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TMI Blog2023 (3) TMI 305X X X X Extracts X X X X X X X X Extracts X X X X ..... y queries have been raised by the AO on the issues and whether on facts considering the replies of the assessee, the view formed by the AO can be said to be a plausible view or not. It is only after considering the same, the Revisionary Authority can come to the conclusion whether the order passed was a carelessly passed order by the AO thus constituting an error by sheer lack of enquiry or absence of relevant enquiry by the AO which causes not only an error but also a prejudice to the interests of the Revenue. It is only after such an enquiry is made that the Revisionary Authority can be held to be justified in setting aside the order. On a consideration of the entire factual matrix of the present case, we find ourselves unable to subscribe to the view taken by the Revisionary Authority. We have taken into consideration the arguments advanced on behalf of the assessee that the amount surrendered in the course of the survey on 04.08.2016 was honored by the assessee which is not an issue in the present proceedings. We find that on the levy of higher rate of tax in terms of amendment of Section 115 BBE which received the Hon'ble President s assent on 15.12.2016, the AO in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that the AO was duly conscious of the issues which he was required to consider. Replies have been taken on record. They are seen to be having a legal support. We find that the appeals of the assessee have to be allowed. We further support our conclusion relying upon the decision of the Apex Court in the case of Parshuram Potteries [ 1976 (11) TMI 1 - SUPREME COURT ] Accordingly, the respective orders passed by the ld. PCIT are quashed and appeals of the assessee are allowed. - ITA No. 317/CHD/2022 And ITA No. 318/CHD/2022 - - - Dated:- 7-12-2022 - Smt. Diva Singh, Judicial Member And Shri Vikram Singh Yadav, Accountant Member For the Assessee : Shri Sudhir Sehgal, Advocate For the Revenue : Shri Sarabjeet Singh, CIT-DR ORDER PER DIVA SINGH A common order is being passed in the present two appeals as the facts, submissions and issues raised by the respective assessees remain identical. In both these appeals, the respective assessees have challenged the separate orders dated 17.03.2022 of ld. PCIT Rohtak pertaining to 2017-18 assessment year on identical grounds. 2. Since it was common stand of the parties before the Bench that the argu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the search. The AO records that statutory notices u/s 143(2) and 142(1) were issued and the assessee's submissions were received on-line on ITBA Portal. Considering the same, assessment was concluded by the AO. This order of the AO was subjected to the Revisionary Powers of ld. PCIT Rohtak. The record shows that after issuance of Show Cause Notice to the assessee and considering the reply, the order was set aside holding as under : “12. Therefore, keeping in view of the facts and circumstances of the case as discussed above, it is observed that the AO had passed the order dated 21.12.2019 in a very casual manner without due diligence and without conducting proper enquiries and taking cognizance of amended Finance Act, 2016 in respect of surrendered income. Therefore, the assessment completed u/s 143(3) of the Act is erroneous so far as it is prejudicial to the interest of the revenue in terms of provisions of section 263 of the Act, especially in view of Explanation 2 inserted by the Finance Act, 2015 w.e.f. 01.06.2015. Accordingly, the assessment order passed by the AO on 21.12.2019 u/s 143(3) of the Act for the A.Y. 2017-18 is set aside with the direction to pass an order afr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view formed by the AO is fully supported by the legal position. Accordingly, it was argued that since a well considered view has been taken by the AO with due application of mind, the order of the ld. PCIT cannot be held to be maintainable as it amounts to relook at the very same facts and evidences to form a different view. This position legally was not permissible. It was also his submission that the nature of queries raised by the AO all along and the replies of the assessee made available to the AO on which the ld. PCIT has also questioned the assessee, would show that the very same reply has been made available by the assessee before the ld. PCIT also. Thus, the legal position namely that the ld. PCIT cannot substitute his view with that of the AO without first faulting the AO’s view was relied upon. Hence, it was his prayer that the impugned order may be quashed. 4.2 In order to demonstrate the correctness of the submissions, attention of the Bench was invited to the two Paper Books of the assessee on facts and two Paper Books filed which contain the supporting legal view by way of Judgements Paper Book relied upon. The third Paper Book wherein the documents on facts and l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and one thousand rupees (hereinafter referred to as specified bank notes) issued by the Reserve Bank of India have been ceased to be legal tender with effect from the 9th November, 2016. 