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TMI Blog2021 (9) TMI 1258X X X X Extracts X X X X X X X X Extracts X X X X ..... ct to the initial year of assessment for which deduction was claimed is factually incorrect as the assessing officer made sufficient enquiries. The assessee filed the detailed reply on 4thAugust 2016, explaining elaborately how the assessee satisfies the conditions, as required under section 80 IB - thus it is abundantly clear that the assessing officer while framing the assessment had made an extensive, elaborate and necessary enquiry with a view to find out whether the assessee fulfils the conditions mentioned in section 80IB or not. The reading of the notice and the reply and subsequent notices and replies clearly shows that the assessing Officer was satisfied that the assessee had fulfilled all the conditions necessary for claiming the deduction under section 80 IB. As sufficient, necessary enquiries were made by the assessing officer during the assessment proceedings, therefore the action on the part of the principle CIT cannot be countenanced and the invocation of jurisdiction under section 263 , was devoid of any merit and is liable to be set aside and annulled . As AO at the first instance was holding the view that no addition can be made based on either non-fulfilment of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ady enquired by the Assessing Officer, however, not expressly discussed in the assessment order passed. 6. That the Pr. CIT did not appreciate that the assessment order was passed after making through enquiries and after filing the necessary information as desired and required from time to time. It is pertinent to point out that this was a cases of tax audit. The case of the assessee was taken up several time and queries were raised and were duly complied. The Assessing Officer after considering all the facts and material and after making all the enquiries allowed deduction u/s. 80IB of the IT Act, 1961. As such the reopening by invoking the provisions of section 263 is not all justified and as such the order by the Pr. CIT is liable to be cancelled. 7. That the Ld. C.I.T. has grossly erred in invoking the provisions of section 263 in spite of the fact that all the facts and material were duly discussed and considered by the AO during the course of assessment proceeding . Because the Principal Commissioner of Income-tax takes a different view should not be made the basis for invoking the provisions of section 263. As such the CIT was not justified in invoking the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is evident from the observations made by the assessing officer in the assessment order as under: [Refer Page No.14 of the assessment order] "4. The case was discussed with the Worthy Principal Commissioner of Income Tax-1, Amritsar with reference to letter no. 5266 Dated 29.12.2016 of Addl. Commissioner of Income Tax, Range-3, Amritsar. After discussion, the returned income is accepted as directed by the Worthy Principal Commissioner of Income Tax-1, Amritsar." 8. It was the contention of the Ld.AR for the assessee that the same assessing officer had moved the proposal for initiation of the proceeding under section 263 of the income tax act, vide proposal dated 26 October 2017, despite the fact he was transferred from the charge of assessing Officer and new officer had taken of the charge on 5 October 2017. It was also the contention of the Ld.AR that the assessing officer namely Sh. Charan Dass was not assessing officer at time of moving the proposal as new officer had taken the charge of DCIT circle 3 Amritsar on 5.10.2017. 9. The Ld.AR for the assessee had submitted that the above said facts and verified from the assessment record. It was also the contention of the Ld.AR th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on U/s. 80IB(11A) are satisfied or not and II) That for fall in gross profit rate during the year in comparison to the preceding year; the assessing officer has failed to make necessary verification and enquiries. 1. We have been afforded an opportunity to explain as to why the provisions of Section 263 of the Income Tax Act should not be invoked in this case. Our submissions on legal position of applicability of Section 263 and on facts are as under : I) At the outset, it is submitted that said show cause Notice is illegal, based on surmises and not substantiated in law. Section 263 of the Income Tax Act, empowers the Commissioner with the power of revising any order of the assessing officer, where the order is erroneous and error has resulted in prejudice to interest of revenue. The Commissioner must come to a firm conclusion to this point only after proper application of mind. Further the conclusions on which the said order is being proposed to be made should not be based on conjectures and surmises. II) In the case of Malabar Industries Co Ltd. vs. CIT 243 ITR(2000) pg 83 the Supreme Court held that the Commissioner is to be satisfied of twin conditions namely: a) Tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference to the facts of