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TMI Blog2024 (7) TMI 1429X X X X Extracts X X X X X X X X Extracts X X X X ..... y perused the notices and replies which are more than two to three and it contains and answers all query of AO. We also hold that notice u/s 142(1) is appropriately answered with relevant enclosure by the assessee firm. As seen both the notice and reply from pape book volume II. Further we notice that vide notice u/s. 142(1) dt. 17/02/2020 the Ld. AO raised few more query and that the same were replied by the assessee. We have perused the further query and reply from paper book Volume II. Vide notice u/s 142(1) AO raised few more query and that the same were replied by the assessee. We have perused such further more query and reply from paper book Vol. III. AO has applied his mind and have enquired and verified the state of affairs of the assessee firm and has passed the assessment order dt. 12/06/2020 in a manner know to law. Raising query after query periodically while the assessment proceedings are going on shows proper application of mind coupled with due inquiry and verification. The Ld. AO has examined all the papers and proceedings of the case and has accepted the return u/s 143(3) after due diligence. The assessee thus has gone through rigor s of law; during the scrutiny pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g supervisory / Revisionary jurisdiction to at least carry out a bare minimum inquiry himself before terming the order of AO as erroneous and prejudicial to the interest of Revenue. In the instant case that has not happened. See Delhi Airport Metro Express Pvt. Ltd. [ 2017 (9) TMI 529 - DELHI HIGH COURT ] Impugned order of PCIT is not proper just and fair and in accordance with law as Ld. PCIT has not made any minimal inquiry before holding that Ld. AO has not made any inquiry and therefore order is erroneous and prejudicial to the interest of the Revenue. We hold that the Ld. PCIT ought not to have passed the impugned order. We also hold enough inquiries as the AO deemed fit and proper had been made on more than one occasion supra. It is not a case of no inquiry the impugned order is therefore without jurisdiction and / or in excess of jurisdiction and / or in irregular exercise of jurisdiction and is null and void. It is illegal and not proper. It is in irregular exercise of supervisory / revisionary jurisdiction u/s 263 of the Act and therefore bad in law. Decided in favour of assessee. - Shri. Krinwant Sahay, AM And Shri. Paresh M. Joshi, JM For the Assessee : Shri Ajay Jain, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith a show cause notice dt. 15/03/2023 in respect of revision proceedings under section 263 of the Income Tax Act, for A.Y. 2018-19 wherein it was stated as under: 4. As per the Explanation 2(a) of section 263 of the Income Tax Act, 1961 if in the opinion of the Pr. Commissioner of Income Tax, the order is passed without making inquiries or verification which should have been made and Explanation 2(b) the order is passed allowing any relief without inquiring into claim, the order passed by the AO shall be deemed to be erroneous as well as prejudicial to the interests of Revenue.. 5. In view of the above, the order passed by the Assessing Officer primafacie is erroneous in as well as prejudicial to the interests of the revenue, as the order has been passed in a summary manner without making requisite enquiries or verification which should have been made. 6. You are hereby given an opportunity to explain as to why the assessment order passed u/s 143(3) of the Act dated 12.06.2020 by the AO for the A.Y. 2018- 19 may not be cancelled and the AO may not be directed to make a fresh assessment. 10. The assessee firm duly replied the aforesaid show cause notice / notice dt. 15/03/2023 wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shed) by the assessee need such micro-surgical examination. Justice to the cause of Revenue and public interest should not only be done but also demonstrably seen to be done, which the AO has, through his silence, failed to do. Therefore, the AO's silence on the facts/details/particulars of the examination on the issues raised in the Notice u/s 263 of the Act amounts to the clear evidence that no examination has visibly been carried out. The various arguments and reasoning and judicial ratios cited by the assessee in his long reply to the Show Cause Notice (SCN) issued can be , summed up by the argument/position that the assessee is trying to state that the AO's silence on the various relevant examinations mandated during the assessment proceedings is a willy-nilly acceptance of the assessee's position. That is, he seeks to argue that non-mention of examination amounts to implied acceptance. The Explanation 2 to Section 263 of the Act introduced w.e.f. 01.06.2015, provides unambiguously that an order passed without making inquiries or verifications