TaxTMI 
TaxTMI 
2017 (10) TMI 1459
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....sion for development expenses made by the assessee, ignoring the provision of Section 37(1) of the Act and wrongly holding the same to an ascertained liability?" 3. This Court while admitting the ITA No.256/2016 on 22.03.2017 framed following substantial question of law: " Whether the Tribunal as well as CIT(A) were justified in quashing the assessment order and thereby deleting the disallowance of development expenses of Rs. 1,46,08,190/- without any application of mind by merely relying upon the earlier order of the Tribunal dated 24.02.2015, ignoring that the said order is under challenge before the Hon'ble High Court?" 4. Counsel for appellant contended that the Tribunal has seriously committed error. However, counsel for respondent has relied upon the observations made by the Tribunal, wherein it has been observed as under:- "2.6 We have heard the rival contentions and perused the material available on record. The first finding of the ld. CIT is to the effect that assessment order has been passed in a casual manner and without application of mind. In our consideration with the above correspondence, evidence and discussions ....
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....ssee). Both the Appellate Authorities have taken into consideration the scheme of JDA for private townships wherein it has been expressly stated that the coloniser cannot charge separate charges from the buyers of the plots in addition to the cost of the land for the internal development work to be carried out by it. Though the JDA carries out external development work, such as providing Sector Road for the colony etc. but at the expense of the coloniser. Now it is option of the coloniser to carry out the development work by itself or through the JDA. In case the coloniser opts to carry out internal development work in the colony through the JDA, it has to pay the amount to the JDA at predetermined rate prescribed by the JDA. However, if a coloniser opts to carry out internal development work of the colony by itself, then the work has to be carried out under the supervision of the JDA and the JDA monitors the quality control of the work. As per the norms of the JDA, if a coloniser opts to carry out the internal development works by itself, then the JDA takes 12.5% of the total plots as security against the internal development work of the colony to be carried out by the coloniser. ....
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.... judgment in the case of Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 this Court has taken the view that the phrase "prejudicial to the interests of the revenue " under Section 263 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 an Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue ; or where two views are possible and the Income Tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue , unless the view taken by the Income Tax Officer is unsustainable in law. 2. CIT v. Rajiv Arora (DBITA 283/2010 dated 28.08.2017 Rajasthan High Court), wherein it has been observed as udner: 11.1 Before proceeding with the matter, we may record that in view of order passed by AO and CIT(A) and taking into account the powers which are conferred under Section 263, in view of the law discussed hereinabove, ....
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.... was holding the same for a period of more than one year, so as to claim exemption on that count. The Commissioner of Income-tax, however, acknowledged that the learned representative of the respondent- assessee had brought to his notice the fact that complete details of long-term gain on sale of shares, had been filed along with computation of income and was available with the Assessing Officer during the assessment proceedings and that the materials at his disposal did contain the date of purchase of the said shares. That the period of holding of the shares involved was more than one year and that those being held as investment and STT being paid while selling the same justified the claim for exemption under section 10(38) of the Act was mentioned. The Commissioner of Income-tax accepted as well the sale of 3,39,496 shares on the aforementioned dates through its broker Inventure Growth and Securities Ltd. under the aegis of the Bombay Stock Exchange for a total consideration of Rs. 3,71,81,627.01. He held as well that the Assessing Officer was correct to conclude that shareholding of 2,18,000 shares out therefrom, was for a period of more than one year, for which the respondent-a....
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....,000 shares received in physical form and eventually shown in the demat account of the respondent-assessee. Referring to the documents/records produced before the learned Commissioner of Income-tax, the learned Tribunal recorded that he (Commissioner) had not formed any opinion that these shares had not been held by the respondent-assessee for more than one year. The learned Tribunal expressed the view that in the face of the materials before him, the learned Commissioner of Income-tax could not have formed any opinion that the assessment order was erroneous. It recalled the findings of the Assessing Officer, as adverted to hereinabove and concluded that the learned Commissioner of Income-tax not having come to the conclusion that the assessment order was erroneous and no reasons having been recorded to demonstrate that the same was prejudicial to the interests of the Revenue, he was not justified to refer the matter back to the Assessing Officer and that too, without examining the materials produced before him on the merits. 8. Upon hearing the learned counsel for the parties and on a consideration of the materials on record, we are inclined to sustain the plea taken on b....
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....as contemplated by section 260A of the Act, exists to be examined. 4. ITO v. D.G. Housing Projects Ltd. 2012 (343) ITR 329 (Delhi), wherein it has been observed as under:- 16. Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under Section 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....
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....val of the income tax authorities. Interestingly, even for future assessment years, the same very accounting practice is accepted. 20. Likewise, whether the Commissioner should have recorded definite finding or not, may not be very relevant factor in the present case where on the facts of this case we have found that the opinion of the AO in treating the expenditure as revenue expenditure was plausible and thus there was no material before the CIT to vary that opinion and ask for fresh inquiry. 6. CIT v. Vikas Polymers (2012) 341 ITR 537 (Delhi), wherein it has been observed as under:- 9. Before we undertake the exercise of answering the reference, it is deemed expedient to reiterate the governing principles laid down by Courts with regard to the exercise of power by the Commissioner under the provisions of Section 263 of the Act. The power of suo moto revision exercisable by the Commissioner is undoubtedly supervisory in nature. The opening words of Section 263 empowers the Commissioner to call for and examine the record of any proceedings under the Act. A bare reading of Section 263 also makes it clear that the Commissioner has to be satisfied of twin c....
