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TaxTMI 
TaxTMI 
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2015 (4) TMI 439
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....s not justified:- a) to set aside the order dated 29-12-2011 passed u/s 153A r.w.s. 143(3) of the Income-tax Act, 1961 passed by the Ld. Asstt Commissioner of Income-tax, Central Circle -13, New Delhi on the ground that the same is allegedly erroneous and prejudicial to the interests of the Revenue; b) to set aside the assessment order dated 29-12-2011 in as much as the twin conditions as laid out in Section 263 of the Income-tax Act, 1961 were not fulfilled; c) to direct the Assessing Officer to examine the taxability of the amount of Rs. 20,19,7341- on account of alleged bogus expenses booked without appreciating the factual position and the detailed submissions made on behalf of the Appellant Company." 2. We may also point out that the grounds in other five appeals are also similarly worded except date of assessment order and quantum of alleged bogus expenses. 3. Briefly stated the grounds giving rise to these appeals are that a search operation u/s 1342(1) of the Act was conducted on 3.3.2010 on Bhushan Steel Group of cases. The premises of M/s Bhushan Steel Ltd. were covered along with other companies of this group. Subsequently, the assessment orders....
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....refully perused the relevant material placed on record. Ld. counsel of the assessee submitted that a search was conducted on 3.3.2010 on Bhushan Steel Group Company. In pursuance to search operation, the assessment proceedings were concluded by framing assessment u/s 143(3) r/w 153A of the Act. Ld. Counsel of the assessee further submitted that no specific question was raised by the AO about the expenses claimed by the assessee in the P&L account and statement of accounts filed along with return of income. Ld. AR further pointed out that under scheme of reassessment u/s 153A of the Act, no addition could have been made beyond incriminating material where the assessment was completed before search operation. Ld. Counsel fairly accepted that this plea was not raised before the CIT(A) during the course of proceedings u/s 263 of the Act. Ld. Counsel of the assessee vehemently contended that all the accounts and details were filed before the AO and the same were also filed before the CIT(A) during the proceedings u/s 263 of the Act. Ld. Counsel also contended that both the conditions viz. "erroneous" and "prejudicial to the interest of revenue" have to be fulfilled and in this case the ....
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....uiry, then in the case of no inquiry, the assessment order is not only erroneous but also prejudicial to the interest of revenue. Ld. DR further pointed out that the order of assessment has to be a speaking order and when the fact of others' view has not been mentioned and the claim of expenses pressed by the assessee has been allowed without making any inquiry, then the order must be held as erroneous and prejudicial to the interest of revenue. Ld. DR further submitted that Hon'ble Jurisdictional High Court has also considered ratio of earlier decisions viz. decisions of Hon'ble Apex Court in the case of Rampyari Devi Sarogi vs CIT (1968) 67 ITR 84(SC), Tara Devi Aggarwal vs CIT (1973) 88 ITR 323 (SC) and the decision in the case of Malabar Industrial Company Ltd vs .CIT, 243 ITR 83 (SC) and decisions of Hon'ble Jurisdictional High Court of Delhi in the case of Gee Vee Enterprises vs ACIT (supra) while passing the order in favour of the revenue in the case of CIT vs Nagesh Knitwears Pvt. Ltd. (supra). 9. Ld. counsel of the assessee also submitted rejoinder to the above submissions and contentions of the ld. DR and submitted that in the case of Realest Builders and....
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.... Advertising Co. (supra) and decision of CIT vs Anil Kumar Sharma (supra) is not available for the assessee because these were the cases of "inadequate inquiry" whereas the present case is clearly of lack of inquiry. Per contra, we respectfully note that the case of the revenue is squarely covered by the decision of Hon'ble Jurisdictional High Court of Delhi in the case of CIT vs Nagesh Knitwears Pvt. Ltd. & Others (supra) and by the landmark decision of Hon'ble High Court of Delhi in the case of Gee Vee Enterprises (supra). 12. In the case of Gee Vee Enterprises speaking for High Court of Delhi their lordships made a clear distinction between the cases of "inadequate inquiry" and "lack of inquiry" by also considering the ratio of the decision of Hon'ble Apex Court in the case of Rampyari Devi Sarogi vs CIT (supra) and Tara Devi Aggarwal vs CIT (supra) and held that it is incumbent upon the ITO to further investigate the facts stated in the return when circumstances would make such an inquiry prudent with the word "erroneous" in Section 263 includes failure to make such an inquiry. It was further held that the order becomes erroneous because such an inquiry has not bee....