which should have been made, should be deemed to be erroneous in so far as it was prejudicial to the interests of the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther standards and stipulations. It is amply and expressly clear that the investigation/ inquiry carried out by the Assessing Officer is unsatisfactory, superficial and incomplete along several of these matters/dimensions including the due and necessary and complete examination of the documentary particulars/details mandated. A partially driven by whatever reasons - inquiry cannot be held to be a full, proper, satisfactory, compete and therefore statutorily valid inquiry, which partial enquiry as carried out by the Assessing Officer resulting in the impugned assessment order in this case has created a vacuum zone of unexplained facts which constitutes an error on facts. This would be tantamount to a premature, precipitate and erroneous decision not borne out by facts or founded on proper law. Such incomplete inquiry is unacceptable and outside of the pale of law, and inconsistent with the various judicial precedents of the Hon'ble Courts cited later below. This is a clear failure on the part of the Assessing Officer that is being referred to and recognized in this case via this order 07s 263 of the Act. It is such failure which calls for revision of the assessment order u/s 263 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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 his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word erroneous in section 263 emerges out of this context. It is because 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 that the word erroneous in section 263 includes the failure to make such an inquiry The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct. vi). Hon'ble Rajasthan High Court in the case of Commissioner of Income-Tax vs Emery Stone Manufacturing Company (213 ITR 843) has held as under: Simply because the facts have been disclosed by the assessee, it does not give immunity from revisional jurisdiction which the Commissioner can exercise u/s 263 and as such even in a case where the facts have been disclosed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 153(3) of the Act. 12. That being aggrieved by the impugned order under section 263 the assessee firm is before us and has raised the following grounds of appeal in Form No. 36 : 1. That the Pr. Commissioner of Income Tax-1 Chandigarh has wrongly and hurriedly passed order under section 263 of Income Tax Act without making any further enquiry during revisionary proceedings and he simply set aside the assessment order for making requisite enquiry. 2. That the assessment order having been passed by the Assessing Officer after making due enquiry due application of mind and taking into consideration, the action restored to by the Pr. CIT 1 Chandigarh for imposing his opinion is unwarranted and uncalled for particularly the order is neither erroneous nor prejudicial to revenue. 3. That the Assessee craves for permission to add, amend, alter or withdraw any grounds of appeal with approval of the hon'ble bench. Record of Hearing 13. The hearing took place before this Tribunal when both the parties were present. They were treated equally and were heard patiently at length on merits of their respective cases. 13.1 The Ld. AR at the outset brought to our notice that consequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt involved in the bill was Rs. 3,50,000/-, Rs. 10,000/- and Rs. 22,832/- respectively (total Rs. 3,82,832/-.) Therefore, sources of cash payments made the assessee are subjected to verification by the Income Tax Department. Therefore, the case was reopened and reasons were recorded and notice u/s.148 of the I.T. Act, 1961 dated 31.03.2022 was issued by the Income-tax Department. In response to the notice u/s 148 of the Act, assessee has filed not Return of income. [2] During the assessment proceedings, all the transactions carried out with Shri Narinder Singh Sandhu, Prop. M/s Sahibzada Timbers have been called for. Assessee has submitted all the details i.e. bills, ledger accounts, bank details for the payments paid and list of sundry creditor along with Audit Report. All the transactions have been checked carried out with Shri Narinder Singh Sandhu, Prop. M/s Sahibzada Timbers i.e. bills, payments paid by cheques and remaining amount as Sundry Creditors. On perusal of ledger account and bank statements, it is noticed that all the transactions have been carried out by cheques. [3] Assessee has submitted all the details which have been verified. Submissions of the assessee have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices and replies submitted during the course of assessment proceedings, all issues raised under section 263 order has been verified by AO. The Ld. AR also contended that Ld. PCIT ought to have conducted bare minimal inquiry if PCIT is of the considered opinion that Ld. AO did not conduct any inquiry and verification. He placed reliance on judgment of Hon;ble Delhi High Court in case of PCIT Vs. Delhi Airport Metro Express Private Limited 398 ITR 8 vide order dt. 05/09/2017. 