TaxTMI 
TaxTMI 
2017 (8) TMI 318
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....r of Income-tax has erred in law and on facts in initiating the proceedings under section 263 of the Income-tax Act, 1961. (4) The learned Principal Commissioner of Income-tax has erred in law and on facts in holding that the assessment order passed by the learned Assessing Officer is erroneous and prejudicial to the interests of the Revenue. (5) The learned Principal Commissioner of Income-tax has erred in law and on facts in cancelling the assessment order passed by the learned Assessing Officer. Without prejudice to the aforesaid grounds (6) The learned Principal Commissioner of Income-tax has erred in law and on facts in cancelling the assessment order and directing the Assessing Officer to conduct necessary enquiries instead of conducting the enquiries himself. (7) The order appeal against is contrary to law and facts. (8) The appellant craves leave to add, amend, alter or withdraw any ground of appeal or raise any new ground of appeal during the pendency of appeal. 2. The only issue involved as per the grounds of appeal is that the order passed by the Assessing Officer was not erroneous and prejudicial to the interest o....
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....ssing Officer has not properly examined/enquired into the details for establishing the creditworthi ness and genuineness of the transaction. 3. Thus during the course of assessment proceedings, the Assessing Officer has not examined/enquired into the details of the facts of the cases properly." 4. The Principal Commissioner of Income-tax-2, Lucknow was not satisfied with the reply of the assessee. He, therefore, cancelled the assessment and directed the Assessing Officer to frame a fresh assessment order as per law after making necessary enquiry and examination of the issues involved and after affording fair and reasonable opportunity of being heard to the assessee, by observing as under : "I have considered the reply of the assessee. The contention of the assessee is not acceptable. The perusal of the assessment records reveals that the Assessing Officer has not made enquiry and verification on this issues which should have been made to establish the genuineness and creditworthiness of the payment of consultancy charges. It is clear that the Assessing Officer has not conducted necessary enquiry and verification before completing the assessment. The order is, t....
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....hich were mentioned by the assessee party-wise for Den Enjoy Cable Networks Pvt. Ltd. It was stated that the assessee has shown an income of Rs. 12,53,938 against the income shown in Form No. 26AS at Rs. 11,84,970. In respect of Big Magic Ltd., it was mentioned that difference of Rs. 5,71,163 has arisen as the assessee has billed and booked the income in April, 2013 i.e., in the financial year 2013-14 relevant to the assessment year 2014-15 and the assessee has not taken any advantage of the TDS of Rs. 57,117 during the impugned assessment year. In respect of receipt from Reliance Television Pvt. Ltd., the assessee has taken a sum of Rs. 3,30,532 in its books of account since the assessee has billed and booked the said income in April 2013, which corresponds to the assessment year 2014-15. The assessee has even not taken any advantage of the TDS amounting to Rs. 33,051. The assessee has even submitted copy of the accounts of these parties and relevant evidence to prove these facts. Even affidavit of the director was also submitted. The books of account were duly produced as has been asked for as is apparent from the order-sheet entry he made on February 16, 2015, March 14, 2015 and....
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....liance was placed on the decision of the hon'ble Delhi High Court in the case of CIT v. Vikas Polymers [2012] 341 ITR 537 (Delhi) ; [2010] 194 Taxman 57 (Delhi). The headnote of which reads as under : "Section 263 of the Income-tax Act, 1961-Revision-Of orders prejudicial to interests of Revenue-Assessment year 1982-83- Whether for exercising power under section 263, it is a pre-requisite that Commissioner must give reasons to justify exercise of suo motu revisional powers by him to reopen a concluded assessment and exercise of power being quasi-judicial in nature, reasons must be such as to show that enhancement or modification of assessment or cancellation of assessment or directions issued for a fresh assessment were called for, and must irresistibly lead to conclusion that order of Assessing Officer was not only erroneous but was also prejudicial to interests of Revenue-Held, yes-Whether before exercising revisional powers, assessee must be called, his explanation sought for and examined by Commissioner, and thereafter, if Commissioner still feels that order is erroneous and prejudicial to interests of Revenue, Commissioner may pass revisional orders-Held, yes-Whet....
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....016). 11. In respect of Explanation 2 to section 263 of the Act, reliance was placed on the decision of the Income-tax Appellate Tribunal Jabalpur Bench in the case of Jashn Beneficiary Trust, v. Asst. CIT [2017] 57 ITR (Trib) 29 (Jablpur) (I. T. A. No. 100/Jab/2016 dated March 15, 2017 ) in which the Tribunal under paragraph 11 took a view that for the applicability of clause (a) of Explanation, it is necessary that the Principal Commissioner must mention in the order what inquiries or verification the Principal Commissioner must mention in the order what inquiries or verification the Principal Commissioner desires to have been carried out by the Assessing Officer. Referring to the order passed under section 263 of the Act, it was submitted that the Principal Commissioner did not point out which enquiry the Assessing Officer should carry out. Therefore, it was contended that the order passed by the Principal Commissioner of Income-tax-2, Lucknow is not valid and must be cancelled. 12. The learned Departmental representative on the other hand, relied on Explanation 2(a) of section 263 of the Act, which defines the word "erroneous" and on that basis contended that after amendm....
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....d and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. Explanation 2.-For the purposes, of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if in the opinion of the Principal Commissioner or Commissioner- (a) the order is passed without making inquiries or verification which should have been made ; (b) the order is passed allowing any relief without inquiring into the claim ; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119 ; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), ....
