TaxTMI 
TaxTMI 
2017 (8) TMI 1547
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.... crore approximately is neither examined or verified by the Assessing Officer immediately before his retirement?" 4. He contended that from the order of A.O. it was very clear that the file was transferred vide letter No. 249 dated 20.10.2008 and assessment order was passed within a week without examining the matter and without considering the relevant material which was required to be considered and he has also taken us to the order of A.O. and contended that the order passed by the A.O. is without any reasons and in fact the assessment order is passed without any evidence. In that view of the matter, the CIT(A) has taken into consideration provisions of Section 263 of the Income Tax Act and passed the order. He contended that the six points which have been raised by the CIT(A) reads as under: 1. The AO did not examine quantitative details of manufacturing/exporting goods. 2. The nature of payment made to following parties have not been examined. 1. Lawat Rs. 1,30,54,500/- 2. Kiran Jewellers Rs. 3,99,31,437/- 3. Single bill 1010000661 Rs. 1,15,00,000/- 4. Rajiv Arora(Individual) Rs. 2,39,12,417/- 5. Murti Corpn, Mumbai Rs. 10,06,5....
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....961 has not been examined. 5. He has contended that after considering the reply, the CIT (A) has passed the following order:- 8. I have examined the written submission of the assessee vis-a-vis assessment record in the case of the assessee. The details available on order sheet revealed that the AO reaised queries on 28.5.2008 and 26.08.08 without original record of assessee available on his file. The case was transferred to him by ACIT, Circle-7, Jaipur on 20.10.2008 and a fresh notice u/s 143(2) of the Act was again issued by on that date. No fresh query letter was issued after receipt of original record but the details pending on earlier routine queries were accepted. The AO has passed assessment order accepting returned income without discussing any of the issues mentioned above. The details made available by the assessee were not examined by the AO and no investigation was made. The issues raised in the notice u/s 263(1) of the Act referred to above were replied by the assessee but none of the issue was examined by the AO during the course of assessment proceedings. 6. Counsel for the appellant has also taken us to the order of the Tribunal and contended that the....
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....mption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. 11. In the instant case, the Commissioner 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....
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.... 4. Rajiv Arora (individual) (2,39,12,417/-) We could not ascertain from where the said amount is arrived. We shall explain the nature and purpose of the said payment if we have been informed how it is arrived. 5. Murti Corpn, Mumbai (10,06,500/-) The assessee has purchased Precious Stone (Diamond) from the party. Copy of account of the party is enclosed. 6. Amrapali Jewels Pvt. Ltd. (1,65,00,000/-) The correct amount is Rs. 1,43,00,000/-. The assessee has given loan to the said party. Copy of account of the party is enclosed. 10.1 However, it is contended that without considering reply, the CIT (A) passed order under Section 263 remanding the matter. He has further taken us to the observation made by the Tribunal which reads as under:- "We have heard rival submission and considered them carefully alongwith various case laws relied upon by Ld. A.R. It is seen that various objection raised by Ld. CIT which have been incorporated in this order some where above, were examined by the A.O. as during the assessment proceeding. The A.O. issued a querry letter dated 28.05.2008. Assessee filed reply by letter dated 12.06.2008." ....
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....as mentioned. The CIT accepted as well the sale of 3,39,496 shares on the aforementioned dates through its broker Inventure Growth & Securities Ltd. under the aegis of Bombay Stock Exchange for a total consideration of Rs. 3,71,81,627.01. He held as well that the AO 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-assessee had been validly granted exemption from tax under s. 10(38) of the Act. Vis-a- vis the balance shares i.e. 1,21,496 (3,39,496- 2,18,000), the CIT noticed the stand of the respondent-assessee that the same were in physical form. Referring to the supporting documents produced on behalf of the respondent-assessee, the learned CIT observed that the same had not been filed during course of the assessment proceedings and thus, were not verified and commented upon by the AO. It held the view that proper verification thereof was necessary by the AO to ensure that 1,43,000 shares of Overseas Capital Ltd., which were received and delivered in physical form to the director of the respondent-assessee, were transferred to its demat account, so as to ensure that these were held by it (r....
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....earned counsel for the parties and on a consideration of the materials on record, we are inclined to sustain the plea taken on behalf of the respondent-assessee. The salient facts bearing on the debate have been outlined hereinabove. To reiterate, a bare perusal of the order dt. 25th Sept., 2008 of the ITO (OSD), Range-1, Kota, would testify that the AO had consciously examined all relevant records in accepting the return submitted by the respondent- assessee. Noticeably, the learned CIT, in spite of his incisive analysis of the factual details, did not find fault with any of the findings of the AO, culminating in ultimate conclusion that the return of the respondent-assessee was acceptable as a whole. The text of the decision of the learned CIT authenticates that the respondent-assessee had furnished to him all relevant records and documents in support of its return accepted by the AO. The learned CIT did neither reject the said documents/records to be irrelevant, nor lacking in their probative worth. It simply remanded the matter to the AO observing that these ought to have been laid before him and examined at the time of assessment. 8. It is no longer res integra that t....