our case and legal position. We submitted in our detailed replies dated 16.07.2015, 1/03/2016 and 04/08/2016. On 13.12.2016, again we were asked to show cause as to why 'Disallowance of deduction U/s. 80IB of ₹ 35125451/- be not made' and why net profit rate be not applied on substantial cash sales. Our said reply dated 13.12.2016 forms part of the assessment order dated 30.12.2016 in which same has been reproduced in verbatim. Copy of our submission dated 13.12.2016 on the above issues which is self explanatory, for your reference is enclosed herewith 4. We explained in detail the provisions of said Section, nature of our business in detail which proved beyond any doubt to the assessing officer that the said deduction of income as has been claimed by us meets the conditions of provision of Section 80IB. That various other issues with regard to our nature of trade, as well as with regard to eligibility of said deduction were also raised from time to time for which were properly replied along with evidences to the satisfaction of the assessing officer. There remained no point / issue at that time which was untouched by the assessing officer. It was af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer. Therefore provisions of Section 263 of Income Tax Act cannot be invoked." 13. However Pr.CIT was not convinced with the reply filled by the assessee, and therefore exercised revisionary power under section 263 and order set-aside the assessment order dated 30.12.2016 passed under section 143(3), on the ground that the order was prejudicial to the interests of the Revenue on account of lack of enquiry conducted in the course of the assessment proceedings in respect of the issue of: (a) claim of deduction under section 80IB(11A) of the Act; and (b) gross profit rate declared by the appellant. 14. Feeling aggrieved by the order passed by the principal CIT the assessee is in appeal before us on the ground mentioned hereinabove. 15. At the outset the Ld. AR for the assessee had submitted that during the assessment proceedings, the assessing officer had made elaborate enquiry from the assessee in respect of both the grounds raised by the principal CIT. To buttress his argument the Ld.AR had drawn our attention to the various notices issued by the assessing officer asking the questions with respect to eligibility the assessee to claim deduction under section 80 IB of the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Please give details and justify the deduction claimed under chap VI-A of Income Tax Act, alongwith appropriate documents and evidence. 11. Please furnish the details in the following format: Financial Year Gross Profit Net Profit Turn Over Ratio (Gp& NP) 2009-10 2010-11 2011-12 2012-13 20. Certified true copies of trading, P/L, Balance Sheet alongwith schedules thereto, Tax Audit Report for A.Y. 2013-14, 2012-13 and 2011-12." Reply dated 16.07.2015 [Copy enclosed at pages 11 to 14 of paperbook] In response to notice dated 16.06.2015, the appellant vide reply dated 16.07.2015, submitted before the assessing officer that the appellant is eligible for claiming deduction under section 80-IB(11A) of the Act and has fulfilled all the requisite conditions. The relevant extracts of the reply are reproduced as under: "9. It is stated that the company has during the year claimed deduction of income u/s 80-IB(11A) of the Income Tax Act ,1961. As already stated in Para No. 1 of the submission and as would. be observed by your goodself from our books of accounts, records and business operation of the company, that our company has established an industrial undertaking and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04.08.2016 [Copy enclosed at pages 34 to 36 of paperbook] In response to the aforesaid query, the appellant once again elaborately reiterated and justified its claim of deduction under section 80IB(11A) of the Act before the assessing officer. Reply dated 12.09.2016 [Copy enclosed at pages 214 to 217 of paperbook] (i) The details of cash deposits in bank duly tallies with respective bank statements. (ii) The date-wise cash and credit sales for the year ended 31/03/2013 are being enclosed herewith vide Annexure 1422 & 1423. (iii) The monthly cash and credit sales for the year ended 31/03/2013 are being enclosed herewith vide Annexure 1424 & 1425. Reply dated 03.10.2016 [Copy enclosed at pages 218 & 219 of paperbook] (i) We have also furnished the item-wise GP in respect of all items dealt in by Company. We again state that we have maintained proper stock record and all our purchases & sales are duly verified. (ii) Copy of cash book for the period 01/04/2012 to 31/03/2013 is enclosed herewith. (iii) The details of all specified persons with ratio of share in all the firms and companies in which they are interested is enclosed. Reply dated 10.10.2016 [Copy enclosed at pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of deduction under section 80-IB(11A) of the Act. It is further relevant to point out that even during the course of assessment, the copies of opinion were duly filed before the AO during the course of assessment