AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (11) TMI 921
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....Rs. 62,44,802/-, which was in the nature of capital expenditure, was debited in the prof it & loss account as revenue expenditure and same was allowed by the Assessing Officer without any verification. (2) Assessee had claimed depredation on dies at the rate of 40% and same was allowed by the Assessing Officer in assessment without any examination, although the depreciation allowable as per the I. T. Rules was 25%. (3) The total depreciation allowable on motor car as per the details filed was Rs. 7,53,906/- whereas the assessee's claim of depreciation of Rs. 9,42,382/- was allowed without any verification. (4) The deduction claimed u/s.80G of the I. T. Act on account of donation was allowed by the Assessing Officer although the assessee had not filed any evidence." 3. In view of the above, the Ld. CIT issued show cause notice dated 11.03.10 to the assessee asking him to submit an explanation as to why not the order passed by the AO be not revised/set aside as per provisions of section 263 of the Act. In compliance to the said notice, the assessee filed written submissions and explained that so far as the expenditure incurred on tools and implements was concerned, the ass....
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.... the order of the Ld. CIT, the assessee has come in appeal before us. 5. We have heard the rival contentions and have also gone through the records. To arrive at the correct conclusion of the case, we deem it necessary to reproduce the relevant provisions of section 263 of the Act. "Section 263(1) in The Income- Tax Act: (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 2 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. ........." 6. The sum and substance of the above reproduced section 263(1) can be summarized in the following points: 1) The Commissioner may call for and examine the record of any proceeding under the Act; 2) If he considers that the order passed by the AO is (i) erroneous; and (ii) is ....
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....ts and copies of bills etc. The Ld. A.R. of the assessee has further invited our attention to copies of the various other letters addressed to the AO to show that from time to time the AO called for various records which were duly submitted and the relevant explanation was given to the AO. After duly examining the records of the assessee, the AO proceeded to pass the assessment order. The Ld. A.R. has further invited our attention to the copy of letter dated 05.03.08 addressed to the AO, the contents of the said letter reveal that the assessee in the said letter has explained that the assessee had not claimed any special rate of depreciation on the plants and machinery purchased during the year but had claimed the same only on moulds purchased during the year and that there was no mistake or error in the order passed under section 143(3) while allowing the claim of depreciation to the assessee. The contents of the letter reveal that after the passing of the assessment order dated 26.07.07, the AO perhaps sought to amend the order as he was of the view that the excess claim of depreciation on plant machinery has been allowed to the assessee. However, the assessee explained that he h....
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....quiry. So far as the words "as he deems necessary" are concerned, the said words suggest that the enquiries which are necessary to form a view as to whether the order of the AO is erroneous and prejudicial to the interest of Revenue or not? A perusal of the above reproduced queries numbering (i) to (v) reveals that the Ld. CIT had asked the assessee about the genuineness/validity of various claims to which the assessee had given a detailed reply. Once a point wise reply was given by the assessee, then a duty was cast upon the Ld. CIT to examine the reply of the assessee and form a prima-facie opinion as to whether the order of the AO was erroneous so far as it was prejudicial to the interest of Revenue. We further note that the Ld. CIT did not raise any query as to what enquiries were made by the AO before proceeding to pass the assessment order in question. The Ld. CIT, in fact, had made queries regarding the validity of the claim of the assessee under different heads, however, has proceeded to hold that the order of the AO is erroneous so far as its prejudicial to the interest of Revenue on the ground that the AO had not made proper enquiries in this respect. In our view, once th....
