TaxTMI 
TaxTMI 
2013 (8) TMI 738
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...., subscribing to 344.50 lac right shares. The party-wise breakup of the shares allotted, all of which shared the same address, appears at pg.2 of the impugned order. In order to verify the genuineness of the credit transactions qua the shares, subscribed and allotted to Mauritius based entities, the Assessing Officer (A.O.) referred the matter to the Foreign Tax Division of CBDT (Department of Revenue), Ministry of Finance, New Delhi (FTD) for further enquiry and investigation. Impending receipt of information from the FTD, the A.O. finalized the draft assessment order on 30.12.2009, and sent the same to the Dispute Resolution Panel-II, Delhi ('DRP' for short) for its opinion and directions u/s.144C of the Act. An 'office note' was placed by him on the file to the effect that necessary action as per the provisions of the Act would be taken on the receipt on information from FTD, CBDT, New Delhi. Subsequently, information was forwarded by FTD to the A.O. vide three letters dated 21.04.2010, 20.05.2010 and 26.07.2010. The A.O. forwarded the same to the DRP vide his letter dated 05.08.2010, seeking directions regarding the investment in the right shares issued by the assessee to vario....
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....e case of CIT v. Lovely Exports, 216 CTR 195 (SC). 2.3 The same did not find favour with the ld. CIT. The only question that is relevant is if the conclusion as to the non-verification of the information received from FTD by the A.O. was wrong or not. The said materials would, in any case, be supplied to the assessee by the A.O. in course of the assessment proceedings. There is, firstly, no question of the revisionary authority seeking to revise the order as proposed/approved by the DRP. Rather, it is the non-compliance on the part of the A.O. with the directions by the DRP, which was sought to be rectified by recourse to section 263 proceedings. Section 263 confers wide powers to make or cause to make such enquiry as the competent authority deems proper after examining the records, making reference to the decision in the case of CIT vs. Shree Manjunathesware Packing Products and Camphor Works [1998] 231 ITR 53 (SC). The A.O. was duty bound under the Act to verify the genuineness of the credit transactions by way of investment for an amount of Rs.795.96 crores in the assessee- company by the nine Mauritius-based entities having a common address, and whose bank statements revealed ....
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.... CIT [1973] 88 ITR 323 (SC), it stands explained that the position and functions of an Income Tax Officer is different from that of a civil court. In it words, the statements made in a pleading proved by the minimum of evidence may be adopted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives a decision on the basis of the pleading and the evidence which comes before it. The Income-tax Officer, on the other hand, is not only an adjudicator but also an investigator. He could not remain passive in the face of a return which is apparently in order but calls for further enquiry. 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 enquiry. It is because it is incumbent on the Income Tax Officer to further investigate the facts cited in the return when circumstances would make such an enquiry prudent that the word 'erroneous' u/s.263 include the failure to make such an enquiry. The order becomes erroneous because such an enquiry has not been made, and not because not anything wrong if all the facts therein are assumed to be correct. This has, over the years, translat....
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....quiry by the assessing authority. There could in fact hardly be any doubt in the matter, given the facts, as narrated above; the same being undisputed and self-speaking. The question is not if he had made any enquiry earlier, and that the assessee had responded thereto. Without doubt, in the absence of initial enquiries, even as much as the fact that the credits are in respect of rights share issue and, further, subscribed to by nine Mauritius-based entities, would itself not come to surface. Enquiry is a tangible process and clearly a matter of fact, and till it leads to the formulation of an opinion, one way or other, is a continuous and iterative process. Some materials and information may be furnished, and which may prompt or propel the enquiry officer to seek further information in furtherance of the enquiry made earlier. It may give a clue or lead to an enquiry on an altogether different aspect or dimension of the matter. We are conscious that it could with some justification be said that in that case no amount of enquiry can be said to be adequate or proper. However, its limit is implicit therein inasmuch as the enquiry that can be held as proper is one which leads to the fo....
