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TMI Blog2022 (8) TMI 915X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment order expressing his opinion in the matter. Once this is done, then the Commissioner cannot impose/ substitute his opinion on the view taken by the AO to say that the said assessment order is erroneous and prejudicial to the interest of the revenue. Revisional CIT cannot substitute his view upon the view of the Assessing Officer if the Assessing Officer has taken one of the possible/plausible views, unless AO s view is unsustainable in law. As supported by the view of the in the case of CIT (Central), Ludhiana v/s. Max India Ltd. [ 2007 (11) TMI 12 - SUPREME COURT] where it has been observed that 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 order erroneous and prejudicial to the interest of the revenue unless the view taken by the AO is unsustainable in law. Once the AO has raised queries which the assessee may not have answered fully then to say that this is a case of no enquiry cannot be permitted. What Section 263 covered prior to insertion of Explanation 2 was a case of no enquiry but not a case of inadequate enquiry. As noted above, with the introduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee with its borrowers and (ii) Deduction under Section 36(1)(iii) of the Act with respect to Interest expenditure of Rs.2,49,53,390/- incurred with respect to borrowings made for the slum rehabilitation project at Dindoshi. 2. Earlier, the assessee had filed its return of income for the previous year relevant to assessment year 2006-07 on 11th November, 2006. The case was selected for scrutiny and assessment order dated 28th December, 2011 came to be passed under Section 143(3) of the Act. On 18th March, 2011, the Department issued a notice under Section 263 calling upon the assessee to show cause as to why the order under Section 143(3) dated 16th December, 2008 should not be treated as erroneous and prejudicial to the interest of revenue. The assessee responded by a detailed reply, in nuce, stating that the Assessing Officer had during the original assessment proceeding enquired into various issues including the aforesaid two issues and formed an opinion as to the correctness of the claim made by the assessee. The Commissioner by his order dated 31st March, 2011 rejected the submissions of the assessee. The relevant portion of the order of the Commissioner is quoted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 submitted the details of write off and also how the income on such transaction was offered to tax. This fact is apparent from page Nos. 11, 16, 17 and 21 to 24 of the paper book. Similarly, in respect of second issue i.e. claim of interest expenditure, we noted that the Assessing Officer made the following query: 26. In case, interest expenditure is claimed, details thereof must include name of the person to whom paid, rate of interest, amount of interest, period for which paid and copy of account of such person in your books. 8.2 In reply thereto, the assessee vide his letter dated 15th September, 2008 gave the details in respect of the interest as well as drawn the addition of the Assessing Officer to Schedule-O, interest on Dinoshi Site as appearing at pages 19 20 of the paper book. This proves that the Assessing Officer was duly informed by the assessee during the course or hearing in respect of the loss on OTS as well as claim of interest in respect of Dindoshi Site. This is not a case where the Assessing Officer has not made the inquiry and completed the assessment just accepting the return filed by the assessee. In our opinion, the CIT cannot enter into the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and circumstances of the case and in law, the Tribunal was justified in holding that lack of enquiry pursuant to notice u/s 142(1) amounts to inadequacy of inquiry by the A.O.? 5. Mr. Suresh Kumar, learned counsel for the Appellant-revenue relies upon the order of the Revisional Commissioner. He draws the attention of this Court to paragraph 4 of the said order (quoted above) to submit that from the records it was observed that the assessee was never called upon to explain the loss under OTS debited to the profit and loss account under the head Administration other expenses . That the records did not contain a copy of OTS scheme under which the assessee is stated to have given concession to private developers only in respect of outstanding interest, nor any details with respect to the amount of interest receivable and written off under the OTS were found on record. He submits that the Assessing Officer in the original assessment under Section 143(3) has also not verified as to how the interest written off has been offered as income in the earlier years nor has the Assessing Officer examined as to whether the interest expenses of Rs.2,49,53,390/- on the Dindoshi pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) Commissioner of Income-Tax v/s. M/s. Shreepati Holdings Finance Pvt. Ltd. (supra) 9. Learned counsel for the assessee would therefore submit that the appeal deserves to be dismissed as it does not raise any substantial question of law. 10. We have heard Mr. Suresh Kumar, learned counsel for the Appellant-revenue and Mr. Nishant Thakkar, learned counsel for the assessee and with their able assistance, we have perused the papers and proceedings in the matter. 11. The Respondent assessee is engaged in the business of developers in slum rehabilitation schemes. As noted above, the Assessing Officer had pursuant to the assessment proceedings under Section 143(3) of the Act had allowed assessee s claim for deduction made by assessee, in respect of the interest of receivables of Rs.6,01,84,862/- under Section 36(1)(vii) of the Act which was forgone under the OTS entered into by the assessee with its borrowers and written off, and the deduction in respect of the interest expenditure of Rs.2,49,53,390/- incurred with respect to the borrowings made for the slum project at Dindoshi under Section 36(1)(iii) of the Act. The Commissioner had thereafter issued a notice dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er or Chief Commissioner or Principal Director General or Director General or Commissioner authorised by the Board in this behalf under Section 120; (b) record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject-matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Principal Commissioner or Commissioner under this subsection shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. 