proceedings, the details of which are as under:- (i) The copy of opinion given by Shri T.N. Pandey, Ex-Chairman CBDT dated 28/02/2013 on the applicability of section 80IB in the case of the assessee was duly filed before the AO during the course of assessment proceedings. [Refer Page No.227 to 233 of the paper-book] (ii) The copy of opinion of T.U. & Company dated 13/02/2013 on the applicability of section 80IB in the case of the assessee was duly filed before the AO during the course of assessment proceedings. [Refer Page No.234 to 238 of the paperbook] On perusal of the aforesaid, it will kindly be appreciated that the assessing officer made extensive/ necessary enquiries to verify and examine the following issues: a) Claim of deduction under section 80IB(11A) of the Act; and b) Reasonableness for fall in gross profit ratio of the appellant during the previous year relevant to the assessment year 2013-14. It is evident from the above that specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act is that the assessing officer has failed to examine the following points (a) whether dry fruits are to be treated as 'fruits' for the purpose of section 80IB(11A) of the Act; and (b) whether the appellant is engaged in the business of 'processing, preservation and packaging. In this regard, it is respectfully submitted, that section 80IB(11A) of the Act provides deduction in respect of profits derived from undertakings engaged in the business of processing, preservation and packaging of fruits or vegetables or meat and meat products or poultry or marine or dairy products. The provisions of section 80IB(11A) of the Act read as under: "(11A) The amount of deduction in a case of an undertaking deriving profit from the business of processing, preservation and packaging of fruits or vegetables or meat and meat products or poultry or marine or dairy products or from the integrated business of handling, storage and transportation of food grains, shall be hundred per cent of the profits and gains derived from such undertaking for five assessment years beginning with the initial assessment year and thereafter, twenty-five per cent (or thirty per cent where the assessee is a company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. 18. The Ld.AR for the assessee had also submitted that the case of the assessee is covered by the decision of the Hon'ble Supreme Court. He relied upon decision of the Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT : 243 ITR 83, wherein the apex Court, dealing with the preconditions for jurisdiction under Section 263 of the Act, held as under: "A bare reading of this provision makes it clear that the prerequisite to the exercise of jurisdiction by the Commissioner suomotu under it, is that 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 is prejudicial to the Revenue - recourse cannot be had to section 263(1) of the Act. There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, the High Court observed as under: "Thus, it is not only the assessment order but the entire record which has to be examined before arriving at a conclusion as to whether the Assessing Officer had examined any issue or not. The assessee has no control over the way an assessment order is drafted. The assessee on its part had produced enough material on record to show that the matter had been discussed in detail by the Assessing Officer. The least that the Tribunal could have done was to refer to the assessment record to verify the contentions of the assessee. Instead of doing that, the Tribunal has merely been swayed by the fact that the Assessing Officer has not mentioned anything in the assessment order. During the course of assessment proceedings, the Assessing Officer examines numerous issues. Generally, the issues which are accepted do not find mention in the assessment order and only such points are taken note of on which the assessee's explanations are rejected and additions/disallowances are made." (emphasis supplied) 21. The aforesaid judgment has been followed with approval by the Delhi High Court in the case of CIT vs. Eicher Limited: 294 ITR 310. The relevant o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment orders be not cancelled, as being erroneous and prejudicial to the interests of the Revenue. Not being satisfied with the explanation of the assessee, the Commissioner set aside the assessment orders for both the years directing the Income-tax Officer to make the assessments de novo. The Commissioner was of the view that the orders for both the years were erroneous and prejudicial to the interests of the Revenue, inasmuch as they were passed by the Income-tax Officer " ......in haste/hurry without proper and adequate enquiry ...... ... The Commissioner also observed that the orders do riot show " How and in what manner and with what capital the trust conducted its business relating to handloom daris and it is not at all clear from the papers filed." He also added that the record shows that the books of account of the trust were never produced before the Income-tax Officer for scrutiny, that no tick marks