TaxTMI 
TaxTMI 
2015 (3) TMI 1190
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.... law in holding the assessment order as prejudicial to the interest of revenue without even pointing out any item where revenue is losing tax which was lawfully payable by the appellant. 3. The Ld. CIT has grossly erred on facts as well as in law in setting aside the assessment order u/s 263 and in directing the AO to make further enquiries / investigation as according to him, the enquiries / investigation conducted by the AO during assessment proceedings were not enough / proper." 2. The ground no.4 taken in each of the appeals is reproduced as under in respect of each appeal:- ITA No.953/DEL/2011 : "4. The Ld. CIT has grossly erred on facts as well as in law in considering the assessment order as erroneous and prejudicial to the interest of revenue on the following issues :- a) Agricultural income of Rs. 88,185/- without pointing out any discrepancy in the cash flow statement of appellant's father or the ownership of agricultural land in his father's name or the evidence of agricultural income in his father's hands who has given share from agricultural income to the appellant. b) Opening balance of Rs. 2,92,192/- as on 01/04/2000 which is....
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....ear. c) Investment in immovable assets without pointing out as to which investment was made and in which property during this year. d) No proper examination of seized material without pointing out as to which document was not at all examined by the AO. e) Considering the transactions pertaining to other assessment years during this year. f) Non-examination of the loan transactions without referring to any particular transaction which was not at all examined." ITA No.956/DEL/2011 : "4. The Ld. CIT has grossly erred on facts as well as in law in considering the assessment order as erroneous and prejudicial to the interest of revenue on the following issues :- a) Agricultural income of Rs. 77,804/- without pointing out any discrepancy in the cash flow statement of appellant's father or the ownership of agricultural land in his father's name or the evidence of agricultural income in his father's hands who has given share from agricultural income to the appellant. b) Cash deposited in the bank accounts without even pointing out as to how much cash was deposited and in which account during this year. c) Investment....
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....11 : "4. The Ld. CIT has grossly erred on facts as well as in law in considering the assessment order as erroneous and prejudicial to the interest of revenue on the following issues :- a) Cash deposited in the bank accounts without even pointing out as to how much cash was deposited and in which account during this year. b) Investment in immovable assets without pointing out as to which investment was made and in which property during this year. c) No proper examination of seized material without pointing out as to which document was not at all examined by the AO. d) Considering the transactions pertaining to other assessment years during this year. e) Non-examination of the loan transactions without referring to any particular transaction which was not at all examined. f) No proper examination of cash found during search." 3. Ground nos. 1 to 3 of these appeals relate to the common issue challenging the validity of order passed u/s 263. Both the parties agreed that the issue regarding the validity of proceedings initiated u/s 263 which has been challenged in all these appeals by way of ground nos. 1 to 3 be disposed....
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.... said income. During the course of assessment proceedings, documentary evidence to substantiate the said agriculture income, like khasara/ Girdawari document, etc. were neither called for by the A.O. nor were filed by you, either along with the return of income, or during the course of assessment proceedings. As such, accepting the agriculture income as declared by you in the return of income, by the Assessing Officer without any verification, enquiry and application of mind is erroneous and prejudicial to the interest of the revenue. 2. Cash in hand as on 01/04/2000 : As per the details filed by you during the course of assessment proceedings, you have shown cash in hand of Rs. 2,92,192/- as on 01/04/2000. The source and genuineness of the said cash at the beginning of the block period was never enquired by the A.O., during the course of assessment proceedings. From your bank statements it is seen that you have made small amounts of withdrawals from your bank account, as and when required for your day to day expenditure. The A.O failed to enquire the purpose of making small withdrawals, if their was such huge cash in hand lying in your possession. The A. also failed to confront....
