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TMI Blog2023 (3) TMI 668X X X X Extracts X X X X X X X X Extracts X X X X ..... the extent he feels proper. The Commissioner of Income Tax by invoking revisionary powers under section 263 of the Act cannot impose his own understanding of the extent of inquiry. Delhi High Court in the case of CIT Vs. Sunbeam Auto [ 2009 (9) TMI 633 - DELHI HIGH COURT] made a distinction between lack of inquiry and inadequate inquiry. The Hon ble court held that where the AO has made inquiry prior to the completion of assessment, the same cannot be set aside u/s 263 on the ground of inadequate inquiry. It is a well-settled principle of law that 263 proceedings cannot be taken recourse to only for the purpose of supplanting the view of the PCIT in place of the view taken by the AO during the course of proceedings simply on the ground that the alternate view would have levelled higher rate of taxation on the assessee or the alternate view taken by the PCIT seems to be more plausible view in the instant set of facts. The AO, in the instant set of facts had applied his mind to the issue under consideration and had taken a view, which in our view, was not a legally implausible view. Genuineness of 50% agricultural income - The second issue for consideration before us t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal:- 1) That on the facts and in the circumstances of the case, the Ld. CIT has erred in initiating and passing the order u/s.263 of the Income Tax Act, 1961. 2) That on the facts and in the circumstances of the case, the Ld. CIT has erred in setting aside the order passed u/s.143(3) of the Income Tax Act, 1961 by the Ld. A.O. 3) That, on the facts and in the circumstances of the case, the Ld. CIT has erred in directing to examine again the genuineness of 50% agricultural income i.e. Rs. 14,32,782/- which is correctly accepted by Learned Assessing officer as agricultural income after in-depth examination of facts of the case. 4) That the order passed by the Ld. CIT u/s. 263 of the I.T. Act, 1961 was arbitrary, bad in law and unjust. 5) That the assessee craves leave to urge such other ground or grounds before or at the time of hearing of appeal. 3. The brief facts of the case are that the assessee filed return of income for assessment year 2017-18 declaring total income of ₹ Nil. The assessment was completed under section 143(3) of the Act assessing the income at ₹ 14,32,782/- 4. The PCIT observed that the assessee had shown gross agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing taxability of agricultural income in the appellate proceedings and therefore since the issue regarding taxability of agricultural income was already considered by Ld. CIT(Appeals), the PCIT cannot again consider the issue again in revisionary proceedings under section 263 of the Act. The counsel for the assessee also argued that the Rajkot ITAT has held that Revenue records do not conclusively determine the nature of agricultural produce and the Department is precluded from relying on the revenue records for the purpose of making additions. Without prejudice, it was also submitted that the issue regarding the taxability of agricultural income has already been adjudicated and considered by the AO during the course of assessment proceedings, and therefore once the AO has already applied his mind to the issue during the course of assessment proceedings, the PCIT cannot again take up this issue in 263 proceedings only with a view to revise/enhance the original assessment order. In response, the DR relied upon the observations made by the PCIT in the 263 order. 6. We have heard the rival contentions and perused the material on record. In our considered view, the issue before us i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Income-tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 2(a) to section 263 in the following words: 20. Further clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provison shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. CIT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO vis- -vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying our enquiries or verification, which a reasonable and prudent officer would have carried out or not. It does not authorise or give unfettered powers to the Ld Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made. In our view, it is the responsibility of the Ld Pr. CIT to show that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de inquiries in detail and after applying mind, accepted the genuineness of loans received by the respondent assessee from the aforesaid two companies and such view of the Assessing Officer is a plausible view, and therefore, the same cannot be said to be erroneous or prejudicial to the interest of the Revenue. 6.6 The Supreme Court in another recent case of Principal Commissioner of Income-tax 2 v. Shree Gayatri Associates*[2019] 106 taxmann.com 31 (SC), held that where Pr. CIT passed a revisional order making addition to assessee's income under section 69A in respect of onmoney receipts, however, said order was set aside by Tribunal holding that AO had made detailed enquiries in respect of on-money receipts and said view was also confirmed by High Court, SLP filed against decision of High Court was liable to be dismissed. The facts of this case were that pursuant to search proceedings, assessee filed its return declaring certain unaccounted income. The Assessing Officer completed assessment by making addition of said amount to assessee's income. The Principal Commissioner passed a revisional order under section 263 on ground that Assessing Officer had failed to car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst High Court's order was liable to be dismissed. The facts of this case were that in course of assessment, Assessing Officer allowed assessee's claim for deduction of certain expenditure on purchase of CDs on Jain Religion by expending an amount of Rs. 10.4 crores, after due examination. The Commissioner passed revisional order holding that Assessing Officer had not carried out any enquiries as to nature of expenditure being capital or not. The Tribunal, however, allowed assessee's appeal holding that Assessing Officer had carried out detailed enquiries and taken a view which was a plausible view. Accordingly, Tribunal set aside revisional order passed by Commissioner. The High Court upheld order passed by Tribunal. The Supreme Court on consideration of above facts held that SLP filed against High Court's order was to liable to be dismissed. The Supreme Court made the following observations, while passing the order: It is by now well settled that, the Commissioner can exercise revisional powers under Section 263 of the Act only when it is found that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue. In the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the PCIT can again pass order under section 263 of the Act with respect to the taxability of the same agricultural income (although from a different perspective) and substitute his opinion by holding that the original assessment order was erroneous and prejudicial to the interests of the revenue. In our considered view, once the issue of taxability of agricultural income has been examined by the AO and also by the Ld. CIT(Appeals) in appellate proceedings, the PCIT is precluded from taxing the same agricultural income, albeit from a different perspective, since the subject income has already been taken into consideration by Ld. CIT(Appeals) in the appellate proceedings. In the case of Smt. Renuka Philip v. ITO [2019] 101 taxmann.com 119 (Madras) , the High Court held that where assessee sold a property and invested sale consideration from same for purchase of another property and claimed exemption under section 54, however, Assessing Officer allowed exemption under section 54F instead of section 54, and, assessee filed an appeal against said order, since larger issue was pending before Commissioner (Appeals), Commissioner could not invoke jurisdiction under section 263 against ..... X X X X Extracts X X X X X X X X Extracts X X X X
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