13. Explanation 2 to Section 263 which was inserted by the Finance Act, 2015 with effect from 1st June, 2015 is quoted as under :- Explanation 2.- For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shi Site of Rs.2,49,53,390/- as revenue expenditure whereas according to him they relate to the projects under work-in- progress and were required to be capitalized. Learned counsel for the assessee has relied in this regard on certain decisions submitting that inadequacy of the inquiry according to whims and caprice does not give jurisdiction to the CIT to invoke the provisions of section 263 to set aside the assessment and that the order impugned was not a case of lack of inquiry. 16. No doubt clause (a) of Explanation 2 to Section 263 deems an order to be erroneous and prejudicial to the interest of the revenue in case the order is passed without making enquiries or verification which should have been made in the opinion of the Principal Commissioner or Commissioner. As noted, this Explanation is prospective and is applicable with effect from 1st June, 2015. In the case of the assessee, we note that show cause notice was issued on 18th March, 2011 invoking the jurisdiction u/s 263 i.e. prior to the insertion of Explanation 2. When the show cause notice was issued, neither clause (a) nor the Explanation 2 were on the statute book. Insertion of Explanation 2 with effect from 1s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat these facts are apparent from page nos.11, 16, 17 and 21 to 24 of the paper book. In other words, the Assessing Officer in the 143(3) proceedings, had called for particulars of interest and considered the allowability of the amount. 21. With respect to the issue regarding claim of interest expenditure pertaining to the Dindoshi site, we observe from paragraph 8.1 of the Tribunal order that the Assessing Officer made the following query :- 26. In case, interest expenditure is claimed, details thereof must include name of the person to whom paid, rate of interest, amount of interest, period for which paid and copy of account of such person in your books. 22. The assessee in reply dated 15th September, 2008 statedly gave details of interest on Dindoshi site recorded by the Tribunal as appearing at pages 19 and 20 of the paper book. That the Dindoshi project was substantially complete at a total cost of Rs.84,11,46,207/out of which the cost of Rs.80.09.14.261/- had already been incurred and since the project had achieved substantial progress, borrowing costs, capitalization of interest ceased as per AS-16. It is contended that it is not the case of the revenue that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustrial Co. Ltd. (supra) this Court has taken the view that the phrase prejudicial to the interest of the revenue under section 263 has to be read in conjunction with the expression erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of the revenue. For example, when the Income-tar 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 interest of the revenue, unless the view taken by the Income-tax Officer is unsustainable in law. ... (emphasis supplied) 25. This Court in case of Commissioner of Income-Tax v/s. M/s. Shreepati Holdings Finance Pvt. Ltd. (supra) while striking down an order under Section 263 has observed in paragraph 6 as under :- 6. We find that that there is no prescribed formula under Section 88E of the Act to determine the quantum of the rebate thereunder. Therefore the same has to be computed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should have been included. The Principal Commissioner cannot decide how elaborate an order of the AO should be. Where the AO, during the scrutiny assessment proceedings, has raised a query which was answered by the Assessee to the satisfaction of the AO but the same was not reflected in the AO by him, the Commissioner cannot conclude that no proper inquiry with respect to the issue was made by the AO and enable him to assume jurisdiction under Section 263 of the Act. ... (emphasis supplied) 27. Paragraph 7 of the decision in the case of Commissioner of Income-Tax v/s. M/s. Shreepati Holdings Finance Pvt. Ltd. (supra) is also usefully quoted as under :- 7. Moreover the CIT in exercise of powers under Section 263 of the Act directed the Assessing Officer to redetermine the rebate allowable under Section 88E of the Act after holding that the same needs more careful examination on the part of the Assessing Officer. This itself indication of the fact that this is not the case of lack of enquiry, but at the highest it can be a case of inadequate enquiry. It is settled position in law that inadequate enquiry by itself would not justify invoking the jurisdiction under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between lack of inquiry and inadequate inquiry . If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 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.... (emphasis supplied) 30. Therefore, once the Assessing Officer has raised queries which the assessee may not have answered fully then to say that this is a case of no enquiry cannot be permitted. What Section 263 covered prior to insertion of Explanation 2 was a case of no enquiry but not a case of inadequate enquiry. 31. However, as noted above, with the introduction of Expla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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