TaxTMI 
TaxTMI 
2017 (11) TMI 1077
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....12.2016 on the grounds that third party confirmations in respect sundry creditors and debtors was not done by the A.O., reason for low rate of profit was not examined by the A.O. and cash deposits of Rs. 50,000/- each on 198 occasions in various bank account were not verified by the A.O. 2.1 In response the show cause notice u/s 263, the assessee submitted that the A.O. had duly raised the query about confirmation from third parties and the relevant papers had been submitted during the course of scrutiny proceedings. The assessee also submitted before the Ld. Pr.CIT that A.O. had raised the query on low rate of net profits and the same was also responded to by the assessee. On the issue of cash deposits, it was submitted that the assessee had filed complete bank statements as well as produced the cash book before the A.O. and had also explained that due to the nature of trade 99% of sales were received in cash. 2.2 However, the Ld. PR.CIT held that the A.O. had failed to carry out proper inquiry on all the three issues as contained in the show cause and proceeded to hold that the order passed by the A.O. was erroneous in so far as it was prejudicial to the interest of revenue....
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....e the Ld. CIT (DR) submitted that the Ld. Pr.CIT had passed the order u/s 263 after properly analysing the issue and that a perusal of the assessment order would show that there was no discussion whatsoever in the impugned assessment order regarding the issues on which the Ld. Pr. CIT has held the assessment order to be erroneous and prejudicial to the interest of the revenue. The Ld. CIT (DR) read out extensively from the order passed u/s 263 and vehemently argued that it was a fit case for upholding the validity of 263 proceedings. 5. We have heard the rival submissions and have perused the material on record. It is an admitted position that the CIT has been conferred with wide revisionary powers u/s 263 of the Act for calling for an examination of records so as to find out whether the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the revenue. However, it is also an admitted position of law that the CIT, before reaching such conclusion, must have some material to hold a prima facie opinion about the inherent error in the order, thereby, making that order prejudicial to the interest of the revenue. It is an equally settled law that if the....
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....of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keev in mind the distinction between 'lack of inquiry1 and 'inadequate inquiry'. If there was any inquiry, even inadequate that would not by itself eive occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. It is only in cases of 'lack of inquiry' that such a course of action would be open. In Gabriel India Ltd. [1993] 203 ITR 108 (Bom), law on this aspect was discussed in the following manner (page 113): '. . . From a reading of sub-section (1) of section 263, it is clear that the power of suo motu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is "erroneous in so far as it is prejudicial to the interests of the Revenue". It is not an arbitrary or unchartered power, it can be exercised only on fulfillment of the ....
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....ested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be formed to be erroneous simply because the Commissioner does not feel satisfied 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..." We may now examine the facts of the present case in the light of the powers of the Commissioner set out above. The Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. Such decision of the Income-tax Officer cannot be held to be "erroneous" simply because in his order he did not make an elaborate discussion in that regard." 5.2 Further, the Hon'ble Delhi High Court in CIT vs. Vikas Polymers reported in 341 IT....
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.... exercise of suo moto revisional powers by him to re-open a concluded assessment. A bare reiteration by him that the order of the Income-tax Officer is erroneous insofar as it is prejudicial to the interest of the revenue, will not suffice. The exercise of the power being quasi-judicial in nature, the reasons must be such as to show that the enhancement or modification of the assessment or cancellation of the assessment or directions issued for a fresh assessment were called for, and must irresistibly lead to the conclusion that the order of the Income- tax Officer was not only erroneous but was prejudicial to the interest of the revenue. Thus, while the AO is not called upon to write an elaborate judgment giving detailed reasons in respect of each and every disallowance, deduction, etc., it is incumbent upon the Commissioner not to exercise his suo moto revisional powers unless supported by adequate reasons for doing so. 5.7 In the instant appeal before us, it is not the Department's case that no information regarding the various issues as enumerated by the Ld. Pr. CIT was called for by the AO. That relevant details and documents were furnished by the assessee during the assess....