TaxTMI 
TaxTMI 
2014 (4) TMI 528
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....in the saving bank account of the assessee. 2. The AO did not examine properly, cost of improvement for Rs. 4,59,000/- shown by the assessee and accepted the same as it was. As per sale deed of the property, there is word mentioned in 'plot' has been sold which is mentioned specifically in the sale deed while the AO accepted this property as house as stated by the assessee. The para 3 of this appellate order of the ld CIT is extracted as under: ''On receipt of proposal u/s 263 of the I.T. Act, 1961 from the Income Tax Officer, Ward- 2(1),Kota a show cause notice u/s 263 vide this office letter No. CIT/KTA/ITO(Tech.)/2012-13/2535 dated 02-01-2013 was issued through Registered A.D. post fixing the case for hearing on 16-01-2013. From the above narration of the ld. CIT order, it becomes veritably clear that the ld. CIT simply show caused the assessee vide letter dated 02-01-2013 after receipt of the proposal from the ITO Ward- 2(1), Kota. He did not apply his mind to see whatever proposal had been proposed to him, he himself should have been satisfied that the proposed action is really false u/s 263 of the Act or not. The facts of the case is that assessee is a small and petty civ....
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....ithout jurisdiction and invalid on the facts and legal position because the ld. CIT has right or jurisdiction of revision u/s 263 only when the order of the AO(i) is erroneous in so far as (ii) it is prejudicial to the interests of the revenue. S. 263 provides as under "263. (1) The Commissioner may call for and examine the record of any proceeding under 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." And on perusal of the order of the ld. AO as well as the order of the ld. CIT itself it is very clearly proved that the order of the AO has neither erroneous nor prejudicial to the interests of the revenue. Because the ld. AO during the course of assessment proceeding has asked or made inquiry regarding the various issues including these issues vid....
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....y to the show cause notice. He, however failed to do so and reached a conclusion that the order was prejudicial with a view that the present AO shall undertake that exercise after the assessment has been setaside for his consideration. Such a view or action is not well founded in the law or by various Hon'ble courts. Kindly refer direct decisions in case of Smt. Leela Choudhary v/s CIT 289 ITR 226(Gau.) also refer, Saw Pipes Ltd v/s Add. CIT 94 TTJ 1036(Del) Also refer Malabar Industrial Co. Ltd. v/s CIT 159 CTR(1)(SC), CIT v/s Rayn Silk Mills 221 ITR 155(Guj.) Same view has been expressed in the case of Kamal Kumar Gupta v/s CIT 142 TTJ 9(Jp) wherein it has been held that "assessee was asked by the AO to file the details of trade creditors which are shown in the name of agriculturalist. In the reply, assessee filed written submission enclosing the list of creditors. Thus, the AO made the inquiry and it is not a case of lack of inquiry but can be case of insufficient enquiry. CIT was not justified in passing the order u/s 263." In the present case also is the same position. And also followed in the case of Sh. Gyan Chand Jain v/s CIT 50 TW 109(Jp). 3. No fix formula or limit or e....
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....cause there is no limit of deep investigation. Also refer Gaberial India Ltd. 203 ITR 108 (Bom). That is why Hon'ble SC held in Malabar Fisheries Industries Ltd. 243 ITR 82 (SC) that in each and every type of mistake/ error cannot be made a basis to invoke Sec.263. The case laws available on the subject on this aspect, are distinguishable in as much as those were the cases where no inquiries at all (or very minor reflecting from a short assessment order), which is not at all a case here. Also refer Gyan Chand Gupta V/s CIT 135 TTJ 01(Jp) In CIT v/s Jain Construction 257 CTR 336(Raj. ) It has been held that Revision u/s 263-Order erroneous and prejudicial to interest of revenue-CIT issued a notice u/s 263 to assessee on ground that assessment order of AO passed u/s 143 (3) was an order erroneous and prejudicial to interest of revenue- Tribunal allowed appeal of assessee-Held, safeguard provided to assessee in section 263 is that mere erroneous orders are not revisable but revisional authority has to further establish with material on record that such erroneous order is also prejudicial to interest of revenue-Twin conditions of assessment order being erroneous and it also being prej....
