TaxTMI 
TaxTMI 
2015 (9) TMI 223
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....visionary powers u/s 263 of the Income-tax Act, 1961 despite the fact that even after a thorough examination, no specific error in the assessment order causing prejudice to the Revenue has been identified and the revision is ordered merely on the basis that necessary enquiries do not appear to have been made. The order being ab initio illegal and void must be quashed." 2. The relevant facts of the case are that the assessee declared an income of Rs. 79,08,143/- by way of filing its return on 23.09.2008 which was processed u/s 143(1). Subsequently the said return was selected for scrutiny assessment by issuance of notice u/s 143(2) etc. The assessment was concluded by the AO vide his order dated 16.11.2010 u/s 143(3) accepting the returned income. 2.1. Subsequently, the said order was revised by the CIT, Meerut exercising her powers u/s 263 of the Income Tax Act, 1961. The Ld. CIT, Meerut after hearing the assessee set aside the aforesaid assessment order thereby directing the Assessing Officer to pass a fresh order after examining the issues properly. The said order is under challenge in the present proceedings. 3. The Ld. AR inviting attention to the order under challenge....
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....It was submitted that the decision in Malabar Industries case (cited supra) was cited by the Commissioner for the following propositions:- "i. An incorrect assumption of facts or incorrect application of law will suffice the requirement of the order being erroneous. ii. If the order is passed without application of mind, such order will fall under the category of erroneous order." 3.4.1. Referring to the above principles extracted, it was submitted that no effort has been made by the Commissioner to show what was the incorrect assumption of facts; or the incorrect application of law by which the order suffered. Further it was submitted nothing has been placed on record to demonstrate that the order was passed without application of mind. 3.4.2. Referring to the decision, it was submitted that the Commissioner could not have claimed to not be aware of the fact that the judgement quoted by her is more often quoted for another important principle i.e. the fulfillment of the twin requirements of establishing that there is an error in the order and that the error is of such a magnitude that it is pre-judicial to the interests of the Revenue. These are the twin conditions which ....
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....oes not help the Revenue in any manner. 3.6. Similarly it was submitted that reliance placed by the Commissioner on the judgement of the Hon'ble Allahabad High Court in the case of Swarup Vegetable Products Industries Ltd. (cited supra), it was submitted is misplaced as after the judgement of the Apex Court in the case of Malabar Ind. Co.Ltd. vs CIT (2000) 243 ITR 83 (SC), the principle laid down in the case of Swarup Vegetable Products Industries Ltd. (cited supra) would not be of much help to the Revenue. 3.6.1. Notwithstanding the said argument it was his submission that even otherwise the judgement rendered by the Hon'ble Allahabad High Court proceeded on facts peculiar to its own wherein admittedly the refund of excise duty was received by the assessee and was placed in the suspense account and not in the P&L A/c consequently the assessment order was found to be erroneous and pre-judicial to the interest of the Revenue which is not the fact in the present proceedings. 3.7. Similarly it was submitted that the proposition laid down in the remaining decisions cited by the Ld. CIT, Meerut in the order were of no relevance as in the facts of the present case as per the Com....
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....r the settled legal position it was submitted the Revisionary powers can not be invoked merely because the Commissioner is of the view that the enquiry should be done in some other manner. 3.12. Inviting attention to para 7 of the impugned order it was his submission that the Commissioner repeatedly uses the word that the claim of the unsecured loan has been accepted "without proper confirmations" and in the very same para, the claim of sundry creditors, she sets aside the issue directing the AO to "properly look" into the same. It was his submission that before directing the Commissioner was first required to meet the twin conditions of error and prejudice to the Revenue. 3.13. Inviting further attention to the impugned order at page 8, it was submitted that the Commissioner has again assailed the AO for not "properly" enquiring into the negligible profit rate and also for not examining and enquiring "properly" into each and every aspect relating to manufacturing, trading and P&L A/c of the assessee. What was improper in the enquiry made it was submitted has been completely left unaddressed by her. 4. Inviting attention to the Paper Book filed, it was his submission that ....
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....t submitted this very response in its reply dated 15.03.2013 to the Commissioner. Referring to copy of the same placed at pages 2 -3 of the Paper Book it was submitted that on behalf of the assessee it was brought to the notice of the Commissioner that the AO before the passing of the order u/s 143(3), had carried out a detailed enquiry and examination of books of accounts covering each and every aspect of the case which were sought to be looked into by the Commissioner again. Inviting attention to para 3 of the said reply it was submitted that on behalf of the assessee it had been stated that the proposed reasons for initiating proceedings u/s 263 were vague and general. Inviting attention yet again to the same, it was reiterated that it was again brought to the notice of the Commissioner that the facts had clearly been looked into by the AO. 5.2. The Commissioner it was submitted can invoke his powers u/s 263 only after considering the material on record and it goes without saying and this was the material on record. Referring to the same, it was submitted that if not before initiating atleast after issuance of notice these pleadings by the assessee which were placed before th....
