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TMI Blog2023 (8) TMI 954X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee that OERC has directed to recover the specified amounts in six years and that amounts have been recovered and offered to tax and in short it is excess income that has been offered to tax and same could not have been treated as erroneous and prejudicial to the interest of the revenue under any circumstances. The order of OERC is also dated 18.3.2011 and this order was available before the Pr. CIT before passing order u/s. 263. In regard to deferred tax liability also, the assessee has collected the amounts on the basis of the order of OERC. This was also before the Pr. CIT. Even on cursor perusal of the reply filed by the assessee would show that the assessee has offered the incomes in the line with the order passed by the Regulatory Authority. In regard to the issue of subsidy also, the assessee has categorically mentioned that it has been following AS-12 and that net of the subsidy has been offered to tax. Thus, clearly this is a case of no enquiry by the Pr. CIT. A perusal of the order of Orissa State Police Housing Welfare Corporation Ltd.,[ 2022 (4) TMI 1395 - ORISSA HIGH COURT] shows thatas categorically held that the purpose of such an enquiry would be to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hearing both the sides, we are convinced that the delay in filing the appeals was reasonable cause. Consequently, we condone the delay of 269 days and admit the appeals for hearing on merits. 4. It was submitted by ld AR that for the assessment year 2013-14, the original assessment came to be completed u/s. 143(3) on 19.2.2016 and for assessment year 2014-15 on 26.2.2016. For the assessment year 2013-14, the Pr. CIT initiated proceedings u/s. 263 of the Act in respect of issue of TDS not deducted on the payments made to Power Grid Corporation of India Ltd (PGCIL) and consequential disallowance liable to be made u/s. 40(a)(ia) of the Act (i) on the differed tax liability, (ii) in respect of wheeling charges paid, (iii) excess claim of regulatory asset and (iv) non recognition of income arising out of subsidy. 5. For the assessment year 2014-15, the Pr. CIT has invoked his powers u/s. 263 in respect of issue of (i) excess claim in the regulatory asset, (ii) non recognition of the income arising out of subsidy and (iii) in respect of consequential computation of assessee s income by applying the provisions of Section 115 JB (MAT). 6. For both the assessment years, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Commissioner or Chief Commissioner or Principal Commissioner or Commissioner has initiated by calling for the records and on his examination of the records, he finds that there is an error in such records which has been passed by the AO or the TPO, as the case may be is; (d) erroneous and prejudicial to the interest of revenue. It should be both erroneous and prejudicial to the interest of revenue. The only erroneous or only prejudicial to the interest of revenue is not adequate; (e) Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may give the assessee an opportunity of being heard. The word used is may and not shall . There is no compulsion on the part of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner to hear the assessee. There is no necessity to issue any show cause notice. However, the fundamental principle of law of audi alteram partem that no one shall be judged without being heard, comes into play and on account of the simple but absolute principle of natural justice, demands that the assessee be put to notice in respect of the proceedings that are being initiated agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Pr.CIT. That was a case in respect of the issue as to whether the AO has made a proper enquiry or not, so also in the decision in the case of the Special Bench of the ITAT in the case of Rajalakshmi Mills Ltd. (supra). 14. It must be mentioned here that in the decision of the coordinate bench of the Tribunal in the case of M/s Kalinga Mining Corporation Pvt. Ltd., (supra), in para 7 what has been extracted as being from the decision of the Hon ble Delhi High Court in the case of Gee Vee Enterprises (supra), is not from the said decision but it is an extract from the decision of the Hon ble Special Bench of Chennai Bench of the Tribunal in the case of Rajalakshmi Mills Ltd. (supra). In the decision of the Hon ble Delhi High Court in the case of Gee Vee Enterprises (supra), the issue was a decision in the writ petition and the said writ petition was dismissed in limine because the petitioner had not filed any appeal against such order of the CIT u/s. 263 of the Act nor it had given any explanation as to why he did not file appeal against the order u/s. 263 of the Act nor any exceptional circumstances were shown to persuade the Hon ble High Court to depart from normal rule that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iny, and it must have, at its foundation, the inquiries, and verifications expected, in the ordinary course of performance of duties, of a prudent, judicious and responsible public servant- that an Assessing Officer is expected to be. If we are to proceed on the basis, as is being urged by the learned Departmental Representative and as is canvassed in the impugned order, that once Commissioner records his view that the order is passed without making inquiries or verifications which should have been made, we cannot question such a view and we must uphold the validity of revision order, for the recording of that view alone, it would result in a situation that the Commissioner can de facto exercise unfettered powers to subject any order to revision proceedings. To exercise such a revision power, if that proposition is to be upheld, will mean that virtually any order can be subjected to revision proceedings; all that will be necessary is the recording of the Commissioner s view that the order is passed without making inquiries or verification which should have been made . Such an approach will be clearly incongruous. The legal position is fairly well settled that when a public authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e can? The answer has to be emphatically in negative because, if he is to do so, the line of demarcation between scrutiny and investigation will get blurred, and, on a more practical note, it will be practically impossible to complete all the assessments allotted to him within no matter how liberal a time limit is framed. In scrutiny assessment proceedings, all that is required to be done is to examine the income tax return and claims made therein as to whether these are prima