2. Concerns have been raised that some of the existing provisions of the Income-tax Act, 1961 could possibly be used for concealing black money. It is, therefore, important that the Government amends the Act to plug these loopholes as early as possible so as to prevent misuse of the provisions. The Taxation Laws (Second Amendment) Bill, 2016, proposes to make some changes in the Act to ensure that defaulting assessees are subjected to tax at a higher rate and stringent penalty provision. 3. In the wake of declaring specified bank notes as not legal tender, there have been representations and suggestions from experts that instead of allowing people to find illegal ways of converting their black money into black again, the Government should give them an opportunity to pay taxes with heavy penalty and allow them to come ciean so that not only the Government gets additional revenue for undertaking activities for the welfare of the poor but also the remaining part of the declared income legiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts was Rs. 21,31,-100/-there is an excess stock of Rs. 75,50,000/- At present I am not in a position to explain the discrepancy and offer additional income of Rs. 75,50,000/-over and above my regular income, subject to no penal action and prosecution. Cash inventory was prepared and cash found was Rs. 10,62,900/- and as per books cash was Rs. 1,12,900/-. There is an excess cash of Rs. 9,50,000/- Presently I am not able to explain discrepancy in cash and hence I am offering an additional income of Rs. 9,50,000/- on this a/c over and above my regular income subject to no penal action or prosecution. This offer of additional income of Rs. 15,00,000/-, Rs. 75,50,000/- and Rs. 9,50,000/- i.e total Rs. 1 crore is over and above my normal regular business income subject to no penal action or prosecution. I will pay the taxes on this additional income of Rs. 1 crore over and above my regular income by 31" March, 2017. Please consider our request and do the needful and obliged. Thanking You Your faithfully Sd/- Madan Mohan Managing Partner, Neelkanth Breeding Farm For Neel Kanth Breeding Farm, Partner 4.5 Reading from the above sur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration and furnish ledger copy of unsecured loans kj advances including squared up account alongwith identity, credit worthiness, genuineness of the lender. 11. Please furnish complete postal addresses of all creditors above Rs. 1 Lac and debtors above Rs. 1 Lac appearing in the balance sheet alongwith confirmation in the forms of Affidavits duly attested by the Notary Public and copies of accounts appearing in the books of accounts of both the creditors and debtors respectively. 12. Please furnish entry-wise narration of each cash deposit exceeding Rs. 20,000/- alongwith source of cash deposit with documentary evidence. 13. Please furnish complete Name & Addressees of the parties from whom purchases made/sales effected exceeding Rs. 1,00,000/- each. 14. Please furnish details of other long term investments appearing in the ITR for the year under consideration and interest received thereon alongwith documentary evidence. 15. Please furnish details of advances taken from others of Rs. 27,03,900/appearing in the ITR for the year under consideration alongwith documentary evidence. 16. Please furnish details of advances of Rs. 76,23,301/- appearing on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fronted to reconcile physical stock with the books of accounts. The assessee because of inavailability of accountant couldn't reconcile the stocks. The assesse however in order to buy peace and mind to avoid hazards litigation made surrender of Rs one crore against alleged excess stock found and other discrepancy if any etc. The assessee further under V.I.O.S. scheme made surrender of Rs.15,00,000/- lakh against the cash. The assessee in true spirit accordingly deposited the due tax.” (emphasis supplied) 4.9 Attention was invited to another notice issued by the AO on 11.12.2019 again requiring the assessee to explain the surrendered amount. Referring to the Paper Book page 39-40 it was submitted that the following specific questions were raised: In connection with the assessment proceedings pending in your case relating to the assessment year 2017-18, the following information may please be furnished : During the survey operation carried out at your business premises on 04.08.2016, daily production register was impounded. You are requested to explain the entries contained in the said register. 