13.4 The Ld. AR contended that no amount whatsoever is specified in the impugned order consequently impugned order is not prejudicial to the interest of Revenue. Both condition of erroneous nature of order and prejudicial to Revenue must be seen by PCIT and that he has miserably failed to do so. According to him PCIT satisfaction under section 263 must be objectively justifiable and cannot be the mere ipse dixit of the Commissioner as held in case of G.M Mittal Stainless Steel (P) Ltd. by Hon ble Supreme Court of India [ (2003) 263 ITR 255(SC)] [Note:- Ipse Dixit= He said it himself ] 13.5 The Ld. AR has placed reliance on the judgment of Hon ble Supreme Court in case of Malabar Industrial Co. Ltd. case reported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erely because the same was not an elaborate order. 13.10 The Ld. AR has also contended that it was incumbent upon the Ld. PCIT to identify errors in the assessment order passed by Ld. AO and he ought to have given a categorical finding in this regard and for this purpose he himself has to make enquiries and investigations whatever he deems fit in the circumstances. In the instant case this has not happened. Delhi High Court judgment reported in case of PCIT Vs. Delhi Airport Metro Express P. Ltd 398 ITR 8 relied upon once again, that some minimal inquiry is must on part of Ld. PCIT is mandated. Upon failure CIT is not entitled to exercise power of revision under section 263 by setting aside the orders of Ld. AO. In addition reliance is placed on another judgment of Hon ble Delhi High Court in case of ITO Vs. DG Housing Projects Ltd. (2012) 343 ITR 329 (Del) wherein Hon ble High Court has held as follows: 16. Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under Section 263 is passed. In such cases, the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is shows perse that PCIT has not made any enquiry and straight away has passed revisionary order hurriedly in mechanical manner with pre determined mind and such order deserves to be quashed. 13.14 The Ld. AR has relied upon following orders of ITAT: (i) Sh. Narayan Tatu Rane Vs. ITO, I.T.A. No. 2690/2691/Mum/2016, dt. 06.05.2016 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 provision 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-a-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 s e c . 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tu Rane vs. ITO reported in 70 taxmann.com 227 has also held that in a case where learned Pr. CIT has not brought any material on record by making enquiries or verifications to substantiate his inference, the learned PCIT is not justified in holding that the impugned assessment order was erroneous. The relevant portion of the decision is as under:- 21. In the instant case, as noticed earlier, the AO has accepted the explanations of the assessee, since there is no fool proof evidence to link the assessee with the document and Mis RNS Infrastructure Ltd, from whose hands it was seized, also did not implicate the assessee. Thus, the assessee has been expected to prove a negative fact, which is humanely not possible. No other corroborative material was available with the department to show that the explanations given by the assessee were wrong or incorrect. Under these set of facts, the AO appears to have been satisfied with the explanations given by the assessee and did not make any addition. We have noticed that the Hon'ble Supreme Court has held in the case of Central Bureau of Investigation (supra) that the entries in the books of account by themselves are not sufficient to cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stifiable. The Ld. DR vehemently opposed the contention of Ld. AR that since in earlier A.Y 2017-18 the assessee firm was scrutined is no ground to hold that in A.Y. 2018-19 the assessee too should be exonerated even if officer is same as principle of resjudicata are not applicable to fiscal statue. That Ld. DR contended that irrespective of nature of assessment proceedings the assessment order should not be silent on conclusions reached. 15. Upon a query by Bench whether order of Ld. AO can be said to be a non speaking order on merits of case under section 143(3) even if no addition is made both side agreed to give a small write upon the query with this final note hearing was concluded. Observations, Findings Conclusions 16. We now have to decide legality, validity and propritory of the impugned order in light of Facts and Circumstances as aforesaid. 