. PCIT consider that assessment order is erroneous, in so far as prejudicial to the interest of the Revenue, the third condition of section 263 of the Act come into operation, after these two stages, which are purely administrative. This third stage required to do what is stated in the statute i.e. he may after giving the assessee an opportunity being heard and after making or causing to the made such enquiry as deemed necessary, pass such order thereon as suggestion of the case justified, including inherence or modifying the assessment or cancelling the assessment and directing for fresh assessment. This requires that Ld. PCIT must give the assessee an opportunity of being heard. It also empowers the Ld. PCIT to cause or make such enquiry as he deem necessary. The fourth condition under section 263 of the Act is the power PCIT/CIT under this section can enhance or modify the assessment including direction for fresh assessment. The ld. CIT-DR further submitted that Explanation 2 was inserte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties. As noted above, we are confining our adjudication on ground no.5 and 8 only. We find the return of the income filed by the assessee was selected for scrutiny and the assessment was completed under section 143(3) on 23.12.2016. We find that the assessing officer while passing the assessment made GP addition by adding ½ of difference of pre survey and post survey thereby adding Rs. 3,17,113/- and disallowance under section 40(a)(ia) of Rs. 37,229/-. However, in the entire assessment there is no reference about the issue revised by ld. PCIT, which are impugned before us in ground No. 5 & 8 (supra). During the course of hearing the Ld. AR for the assessee submitted that during the assessment, all details related to advance given to Amrutbhai I. Patel was provided to the AO vide reply/latter dated 25.11.2014 and 21.09.2016 and that the AO made sufficient enquiries and after his satisfaction no addition was made. It was also argued that the AO was fully satisfied about the correctness of the claim of the assessee. On perusal of reply dated 21.09.2016 filed by assessee in response to the show cause notice dated 04.08.2016, copy of which is duly acknowledged by assessing offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, to be considered firstly as to when an order can be said to be erroneous. One finds that the expressions 'erroneous', 'erroneous assessment' and 'erroneous judgment' have been defined in Black's Law Dictionary. According to the definition, 'erroneous' means 'involving error; deviating from the law'. 'Erroneous assessment' refers to an assessment that deviates from the law and is, therefore, invalid, and is a defect that is jurisdictional in its nature, and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. Similarly, 'erroneous judgment' means 'one rendered according to course and practice of Court, but contrary to law, upon mistaken view of law, or upon erroneous application of legal principles. The Hon'ble Court further held that from the above said definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an assessing 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 wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realized or cannot be realized. There must be material available on the record called for by the Commissioner to satisfy him prima facie that the aforesaid two requisites are present. If not, he has no authority to initiate proceedings for revision. Exercise of power of su motu revision under such circumstances will amount to arbitrary exercise of power. It is well-settled that when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on record to satisfy it in that regard. If the action of the authority is challenged before the Court, it would be open to the Courts to examine whether the relevant objectives were available from the records called for and examined by such authority. The 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, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 14. The Hon'ble Jurisdictional High Court in CIT Vs Arvind Jewellers (259 ITR 502), while relying on the decision of Hon'ble Apex Court has taken a view that the provisions of section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous, that section will be attracted and incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. The Supreme Court has also made it clear that the phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer and 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. It was further emphatically stated that when an ITO adopts one of the courses permissible in law and it has resulted in loss of revenue, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the assumption that no such information, as was furnished to him, was furnished at the time of assessment. The Commissioner has mentioned that the Income-tax Officer has not examined the cash credits of the partners or deposits of Chit Fund. Assuming this to be so (though there does not appear to be any justification for the aforesaid observation), this may make the order erroneous, but how it is prejudicial to the interest of the revenue has not been stated by the Commissioner as he did not deal with the explanation given by the assessee in the course of section 263 proceedings. 16. Now adverting to the facts of the present case qua the issues under consideration with regards to commission's payment to two persons. We find that during the assessment the assessee has filed reply to the quarry raised by the assessee and produced relevant evidence and offered explanation in pursuance of the notices issued and after considering those materials and explanation, the assessing officer has come to a certain conclusion, though it has not been mentioned explicitly in the assessment order. The ld. PCIT is not agreed with the conclusion reached by the assessing officer. 17. At the cost o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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