2. During the Survey Operation carried out on 04.08.2016 at your b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,60,000/- Total Amount of surrender 1,00,00,000/- That at the time of survey conducted by on 04/08/2016 by the Income Tax Authorities present at our business premises, they told us that current/prevailing rate of tax is 30% of surrendered amount u/s 115BBE of the Income Tax Act and we deposited the said tax before filing of our income tax return for the Asst. Yr 2017-18 accordingly. ………………..” (emphasis supplied) 4.11 Relying on the said letter, it was submitted that the AO was conscious and had enquired into this issue. Referring to the same reply, it was further submitted that reference is made to the provisions of the Income Tax Act as it then stood. The Survey Team had informed the assessee on the basis of the provisions as available on the Statute that the rate of tax applicable. Considering the reply that the survey was conducted on 04.08.2016 and Section 115BBE as it then stood considering the amendment introduced by the Finance Act, 2012 w.e.f. 01.04.2013 the AO had taken an informed view. Inviting attention to page 42 of the Paper Book it was submitted that the reasons and pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw is well settled that the Income Tax Act as it stands amended on the 1 day of April of any F Y must apply to the assessments of that year Any amendments in the Act which come into force after the 1s t day of April of FY would not apply to the assessment to that year, even if the assessment is actually made after the amendments came into force.” Reliance had been placed upon Kasimtharuvi Tea Estate Ltd. Vs. State of Kerala (1966) 60 ITR 262 (S.C) and C.I.T. Vs. Scindia Steam Navigation Co. Ltd S.C. (1961) 42 ITR 589. Accordingly, it had been argued before the AO and also the ld. PCIT that the amendment to Section 115BBE would come into force w.e.f. 2018-19 assessment year and not 2017-18. The AO, it was submitted, had considered the argument, the provision and the position of law before forming the view taken. It was also submitted that the interpretation of law as considered to be incorporated by the Revenue now is contrary to natural justice. The assessee, it was submitted, referring to Paper Book page 46 had also advanced the following submissions before the AO which had been considered by him: “That amended tax u/s 115BBE of the Income Tax Act has been levied with retrospe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same issue had been made by the AO and duly enquired into. Attention was invited to Loil Continental Foods Ltd. Vs Pr. CIT (ITA No.577/CHD/2019 [CHD-Tribunal]) so as to canvass that just because the assessment order passed by the AO is brief, it cannot lead to the conclusion that the AO has not duly applied his mind. It was submitted that in order to determine whether the AO has made enquiries and applied his mind, this can be understood from the nature of enquiries made and replies considered. It was submitted that at best the issue can be said to be a debatable issue, but once two views are possible, the view taken by the AO again perse cannot be discarded by an order u/s 263 unless it can be shown that the order was passed without making any enquiry or any relevant enquiry. 4.15 Attention was also invited to decision of the ITAT Surat Bench dated 16.03.2021 in the case of Pramod Kasharichand Shan (ITA No.43/SRT/2018) decisions of ITAT Chandigarh Bench in the case of Surinder Pal Singh ITA No.57/CHD/2021 dated 31.01.2022 and in Sanjay Jain & others ITA No.140/CHD/2021 dated 23.03.2022 which are decisions of the Chandigarh Bench which are again to support that once on facts it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cognizance of the statement of the assessee and the order passed has been held to have been passed after due application of mind. Thus, it was his prayer that the impugned order may be quashed following the said decision. 4.17 Closing his arguments, it was also submitted that submissions advanced in writing contained in the synopsis originally filed and the synopsis filed on 18.08.2022 may also be considered. For the sake of completeness, these are set out herein under: 1. The assessee is a partnership firm running hatchery business under the name and style of M/s Surya Hatchery. Other than the said business, the assessee does not have any other source of income. The copy of acknowledgement of return filed by the assessee along with computation of income is forming part of paper book at Pg 1-4. 2. The books of accounts of the assessee are duly audited by a Chartered Accountant and copy of audit report in Form 3CD is forming part of paper book at Pg 5-21. 3. A survey u/s 133A of the Act was conducted by the Income Tax Authority on 04.08.2016 at the BUSINESS PREMISES of the assessee, where, to cover the DISCREPANCIES OF BUSINESS, the assessee had surrendered an amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act on the income surrendered by the assessee and it was also explained to the AO that at the time of survey operations, income tax authorities guided the assessee about the prevailing tax rate of 30% on surrender income. Moreover, since the surrender has been made on account of business discrepancies, the applicable tax rate on the surrendered income is 30% instead of 60% levied by the PCIT. The copy of the reply filed before the AO is forming part of paper book at Pg 41-46. 