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....he assessee, made some additions and rejected the books of accounts, it could not be said that he had not applied his mind. It is not always necessary that every assessee in the line of business should have the same rate of profit. The tribunal was correct in canceling the order under sec 263 of Income Tax Act." Also refer CIT v/s Ganpat Ram Bishnoi 296 ITR 292(Raj.) 6.3 In Haryana State Co-Op Supplier & marketing Federation Ltd. V/s Dy. CIT (2004) 90 ITD 551 (CHD-Trib). In Hycron India V/s Asstt. CIT (2004) 82 TTJ (Jod-Trib) 450, the order passed u/s 263 was not valid as, on the facts of the case, the Assessing officer has made due enquiries, for allowing interest income as business income and after application of mind the assessment order was passed. Same cannot be termed as erroneous and prejudicial order. Since after obtaining requisite information & detailed evidence, the assessing officer had accepted that there were no unexplained investments & gifts received by assessee were genuine, therefore, assessment order cannot be said to be erroneous & prejudicial to the interest of Revenue.- Vide Shri Mukesh Kumar Jain V/s ITO (2000) 13 DTC 793 (Jab-Trib), National Plastic & Allie....
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....picion of the commissioner that the assessing officer did not make proper enquiry, there was no evidence brought on records to show that any of the shareholders, assuming that the amount could be added as income of the assessee, were bogus in nature or the benamidars of some other persons. Suspicion cannot be the basis to invoke the powers vested in the commissioner under section 263. 6.6 In the case of Commissioner of Income Tax V/s Anil Kumar sharma 335 ITR 83, " Revision- Erroneous and Prejudicial order- lack of proper enquiry- CIT came to the conclusion that the issue relating to taxability of compensation received by the assessee was not examined by the AO and held that the order of AO is erroneous and prejudicial to the interest of the revenue- Tribunal has arrived at a conclusive finding that through the assessment order does not patently indicate that issue of the taxability of the compensation has been considered by the AO, the record shows that the AO has applied his mind-Thus, it is not a case of lack of enquiry even if the enquiry was inadequate and the CIT was not justified in passing the order under section 263- findings of the Tribunal quashing the order of the CIT ....
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....e erroneous simply because in his order he does not make an elaborate discussion in that regard. Kindly refer The Lake Palace Hotels & Motels Pvt Ltd v/s The CIT Udaipur 48 TW 181(Jd). 8. On Merit our Submissions are as under which has also been filed before the ld. CIT: Regarding first issue on account of verification of debit credit entries in saving bank account: It is submitted that during the course of assessment proceeding the assessee has submitted that the copy of bank account(PB 10-11) and the entries in this account has been explained to the AO. And on perusal of the bank account it is very clear that there is no much entries in this bank account and nor any entries in this bank account from which it is revealed or arises any undisclosed income. For example in the credit side on Ist April there is opening balance of Rs. 1,82,259/- out of these balance the assessee has made withdrawals in small amounts on various dates till 25.06.2004. On 28/06 there is deposit/credit of Rs. 18,000/- through Cheque, on 02/08 there is credit of half yearly interest of Rs. 2076/- on 07/08 deposit/credit of Rs. 18,000/- through Cheque and Rs. 1,00,000/- deposit/credit of Rs. 18,000/- through....
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....rchaser has broken this house for new construction and now it was in the shape of plot. This has been clearly mentioned in the sale deed. On perusal of the all pages of sale deed itself(PB18). It is clearly mentioned almost on every pages that house sold(at present it is in the shape of plot). Thus, the assessee has sold the house not plot and it is also clear form the purchase deed itself (PB32-34) and the registrar of stamp duty has also valued the property as house. And the ld. AO (who has proposed the action u/s 263) as well the ld. CIT both have misguided their self despite the record available. If so than how it can be said that order of the ld. AO was being erroneous and prejudicial to the interest of the revenue. During the Asstt. proceeding the same has been explained to AO also and he himself was satisfied. Thereby no inference has been made by AO. It is submitted that when all the details submitted by assessee and AO framed the asstt order thereon, reliance is placed on a case of High Court of Gujarat 21 Taxman. Comm. 64 (Guj) Commissioner of I. Tax V/s Amit Corporation it has been held " When during course of framing of assessment, Assessing Officer had access to all re....
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....n of the learned CIT. The reliance is placed upon the decision of Hon'ble Delhi High Court in the case of CIT v. Hindustan Marketing & Advertising Co. Ltd. [2010] 46 DTR (Del.) 109. The attention is drawn towards the decision of Hon'ble jurisdictional High Court in the case of CIT v. Trustees Anupam Charitable Trust [1987] 65 CTR (Raj.) 30 : [1987] 167 ITR 129 (Raj.) Thus it is clear that Assessing Officer has made enquiry but sufficiency of enquiry can be depend upon from person to person. The AO cannot remain passive in the face of a return which is apparently in order but calls for further enquiry. It is the duty of the AO to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an enquiry. The word 'erroneous' includes the failure to make enquiry. It is submitted that the AO made the enquiry and it is not a case of lack of enquiry. The Hon'ble Delhi High Court in the case of CIT v. Vikas Polymers [2010] 236 CTR (Del.) 476 : [2010] 47 DTR (Del.) 348 had an occasion to consider the passing of order under s. 263 of the Act by the learned CIT when the AO made an enquiry and the assessee filed the reply. The Hon'ble Delhi Hi....