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....t. of Mizoram or Investigation Wing of the Department in this regard. As such, non verification of various investments made by you, either in your own name, or name of any other person and accepting the same without any enquiry and application of mind is erroneous and prejudicial to the interest of revenue. 5. Non examination of the seized material : During the course of search proceedings, a diary market as Annexure A/RK/211/2, Laptop and other incriminating documents were found and the same were seized by the Investigation Wing. It is seen that the said documents were not properly examined by the A.O during the course of assessment proceedings. Regarding the Laptop, the A.O only observed that nothing incriminating regarding any land deal has been found. However, the A.O failed to examine the other files, if any, containing in the said laptop and their financial implication. Documents relating to construction of house within the block period was found and seized during the course of search proceedings, but again these and other seized materials were also not properly investigated. As such, the non proper examination of seized material by the Assessing Officer is erroneous and p....
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.... (i) agriculture ; or (ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market; or (iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in paragraph (ii) of this sub-clause; (c) any income derived from any building owned and occupied by the receiver of the rent or revenue of any such land, or occupied by the cultivator or the receiver of rent-in-kind, of any land with respect to which, or the produce of which, any process mentioned in paragraphs (ii) and (iii) of sub-clause (b) is carried on : However in the case of the assessee, he is clearly not owning any such land or earning any such income. Further no expenses have been claimed by the assessee, purported to have been incurred to earn the said agriculture income. It is also seen that during the course of assessment proceedings, documentary evidence to substantiate the said agricu....
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.... this reply, the assessee has filed a statement, which is mentioned as "A cash flow statement of Mr. K. Bakkaiah / Mr. K. Yelleshwar." However, this statement is neither signed by Mr. K. Bakkaiah nor Mr. K. Yeslleshwar. Even the assessee himself or his counsel have not signed this statement. Since the statement was unsigned, it had no legal value. Even otherwise, the payment received by the assessee from his father or brother, under no provisions of the Income Tax Act, can be considered as agriculture income of the assessee. As the assessee is neither owning any agriculture land, nor is himself a cultivator, none of the receipts of the assessee can be regarded as his agriculture income. As mentioned in the earlier paras, the Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. Vs CIT [2000] 243 ITR 83 (SC) has held that an incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. It was further held that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing officer accepting the same without application of mind as such will be erroneous....
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....nt proceedings, the assessee vide his submission dated 24/11/2008, has submitted the balance sheet dated 31/03/2000, which has been carried forward as opening cash in hand as on 01/04/2000. The assessee also contested that this issue has no relevance with the income taxable in the block period 9AY 2001-02- AY 200607). The assessee further submitted that source of opening cash balance as on 01.04.2000 is the income earned in the preceding period which did not fall within the purview of block assessment and consequently the subject notice u/s 263 on this aspect is totally extraneous. The above contentions of the assessee were considered and examined and it was found that the same are not factually correct. There is nothing in the Statement of Affairs for the year ending 31/03/2000, which can justify the cash in hand of Rs. 2,92,192/-. Moreover, the assessee has not filed any statement of affairs with his regular return of income. During the search at the office and residential premises of the assessee, no such books of accounts or statement of affairs were found. Hence, it is apparent, that the statement of affairs was an after thought, prepared by the assessee to justify his unex....
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....tted that A.O had undertaken reconciliation of deposit in bank account and subsequently vide letter dated 18/08/2008 has raised specific query with regard to verification of deposits in bank account and discrepancies as identified by the A.O. The assessee submitted that in this notice, the A.O has also asked the assessee to file copies of all bank statement alongwith the explanation of the entries. The assessee further submitted that the aforesaid queries were duly replied by him vide letter dated 15/11/2008. The assessee also submitted that the bank statement of the ICICI Bank, Pondichery was also submitted alongwith the said reply. Thus it was contended by the assessee that it is incorrect to allege that the AO had accepted the deposits made in bank account without proper verification and enquiry. The above contentions of the assessee were considered and examined and it was found that the same are factually incorrect. Thought it is correct that the Assessing officer has issued the notice specifying the discrepancies and asking for assessee's explanation, however, the said discrepancies were itself mostly inaccurate. Out of the 34 discrepancies pointed out by the assessing offi....