12. After raising specific query on the issue of chargeability of tax u/s 115BBE of the Act and after considering the replies filed by the assessee, the AO took a possible view based on the due application of mind and based on the in depth verifications made by the AO, assessment order was passed u/s 143(3) of the AC wherein returned income of the assessee was accepted and surrendered income was accepted as part of business income. 13. Thereafter, audit objection was raised by the ITO Audit Karnal that income to the tune of Rs. 1,00,00,000/- as surrendered during the course of survey proceedings should be taxed u/s 115BBE of the Act @ 60% instead of normal tax rates which led the PCIT to assum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ender also, the tax authorities have accepted the surrendered sum as a part of regular business income of the assessee. Therefore, tax paid on the additional business income of the assessee at normal tax rates is totally justified based on the facts of the case. 1.3 Further, it is submitted that during the course of assessment proceedings, the issue of taxability of income surrendered by the assessee in survey proceedings was specifically confronted to the assessee vide notice forming part of paper book at Pg 39-40 and after considering the detailed reply filed by the assessee (Pg 41-46), the AO took a POSSIBLE VIEW on the taxability of income surrendered by the assessee and accepted the sum surrendered as part of business income of the assessee. 4.17.1 For canvassing in the written submissions that it was not a case of lack of enquiry, reliance has been placed upon Sanjay Jain & sons vs. PCIT in ITA No. 141/CHD/2021; Dev Raj Hi Tech Machines Ltd. Vs. DCIT as reported in 83 Taxmann.com 15 (ASR Trib); CIT vs. A.R. Builders & Developers P.Ltd. (Madras High Court) (2020) 425 ITR 272 (Mad); Kusumlata Sonthalia vs. PCIT (ITAT Kolkata) (2020) 82 ITR (Trib)382; PCIT vs. Deccan Je ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come. The case of the assessee was taken up under compulsory scrutiny through CASS Statutory notices us 143(2) ft 142(1) of the IT Act 1961 were duly served upon the assesses in as such as questionnaires were also issued seeking certain information. The assessee has filed reply online on ITBA portal to the various queries and submitted the documents in support of various contentions, which has carefully been perused and considered. On perusal of the reply filed by the assessee, nothing adverse was found. Accordingly, the returned income shown is J hereby accepted and assessed at Nil". 4.17.4 These issues, it has been canvassed were fully enquired into by the AO. Reliance has been placed upon the following decisions : i) Narain Singla vs. PCIT in lTA no. 427/CHD/2015; ii) CIT vs. Anil Kumar Sharma as reported in 335 ITR 83 (Del High Court) iii) CIT vs. Hindustan Marketing and Advertising Cor. Ltd. as reported in 341 ITR 180 (Del HC); iv) Loil Continental Foods Limited vs. PCIT in ITA No. 577/chd/2017 (CHD-Trib) v) CIT vs. Late Shri Vijay Kumar Koganti as reported in 195 DTR 428 (Madras HC); vi) Shri Varinder Kumar Guptra Vs ITO ITA NO.754/CHD/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he paper book pages 123 to 126 and the relevant portion of the 'Income Tax' is their at pages 126 to 129~ofl±ie7pliper book'. 3. Now in the light of the above said amendment and due to the substitution of subsection (1) of section 115BBE of the Income tax Act, the income whether offered by the assessee in its return of income or not under these six sections and considered as income by the assessing officer invoking any of the sections 68, 69, 69A, 69B, 69C or 69D, has become taxable at a higher rate of tax. The amendment was brought to plug the loophole of taxing the unexplained cash in demonetized currency at 30% u/s 115BBE at the earliest otherwise the defaulting assessee would give tax at 30% and convert its 70% black money / unaccounted money as 'White Money'. 4. However, the question that arise is "Whether the tax u/s 115BBE at a higher rate can be levied on income considered by the assessing officer as taxable under these sections as per the amended section, even though it was assumed to be the income of the assessee prior to the date when the Bill was passed by the Parliament on 29.11.2016 under Article 110 of the Constitution of India or when the assent was given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onest taxpayers who have to bear the brunt of higher taxes to make up for the revenue leakage. As a step forward to curb black money, bank notes of existing series of denomination of the value of five hundred rupees and one thousand rupees (hereinafter referred to as specified bank notes) issued by the Reserve Bank of India have been ceased to be legal tender with effect from the 9th November, 2016. 2. Concerns have been raised that some of the existing provisions of the Income-tax Act, 1961 could possibly be used for concealing black money. It is, therefore, important that the Government amends the Act to plug these loopholes as early as possible so as to prevent misuse of the provisions. The Taxation Laws (Second Amendment) Bill, 2016, proposes to make some changes in the Act to ensure that defaulting assessees are subjected to tax at a higher rate and stringent penalty provision." 