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....hat the assessee explained that the capital investment made by the partners, which had been called into question by the CIT was duly reflected in the respective assessments of the partners who were incometax assessee and the unsecured loan taken from SC (P) Ltd. was duly reflected in the assessment order of the said chit fund which was also an assessee. Merely on the basis that the AO has not examined the cash credits of the partners or deposits from SC (P) Ltd., CIT was not justified in invoking his suomotu powers, especially where the assessee had explained that the capital investment made by the partners, which had been called into question by the CIT was duly reflected in the respective assessments of the partners and the unsecured loan taken from the SC (P) Ltd. was duly reflected in the assessment order of the said person." The reliance is placed in the order of the Hon'ble Delhi High Court in the case of CIT v. Anil Kumar Sharma [2010] 38 DTR (Delhi) 305 : [2011] 335 ITR 83 (Delhi) has held that jurisdiction under s. 263 cannot be assumed if enquiry is inadequate as per opinion of the learned CIT. It will be useful to reproduce the held portion: "Held, dismissing the appeal....
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.... 156: (1998) 65 ITD 1 (Cal) and Progressive Services Ltd. Vs. ITO (1991) 40 TTJ (cal) 595. The reliance is also placed in the order of the Hon'ble High Court of Bombay in the case of CIT v. Gabrial India Ltd. [1993] 71 TAXMAN 585 (BOM.). It will be useful to reproduce the held portion of the case: Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - Assessment year 1973-74 - Assessee claimed a sum of Rs. 99,326 described 'as plant relay out expenses' as revenue expenditure and ITO, after making enquiries in regard to nature of said expenditure and considering explanation furnished by assessee in that regard, allowed assessee's claim - Subsequently, Commissioner, exercising powers under section 263, cancelled order of the ITO observing that order of ITO did not contain discussion in regard to allow ability of claim for deduction which indicated non-application of mind and that claim of assessee required examination as to whether expenditure in question was a revenue or capital expenditure and directed ITO to make a fresh assessment on lines indicated by him - Whether under section 263 substitution of the judgment of the Co....
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.... assessment. He is empowered to take recourse to any of the three courses indicated in section 263. So, it is clear that the CIT does not have unfettered and unchequred discretion to revise an order. The CIT is required to exercise revisional power within the bounds of the law and has to satisfy the need of fairness in administrative action and fair play with due respect to the principle of audi alteram partem as envisaged in the Constitution of India as well as in section 263. An order can be treated as 'erroneous' if it was passed in utter ignorance or in violation of any law; or passed without taking into consideration all the relevant facts or by taking into consideration irrelevant facts. The 'prejudice' that is contemplated under section 263 is the prejudice to the Income Tax administration as a whole. The revision has to be done for the purpose of setting right distortions and prejudices caused to the Revenue in the above context. The fundamental principles which emerge from the several cases regarding the powers of the CIT under section 263 may be summarized below: (i) The CIT must record satisfaction that the order of the Assessing Officer is erroneous and prejudicial to ....
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.... Commissioner who may call and examine the record of any proceeding under the Act and if he considers that any order passed therein by the AO is erroneous and prejudicial to the interest of the Revenue. He may after giving the assessee an particular opportunity of being heard or after making any such enquiry revise that order. Therefore, it is very clear from the provision of Section 263 of the Act that the AO has to examine the record himself to come to a conclusion that the order is erroneous and prejudicial to the interest of the Revenue. There is no such procedure laid under this Section wherein the AO himself can propose the order to file u/s 263 of the Act. This action of the AO is unwarranted and not legal. On the basis of such proposal, the ld. CIT cannot take action as he has taken in this regard. The decision of ITAT Lucknow Bench in the case of Jheenu Ram vs. CIT, 130 TTJ (Luck) and ITAT Jaipur Bench in the case of Rajeev Arora vs. CIT 135 TTJ 01 (JP.) are relevant. The ratio decidendie of the above two orders is that the AO cannot propose his own order by treating it as erroneous and prejudicial to the interest of Revenue for getting it revised by the ld. Commissioner u....