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....ner was also of the view that the Income-tax Officer was not justified in accepting the initial capital, the sale of ornaments, the income from business, the investments etc., without any inquiry or evidence whatsoever and that the order of assessment was erroneous and prejudicial to the interests of the revenue. The High Court held that there were materials to justify the Commissioner's finding that the order of assessment was erroneous in so far as it was prejudicial to the interests of the revenue. Shri Sharma tried to distinguish this decision on the ground that the address of the assessee in that case was given incorrectly. The decision of the High Court and that of the Supreme Court were not, however, based on that ground at all. On the contrary, the Supreme Court followed their previous decision in Rampyari Devi's case and upheld the decision of the High Court precisely on the same grounds. These two decisions show that it is not necessary for the Commissioner to make further inquiries before cancelling the assessment order of the Income-tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income-tax ....
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....The term „erroneous‟ means a wrong/incorrect decision deviating from law. This expression postulates an error which makes an order unsustainable in law. 11. The Assessing Officer is both an investigator and an adjudicator. If the Assessing Officer as an adjudicator decides a question or aspect and makes a wrong assessment which is unsustainable in law, it can be corrected by the Commissioner in exercise of revisionary power. As an investigator, it is incumbent upon the Assessing Officer to investigate the facts required to be examined and verified to compute the taxable income. If the Assessing Officer fails to conduct the said investigation, he commits an error and the word „erroneous‟ includes failure to make the enquiry. In such cases, the order becomes erroneous because enquiry or verification has not been made and not because a wrong order has been passed on merits. 12. Delhi High Court in Gee Vee Enterprises v. Additional Commission of Income-Tax, Delhi-I, (1975) 99 ITR 375, has observed as under:- "The reason is obvious. The position and function of the Income-tax Officer is very different from that of a civil court. The statements made in a pleading ....
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....ings ITA No. 591/2008 and connected matters 30 are incorrect/erroneous; and (ii) where there is failure to make proper or full verification or enquiry. 15. In the case of Commissioner of Income Tax v. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del), Delhi High Court was considering the aspect, when there is no proper or full verification, and it was held as under:- "We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Income-tax Act. As noted above, the submission of learned counsel for the Revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order, which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the ....
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....orks Co. Ltd. v. ITO [1977] 106 ITR 1 (SC) at page 10) ... From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Incometax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the ITA No. 591/2008 and connected matters 32 income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. Th....
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....nces drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under Section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. 17. This distinction must be kept in mind by the CIT while exercising jurisdiction under Section 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of alleged "inadequate investigation", it will be difficult to hold that the order of the Assessing Officer, who had conducted enq....
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....interest of the Revenue." 14. In view of foregoing discussions, we are inclined to hold that the present case is squarely covered in favour of the revenue by the decisions of Hon'ble Jurisdictional High Court of Delhi in the case of Gee Vee Enterprises vs ACIT (supra) and CIT vs Nagesh Knitwears P. Ltd. (supra) as in the present case, the AO did not raise any query or make any inquiry pertaining to the claim of expenses submitted by the assessee in its books and statements of accounts submitted along with return and this is a clear case of "lack of inquiry". We may also point out that if the AO fails to conduct the said investigation, he commits the error and the word "erroneous" includes failure to make inquiry. In such cases, the order becomes erroneous because necessary inquiry or verification has not been made and not because a wrong order has been passed on merits. We further hold that if from the detailed investigation conducted by the Investigation Wing of the department, it is revealed that the bogus expenses have been claimed by the assessee with the intention to reduce its tax liability, then the order is also prejudicial to the interest of revenue. The argument of t....