AI Drafter 
TaxTMI 
TaxTMI 
2017 (8) TMI 1374
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....nas (South) and 24 Parganas (North). The assessing officer completed assessment under section 143 (3) of the Act, on 7/8/2012 determining the total income Rs. 1,67,07,512/- 3. The ld. CIT, issued a show cause notice under section 263 of the Act for the following reasons:- "On perusal of the assessment records vis-à-vis the return and other document submitted it is seen that the information in respect of unverifiable payments of Commission worth Rs. 9,25,000/-was passed on by ITO Ward 7 (2), Kol while computing the assessment of M/s. Wise Agencies Pvt. Ltd. found that the above mentioned assessee has provided bogus entries to different parties. The AO while finalization the assessment of the above mentioned assessee failed to cause sufficient enquiries on this aspect regarding the genuineness and creditworthiness of the transaction. The wrongful act on the part of the AO on the points discussed above has made the assessment order erroneous and prejudicial to the interest of the Revenue." 4. The assessee replied making detailed submissions vide reply dated 08/02/2015. The ld. CIT rejected the submissions and passed an order under section 263 of the Act, on 24/03....
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....ncies Pvt. Ltd., was not provided to the assessee and that the request of the assessee to provide relevant material and opportunity for cross examination of the person-in-charge of M/s Wise Agencies Pvt. Ltd. had not been given. He submitted that the assessee had, in pursuance to the query raised by the assessing officer in the regular assessment proceedings clarified and furnished evidence of the fact of the assessee having paid commission, on sale of vehicles, amounting to Rs. 9,24,075/-, to M/s. Wise Agencies Pvt. Ltd. TDS was deducted, and thereafter, the net amount was remitted to banking channels. He argued that information and documents, normally expected to be maintained in the ordinary course of business for such transactions were produced before the assessing officer by M/s. Wise Agencies Pvt. Ltd. and the assessee complied with the notice issued to it under section 133 (6) of the Act. The assessing officer of M/s. Wise Agencies Pvt. Ltd. had issued a certificate to that assessee for deduction of tax at a lower rate and accordingly TDS was deducted at a lower rate. He submitted that this was enquiry made by the assessing officer during the course of assessment pr....
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....ned on its factual matrix. He pointed out that the information has come to the possession of the department that M/s. Wise Agencies Pvt. Ltd. has been providing accommodation entries to various parties and based on such specific information the ld. CIT has examined the records of the assessee and come to the conclusion that the assessing officer has not conducted adequate enquiries on this issue. He submitted that the Assessing Officer during the assessment proceedings merely called for information and placed the replies on the record. Such and act, as per the ld. DR cannot be the basis to come to a conclusion that the assessing officer has taken a plausible view. Merely the fact that certificate of lower deduction of tax was given by the assessing officer, does not prove the genuineness of the payment of commission. He relied on the order of the ld. CIT and the case law mentioned therein and Thus, he submitted that the appeal of the assessee, be dismissed, and the order of the ld. CIT be upheld. 8. After hearing rival submissions, I hold as follows:- The ld. CIT based his entire decision on the fact that the assessing officer having jurisdiction on the assessee of M/s. Wise ....
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....ropositions of law:- The Hone'ble Andhra Pradesh High Court in the case of Spectra Shares and Scrips Pvt. Ltd. V CIT (AP) 354 ITR 35 had considered a number of judgments on this issue of exercise of jurisdiction u/s 263 of the Act by the Principal Commissioner of Income Tax and culled the principles laid down in the judgments as below : "24. In Malabar Industrial Co.Ltd. ( 2 Supra), the Supreme Court held that a bare reading of Sec.263 makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suomotu under it, is the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent - if the order of the Income Tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but it is prejudicial to the Revenue - recourse cannot be had to Sec.263 (1) of the Act. It also held at pg-88 as follows: "The phrase "prejudicial to the interests of the R....