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....ficer concerned was on the lower side and left to the commissioner he would have estimated the income at a figure higher than the one determined by the Income Tax Officer. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the Income Tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at conclusion and such a conclusion cannot be termed 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 recor....
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....ncumbent upon the Assessing Officer to investigate the facts required to be examined and verified to compute the taxable income. If the Assessing Officer fails to conduct the said investigation, he commits an error and the word 'erroneous' includes failure to make the enquiry. In such cases, the order becomes erroneous because enquiry or verification has not been made and not because a wrong order has been passed on merits. 5. In the present case, inquiries were certainly conducted by the Assessing Officer. It is not a case of no inquiry. The order under Section 263 itself records that the Director felt that the inquiries were not sufficient and further inquiries or details should have been called. However, in such cases, as observed in the case of DG Housing Projects Limited (supra), the inquiry should have been conducted by the Commissioner or Director himself to record the finding that the assessment order was erroneous. He should not have set aside the order and directed the Assessing Officer to conduct the said inquiry. 8. PCIT v. Delhi Airport Metro Express Pvt. Ltd. (ITA 705/2017 dated 05.09.2017) 10. For the purposes of exercising ju....
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....rt by inpugned order held that finding recorded by Tribunal being a finding of fact, no substantial question of law arose therefrom - Whether Special Leave Petition filed against impugned order was to be dismissed - Held, yes." 2. CIT v. Sunbeam Auto (2011) 332 ITR 167 (Delhi), wherein it has been observed as under:- "12. We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income Tax under Section 263 of the Income Tax Act. As noted above, the submission of learned Counsel for the Revenue was that while passing the assessment order, the AO did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order, which apparently does not give any reasons while allowing the entire expenditure as Revenue expenditure. However, that by itself would not be indicative of the fact that the AO had not applied his mind on the issue. There are judgments galore laying down the principle that the AO in the assessing order is not ....
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....3 of the Act. Hence 263 order holding the AO's order as erroneous cannot be sustained merely because the Id. CIT holds different plausible view about manner of inquiry. Consequently, we are unable to uphold the impugned order under Section 263 of the Act passed by the Id. CIT which is quashed. Thus the appeal of the assessee is allowed." The Tribunal has held that the case under section 263 of the Act is not made out and we are in complete agreement with the view taken by the Tribunal. Power of section 263 cannot be exercised for want of enquiry in a particular manner." 4. CIT v. Fine Jewellery (India) Ltd. (DBITA 296/2016-dated 03.02.2013-Bombay HC), wherein it has been observed as under:- "8. We find that the impugned order of the Tribunal does record the fact that specific queries were made during the assessment proceedings with regard to details of expenditure claimed under the head "miscellaneous expenses" aggregating to Rs. 2.94 crores. The respondent-assessee had responded to the same and on consideration of response of the respondent-assessee, the Assessing Officer held that of an amount of Rs. 17.98 lakhs incurred on account of repairs and mainte....
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....ped assessment on account of non-application of mind by the assessing officer. The Tribunal, therefore, allowed the appeal of the assessee and quashed the order of the CIT passed under Section 263 of the said Act. 7. In view of the above discussion, it is apparent that the Tribunal arrived at a conclusive finding that, though the assessment order does not patently indicate that the issue in question had been considered by the assessing officer, the record showed that the assessing officer had applied his mind. Once such application of mind is discernible from the record, the proceedings under Section 263 would fall into the area of the CIT having a different opinion. We are of the view that the findings of facts arrived at by the Tribunal do not warrant interference of this Court. That being the position, the present case would not be one of "lack of inquiry" and, even if the inquiry was termed as inadequate, following the decision in Sunbeam Auto Ltd. (supra), "that would not by itself give occasion to the CIT to pass orders under Section 263 of the said Act, merely because he has a different opinion in the matter." No substantial question of law arises for our considerat....
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....d some other claims that were allowed by the Assessing Officer, the Assessing Officer has not made a specific reference in the assessment order. It is apparent from the assessment order that the Assessing Officer has expressed in detail about the claims that were disallowable. Where the claims were allowable, as we find from the reading of the assessment order, the Assessing Officer has not referred to those claims. The Corporate Social Responsibility claim is one of them. It is apparent from the notice under Section 142 (1) of the Act that a specific query in regard to the claim pertaining to the Corporate Social Responsibility was made and a detailed note after giving bifurcation of the expenses under different heads was sought. We have perused the response in respect of this query which is exhaustive. We find that the assessee has given the details, as are sought under query No. 9 in the notice under Section 142 (1) of the Act. If that is so, the judgments, reported in (2015) 372 ITR 303 (Bom.) and (2016) 138 DTR 81 (Bom.) and on which the learned Counsel for the assessee has placed great reliance would come into play. It is ....
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....ibility was exhaustively answered and the appellant - assessee had provided the data pertaining to the expenditure under each head of the claim in respect of Corporate Social Responsibility, in detail. The Tribunal was not justified in holding that the reply/explanation of the assessee was not elaborate enough to decide whether the expenditure claim was admissible under the provisions of the Income Tax Act. The Assessing Officer is not expected to raise more queries, if the Assessing Officer is satisfied about the admissibility of claim on the basis of the material and the details supplied. In the facts and circumstances of the case, we answer the question of law in the negative and against the revenue." 7. CIT v. Honda Siel Power Products Ltd. (2011) 33 ITR 547 (Delhi), wherein it has been observed as under:- 18. From the aforesaid discussion, it is apparent that the expression prejudicial to the interest of revenue appearing in Section 263 has to be read in conjunction with the expression 'erroneous' and that every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of the revenue. In cas....