16.1 We observe that consequential order in pursuance to impugned order is already passed as brought to our notice at the outset and threshold by the Ld. AR. Be that as it may we are mandated to decide the present appeal in accordance with the provisions of law and binding judicial precedents provided they are applicable to the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and answered according to law. We also hold that under Income Tax Act besides being practice that whenever any addition / disallowances are made an opportunity is given to the assessee to show cause why addition / disallowance should not be made. In so far as income and its components are concerned which are untainted are normally accepted as it is. We are fortified by the judgement of the jurisdictional High Court in the case of Hari Iron Trading Company Vs. CIT reported in 2003(5) TMI 48 (P H) wherein it has been held as follows: A bare perusal of the aforesaid provision shows that the Commissioner can exercise powers under subsection (1) of section 263 of the Act only after examining the record of any proceedings under the Act . The expression record has also been defined in clause (b) of the Explanation so as to include all records relating to any proceedings available at the time of examination by the Commissioner. Thus, it is not only the assessment order but the entire record which has to be examined before arriving at a conclusion as to whether the Assessing Officer had examined any issue or not. The assessee has no control over the way an assessment order is drafted. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .7 We once repeat and reiterate that during the course of assessment proceedings, the AO examine numerous issues. Generally the issues which are accepted do not find mention in the assessment order and only such points are taken note of on which the assessee s explanations are rejected and additions / disallowances are made. The CIT DR despite opportunity by this Hon ble Tribunal at fag end of the hearing or later by extra submissions post hearing for which opportunity was given has not brought any SOP or instruction which has not been followed by AO while framing the assessment order under section 143 (3) dt. 12/06/2020. However, the Ld. DR by extra written submissions dt. 22/07/2024 has placed reliance on Special Bench judgement of ITAT in case of Rajalakshmi Mills Ltd. Vs. ITO, Company Circle-III, Coimbatore reported in [2009] 121 ITD 343 (Chennai) to demonstrate that it is not necessary under section 263 for PCIT to make any enquiry before cancelling the assessment order. The reliance was placed on para 3 wherein it is held that It is not necessary for the Commissioner of Income Tax to make further enquiries before cancelling the assessment orders of the Assessing Officer. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not made the requisite enquiries. However, in reply to the show cause notice, when the assessee had shown from the record that the necessary enquiries were made by the AO and the AO had applied his mind and the view adopted by him was one of the possible views, then without considering the reply of the assessee and without recording his reasoned disagreement / dissatisfaction thereto, it was not open to the Ld. PCIT to brand the order of the AO as erroneous. Admittedly, the AO asked the assessee to furnish the necessary details from time to time which were duly furnished by the assessee and after considering the same the AO passed the assessment order. Second step for the Ld. PCIT, as per the provisions of section 263 before passing an order of modifying, enhancing or cancelling the assessment, he was supposed either to himself make or cause to make such an enquiry as he deems necessary. The words as he deems necessary , in our view, do not mean that the Ld. PCIT was left with a choice either to make or not to make an enquiry. As per the relevant provisions of section 263, it was incumbent upon the Ld. PCIT to make or cause to make an enquiry. So far as the words as he deems necess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n exercise of supervisory power as Section 263 can be invoked and employed only for the purpose of setting right distortion and prejudices to the revenue. Under Section 263 favourable orders cannot be set side. Section is not meant to get back sheer escapement of revenue. It is taken care of by other provisions of the Act. The Ld. PCIT has not taken a conspectus view of the entire record of the case which is mandated by law and instead has confined himself to the Ld. AO s assessment order. Under section 263 entire records of the case are required to be taken into consideration. Examination cannot be confined only to order of Ld. AO. Section 263 speaks for itself. The Ld. PCIT in the impugned order has failed to see the entire records of the case and has focussed only on Ld. AO s order while passing the impugned order which is irregular exercise of power of revision. There is vast difference between a review and a revision / revisionary power particularly under section 263 of