TaxTMI 
TaxTMI 
2016 (5) TMI 1162
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....e heading "Rane C M". Based on this information, the assessing officer reopened the assessment of both the years under consideration by issuing notices u/s 148 of the Act. The AO completed the assessments u/s 143(3) r.w.s. 147 of the Act, accepting the explanations of the assessee that the said incriminating document do not relate to him. Thus the assessing officer completed the assessment without making any addition, i.e., accepting the income returned by the assessee. 3. On examination of the assessment records, the Ld Pr. CIT took the view that the assessing officer did not examine and verify the issues by correlating the evidences found during the course of search conducted in the hands of R.N.S. Infrastructure. Accordingly he held that the assessment orders passed for both the years under consideration is erroneous and prejudicial to the interests of revenue. The relevant observations made by Ld Pr. CIT in this regard are extracted below, for the sake of convenience. "2......On perusal of records, the fo11owing issues were noticed in the aforesaid order u/s 143(3) r.w.s 147 of the income-tax Act, 1961 dated 31.03.2015 for the A.Y. 2007-08:- (1) The case was reopened for ....
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....rch, which resulted in incorrect computation of income for both the years as the amounts shown to be received were not been added to the total income by the Assessing Officer. For the said reasons, the assessment order made by the Assessing Officer was found to be erroneous in so far as it was prejudicial to the interest of the revenue. Hence, a notice u/s 263 of the Act dated 1.3.2016 was issued to the assessee as the order was found to be erroneous & prejudicial to the interest of the revenue within the meaning of section 263 of the Income-tax Act. 1961 and the assessee was allowed an opportunity of being heard and to show cause as to why an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment within the meaning of Section 263 of the Income Tax Act, 1961 may not be passed in his case. Similar notice was issued for A.Y. 2008-09 as well with minor modifications." 4. The assessee contended before the Ld Pr. CIT that the assessing officer has reopened the assessment of both the years for the specific purpose of assessing the income, if any, noticed in the incriminating documents. The assessee had objected to the reopening, but th....
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.... could not be vested with the power to re-examine the accounts and determine the income himself at a higher figure. The claim was allowed by the Assessing Officer on being satisfied with the explanation of the assessee and such decision cannot be held to be 'erroneous' simply because in his order he did not make an elaborate discussion in that regard. The decision is distinguishable on facts as in the instant case the issue is not the nature of expenditure being capital or revenue but failure to conduct inquiries and examine the evidence found in the course of the search in which transactions relating to the assessee were mentioned. Hon'ble Delhi High Court in the case of CIT vs. Sunbeam Auto Ltd 332 ITR 167, 182 also held that the opinion of the Assessing Officer in treating the revenue expenditure was plausible and thus, there was no material before the Commissioner to vary that opinion and ask for fresh inquiry. In the case of the assessee, on the other hand, on examination of records as they exist now, it is evident that the Assessing Officer did not appreciate the full facts of the case and vital evidences being the date of birth, the date of assumption of the public office an....
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....use (a) of Explanation 2 below sub section (1) of section 263 of the Income tax Act, 1961, the order passed by the Assessing Officer is deemed to be erroneous and prejudicial to the interests of revenue." 6. Aggrieved by the common order passed by Ld CIT, the assessee has filed these appeals before us. 7. The Ld A.R submitted that the assessing officer had reopened the assessment of both the years under consideration on the basis of the incriminating documents found during the course of search conducted in the hands of M/s R.N.S infrastructure in order to assess the income escaped in the hands of the assessee. He submitted that the objection raised by the assessee for reopening of the assessment was overruled by the AO. Thereafter the assessee has cooperated fully with the assessing officer by furnishing necessary details and has strongly denied the transactions noted down in the document. The Ld A.R submitted that the assessing officer was satisfied with the explanations given by the assessee and hence did not make any addition. He submitted that the assessing officer has taken a possible view after due application of mind and hence the Ld Pr. CIT was not justified in holding t....
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....icial to the interest of the revenue. For this proposition he placed strong reliance on the decisions rendered by Hon'ble Supreme Court in the case of Malabar Industrial Co. (243 ITR 83)(SC) and CIT Vs. Max India Ltd (295 ITR 282)(SC). 9. On merits, the ld A.R submitted that the impugned incriminating document was a dumb document and hence the tax authorities could not place any reliance on it. In this regard, he placed reliance on the decision rendered by Hon'ble Supreme Court in the case of Central Bureau of Investigation vs. V.C.Shukla (1998)(3 Supreme Court Cases 410) and more particularly to the following observations made by Hon'ble Apex Court:- "37. In Beni Vs. Bisan Dayal (AIR 1925 Nag 445: 89 IC 371), it was observed that entries in books of account are not by themselves sufficient to charge any person with liability, the reason being that a man cannot be allowed to make evidence for himself by what he chooses to write in his own books behind the back of the parties. There must be independent evidence of the transaction to which the entries relate and in absence of such evidence no relief can be given to the party who relies upon such entries to support his claim agains....