were made on any papers filed by the trust along with the return and that the assessment was made in one hearing, without requiring the presence of the trustees …………… There is no finding by the Commissioner that the Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered by the assessing officer, in such circumstances, it is not open to the CIT to exercise revisionary jurisdiction, unless the assessing officer is found to have failed to make inquiries/ verification, which should have been made as per law but were not made. The CIT cannot, merely on difference of opinion with regard to the manner of the inquiries/ investigation, exercise revisionary jurisdiction 25. it was submitted by the Ld.AR that the assessment order passed by the assessing officer or the assessment year 2013 - 14 was neither erroneous nor prejudicial to the interest of revenue and therefore the exercise of jurisdiction by the PCIT was without jurisdiction . 26. It was also the contention of the Ld.AR that the assessing officer had passed the order after taking approval from the principal Commissioner of income tax and discussing the matter with him. He had drawn our attention to the observation made by the assessing officer at page 14 to the following effect "4. This case was discussed with the Worthy Principal Commissioner of Income Tax -1, Amritsar with reference to Letter No.5266 Dated 29.12.2016 of Addl. Commissioner of Income Tax, Range-3, Amritsar. After dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be brought on to record that for AY 2013-14, the PCIT had set aside the assessment on the issue of 80IB(11A). However, on a perusal of case records, this decision is rooted in the assessment order, where, after over 30 order sheet notings, the Assessing Officer, in his wisdom, noted that "the returned is accepted as directed by the Worthy Pr. Commissioner of Income Tax-1, Amritsar." The genesis of the 263 proceedings for AY 2013-14 lay in this comment. This is not the case for AY 2014-15 and is dealt with as such. 05. The submission of the AR have been carefully perused vis-à-vis the assessment records. The AO has in fact done a detailed enquiry and due verification of the information called. The order sheet notings on the file of the AO on 1.11.2017 and 22.11.2017 and the compliance of the AR thereto indicate a sufficient level of enquiry and examination of the issued involved. As such, I am unable to conclude on the satisfaction of the twiu conditions of the order being erroneous and prejudicial to the interest of the revenue. Nor is this a case of an abject lack of enquiries to invoke revisionary power under section 263 of the Act. The fact that the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no order sheet after 16 December 2016 and therefore if any enquiry was required to be made by the assessing officer, step should have been taken by the assessing officer after 16 December 2016. However no steps were taken as sufficient enquiries were already made by the assessing officer satisfying himself about the eligibility of the assessee under section 80 IB as well as in respect of GP rate of the assessee. 32. The assessment record was made available to us, however we were not able to locate either the letter dated 29th of December 2016 written by additional Commissioner to the assessing officer , the reply of the assessing officer to the explanation dated 5 January 2017 and the draft assessment order prior to passing of the assessment order on 30 December 2016. 33. We have considered the rival contention of the parties and perused the material available on record, including the judgments cited at bar during the course of hearing by both the parties. The power under section 263 vest in principal Commissioner of income tax, is a revisionary power, required to be exercised by the authorities if the authorities come to the conclusion that the order passed by the assessing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income and notes thereto. ……………….. 9. Please give details and justify the deduction claimed under chap VI-A of Income Tax Act, alongwith appropriate documents and evidence. 11. Please furnish the details in the following format: Financial Year Gross Profit Net Profit Turn Over Ratio (Gp& NP) 2009-10 2010-11 2011-12 2012-13 20. Certified true copies of trading, P/L, Balance Sheet alongwith schedules thereto, Tax Audit Report for A.Y. 2013-14, 2012-13 and 2011-12." Reply dated 16.07.2015 [Copy enclosed at pages 11 to 14 of paperbook] In response to notice dated 16.06.2015, the appellant vide reply dated 16.07.2015, submitted before the assessing officer that the appellant is eligible for claiming deduction under section 80-IB(11A) of the Act and has fulfilled all the requisite conditions. The relevant extracts of the reply are reproduced as under: "9. It is stated that the company has during the year claimed deduction of income u/s 80-IB(11A) of the Income Tax Act ,1961. As already stated in Para No. 1 of the submission and as would. be observed by your goodself from our books of accounts, records and business