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....use notice. 5. As required by you complete books of accounts and supplementary records (including purchase bills, sale bills, bank statements, daily stock records etc.) are produced." 5.4. Accordingly in view of these facts, arguments and position of law, it was his submission that following the principle laid down by the Delhi High Court in the case of DG Housing Projects Ltd. (cited supra) and CIT vs NDTV Ltd. [2013] 39 taxmann.com 135 (Del.) which have considered the judgement of the Gee Vee Enterprises vs ACIT 99 ITR 375 and the judgement of the Apex Court in the case of Malabar Ind. Co.Ltd. (cited supra), the impugned order deserves to be quashed. 6. The Ld. CIT DR, Smt. Sulekha Verma on the other hand relying upon the judgement of the Delhi High Court in the case of Duggal & Co. vs CIT 7 Taxman 331 and Gee Vee Enterprises (cited supra) alongwith the order of the Tribunal order dated 21.01.2011 in ITA no.-2595/Del/2009 in the case of Sh. Virendra Kr. Gupta vs. CIT (copy provided in the Court) submitted that the impugned order deserves to be upheld. Inviting attention to the brief and cryptic assessment order which was read out by her, it was her submission that on a r....
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....bmitted that the two paged order does not inspire any confidence whatsoever and clearly shows that the AO blindly accepts the assessee's claims as he has not even cared to address the discussion on any issue which he is presumed to have considered. Accordingly it was her argument that the impugned order deserves to be upheld. 7. In reply the Ld. AR submitted that apart from relying upon the arguments advanced and the decisions cited he would merely want to add that the decision of the Delhi High Court in the case of Duggal & Companies is not applicable at all. It was his submission that it was rendered in the scenario where the only decision available at that point of time was the decision of the Delhi High Court in Gee Vee Enterprises (cited supra). Thus the decision which does not have the benefit of the latest decision on the issue it was submitted should not be followed. Referring to the latest decisions of the Delhi High Court in the case of NDTV and DG Housing case which both have considered the principle and the propositions of law in Gee Vee Enterprises it was submitted that the decision being latest in point of time should be preferred. Apart from this principled object....
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.... present case, it is seen that the AO has passed a cryptic order dated 16.11.2010 on the basis of which it has been respectively canvassed by the parties before the Bench that the order was passed after making due enquiries with full application of mind of the AO as per assessee's stand and that the order is erroneous and prejudicial to the interest of the Revenue as per the departmental stand. Considering this order it is seen that the Ld. Commissioner has passed the order under challenge dated 18.03.2013 setting aside the afore-said assessment order directing the AO to properly enquire into the four issues notified by her. 8.1. The Ld. CIT DR relying upon the said order has taken the position that the enquires made were not carried to the logical conclusion by the AO on the four issues of unsecured loans, the net profit of the assessee, the addition to plant & machinery and the sundry creditors etc. for the said purpose proper enquiry on facts according to her was justifiably warranted. 8.2. The Ld. AR on the other hand has canvassed that the law mandate that the Commissioner in her order is bound to address the error committed by the AO and needs to demonstrate that the er....
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....e sides so as to contend that legally the issues is covered in their favour. 8.3. Before we proceed to address the same, it is considered necessary to first refer to the order under challenge. A perusal of the 10 paged order of the Ld. Commissioner of Income Tax (Meerut) shows that the exercise of power by the Ld. Commissioner is hesitant unsure and infact the Ld. Commissioner repeatedly holds that proper enquiry is required. This conclusion is drawn from a reading of the order under challenge as repeatedly in the face of the clear-cut arguments of the assessee the Ld. Commissioner shirks to address the issue head on and instead takes a stand that the issues be looked into properly for vague reasons. Before considering that the order is to be revised as per settled legal jurisprudence the Ld. Commissioner should have atleast somewhere in the order on the issues considered by her ought to have addressed what was the error. We have carefully gone through the order and have found that there is no such conclusion. Infact the hesitancy in holding that there is an error coupled with the usage of words not "properly looked into" needs to be "properly enquired" makes the Ld. Commissione....
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....d in the following manner:- "It was further argued that since the books of account were also required to be produced on the date of hearing vide notice itself, it indicated that the CIT has made her mind to reopen the assessment under section 263 even without considering the assessee's explanation and reply to the show cause notice. The legal position in this regard is again absolutely clear as per which no show cause notice needs to be given for initiation of proceedings under section 263 of the Income Tax Act, 1961 an assessment order is subject to revision under section 263 of the I. T. Act which has been found to be erroneous and prejudicial to the interest of revenue and Commissioner is the authority to start proceedings for which no prior notice to the assessee is required to be given before such commencement of 263 proceedings. Hence, the ground remains untenable and without any proper basis." 8.5. On each of the above issues the Ld. AR has referred to material on record which was considered by the AO. In the afore-mentioned peculiar facts and circusmtnaces in the absence of any rebuttal on this factual position, we find that in the facts of the present case the power ....
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.... order coupled with the requirement to point out that the error is prejudicial to the interests of the Revenue. It is not each and every error which the law permits the Commissioner to revise as is settled by the Apex Court in Malabar Industries and consistently followed by various Courts. Even otherwise the present case is a case of enquiry and is not a case of no enquiry. It is wellsettled that the Commissioner u/s 263 cannot revise the order on the reasoning that the enquiry as conducted by the AO be substituted by her method of enquiry without first meeting the twin conditions. The enquiry of the AO cannot be substituted by the Commissioner. The law permits the doing of a thing in a particular manner and the law does not permit a fishing and roving enquiry based on suspicions and surmises. The Commissioner exercising the powers u/s 263 of the Act cannot direct a second investigation without first finding the order erroneous and that too such an extent that it is prejudicial to the interests of the Revenue. Pointing out of an error by the Commissioner is not an empty formality. These twin requirements which the Ld. Commissioner is required, fulfilled cannot be said to be met bec....