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....in the Annual Property Return filed with the Government, the assessee has shown eight properties. Besides Page 51, Annexure A-1, seized from the residence of assessee at Delhi is hand written note about construction of a house within the block period. This paper contained details of monies received, amounting to Rs. 6,39,000/- and also Expenditure details regarding purchase of building for Rs. 6,66,000/-. It is observed that the assessing officer during the course of assessment proceedings had not examined the various properties held by the assessee; evidence regarding the date of their purchase; source of said investments, if purchased during the block period and the purpose for which the same were put to use. A letter was written to Govt. of Mizoram by the Investigation Wing, regarding the source of investment, as declared by the assessee in his IPR or otherwise. However, it is observed that the A.O did not make any further correspondence with Govt. of Mizoram or Investigation Wing of the Department in this regard. Accordingly in the notice dated 09.07.2010, the assessee was show cause as to why the Order passed by the A.O., without verification of various investments made ....
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....tioned. Like wise in the case of Bibi Nagar the size, location as well as value of the plot are all missing. The assessee alongwith this letter has also filed a statement containing details of member of Civil Services Officers Welfare Society, of which the assessee had also become member for acquiring residential plot at Greater Noida. This statement is signed by the President, Secretary and Treasurer of the Society, as well as of the Chartered Accountant, M/s Bhatia & Bhatia. As per this statement the contribution made by the assessee in this society as on 01/04/2005 and 31/03/2006 was Rs. 12,70,217/- and Rs. 13,20,217/- respectively. However, this figures also do not tally with the statement of affairs filed by the assessee, during the course of assessment proceedings. On the issue of the document seized from the residence of the assessee at Delhi, which is a hand written note regarding sum of Rs. 6,39,000/- received and expenditure of Rs. 6,66,000/- on purchase of building, the assessee did not furnished any reply and documentary evidence to substantiate the same, though there was specific query of this issue. However, inspite of the above mentioned discrepancies and in....
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....2008 respectively. The assessee further submitted that vide letter dated 24.11.2008 he explained that a sum of Rs. 1,80,000/- was incurred by him, as contribution for repair and renovation of his old house, out of the funds available with him and the a balance amount of Rs. 3,41,600/- was incurred by assessee's father out of the receipts from the maturity of the chit fund for which the necessary evidence dated 24.11.2008. The assessee also submitted that the A.O has categorically confirmed in para2 of his assessment order that the return of income along with all the details were examined with reference to the seized / impounded materials. The above contentions of the assessee were considered and examined and it was found that the same are not factually correct. The assessing officer during the course of assessment proceedings has asked the assessee to explain the contents of diary seized. However, the assessee instead of explaining the entries contained therein, submitted a vague reply that information contained in the said diary does not has any financial implications. The reply of the assessee filed before the assessing officer is as follows:- "It may be appreciated t....
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....ies in the diary and no explanation was submitted. It is also clear from the facts of the case that the questionnaire was issued by the assessing officer on 18/08/2008. However, subsequent to the operation of the laptop on 25/11/2008 (as mentioned by the assessee), no query, on the issue was raised by the assessing officer. Regarding, the documents seized during the course of search proceedings, relating to construction of house within the block period, as also mentioned in para 4 above, the said documents showed receipt of Rs. 6.39 lakhs and expenditure incurred by the assessee on purchase of building amounting to Rs. 6,66,000/-. The assessee has contended that reply on this issue was filed by him during the course of assessment proceedings on 24/11/2008, wherein it was submitted that a sum of Rs. 1,80,000/- was incurred by the assessee out of the funds available and Rs. 3,41,600/- was incurred by his father. Perusal of the above submission of the assessee, shows that the assessee has given details of Rs. 5,21,600/- (1,80,000 + 3,41,600), whereas the amount invested as per the document was Rs. 6,66,000/-. Moreover, as per the document, the investment was made by the assessee ou....
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.... that, for the purposes of this sub-section, - (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include - (i) an order of assessment made by the Assistant Commissioner or Deputy Director or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the power or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorised by the Board in this behalf under section 120; (b) "record" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to ha....