operation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng satisfaction of conditions along with documentary evidences. Reply dated 04.08.2016 [Copy enclosed at pages 34 to 36 of paperbook] In response to the aforesaid query, the appellant once again elaborately reiterated and justified its claim of deduction under section 80IB(11A) of the Act before the assessing officer. Reply dated 12.09.2016 [Copy enclosed at pages 214 to 217 of paperbook] (i) The details of cash deposits in bank duly tallies with respective bank statements. (ii) The date-wise cash and credit sales for the year ended 31/03/2013 are being enclosed herewith vide Annexure 1422 & 1423. (iii) The monthly cash and credit sales for the year ended 31/03/2013 are being enclosed herewith vide Annexure 1424 & 1425. Reply dated 03.10.2016 [Copy enclosed at pages 218 & 219 of paperbook] (i) We have also furnished the item-wise GP in respect of all items dealt in by Company. We again state that we have maintained proper stock record and all our purchases & sales are duly verified. (ii) Copy of cash book for the period 01/04/2012 to 31/03/2013 is enclosed herewith. (iii) The details of all specified persons with ratio of share in all the firms and companies in which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 30.12.2016 The assessing officer passed assessment order, duly accepting the claim of deduction under section 80-IB(11A) of the Act. 36. Similarly AO asked various questions/ show cause notice/ verification in respect of alleged fall in GP. The table of questions raised and reply given by the assessee to the assessing officer are given hereinbelow. Details of notice/ reply Description/ particulars of notice/ enqiry by AO and reply thereto Notice dated 16.06.2015 [Copy enclosed at pages 8 to 10 of paperbook] The assessing officer vide the said notice, inter-alia required the appellant to justify the claim of deduction made under Chapter-VI-A of the Act and also directed to file details of gross profit declared in the past assessment year(s). The relevant extracts of the notice is re-produced hereunder: "1. A note on business activity/activities………………………………………… 3. Also submit ROI for A.Y. (Current year and preceding year) alongwith computation of income and notes thereto. ……………….. 9. Please give details and justi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... along with the similar information for last year is enclosed herewith vide Annexure No.770 to 775. It is thus submitted that we are dealing in highly volatile items and gross profit rate(s) depend upon the market conditions prevailing at that time. 4. Our all sales and purchases are completely vouched. Complete stock tally has been maintained. It is therefore requested that no adverse inference can be drawn. Reply dated 12.09.16 [Copy enclosed at pages 214 & 215 of paperbook] The necessary details with regard to cash sales and credit sales and other details were filed along-with annexures. Reply dated 03.10.16 [Copy enclosed at pages 218 & 219 of paperbook] The GP rate on aggregate sales and also item-wise GP rate in respect of all items dealt by the company were filed. Reply dated 10.10.16 [Copy enclosed at pages 220 of paperbook] The item-wise stock tally in value and quantity of both raw material and finished goods were filed along-with annexures. Reply dated 13.10.16 [Copy enclosed at pages 223 & 224 of paperbook] (i) The number of Photostat copies as well as cash memo picked up at random (issued and prepared by the company) for the sale of its products are enclos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uits" for the purpose of section 80IB (11A) • He has also failed verify as to whether the assessee company is engaged in the business of 'processing, preservation and packaging." • The AO has also failed to examine as to whether the year under consideration was the "initial assessment Year" of the assessment company claiming the deduction Us 80IB(11A) of the I.T. Act 39. In first notice dated 16 June 2015, the assessing officer had asked the assessee to " 9. Please give details and justify the deduction claimed under chap VI-A of Income Tax Act, alongwith appropriate documents and evidence.". The assessee had filed the reply to the notice on 16 July 2015 and had categorically submitted that the assessee is eligible for claiming the deduction under chapter VIA of the Act. The assessee fulfills all the requisite conditions required under the law. 40. In paragraph 9 of the reply was mentioned that the assessee" in exclusively driving profit from the business of processing, preservation and packaging of fruits VIZ Badam Girl Badam,bjosh, Kaju, Kishmish, Pista.It was also mentioned We have also fulfilled all other conditions as laid out in section in 80-IB and for this p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 961, under which deduction is being claimed : ..................... 8. Date of commencement of operation/activity by the undertaking or enterprise : .................... 9. Initial assessment year from when deduction is being claimed : 10. Address (with District and State) of the enterprise/ undertaking claiming deduction : .................... 