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TMI Blog2023 (9) TMI 1304X X X X Extracts X X X X X X X X Extracts X X X X ..... ince the required information was not furnished by the assessee therefore it cannot be considered to be a case where the AO was satisfied with respect to the query by some other explanation offered by assessee. Merely asking a question which goes to the root of the matter and not carrying it further, would according to us fall in the category of non inquiry. We find that Hon ble Apex Court in the case of Malabar Industries Co. [ 2000 (2) TMI 10 - SUPREME COURT ] has held that an incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous and in the same category fall orders passed without applying the principals of natural justice or without application of mind. Also in the case of Duggal Co. [ 1994 (8) TMI 6 - DELHI HIGH COURT ] has held that the Income tax officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. 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 and the word erroneous in Section 26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... V5/2021-22/1041531884(1), set aside the assessment order passed by AO and directed him to pass fresh assessment order after considering the observations made by him. 5. Aggrieved by the order of PCIT, assessee is now in appeal and has raised the following grounds:- 1. On the facts and in the circumstances of the case and in law, the Ld. Pr. CIT grossly erred in setting aside the assessment framed w/s 143(3) r.w.s. 144C(3) of the Act dated 17.02.2020 and directing the assessing officer for denovo assessment by erroneously holding that the assessment so framed is erroneous and prejudicial to the interests of the revenue under the provisions of section 263 of the Act, thereby, rendering the impugned order as bad in law. 2. On the facts and in the circumstances of the case and in law, the Ld. Pr. CIT grossly erred in holding that Assessing Officer (A) had failed to make necessary enquiry and verification within the meaning as per Explanation 2 to section 263 of the Act without appreciating that the issues so raised are merely computational adjustments vis- -vis Audited Financial Statements and the return of income. 3. On the facts and in the circumstances of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as Hon ble CBDT Circular no. 12/2016 dated May 30, 2016. 6. Without prejudice to the above grounds, that, Ld. PCIT failed to appreciate that amortization of foreign currency monetary item translation difference account amounting to INR 25,18,95,557 (part one of INR 25,59,20,557) had been suo-moto offered to tax by the Appellant in its return of income for the assessment year 2016-17. 7. That, Ld. PCIT failed to appreciate that the deduction claimed by the Appellant of INR 40,25,000 (part two of INR 25,59,20,557) towards mark to market loss realized loss) in relation to foreign exchange forward contract for a revenue transaction is an allowable business expenditure. 8. That, Ld. PCIT erred in holding that AO has failed to make necessary enquiry and bring on record all facts without appreciating that specific query was duly raised in the assessment proceeding on the issue of provision for doubtful receivables and all the details in respect thereof were duly filed by the Appellant during the course of the original assessment proceedings. 8.1 Without prejudice to the above ground, that, Ld. PCIT failed to appreciate that the Appellant had reversed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounting of Rs. 38,18,704/- from the total income of the assessee in the year under consideration on the presumption that no enquiries were conducted by the learned AO with respect to the aforesaid claim, in the course original assessment. Learned AR thereafter pointed to the notice issued u/s. 142(1) dated 23.09.2019, the copy which is placed at page 43 to 45 of the paper book and from the aforesaid notice he pointed to query at point 6 wherein assessee was asked to furnish the details of large amount allowable as deduction claimed in schedule BP of ITR with evidences. He thereafter pointed to the assessee s reply dated 31.10.2019 and the relevant portion of reply at page 30 and 33 of the paper book wherein it was inter alia submitted that the during A.Y. 2016-17 assessee had written back provision for doubtful debts amounting to Rs. 38,18,704/- and included the same in its Profit and Loss account. It was further submitted that since the company had suo motto added back the said provision in the computation of income of earlier years therefore during the year under consideration it was charged to Profit and Loss account therefore the same has been claimed as deduction in the curren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. 12. The reading of the above provision makes it very clear that the power of suo motu revision u/s 263(1) is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of revision u/s 263, namely (i) the order is erroneous (ii) by virtue of being erroneous, and prejudice has been caused to the interests of the Revenue. 13. Hon ble Apex Court in the case of Malabar Industrial Co., Ltd., Vs CIT reported in (2000) 243 ITR 83 (SC) has held that PCIT has to be satisfied of twin conditions, namely, (i) the order of the AO sought to be revised is erroneous; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so a fact that no reconciliation of the same was furnished by the assessee to AO and the AO had accepted the contentions of the assessee by not making any addition of the amount of such provision for doubtful debts. In such a situation, we are of the view that though the AO had called for the required information of the issue and in the absence of full details furnished by the assessee on the issue, there was no application of mind on the issue. We are of the view that AO merely seeking information on an issue and the assessee not giving the full information, cannot be considered to be sufficient. It is necessary that AO actually applies his mind to the information that is supplied by assessee and after considering the information AO is required to form an opinion as to whether the assessee is actually entitled to deduction. We are of the view that there is a distinction between merely calling for information on a particular issue and considering such information with due application of mind if and when such information is actually provided by the assessee. Thus in the present facts, we are of the view that on the issue of allowing of provision for doubtful debts, the claim of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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