8. Thus, the object of the change in section 115BBE was to tax such income at a higher rate which arise to the assessee due to the deposit of bank notes declared as no legal currency after 08.11.201,6 to penalise such assesses and to avoid such persons to take advantage of section 115BBE, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 745/CHD/2016 order dated 01.07.2019. (S.No. 11) 4.18.3 It has also been argued that if any vested right of the assessee is disturbed, then the Statute cannot be considered to be retrospective as it creates new obligation and thus, the increase in the tax rate as per Section 115BBE was not a procedural change but it is a substantive change. Drawing an analogy from the decision of the Gujrat High Court in the case of Anil Kumar Gopikishan Agarwal Vs ACIT (2009) 418 ITR 25 (Gujrat) it was argued that the view taken by the AO after due enquiries was a correct view. Following relevant extract relied upon is reproduced hereunder : "While it is true that section 153C is also a machinery provision for assessment of income of a person other than the person searched, in the opinion of this court, this is not a case where by virtue of the amendment, there is merely a change in the procedural provisions affecting the assessees who were covered by the unamended provision. By the amendment, a new class of assessees are sought to be brought within the sweep of section 153C, which affects the substantive rights of the assessees and cannot be said to be a mere change in the procedure. Since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as specifically given in section 115BBE itself. By the Finance Act, 2016, there was no amendment made in the said tax rate. It was only as per the Amended Act, 2016, the tax rate was increased. There was no former omission in the legislation and the assessee is burdened with extra new liability. Recently the Hon'ble Jaipur Tribunal in the case of Utsav Cold Storage (P) Ltd Vs. ITO [2019] 107 taxmann.com 184 (Jaipur - Trib.) has held that retrospective operation of a law should not be given so as to effect, alter or destroy an existing right and to create a new liability or obligation.” Reliance was also placed on decision of the Apex Court in the case of Star India (P) India Vs Commissioner of Central Excise (2006) 280 ITR 321 (S.C) to argue that a liability created retrospectively is not permissible. It was submitted that the liability increased with the subsequent amendment of Section 115BBE and since it is penal in nature, it cannot be applied retrospectively. Para 23 of the aforesaid brief synopsis relies on Lohia Machines Ltd. Vs. Union of India (1985) 20 taxman 9 (S.C). The submissions are reproduced hereunder : “23.Every assessee is entitled to arrange his financial affa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued rights or imposes obligations or castes new duties or attaches a new disability is to be treated as prospective. [Para 80] It is trite law that an explanatory or declaratory Act is intended to supply an obvious omission or is enacted to clear doubts as to the meaning of the previous Act. While retrospective operation is generally intended as to declaratory or curative provisions, which is supplied with the 'language' 'shall be deemed always to have meant'. Therefore, in absence of clarity amendment being declaratory or curative in the face of unambiguous or confusion in the pre-amended provisions; the same is not required to be treated as curative or declaratory amendment. Viewed in the light of the settled legal proposition, as aforesaid, Benami Amendment Act, 2016, neither appears to be clarificatory nor curative. Moreover, by way of amendment, penal consequences have be&n introduced providing for confiscation of the benami property and enhanced punishment. [Para 81] The power to confiscate and consequent forfeiture of rights or interests are drastic being penal in nature, and therefore, such statutes are to be read very strictly. However, there can be no exercise o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit of 100 per cent tax deduction for a period of seven years on each well/cluster of wells which is an undertaking and qualifies for tax deduction. The amendment in section 80-IB(9) and addition of Explanation was made by the legislature by Finance (No.2) Act, 2009 which was given retrospective operation with effect from 1-4-2000, after the petitioner had started commercial production and were entitled for 100 per cent tax deduction on profits and gains. [Para 44] The benefits of deductions under section 80-IA were expressly made available with effect from 1-4-1999 by amending the then existing section 80-IA. Later on section 80-IB(9) was introduced to provide for such benefits. At all times the benefit had been available to an 'undertaking'. Neither section 80-IA, section 80- IB nor the provisions of PSC provided that the 'undertaking' would be construed as a whole Block. [Para 47] Section 80-IB(9)(ii) before the insertion of the Explanation had created a substantive vested right in the petitioner in deriving profits and seeking deductions for every undertaking