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....e assessee. 8. For invoking the provisions of section 263, we do agree with the Ld. A.R both the conditions that the order passed by the A.O is erroneous and also that it is prejudicial to the interest of Revenue must be satisfied. If one of them is absent, the provisions of section 263 cannot be invoked. The term „erroneous‟ has not been defined under the Income-tax Act but it is well settled that each and every type of mistake or error committed by the A.O cannot be said to be an error. An order can be said to be erroneous if there is incorrect assumption of facts or incorrect application of law in the order by the A.O. If the A.O after making the enquiries and examining the records taken one of the possible view, it cannot be said that the order passed by the A.O was erroneous. 9. We noted in the case of the assessee the CIT invoked the jurisdiction u/s 263 on the basis of the reasons as stipulated in the preceding paragraphs. 10. From these reasons it is apparent that it was noted by CIT from the assessment records so far as agricultural income is concerned that during the course of assessment proceedings document to substantiate the agricultural return lik....
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.... of bank statement however, bank statement of ICICI Bank Savings Account No. 05601502207, 47 Mission Street, Pondichery had not been filed although the same was mentioned in the covering letter. The A.O did not point out the same which prove that this bank account was not at all examined. The Ld. A.R again before us relied on the decision of the Delhi High Court in the case of CIT Vs DG Housing Projects Ltd., 343 ITR 329 but expressed his inability to prove that any query has been raised by the assessing officer in this regard. 11.2 Similarly, in respect of investment in immovable assets the CIT noted that the assessing officer during the course of the assessment proceedings has not examined the various properties held by the assessee even though seized material page no.51 annexure „A1‟, consists of detail of eight properties and paper found from the residence shows the written note about the construction note of a house within the block period, details of Rs. 6,39,000/- received, and also the details of expenditure for purchase of building for Rs. 6,66,000/-. Simply a letter was written to Govt. of Mizoram, but no further correspondence was made. Again when we inqui....
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....ficer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. The Commissioner of Income-tax cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the Commissioner of Income-tax must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the Commissioner of Income-tax and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in law. In some cases possibly though rarely, the Commissioner of Income-tax can also show and establish that the facts on record or inferences 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 erroneo....
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....o be erroneous. In the case of ITO Vs. DG Housing Projects Ltd,(supra) as relied by the Ld. A.R the Hon‟ble High Court has hold that where there is no inquiry order becomes erroneous. The relevant finding of the Hon‟ble High Court are reproduced as under:- "11. The Revenue does not have any right to appeal to the first appellate authority against an order passed by the Assessing Officer. Section 263 has been enacted to empower the Commissioner of Income-tax to exercise power of revision and revise any order passed by the Assessing Officer, if two cumulative conditions are satisfied. Firstly, the order sought to be revised should be erroneous and, secondly, it should be prejudicial to the interests of the Revenue. The expression "prejudicial to the interests of the Revenue" is of wide import and is not confined to merely loss of tax. The term "erroneous" means a wrong/incorrect decision deviating from law. This expression postulates an error which makes an order unsustainable in law. 12. 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 i....
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....lly been satisfied. Even the appellant's return did not contain such details from which a conclusion in accordance with law could be drawn. The implication of the judgment by Apex Court in the case of CIT vs. Sesa Goa Ltd. 271 ITR 332 (SC) has not been analyzed to find out as to whether the new machinery on which additional depreciation has been claimed is acquired or installed in the assessee's business of manufacture or production of any article or thing or that it was a machinery installed in the trading business or otherwise in a business which does not amount to manufacture or production of any article or thing as clarified in the Supreme Court judgment in Sesa Goa Ltd., supra. No findings of fact are shown to have been recorded by the Assessing Officer on these aspects. The nature of business mentioned at page no. 1 of the assessment order simply states the ex-facie position as is narrated by the assessee in the return of income filed by him. The same does not constitute any finding of fact reached after making any enquiry by the Assessing Officer. It thus is apparent that the Assessing Officer accepted the claim on its face without performing his functions as are required of....