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....into the explanations submitted by the assessee. 14. Now coming to the various case laws relied upon by both the parties. 15. The Ld. D.R. has relied upon the following authorities to stress the point that if the Commissioner finds that there was a lack of enquiry on the part of the AO regarding the claim made by the assessee, the order can be treated as erroneous and the Commissioner exercising his powers under section 263 can direct the AO to make appropriate enquiries/verifications etc.: (i) CIT vs. Infosys Technologies Ltd. (2012) 17 taxmann.com 203 (Karnataka - HC). (ii) CIT vs. Maithan International (2015) 56 taxmann.com 283 (Calcutta) (iii) Malabar Industrial Co. Ltd. vs. CIT (2000) 109 Taxman 66 (SC). (iv) Manmohak Properties (P.) Ltd. vs. CIT (2013) 39 taxmann.com 105 (Mumbai - Trib.) 16. The Ld. A.R., on the other hand, has relied upon the following authorities to stress that there is a difference between lack of enquiries and inadequate enquiries. The Commissioner must give a finding of fact or of law that the order is erroneous so far as it is prejudicial to the interest of Revenue by making proper enquiries after seeking explanation from the assessee. (i) ....
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....ner was justified in exercising his power under section 263 and directing the AO to make enquiries about the creditworthiness of the parties. In the case of "Manmohak Properties (P.) Ltd." (supra), the Mumbai Tribunal has held that the absence or lack of enquiry, or not so, is a matter of fact and where the Commissioner on an examination of the record issued definite finding of the fact which clearly exhibited that the assessee may be trading in shares and that he could not be regarded as an investor without further enquiry in the matter, bringing further material on record, the CIT was justified in exercising his jurisdiction under section 263. The Ld. D.R. has also relied upon the decision of the Hon'ble Supreme Court in the case of "Malabar Industrial Co. Ltd." (supra) which incidentally has also been relied upon the Ld. A.R. which we will discuss in the subsequent paras of this order. 19. Now coming to the case laws relied upon by the Ld. A.R. The Hon'ble Delhi High Court in the case of "Sunbeam Auto Ltd." (supra) has held that there is a distinction between lack of enquiry and inadequate enquiry. If there is an enquiry even inadequate that would not by itself give occasion t....
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..... The Hon'ble Bombay High Court observed in the said case that when the CIT himself , even after initiating proceedings for revision and hearing the assesse, could not say that the allowance of the claim of the assessee was erroneous,.....he simply asked the AO to reexamine the matter; that was not permissible. Almost similar proposition has been laid down in the case of "Gupta Spinning Mills Ltd." (supra) and "Amit Corporation" (supra) that Commissioner has to give a definite finding that the order of the AO is erroneous and that inadequate enquiries by itself will not make the order as erroneous. 20. We find that the Hon'ble Delhi High Court in the case of "CIT vs. Goetz (I) Ltd." (supra) has elaborately discussed the various case laws regarding the powers of the Commissioner under section 263 including "CIT vs. Nagesh Knitwars Pvt. Ltd." (2012) 345 ITR 135 (Delhi - HC) and of the Hon'ble Bombay High Court in the case of "Gabriel India Ltd." (supra) and also of the Hon'ble Delhi High Court in the case of "Sunbeam Auto Ltd." (supra) and has reached to the conclusion that the Commissioner should be able demonstrate that the view taken by the AO was not possible being legally unsus....
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....ordingly, the purchaser paid the damages to the assessee company. In the return filed, the assessee company claimed the said compensation and damages received as agricultural income. The AO accepted the same. The Commissioner, however, exercising his jurisdiction under section 263 held that the said amount was unconnected with any agricultural operation activity and was liable to be taxed under the head 'Income from other sources'. The matter ultimately travelled to the Hon'ble Supreme Court. The Hon'ble Supreme Court held that as per the provisions of section 263(1) the Commissioner has to be satisfied with twin conditions namely; (i) the order of the AO sought to be revised is erroneous, (ii) it is prejudicial to the interest of Revenue. If one of them is absent, viz., if the order of the ITO is not erroneous but it is prejudicial to the interest of Revenue or if it is erroneous but is not prejudicial to the interest of Revenue, recourse cannot be had to section 263(1). 21. From the above facts, it is revealed that even in the case "Malabar Industrial Co. Ltd. (supra), the CIT had made enquiries and thereafter concluded that the income received by the assessee on account of comp....