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....information sought from the FTD had actually been received subsequent to the completion of the assessment, the same could be taken cognizance of for the purpose of initiation of revisionary proceedings; it being trite that 'record' for the purpose of section 263 is as before the revisionary authority at the time of his examination (refer Shree Manjunathesware Packing Products and Camphor Works (supra)). 3.5 One of the arguments taken by the assessee is that the relevant record, i.e., the information and details as received from the FTD, have not been examined by the ld. CIT and, accordingly, his action fails; not satisfying one of the basic ingredients of sec. 263. The argument is misconceived, and arises, as we see it, on account of confusion with regard to the scope of the word 'examination' as used in s.263. The same is of indefinite import, i.e., as to its extent and contours. The examination by the CIT would in each case be guided by, and is therefore to be seen with reference to his order, i.e., the findings issued thereby. In a particular case, he may make an enquiry (which is again inherently variable), while in another he may cause further enquiry in the matter. Clearly, ....
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....of the total income. This is apart from the fact that section 68, which is the provision under reference, also contemplates satisfaction of the A.O., which is patently absent in the present case. The non-furnishing of the said bank statement to the assessee thus cannot be by any stretch of imagination considered as violative of the principles of natural justice, and the assessee's charge in its respect, if anything, only needs to be stated to be rejected. Further, how we wonder could the assessee claim of the set aside as having been made by the ld.CIT for fishing and roving enquiries, when firstly the relevant record had been called for by the A.O. himself and, secondly, without assailing the relevancy of the said record or his observation/s arising there-from. Equally frivolous is the assessee's claim of the A.O. having not made out any case for enhancement of income to the DRP vide the draft order. The question of the A.O. being satisfied or not so, in terms of section 68, is premature in the absence of proper enquiry, so that there is no question of his forming or having formed any opinion, much less an informed one, which he is required to in law, when he forwarded the draft o....
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....ingredient towards satisfaction u/s.68, a decision or formulation of an opinion qua which is to be necessarily arrived at by the A.O., is of indefinite scope, and is to be arrived at on the conspectus of the case. Without doubt, it cannot be in the absence of full facts. That the moneys come from existing shareholders lends credence to the assessee's case in the same manner and to the extent as the loans being extended by an existing lender, so that the matter has to be seen in conjunction with the other facts on record. 3.7 Next, we consider the assessee's argument that the transactions stand also examined by the TPO, finding the same as not at arm's length in some cases, recommending adjustment. No doubt, the same represents an aspect of the matter, even as in the absence of full facts, we are unable to comment on the correlation between the two aspects. At this stage it would be sufficient to say that if and to extent it is, the assessee could advance its case u/s.68 with reference thereto before the A.O. 3.8 The ld. AR was vehement in his arguments before us that the only error the ld. CIT has pointed out in the impugned order is that the A.O. has not followed the direction o....
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....y non-reference by the DRP - a matter of fact - which effectively has not taken any cognizance of the said materials forwarded to it by the A.O., that his order is rendered liable to be subject to review u/s.263, and which also constitutes one of the objections raised by the assessee. Had the DRP issued any direction/s qua the said materials and the A.O. rendered his report thereon, so that the same stand acted upon, a question on the proprietary or jurisdiction of the ld. CIT could possibly arise inasmuch as the DRP is a collegium of three Commissioners. Be that as it may, the question does not arise for consideration in the instant case, so that there is no bar on the power of the CIT u/s.263, which is otherwise of wide amplitude (and toward which the ld. CIT has cited a number of decisions at pg. 13 of his order); the relevant materials having not been considered by either the DRP or the A.O. The assessee's objection, raised with reference to the CIT being a subordinate authority to the DRP, made with reference to some case law, is therefore not valid in the facts and circumstances of the case. Further, that being the case, the mention by the ld. CIT in his order that the A.O. h....
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....would be apparent, is based principally on findings of fact, i.e., toward absence or lack of proper enquiry, with reference to which the law is trite and well settled (refer para 3.1). The decision in the case of ITO vs. D G Housing Projects Ltd., 343 ITR 329 (Del) clarifies that the findings by the CIT as to the absence of or lack of enquiry must also exhibit, on an examination of record by him, that the same has resulted in the impugned order being erroneous. This is as an order being erroneous is a precondition and, therefore, the s.263 order has to bear a finding to this effect. The said decision is clearly not applicable to the facts of the instant case inasmuch as the A.O. was himself of the considered view that further enquiry is required, having sought materials for the same, though was unable to, in the exigencies of the case, verify and examine the same. In fact, the hon'ble court itself clarifies therein that the CIT could establish that the facts on record or the inference drawn from the facts on record per se justify and mandate further enquiry or investigation by the A.O., which had not been conducted by him. Our observation with regard to the relevancy of the record ....