11. Excise/service tax registration number and office where registered : ..................... 12. Sales tax registration number and office where registered .......... : 13. Local/State authorities from whom approval is taken (attach copy of approval) 43. The perusal of the Performa (supra) of audit report dated 29th November 2013, clearly shows that the assessee has mentioned in the four Performa the initial year of the assessment year for which the deduction was claimed and also mentioned the date of commencement of the activities. Thus the finding of the Ld. PCIT that AO had not made enquiry with respect to the initial year of assessment for which deduction was claimed is factually incorrect as the assessing officer made sufficient enquiries. 44. Similarly, vide order sheet entry dated 22 February 2016, the assessing off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h provides that where the income tax payable on total income computed under this Act is less than 18.5% of Book Profit, such Book Profit shall deemed to be the total income of the assessee. In view of the same we have paid tax @18.5% + surcharge & education cess on the book profits of the company amounting ₹ 8156794 for the year ended 31.03.2013. Audit Report under section 115JB in Form No.29B of the Income Tax Act,1961 dated 28.09.2013 for computing the book profits of the company stand already furnished by the Company vide earlier letter dated 26.05.2015 to your ld. predecessor. It is requested that the same be kindly referred to by your honor from your record. 48. The assessing officer after satisfying himself about the nature of activities of the assessee and its entitlement under section 80 IB, had expanded the scope of enquiry and sought to deny the deduction under section 80 IB on the basis that the assessee along with other AE have undertaken mutual sale/purchase with M/s Fairways, and therefore had issued show cause notice on 5thof December 2016, and asked the assessee to explain why the deduction claimed under section 80 IB(11A) of the Act should not be disallowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were made by the assessing officer during the assessment proceedings, therefore the action on the part of the principle CIT cannot be countenanced and the invocation of jurisdiction under section 263 , was devoid of any merit and is liable to be set aside and annulled . 54. There is yet another critical aspect of the matter whereby the Principle CIT relied upon explanation 2 to section 263 of the Income Tax Act. In our opinion, the explanation to section 263 is prospective and cannot be applied to the assessment year prior to the introduction of the explanation in the Statute book. The explanation was introduced by the Finance act 2015 with effect from 1 June 2015. Recently we had occasion to examine the issue of applicability of these explanation 2 to section 263. In the matter of Smt Surinder Kaur Brar vs PCIT ITA Nos. 204 to 207/Amr/2019 we had held as under :- 6.7 We are supported by the decision rendered by Delhi Tribunal in the case of Brahma Centre Development Private Limited, ITA nos. 4341 & 4342/Delhi/2019 dated 18.12.2019 wherein the Tribunal in paragraphs 12, 13 & 14 has held as under:- "12. In view of the above, we find it difficult to agree with the ld. DR that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for the PCIT to conduct any further inquiry, it also inures to the benefit of the assessee because all these things are available on record and the assessee specifically submitted that the difference in the ITR and 26AS occurred because of the adjustment of the interest received against the project expenditure. Admittedly, this is the only project conducted by the assessee and there is no other project. In such an event, it is not the passive submission to be recorded to the AO, but also actively pleading before him that the interest received was adjusted against the project expenditure." 6.8 From the perusal of paragraph 13 supra it is clear that the Tribunal has held that the explanation 2 section 263 is only prospective in nature. 6.9 The said decision of the Tribunal was assailed by the Revenue in ITA No.116 of 2021 and ITA No.118 of 2021 before Delhi High Court and the Hon'ble Delhi High Court had confirmed the order passed by the Tribunal. We are reproducing hereinbelow of the findings of the Delhi High Court in paragraphs 10 & 11 which are to be following effect. Issue no. (ii): 10. The standard to be adopted while dealing with the issue as to whether or not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 263 of the Act, merely because he has different opinion in the matter. It is only in cases of "lack of inquiry", that such a course of action would be open. In Gabriel India Ltd.'s case (supra), law on this aspect was discussed in the following manner: ". . . From a reading of sub-section (1) of section, it is clear that the power of suo motu revision can be exercised by the Commissioner only if, on examina-tion of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is 