comprised in each Development Area within the Contract Area or Block. No ambiguity or doubt could be imputed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, the AO failed to acknowledge the same and take proper cognizance of the amended Finance Act, 2016 and said case laws. 2.5 In view of the above, the AO had failed to invoke the provisions of section-68/69/69A/69B/69C of the Act on the above surrendered income as the same was clearly unexplained in nature, therefore, cannot be treated as normal business income and the A.O has also failed to enquire as to why the assessee had paid taxes at rate of 30% of Section-115BBE(rate. prevailing before amendment) instead of maximum marginal rate of 60% as per amended Section-115BBE of the Act, which was clearly erroneous and prejudicial to the interest of revenue. 5.1 On a reading of the above, attention of the ld. CIT-DR was invited to the fact that the assessee himself appears to have agreed that Section 115BBE was applicable, even though it is argued that it is from business income. Hence, the occasion to consider the applicability of Section 69A and 69B did not arise. 5.2 The ld. CIT-DR submitted that the AO in the course of the passing of the order has failed to make proper enquiries and has not even cared to consider that the income was being surrendered under which pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount surrendered in the course of the survey on 04.08.2016 was honored by the assessee which is not an issue in the present proceedings. However, we find that on the levy of higher rate of tax in terms of amendment of Section 115 BBE which received the Hon'ble President’s assent on 15.12.2016, the AO in the course of the assessment proceedings considering the queries raised and the replies received on the ITBA Portal itself, it is evident that before the passing of the order dated 21.12.2019 the AO was very much conscious of the nature and counts on which the surrender stood made in the Survey. It is evident from the record that he was very much conscious of the fact that the case was selected for compulsory scrutiny for this specific purpose. We have seen that he has also enquired into the nature of income of the assessee. The surrender letter of the assessee placed before the AO is available before us as it has also been relied upon before the Revisionary Authority. On perusal of the same it is evident that notwithstanding possibly the confused response of the assessee as noticed in the impugned order on the applicability of Section 115 BBE provisions. The fact remains that e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of the Act is highly debatable issue, and therefore, in our understanding of the law, the PCIT has wrongly assumed jurisdiction. 14. The Hon'ble Supreme Court in Malabar Industrial Co. Ltd., 243 ITR 83, has laid down the following ratio: "A bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu 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. The provision cannot be invoked to correct each and every type of mistake or 8 error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner he would have estimated the income at a figure higher than the one determined by the Income tax Officer. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interests of the Revenue. But that by itself will not be enough to vest the Commissioner with the power of suo motu revision because the first requirement, viz., that the order is 10 erroneous, is absent. Similarly, if an order is erroneous but not prejudicial to the interests of the Revenue, then also the power of suo motu revision cannot be exercised. Any and every erroneous order cannot be the subject-matter of revision because the second requirement also must be fulfilled. There must be some prima facie material on record to show that tax which was lawfully exigib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the Income tax Officer to re-examine the matter. That, in our opinion, is not permissible. Hence the provisions of section 263 of the Act were not applicable to the instant case and, therefore, the commissioner was not justified in setting aside the assessment order.” 16. It is a settled position of law that powers u/s 263 of the Act can be exercised by the Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and prejudicial to the interest of the Revenue. By 'erroneous' is meant contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 CIT to pass orders under s. 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”. 30. Considering the facts of the case in totality from all possible angles, we failed to persuade ourselves to accept the contention of the ld. DR who had strongly supported the findings of the PCIT. We are of the considered view that the order framed u/s 263 of the Act deserves to be set aside and that of the Assessing Officer deserves to be restored. We order accordingly.” 18. Considering the facts of the case in hand, in totality, in light of judicial decisions discussed here in above, we set aside the order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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