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.... complicated over the years that two views were inherently possible; and therefore, the subsequent amendment in 2005 even though retrospective will not attract the provision of Sec.263. 26. In Vikas Polymers (4 Supra), the Delhi High Court held that the power of suomotu revision exercisable by the Commissioner under the provisions of Sec.263 is supervisory in nature; that an "erroneous judgment" means one which is not in accordance with law; that if an Income Tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as "erroneous" by the Commissioner simply because, according to him, the order should have been written differently or more elaborately; that the section does not visualize the substitution of the judgment of the Commissioner for that of the Income Tax Officer, who passed the order unless the decision is not in accordance with the law; that to invoke suomotu revisional powers to reopen a concluded assessment under Sec.263, the Commissioner must give reasons; that a bare reiteration by him that the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, will not suffice; that t....
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....e explanation of the assessee and where the same accounting practice followed by the assessee for number of years with the approval of the Income Tax Authorities. It held that the Assessing Officer had called for explanation on the very item from the assessee and the assessee had furnished its explanation. Merely because the Assessing Officer in his order did not make an elaborate discussion in that regard, his order cannot be termed as erroneous. The opinion of the Assessing Officer is one of the possible views and there was no material before the Commissioner to vary that opinion and ask for fresh inquiry. 28. In Gabriel India Ltd. (6 Supra), the Bombay High Court held that a consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. It held that the Commissioner cannot initiate proc....
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....ived and sale of jewellery, the income from business etc., without any enquiry or evidence whatsoever . He directed the income tax officer to do fresh assessment after making proper enquiry and investigation in regard to the jurisdiction. The assessee complained before the Supreme Court that no fair or reasonable opportunity was given to her. The Supreme Court held that there was ample material to show that the income tax officer made the assessments in undue hurry; that he had passed a short stereo typed assessment order for each assessment year; that on the face of the record, the orders were pre-judicial to the interest of the Revenue; and no prejudice was caused to the assessee on account of failure of the Commissioner to indicate the results of the enquiry made by him, as she would have a full opportunity for showing to the income tax officer whether he had jurisdiction or not and whether the income tax assessed in the assessment years which were originally passed were correct or not" 31. From the above decisions, the following principles as to exercise of jurisdiction by the Commissioner u/s.263 of the Act can be culled out: a) The Commissioner has to be satisfied....
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....o end except when legal ingenuity is exhausted f) Whether there was application of mind before allowing the expenditure in question has to be seen; that if there was an inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under Sec.263 merely because he has a different opinion in the matter; that it is only in cases of lack of inquiry that such a course of action would be open; that an assessment order made by the Income Tax Officer cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately; there must be some prima facie material on record to show that the 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. g) The power of the Commissioner under Sec.263 (1) is not Commissioner is entitled to examine any other records which are available at the time of examination by him and to take into consideration even those events which arose subsequent to the order of assessment. Now we examine the follo....
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....eous, by conducting necessary enquiry, if required and necessary, before the order under s. 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT 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 CIT 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 CIT 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 CIT 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 th....
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....xercise power under Section 263 of the Act even in a case were the issue is debatable was a mere passing remark which is again contrary to the view taken by the Apex Court in thecase of Malabar Industrial Company Ltd. & Max India Ltd. If the Assessing Officer has taken a possible view, it cannot be said that the view taken by him is erroneous nor the order of the Assessing Officer in that case can be set aside in revision. It has to be shown unmistakably that the order of the Assessing Officer is unsustainable. Anything short of that would not clothe the CIT with jurisdiction to exercise power under Section 263 of the Act. CIT vs. M. M. Khambhatwala reported in 198 ITR 144; CIT vs. Ralson Industries Ltd. reported in 288 ITR 322 (SC), not applicable; Malabar Industrial Co. Ltd. v. CIT reported in 243 ITR 83, relied on. (Para 72) As regard the third question as to whether the assessment order was passed by the Assessing Officer without application of mind, it was held that the Court has to start with the presumption that the assessment order was regularly passed. There is evidence to show that the assessing officer had required the assessee to answer 17 questions and to file do....