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TMI Blog2021 (12) TMI 975X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary enquires. Since there was a failure on the part of AO to make necessary enquiry, we are of the view that the CIT was justified in invoking jurisdiction u/s. 263 of the Act in the facts and circumstances of the present case. We are of the view that we need not examine the arguments of the learned counsel for the Assessee in this regard because Explnation-2 is only a deeming provision and if on facts it is found that the AO did not make any enquiries before concluding the assessment there is no need to take recourse to the deeming provisions. We are of the view that the scope of enquiry in the set aside proceedings will be restricted to the directions as set out above and to this extent the impugned order is modified. With these observations, we partly allow the appeal of the Assessee. - ITA No. 2205/Bang/2019 - - - Dated:- 22-11-2021 - SHRI N.V. VASUDEVAN, VICE PRESIDENTAND SHRI B. R. BASKARAN, ACCOUNTANT MEMBER Assessee by : Shri. T. Suryanarayana, Advocate Revenue by : Shri. Sumer Singh Meena, CIT(DR)(OSD)(ITAT), Bengaluru ORDER Per N. V. Vasudevan, Vice President This is an appeal by the assessee against the order dated 7.8.2019 of P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hown as Audit adjustment entry. It must be pointed out that in AY 2010-11 and 2011-12 such audit adjustment entry was held by the AO to be suppressed sales and added to the total income of the Assessee. In the present AY 2014-15, no such addition was made by the AO in the assessment completed u/s.143(3) of the Act by order dated 11.1.2008. 4. The Pr.CIT in exercise of his powers u/s.263 of the Act was of the view that the aforesaid order of the AO was erroneous and prejudicial to the interest of the revenue for the reason that the AO failed to obtain any reconciliation of the turnover as per Profit and Loss account with the total invoice value and whether the invoices were raised on cost plus method, which receiving the corresponding amount from the clients. He also observed that the issue was agitated in AY 2010-11 and the AO failed to call for and examine the details and hence the order of the AO in completing the assessment without proper verification is erroneous and prejudicial to the interest of the revenue. A show cause notice dated 15.5.2019 u/s.263 of the Act was accordingly issued by the Pr.CIT. 5. In reply the Assessee submitted in its reply dated 4.6.2019 that ann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for AY 2013-14 and no adjustment was made in the final assessment order for the said year. The assessment was completed by the AO for AY 2014-15 after detailed enquiry and due verification of detailed records submitted to the AO in response to queries raised from time to time, including the revenue reconciliation filed vide submission dated October 16, 2017. Therefore, the AO had applied his mind while passing the final assessment order for AY 2014-15. Merely because adjustments were made in prior years doesn't render the order erroneous, especially when the AO has applied his mind while passing the order for subsequent years. Hence, it was submitted that the final assessment order for AY 2014-15 should not be considered as erroneous and therefore, proposed revision of assessment order under section 263 of the Act should be dropped. 6. The CIT was not convinced with the aforesaid reply of the Assessee and he proceeded to revise the order of the AO by the impugned order by setting aside the order of the AO and remading the question of verification and examination of the turnover as per profit and loss account and turnover as per invoices raised and reconcile the difference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) referring to an essay on Determining the Ratio Decidendi of a case by Dr. A. L. Goodhart, the principle of a' case is determined by taking into account the facts treated by the Judge deciding a case as material and his decision as based thereon. The ratio of the decision in Calcutta Discount Company's (10) case cannot apply to the facts of the present case for the following reasons :- (I) Under section 34, the duty of the assessed is only to state the material facts necessary for the purpose of .assessment. Once these facts are accepted and an assessment is made, the Income Tax Officer cannot reopen the assessment unless he had reason to believe that the material facts were not truly disclosed.. The reason why the reopening of the assessment is thus made somewhat difficult is to preserve the finality of the previous decision which should not be destroyed except for a good reason. Once it is found that the disclosure of facts was complete, no jurisdiction could arise for the reopening of the assessment. (II) On the other hand, the condition for the assumption of jurisdiction under old section 33B and the new section 263 is easier to fulfill. The reason is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial to show that the Income Tax Officer made the assessments in undue hurry........,...The assessed made a declaration giving the facts regarding initial capital, the ornaments and presents received at the time of marriage, other gifts received from her father-in law, etc., which should have put any Income Tax Officer on his guard. But the Income Tax Officer without making any inquiries to satisfy himself passed the assessment order ....... A short-typed assessment order was made for each assessment year......No evidence whatsoever was produced in respect of the money-lending business done. ............No names were given as to the partics to whom the loans were advanced. In Tara Devi Aggarwai v. Commissioner of Income Tax, (1973) 88 I.T.R. 323, also the Income Tax Officer, Howrah, while remarking that the source of income of the assessed was income from speculation and interest on investments stated that neither the assessed , able to produce the details and vouchers of the speculative transactions made during the accounting year nor was there any evidence regarding the interest received by the assessed from different parties on her investments. Notwithstanding these de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this contract. It is because it is incumbent on the Income Tax Officer to further investigate the facts stated 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 inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is any thing wrong with the order if all the facts stated therein are assumed to be correct. 9. We are of the view that the mere fact the Assessee gave a reconciliation of sales as per invoices and as per the profit and loss account and the fact that the very same AO made enquiries in AY 2013-14 and therefore he was well aware of the issue and accepted the reconciliation given by the Assessee cannot be the basis to hold that the AO made necessary enquires. Since there was a failure on the part of AO to make necessary enquiry, we are of the view that the CIT was justified in invoking jurisdiction u/s. 263 of the Act in the facts and circumstances of the present case. 10. The learned counsel for the Assessee submitted that Explanation 2 to Sec.263 of the Act which was introduced by the Finance Act, 2015 w.e.f. 1.6.2015 is no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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