the Act. 16.9 The Ld. PCIT ought to have appreciated before passing the impugned order dt. 27/03/2023 under section 263 of the Act that there was yet another assessment order in respect of same return of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the interest of Revenue. In the instant case that has not happened. Our view is fortified by the judgement of Hon ble Delhi High Court in case of PCIT Vs. Delhi Airport Metro Express Pvt. Ltd. reported in 398 ITR 8 wherein Hon ble Delhi High Court has held as follows: Mr. Asheesh Jain then volunteered that the PCIT had exercised the second option available to him under Section 263 (1) of the Act by sending the entire matter back to the AO for a fresh assessment. That option, in the considered view of the Court, can be exercised only after the PCIT undertakes an inquiry himself in the manner indicated hereinbefore. That is missing in the present case. 16.12 And further by another judgement of the Hon ble Delhi High Court in case of ITO Vs. DG Housing Projects Ltd. reported in (2012) 343 ITR 329 (Delhi) wherein in Para 16 it was held as under: Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under Section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Section 143(3) he has passed the assessment order dt. 12/06/2020 as requisite notice under section 143(2) of the Act dt. 22/09/2019 was issued to the assessee firm and that the same was served upon the assessee in time. 16.13 Section 143(2) contemplates a notice which in the instant case has been given within time. The notice is dt. 22/09/2019 which is at page 379 of the paper book. It is titled scrutiny (Computer aided Scrutiny Selection). Reason for selection is Income from Real Estate Business . Thereafter a notice under section 142(1) of the Act dt. 14/01/2020 is too served calling upon the assessee firm to furnish the accounts and documents specified from Serial No. 1 to 19, pages 383 to 386 of paper book. The assessee firm complies with the requisition so made pages 387 to 556 of paper book. Thereafter again a notice is served upon the assessee firm dt. 17/02/2020 under section 142(1) of the Act wherein few more additional requisitions are made which too are complied with pages 557 to 630. Furthermore another notice dt. 09/06/2020 is served to the assessee firm wherein a query is made to provide Details of percentage of completion of various projects undertaken by the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired. 16.17 In view of two assessment orders one under 143(3) and another under section 147 its is not open for the PCIT to hold that one under section 143(3) is erroneous and prejudicial. The later order dt. 24/03/2023 under section 147 was much prior to impugned order dt. 27/03/2023 it was part of record under section 263 the studded silence of PCIT in the impugned order shows that impugned order under section 263 is passed in a mechanical manner. The finding of no inquiry and verification is ipse Dixit. 16.18 With regard to assessment order dt. 22/11/2019 for A.Y. 2017-18 done by same AO which was also sheet anchor of argument of Ld. AR we respectfully disagree with his contention and agree with the contention of ld. DR supra. 16.19 With regard to shot gap between time of reply and passing of impugned order leading AO to contend that impugned order is passed in hurry we refrain from passing any order on it as that we feel is not relevant to decide legality or otherwise of the impugned order. 16.20 We hold that if we take into consideration both the assessment order one under 143(3) and another under section 147 it emerges crystal clear from Records before us is that during the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s galore laying down the principle that the AO in the assessment order is not required to give detailed reason in respect of each and every item of deduction etc. One has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Even if there was inadequate inquiry besides two queries supra that would not give PCIT to pass an order under section 263. We have seen both queries supra and notices and reply supra during course of assessment proceedings and we hold that this is not a fit case to exercise revisionary power under section 263. 16.24 We hold impugned order to be not proper and hold Ld. AO order to be proper and in accordance with law which cannot be labelled as erroneous and prejudicial under section 263. We also hold enough inquiries as the AO deemed fit and proper had been made on more than one occasion supra. It is not a case of no inquiry the impugned order is therefore without jurisdiction and / or in excess of jurisdiction and / or in irregular exercise of jurisdiction and is null and void. It is illegal and not proper. It is in irregular exercise of supervisory / revisionary jurisdiction und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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