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....roviding opportunity of being heard to the assessee. This would cause no prejudice to the assessee. Having regard to the judgment rendered by Hon'ble Delhi High Court in the case of Gee Vee Enterprises vs. Addl. CIT [1975] 99 ITR 375 (Del), Hon'ble Rajasthan High Court in the case of Smt. Renu Gupta vs. CIT [2008] 301 ITR 45 (Raj.) and Hon'ble Madhya Pradesh High Court in CIT vs. Deepak Kumar Garg [2008] 299 ITR 435 (MP) and the findings reached as aforesaid, we find no infirmity in the decision taken by learned CIT. the grounds raised in appeal, therefore, stand rejected and appeal is dismissed." 15. It is not a case where the A.O has accepted the income of the assessee by taking one of the possible views. It is also not a case of inadequate inquiry on all the issues but a case where no inquiry has been conducted by the A.O in three issues out of the five issues on which show cause notice was issued by the CIT u/s 263. 16. We have gone through the decision of CIT vs. Vodafone Essar South Ltd. 212, Taxmann 184 (Del.). We noted that this decision will also not assist the Assessee. In this decision the Hon‟ble High Court relied on the earlier decision of the H....
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....ner noted that the Income Tax Officer passed the order of nil assessment without application of mind. Indeed, the High Court recorded the finding that the Income Tax Officer failed to apply his mind to the case in all perspective and the order passed by him was erroneous. It appears that the resolution passed by the board of the appellant company was not placed before the Assessing Officer. Thus, there was no material to support the claim of the appellant that the said amount represented compensation for loss of agricultural income. He accepted the entry in the statement of the account filed by the appellant in the absence of any supporting material and without making any inquiry. On these facts the conclusion that the order of the Income Tax Officer was erroneous is irresistible. We, are, therefore of the opinion that the High Court has rightly held that the exercise of the jurisdiction by the Commissioner u/s 263(1) was justified." 21. This itself proves non application of mind on the part of the Assessing Officer and accepting the income of the assessee without making an enquiry will tantamount that the order is erroneous and prejudicial to the interest of the Revenue. Hon....
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.... case of Rajalaksmi Mills Ltd. Vs. Income Tax Officer [2009] 121 ITD 343 (Chennai) (SB). The facts of this case were that the assessee enclosed the balance sheet along with the return and in the balance sheet the assessee made a provision for gratuity amounting to Rs. 7,85,600/-. The assessee claimed it as deduction in the return of income. The Assessing Officer allowed the same without making any discussion in the order of assessment. The CIT by invoking the provision of section 263 took the view that the order was erroneous and prejudicial to the interest of revenue. The Special Bench of I.T.A.T. under these facts has held as under:- "It is not necessary for the Commissioner to make further enquiries before cancelling the assessment order of the Assessing Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Assessing Officer should have made further inquiries before accepting the statements made by the assessee in the return. The reason is obvious. Unlike the civil court which is neutral to give a decision on the basis of evidence produced before it, an Assessing Officer is not only an adjudicator but is also....
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....ficer must have gone through all these details. However, Hon'ble Supreme Court in the case of Malabar Industries, Hon'ble Delhi High Court in the case of Gee Vee Enterprises as well as in the case of Ashok Logani and DLF Power Equipments, it has been held that if the Assessing Officer failed to go into the issues in proper perspective and his approach is perfentory then the order would be termed as erroneous which would ultimately caused a prejudice to the assessee on escapement of income from tax. The judgment of the Hon'ble Delhi High Court in the case of Ashok Logani as well as in the case of DLF Power are the latest decisions on this issue. Similarly, Learned DR has brought to our notice the decision of Hon'ble Delhi High Court dated 15.2.2002 in the case of CIT vs. Regency Park Property Management Services Pvt. Ltd. reported in [2012] TIOL Page 75 where it has been held that if Assessing Officer had not dealt with the details and examined the issues then there was an error on the part of the Assessing Officer upon which action u/s 263 can be justified. Thus, considering all these aspects, we are of the view that learned Commissioner has rightly taken c....