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....lic officer, constituency form which he won election etc. has led the AO to frame the assessment in an arbitrary manner and hence the said assessment order is liable for revision as held in the case of CIT Vs. V.P. Agarwal (68 Taxman 236)(All). He further submitted that the Explanation 2 given under sec. 263(1), which was inserted by the Finance Act 2015 w.e.f. 1.6.2015, provides that the order passed without making inquiries or verification which should have been made shall be deemed to be erroneous in so far as it is prejudicial to the interest of the revenue. He submitted that the said Explanation 2 is clarificatory in nature and hence the same should be applied retrospectively. 11. In the rejoinder, the Ld A.R submitted that the assessing officer has made due enquiries with regard to the impugned incriminating document, since the AO has reopened the assessment to examine the same only. He submitted that the alleged incriminating document was a dumb document and even the person from whom it was seized, did not implicate the assessee at all in the statement taken from him u/s 132(4) of the Act. He submitted that the assessing officer has accepted the explanations of the assessee....
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.... the record of any proceedings under the 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, to pass an order upon hearing the assessee and after an enquiry as is necessary, enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. The key words that are used by section 263 are that the order must be considered by the Commissioner to be "erroneous in so far as it is prejudicial to the interests of the Revenue". This provision has been interpreted by the Supreme Court in several judgments to which it is now necessary to turn. In Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83, the Supreme Court held that the provision "cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer" and "it is only when an order is erroneous that the section will be attracted". The Supreme Court held that an incorrect assumption of fact or an incorrect application of law, will satisfy the requirement of the order being erroneous. An order passed in violation of the principles of natural justice or without app....
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....lso furnished to the assessee the reasons for reopening of the assessments and the assessee has also objected to the reopening. The assessing officer has specifically addressed those objections and has also rejected the same. In the notice issued u/s 142(1) of the Act, the assessing officer has asked the assessee to clarify about the impugned incriminating document and also to give explanations as to why the amounts mentioned therein should not be added back to the total income of the assessee. In response thereto, the assessee has filed a reply, wherein he has denied any connection with the incriminating document. The assessing officer was satisfied with the said explanations and accordingly did not make any addition to the total income in both the years. 15. However, the Ld Pr. CIT has taken the view that the assessing officer has completed the assessments without making proper enquiries with regard to the incriminating documents. According to Ld Pr. CIT, the AO should have made further enquiries in this matter. Accordingly he has passed the impugned revision order. 16. We have noticed earlier that the Ld Pr. CIT can revised the order only if it is shown that the assessment ord....
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....lowed the above said view in the case of CIT Vs. Sunbeam Auto Ltd (2011)(332 ITR 167). The Hon'ble Delhi High Court has also extracted following observations made by the Tribunal:- "38. Still further, the Hon'ble Supreme Court in Malabar Industrial Co. (2000) 243 ITR 83 has held that when two views are possible and the Assessing Officer has taken one of the possible view, then the order cannot be held to be prejudicial to the interest of the Revenue. Since the Commissioner of Income tax could not come to a definite finding that the expenditure in question was a capital expenditure in the proceedings under section 263, in our opinion, the order of the assessing officer could not be held to be erroneous." 18. In the case of Nagesh Knitwears P Ltd (2012)(345 ITR 135), the Hon'ble Delhi High Court has elucidated and explained the scope of the provisions of sec. 263 of the Act and the same has been extracted by the Delhi High court in the case of CIT Vs. Goetze (India) Ltd (361 ITR 505) as under:- "Thus, in cases of wrong opinion or finding on merits, the Commissioner of Income tax has to come to the conclusion and himself decide that the order is erroneous, by conducting necessar....
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....n accordance with the mandate of the provisions of sec. 263 of the Act. The Ld Pr. CIT has taken support of the newly inserted Explanation 2(a) to sec. 263 of the Act. Even though there is a doubt as to whether the said explanation, which was inserted by Finance Act 2015 w.e.f. 1.4.2015, would be applicable to the year under consideration, yet we are of the view that the said Explanation cannot be said to have over ridden the law interpreted by Hon'ble Delhi High Court, referred above. If that be the case, then the Ld Pr. CIT can find fault with each and every assessment order, without conducting any enquiry or verification in order to establish that the assessment order is not sustainable in law and order for revision. He can also force the AO to conduct the enquiries in the manner preferred by Ld Pr. CIT, thus prejudicing the independent application of mind of the AO. Definitely, that could not be the intention of the legislature in inserting Explanation 2 to sec. 263 of the Act, since it would lead to unending litigations and there would not be any point of finality in the legal proceedings. The Hon'ble Supreme Court has held in the case of Parashuram Pottery Works Co. Ltd Vs. I....
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....iven by the assessee and did not make any addition. We have noticed that the Hon'ble Supreme Court has held in the case of Central Bureau of Investigation Vs. V.C. Shukla and Others (supra) that the entries in the books of account by themselves are not sufficient to charge any person with liability. Hence, in our view, it cannot be held that the assessing officer did not carry out enquiry or verification which should have been done, since the facts and circumstances of the case and the incriminating document was not considered to be strong by the AO to implicate the assessee. Thus, we are of the view that the assessing officer has taken a plausible view in the facts and circumstances of the case. Even though the Ld Pr. CIT has drawn certain adverse inferences from the document, yet it can seen that they are debatable in nature. Further, as noticed earlier, the Ld Pr. CIT has not brought any material on record by making enquiries or verifications to substantiate his inferences. He has also not shown that the view taken by him is not sustainable in law. Thus, we are of the view that the Ld Pr. CIT has passed the impugned revision orders only to carry out fishing and roving enquiries ....