'erroneous insofar as it is prejudicial to the interests of the revenue'. It is not an arbitrary or unchartered power. It can be exercised only on fulfilment of the requirements laid down in sub-section (1). The consideration of the Commissioner as to whether an order is erroneous insofar 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 wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or incomplete interpretation a lesser tax than what was just has been imposed. ****** We may now examine the facts of the present case in the light of the powers of the Commissioner set out above. The Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation on that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. Such decision of the Income-tax Officer cannot be held to be "erroneous" simply because in his order he did not make an elaborate discussion in that regard . . ." (pp. 113-117) xxx xxxxxx 15. Thus, even the Commissioner conceded the position that the Assessing Officer made the inquiries, elicited replies and thereafter passed the assessment order. The grievance of the Commissioner was that the Assessing Officer should have made further inquires rather than accepting the explanation. Therefore, it cannot be said that it is a case of 'lack of inquiry'." 10.2. This view was followed by another Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding - Please refer to the above. 2. In this case only one issue seems to have been raised during the course of assessment proceedings and that issue, according to you, is whether the assessee is entitled to deduction u/s 80IB of the Income-tax Act, 1961. 1. Please refer to your observations given in para 2 of the assessment order where you have observed as under:- "During the year under consideration, the assessee company is engaged in the business of processing, preservation and pasckaging of nuts and dry fruits items.' Refer to your query as raised in para 3(iii) wherein you have observed that the assessee has only purchases Badam and sold BadamGiri by cracking of Badam. According to you, the activities of the assessee are found to be cracking of Badam and not the processing, packaging and preserving the fruits and vegetables, and work of processing, preserving, if any, would be the essence of trading business of(trading of dry fruits of the assessee) 4. In your order you have mentioned but explanation of the assessee is not found satisfactory, and returned income is being accepted as per directions of the Worthy Principal Commissioner of Income-tax-1, Amri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notice of the Additional Commissioner of income tax, he had written one letter dated 10th of November 2017 to the following effect. "Sub:- Proposal u/s 263 [PAN:- AADCK3310K] M/s KBB Nuts Pvt. Ltd. for the Asst. Year. 2013-14 -Regarding. * . * . * _ * . * . * _ * Refer to the above. The proposal u/s 263 in the aforesaid case has been sent vide letter no. 4584 dated 26.10.2017. It has to be noted that you have taken over the charge of Circle-3 Amritsar on 5/10/2017, whereas the proposal bears the signature of your predecessor who was not DCIT Circle-3, Amritsar on 26/10/2017, i.e. the date of sending of proposal. In this regard, the proposal is returned herewith for clarifying the discrepancy and taking necessary action after examining the issues involved in this case in detail." 58 After that the fresh proposal was given by the new assessing officer on 6thMarch 2018. Based on that, the PCIT had issued the show-cause notice to the assessee under section 263 of the Income Tax Act. 59 Based on the above-said facts, the Ld.AR had made two-fold arguments firstly the notice was required to be issued after verifying the record by the PCIT and it should not have been done o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities. 62 We have noted down the above-said sequence of fact, intending to show the above perversity in the working of the Department at the level of the assessing officer and thereafter. 63 In our opinion, the law is fairly settled. The assessing officer cannot be given the right to review his own order in the garb of sending proposal under section 263 of the income tax act. Under the Income Tax Act, the two options are available with the assessing officer, either to initiate proceedings under section 148 of the income tax act or to correct the mistake by invoking the power under section 154 of the income tax act to rectify the mistake. No other authority has been conferred on the assessing officer under the income tax act for sending the proposal under section 263. The power only vests with the officer mention under section 263 and not to any other officer. It is the settled position of law. If a act is required to be done by a particular officer, then it should be done by the said officer and by none other. Under section 263 of the Act, it is the duty and responsibility of the Commissioner, to apply his mind and issue the notice under section 263, he cannot delegate his ..... X X X X Extracts X X X X X X X X Extracts X X X X
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