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.... 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 Assessing Officer cannot be said to be an error. The expressions "erroneous", "erroneous assessment" and "erroneous judgment" have been defined in Black's Law Dictionary, Sixth Edition, page 542. According to the definition "erroneous" means "involving error, deviating from the law". "Erroneous assessment" refers to an assessment that deviates from the law and is therefore invalid, and is defect that is jurisdictional in its nature, and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. Similarly, "erroneous judgment" means "one rendered according to course and practice of court but contrary to law, upon mistaken view of law, or upon erroneous application of legal principles". Thus, an order can be said to be erroneous if there is incorrect assumption of facts or incorrect application of law by the Assessing Officer. If the Assessing Officer after making the enquiries and examining the rec....
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.... dated December 9, 2014. The assessee in this regard submitted detailed reply explaining the gross receipts and even specifically clarified vide letter dated May 14, 2015 explaining why there is a difference in the amount shown in Form No. 26AS at Rs. 1,87,85,136 and in the books at Rs. 1,79,85,012. The reply of the assessee in this regard is appearing at pages 55 to 58 of the paper book. 17. So far the payment of consultancy charges are concerned, the Assessing Officer specifically made query not only by way of notice but also during the course of hearing. The assessee vide its letter dated December 29, 2014 explained how the consultancy charges have been paid and to whom these were paid. Even copy of the agreements with Anjali Arora and Siddhart Srivastava for the payment of Rs. 10 lakhs and Rs. 5 lakhs respectively were also filed vide letter dated February 16, 2015. Not only this, the assessee has also filed explanation why consultancy charges have been paid, vide its letter dated May 14, 2015. The Assessing Officer, after being satisfied, completed the assessment without making any addition or disallowance in respect of queries made by him. 18. No doubt clause (a) of the....
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....the assessment order passed by the Assessing Officer was cancelled on the ground that the Assessing Officer has not made proper enquiry and verification in respect of the issue as discussed above. This, in our considered opinion, cannot be sufficient ground for cancelling the assessment. While making the assessment order, it is the satisfaction of the Assessing Officer who made the enquiry and it should be the touchstone of assessment order passed by him. No cogent material or evidence was brought to our knowledge by the learned Departmental representative which may prove that the view taken by the Assessing Officer in the case of the assessee was unsustainable in law. Therefore, we are of the view that the order passed by the Commissioner of Income-tax is illegal and without jurisdiction. If the order passed by the Commissioner of Income-tax is sustained then this will permit the illegality to continue and the subsequent action is carried out on the illegal order is also illegal per se. 21. We find this case of the assessee is duly covered by the decision of the hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) wherein their Lord....
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....of the Commissioner of Income-tax in revision proceedings, inter alia, include the name of these sub-contractors, their permanent account numbers, their permanent addresses, amount given to them, name of work entrusted to them, nature of such work and statements recorded by the Assessing Officer, etc. These details reveal that during the course of examination under section 131, no question was put to many of these sub-contractors as to the variation in their signatures. Similarly, no question was put to them for the reasons of discounting with the shroff. It is the stand of the assessee right from the beginning that all these sub-contractors were mainly working for the assessee and they did not have any office set up and since they were working for the assessee, they have used the assessee's address for correspondence, especially with the Government for timely communication. These persons are eligible under section 44AD to file their returns under presumptive scheme of taxation. All these persons were produced before the Assessing Officer in revision proceedings and no question was put to them though their statement on oath was recorded. All these persons have confirmed in revi....
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.... of the Tribunal and hence, the appeal filed by the Revenue deserves to be dismissed.-CIT v. Arvind Jewellers [2003] 259 ITR 502 (Guj) ; [2002] 177 CTR (Guj) 546 and Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) ; [2000] 159 CTR (SC) 1 relied on)". 23. In our opinion, the impugned case is duly covered by this decision also. 24. The hon'ble Supreme Court in the case of CIT v. Max India Ltd. [2007] 295 ITR 282 (SC) has held as under (headnote) : "The phrase 'prejudicial to the interests of the Revenue' in section263 of the Income-tax Act, 1961, has to be read in conjunction with the expression 'erroneous' order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when the Assessing Officer adopts one of two courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the Revenue, unless the view taken by the Assessing Offic....
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....de by them in the assessee-company. The Commissioner under section 263 of the Act directed the Assessing Officer to conduct further enquiries in respect of the share application money of Rs. 47 lakhs. He also held that the Assessing Officer had erred in determining the loss after issue of notice under section 148 of the Act. He mentioned lacunas and defects in the statements of the seven share applicants and the manner in which they were recorded. Accordingly, he held that the Assessing Officer had failed to make necessary verification and enquiries, which were required. The Tribunal quashed the order under section 263 of the Act passed by the Commissioner. On appeal : Held, dismissing the appeal, that the Tribunal had held that the order of the Assessing Officer could not be regarded as erroneous even if the Assessing Officer had failed to carry out necessary verification and required enquiries in respect of the share application money, as no addition had been made on account of the reasons for reopening, which were recorded before issue of notice under section 148 of the Act. It had held that the Assessing Officer could not have made an addition on account of the share a....
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....d with the conclusion. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. The assessee was a manufacturer of car parts. Its return for the assessment year 2001-02 was taken up for scrutiny and assessment was completed. In revisional proceedings, the solitary objection of the Commissioner was that the expenditure on tools and dies aggregating to Rs. 10,56,69,367 was allowed as revenue expenditure without a detailed investigation. After considering all the materials furnished by the assessee the Commissioner took the view that the accounting practice followed by the assessee to debit the entire cost of tools and dies in the year of installation was not correct and he remitted the case to the Assessing Officer for re-examination. The Tribunal allowed the claim of the assessee. On appeal : Held, dismissing the appeal, (i) that the Assessing Officer allowed the claim on being satisfied with the explanation of the assessee. Such decision of the Assessing Officer ....