facie in accordance with the law and where one has any reasons to doubt the correctness of a claim made in the income tax return, probe into the matter deeper in detail. He need not look at everything with suspicion and investigate each and every claim made in the income tax return; a reasonable prima facie scrutiny of all the claims will be in order, and then take a call, in the light of his expert knowledge and experience, which areas, if at all any, required to be critically examined by a thorough probe. While it is true that an Assessing Officer is not only an adjudicator but also an investigator and he cannot remain passive in the face of a return which is apparently in order but calls for further inquir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. The test for what is the least expected of a prudent, judicious and responsible Assessing Officer in the normal course of his assessment work, or what constitutes a permissible course of action for the Assessing Officer, is not what he should have done in the ideal circumstances, but what an Assessing Officer, in the course of his performance of his duties as an Assessing Officer should, as a prudent, judicious or reasonable public servant, reasonably do bonafide in a real-life situation. It is also important to bear in mind the fact that lack of bonafides or unreasonableness in conduct cannot be inferred on mere suspicion; there have to be some strong indicators in direction, or there has to be a specific failure in doing what a prudent, judicious and responsible officer would have done in the normal course of his work in the similar circumstances. On a similar note, a coordinate bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch cases, where there is inadequacy of enquiry, that the Pr. CIT is required to do further enquiry to show how the orders passed by the AO was erroneous and prejudicial to the interest of the revenue. It was the further submission that the word used in the provisions of section 263 is to do enquiry as the Pr. CIT deems necessary. There is discretion available with the Pr. CIT to do or not to do enquiry. Ld Pr. CIT (OSD) drew our attention to the decision of the Hon ble Jurisdictional High Court of Orissa in the case of Pr. CIT vs. Orissa State Police Housing Welfare Corporation Ltd., (20220 139 taxmann.com 207) Orissa), wherein, in para 14, it has been held as follows: Section 263 of the Act requires the CIT, after hearing the assessee, to pass an order by making such enquiry as he deems necessary . The purpose of such an enquiry would be to arrive at a subjective view that the order of the AO was erroneous insofar as it is prejudicial to the interest of revenue. Even if such enquiry may not be mandatory, there has to be some basis on which the CIT can form such a view. In the present case, the basis for forming a view that the profit element in the WIP was not accounted for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not on account of his mere disagreement with the view taken by the Assessing Officer. Any inquiry, without application of mind, is nonest. The given facts warranted the Assessing Officer to have conducted complete and proper inquiry and only thereafter, assessed the income so declared by the Assessee. He ought to have considered that the Assessee had sought to revise the return by declaring an income 1872% higher than what was originally returned and that too after action for scrutinizing the return was initiated. All transactions of sale of agricultural produce were in cash. Income declared was (a) disproportionately high only with respect to the relevant year and never in the preceding or succeeding years, (b) investment of huge amount of Rs. 3.8 crore was carried out by the Assessee himself, be from whatever source and there was no reference thereof in the original return. As such, omission or wrong statement cannot be said to be bonafide. Prima facie returns, being invalid, ought to have been rejected. 120. The case in hand being that of no inquiry, and the amplitude of the powers of the Commissioner being wide enough to pass such order as the circumstances of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee was obliged to offer the same to tax if it was on revenue field by showing in the profit and loss account. If it was in the capital field, it has to be taken to capital reserve account and if it was for the machinery, the same was liable to be reduced from the cost of machinery for the purpose of claiming depreciation. It was the submission that Pr. CIT was not obliged to make any enquiry insofar as nothing has been brought to show that the AO had conducted any enquiry on these issues. It was the submission that the fact that the issues having not been considered clearly showed erroneous application of mind by the Assessing Officer. It was the prayer that the orders passed under section 263 are to be upheld. 14. We have considered the rival submissions. Shorn of all the frills in respect of the arguments, the simple issue before the Tribunal is whether the Pr. CIT has applied his mind to the issues on which he has invoked his powers u/s. 263 to hold the assessment orders passed u/s. 143(3) for the impugned assessment years as erroneous and prejudicial to the interest of the Revenue. A perusal of the orders passed u/s. 263 show that the Pr. CIT in his orders u/s. 263 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o, the assessee has collected the amounts on the basis of the order of OERC. This was also before the Pr. CIT. Even on cursor perusal of the reply filed by the assessee would show that the assessee has offered the incomes in the line with the order passed by the Regulatory Authority. In regard to the issue of subsidy also, the assessee has categorically mentioned that it has been following AS-12 and that net of the subsidy has been offered to tax. Thus, clearly this is a case of no enquiry by the Pr. CIT. A perusal of the order of the Hon ble Jurisdictional High Court of Orissa in the case of Orissa State Police Housing Welfare Corporation Ltd., (supra) shows that in para 14, which has been extracted above, the Hon ble High Court has categorically held that the purpose of such an enquiry would be to arrive at a subjective view. Even if such enquiry is not mandatory, there has to be some basis on which the CIT can form such a view. The basis for forming a view that the assessment order is passed is erroneous and prejudicial to the interest of the revenue is admittedly not coming out of the order of the Pr. CIT. The order of the Pr. CIT is admittedly non speaking one in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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