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....ority did not hold a sufficient enquiry during the course of assessment proceedings unless the aforesaid twin conditions for invoking the said jurisdiction under Section 263 are satisfied. 26. Thus having heard the learned counsel for Revenue at length and in view of aforesaid legal position and factual matrix, we are satisfied that the Tribunal was justified in holding that in these facts and upon the stated objections, the Commissioner was in error in D.B. Income Tax Appeal No.60/2012 Commissioner of Income Tax-II, Jodhpur Vs. M/s Jain Construction Co. invoking the revisional jurisdiction under Section 263 of the Act, and thus the findings arrived at by the Tribunal essentially remain findings of fact, which do not give rise any substantial question of law, requiring consideration by this Court. Mere alleged insufficiency of the enquiry in the opinion of the Commissioner by the Assessing Authority, could not permit him to invoke the revisional jurisdiction under Section 263 of the Act and, therefore, the essential twin conditions for invoking the revisional jurisdiction, namely, the impugned assessment being erroneous as well as prejudicial to the interest of Revenue, we....
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....n 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 required to give detailed reason in respect of each and every item 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 keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under Section 263 of the Act, merely because he has different opi....
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.... Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer 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. x x x There must be some prima facie material on record to show that tax which was lawfully eligible 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. x x ....
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....missioner 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. 5. Commissioner of Income Tax vs. Vikas Polymers (16.08.2010 - DELHC) : MANU/DE/2159/2010 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 conditions, namely, (i) the order of the assessing officer sought to be revised is erroneous; and (ii) it is prejudicial to the interest of the revenue. If one of them is ab....
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.... 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. x x x x 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. x x x x 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 O....
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....ted by the AO; however it is not 'sufficient to hold the assessment order as erroneous and thereby prejudicial to the interest of revenue. The plethora of case laws cited by the assessee do not support such type of exercise of power u/s. 263 of the Act. Hence 263 order holding the AO's order as erroneous cannot be sustained merely because the ld. CIT holds different plausible view about manner of inquiry. Consequently, we are unable to uphold the impugned order u/s. 263 of the Act passed by the ld. 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. 7. Commissioner of Income Tax vs. Fine Jewellery (India) Ltd. (03.02.2015 - BOMHC) 7. 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....
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....by the AO. Every loss to the Revenue cannot be treated as prejudicial to the interest of the Revenue and if the AO has adopted one of the courses permissible under the law or where two views are possible and the AO has taken one view which the CIT does not agree, it cannot be treated as an order erroneous and prejudicial to the interest of the Revenue, the AO exercises quasi judicial power vested in him and if he exercises such powers in accordance with law and arrives at a just conclusion such conclusion cannot be termed to be erroneous only because the CIT does not feel satisfied with the conclusion. 16. We are also of the view that the CIT in the subsequent order passed under s. 263 held that the assessment order was without jurisdiction and is not valid order and in our view, original order passed under s. 143(3) and 263 cannot be rectified either under s. 154 or under s. 263 of the Act through the revisional power conferred on the CIT under s. 263. 17. As discussed hereinabove, the AO had the jurisdiction when the notice under s. 143(2) was issued and once the ITO had valid jurisdiction at the time of issuance of notice, then the AO ought to have informed the....
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....re- examining the matter and directing fresh on his own whim for change or having a different view. He has been conferred with a quasi-judicial power and the same is hedged with limitation and, therefore, it has to be exercised within the parameters of the provision. When the Commissioner is himself not able to form an opinion, he cannot direct another inquiry by the Assessing Officer under Section 263 of the Act. In this regard, we may profitably reproduce a passage from Associated Food Products (P.) Ltd's case (supra): 10. In view of the aforesaid pronouncement of law and taking into consideration the language employed under Section 263 of the Act, it is clear as crystal that before exercise of powers two requisites are imperative to be present. In the absence of such foundation exercise of a suo motu power is impermissible. It should not be presumed that initiation of power under suo motu revision is merely an administrative act. It is an act of a quasi-judicial authority and based on formation of an opinion with regard to existence of adequate material to satisfy that the decision taken by the Assessing Officer is erroneous as well as prejudicial to the interests o....
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.... scrutiny of the order of the Income Tax Officer, found that the order did not disclose application of mind and despite examining the matter at length and hearing the Assessee could not come to a definite conclusion that the expenditure was not revenue expenditure but expenditure of capital nature. He referred the matter back to the Income Tax Officer to examine the same and to decide afresh. The said action of the Commissioner was not approved by the Tribunal. In that background, the High Court of Bombay expressed the view as follows: 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 insofar as it is prejudicial to the interests of the Revenue". It is not an arbitrary or unchartered power. It can be exercised only on fulfilment of the requirements laid down in Sub-section (1). The consideration of the Commissioner as to whether an order is erroneous insofar as it is prejudicial to the interests of the Revenue, must be based on materia....
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....hat he applied his mind to the relevant material and facts, although such application of mind is not discernible from the assessment order. The Tribunal held that the CIT in proceedings under Section 263 also had all these details and material available before it, but had not been able to point out defects conclusively in the said material, for arriving at a conclusion that particular income had escaped 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 Co....
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....hat of a civil court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word "erroneous" in section 263 emerges out of this context. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct. 13. In the said judgment, Delhi High Court had referred t....
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.... the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item 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 keep in mind the distinction between " lack of inquiry" and " inadequate inquiry". If there was any inquiry, even inadequate that would not by itself give 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. MANU/MH/0220/1993MANU/MH/0220/1993 : [1993] 203 ITR 108 (Bom), law on this aspect was discussed in the following manner (page 113): ... From a rending 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 ....
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....o 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 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 Incom....