TaxTMI 
TaxTMI 
2020 (2) TMI 113
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.... circumstances of the case and in law, Ld. Pr. CIT-2, Indore erred in giving contradictory observations that A.O. did not make any inquiries at all about the issue and at the same time observing that A.O. made half hearted investigations and inquiries about the issue of receipt of gifts by the appellant from various family members in cash. 4. On the fact and circumstances of the case and in law, Ld. Pr. CIT-2, Indore erred intreating the gifts received by the appellant from his family members and close relatives as loans and also directing the A.O. to refer the matter to Jt. CIT Range-4, Indore for initiating penalty proceedings under section 271D of the Act. 5. On the fact and circumstances of the case and in law, Ld. Pr. CIT-2, Indore erred in holding that assessment order passed by the A.O. is erroneous in so far as it is also prejudicial to the interest of revenue, thereby setting aside the said assessment order to the file of the A.O. to re-examine the issue of cash deposited by the appellant after making necessary verification, inquiries and investigations. 6. The appellant craves leave to add, amend alter or otherwise raise any other ground of appe....
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....and trading portfolio in addition to other details. In response this questionnaire, assessee submitted copies of statement of Swastika Investmart Limited - NSE Capital, MCX Futures and derivatives for AY 2015-16. Copy of bank statements were also submitted.[PB 115-119, 106-114] 4. Assessee submitted that he has incurred loss from the said NSE, MCX and futures transactions as mentioned above at point no.1. Ld.AO further enquired as to how this loss was mitigated by assessee. In response to which assessee submitted that to mitigate this loss gifts were received from his relatives, from sale of jewellery and out of his personal savings. Assessee submitted copy of bank statements, acknowledgment of income tax returns and confirmation for the gifts from donors before Ld. AO. Source of source has also been explained by assessee before Ld. AO. 5. Ld. AO examined these evidences and proceeded to make addition of Rs. 50,000 each received from Jyoti Khandelwal (wife of assessee) and Kailashchandra Khandelwal (father of assessee). [PB 231 backside] 6. Show cause notice u/s 263 was issued on 06.07.2018 by Ld. Pr.CIT -II, Indore by stating that - [PB 232] "3.....
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....oth erroneous and prejudicial to the interest of the Revenue. 1. Provisions of section 263 reads - "(1) The Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue................" 2. To invoke the provisions of section 263 the order of assessing officer should be both erroneous and prejudicial to the interest of the Revenue. Order passed by an Assessing Officer can be said to be 'erroneous' only if it is contrary to law. This power of revision can be exercised by Ld. Pr.CIT only when no enquiry as required under the law is done by Ld. AO. 3. Assessee has suffered loss from the commodity, derivatives and securities transactions which has not been claimed in the return filed. No tax advantage/benefit has been claimed by the assessee on this actual and real loss sustained. There is no prejudice caused to the interest of the Revenue on this loss. [PB 07] 4. Term "erroneous" used in the section 263 is to be read relating to....
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.... bank statements, bills of sale of jewellery and confirmation of gifts given by them. [PB 25,83, 120-193, 220] 9. Ld. AO examined these documents submitted to establish how he mitigated the loss incurred from trading activities proceeded to make addition of gift received from Jyoti Khandelwal (wife of assessee) of Rs. 50,000 and Kailashchandra Khandelwal (father of assessee) of Rs. 50,000 as unexplained income. 10. All the necessary documents were already before Ld. AO for the loss incurred from commodity and derivatives transactions and also how this loss was mitigated. Ld. AO took one of the plausible view by making addition of Rs. 1,00,000 to the returned income. Ld. AO conducted all the necessary enquiries in relation to the 'limited scrutiny' for which the case of assessee was selected for assessment. 11. It is a well settled law that to invoke the provisions of section 263 both the conditions that the order must be erroneous and prejudicial to the interest of Revenue must be satisfied. Reliance is placed on the following judicial precedents - a. Hon'ble Jurisdictional High Court of Madhya Pradesh in the case of H.H. Maharaja Raja Pawer Dewa....
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....; is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the ITO, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. The phrase 'prejudicial to the interest of the Revenue' has to be read in connection with an erroneous order passed by the AO. Every loss of revenue as a consequence of an order of AO cannot be treated as prejudicial to the interests of the Revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken by the ITO is unsustainable in law." Para 9 - ".......An order cannot be termed as erroneous unless it is not in accordance with law. If an ITO acting in accordanc....
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....er is prejudicial to the interests of the revenue or not is to address oneself to the question whether the legitimate revenue due to the exchequer has been realised or not or can be realised or not if his orders under consideration are allowed to stand. For arriving at this conclusion, it becomes necessary and relevant to consider whether the income in respect of which tax is to be realised, has been subjected to tax or not or if it is subjected to tax, whether it has been subjected to tax at a rate at which it could yield the maximum revenue in accordance with law or not.If income in question has been taxed and legitimate revenue due in respect of that income had been realised, though as a result of erroneous order having been made in that respect, in our opinion, the Commissioner cannot exercise powers for revising the order under section 263 merely on the basis that the order under consideration is erroneous. If the material in that regard is available on the record of the assessee concerned, the Commissioner cannot exercise his powers by ignoring that material which links the income concerned with the tax realization made thereon. The two questions are inter-linked and the auth....
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....s of sale of jewellery and confirmation letters for the gift given along with PAN numbers were submitted before Ld. AO. 3. Ld. AO after considering all these documents proceeded to make addition of gift received from Jyoti Khandelwal (wife of assessee) of Rs. 50,000 and Kailashchandra Khandelwal (father of assessee) of Rs. 50,000. 4. Ld. AO allowed the claim on being satisfied with the explanation of assessee, on an enquiry made during the course of assessment proceedings. Thus, the decision of Ld. AO cannot be held to be erroneous. 5. Distinction is to be appreciated between lack of enquiry and inadequate enquiry. If there was any enquiry, even inadequate that would not by itself give occasion to Ld. Pr. CIT to pass orders u/s 263, merely because he has different opinion in the matter. It is only in cases of "lack of enquiry" that such a course of action would be open for the Ld. Pr. CIT. 6. Reliance is placed on following judicial precedents - a. Hon'ble Allahabad High Court in the case of Krishna Capbox (P) Ltd - [2015] 60 taxmann.com 243 - order pronounced on 23.02.2015 - HEAD NOTE - "Section 263 of the Income-tax Act, 1961 - Revisio....
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.... yes - Whether if a query was raised during course of scrutiny by Assessing Officer, which was answered to satisfaction of Assessing Officer, but neither query nor answer was reflected in assessment order, that would not, by itself, lead to conclusion that order of Assessing Officer called for interference and revision - Held, yes" [emphasis supplied] c. Hon'ble Delhi High Court in the case of Ashish Rajpal - [2009] 320 ITR 674 - order pronounced on 14.05.2009 - HEAD NOTE - "Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue - Assessment year 2002-03 - Whether merely because an assessment order does not refer to queries raised by Assessing Officer during course of scrutiny and response of assessee thereto, it can be said that there has been no enquiry and, hence, assessment is erroneous and prejudicial to interest of revenue - Held, no - Whether it is requirement of section 263 that assessee must have an opportunity of being heard in respect of those errors which Commissioner proposes to revise - Held, yes - Whether to accord such an opportunity after setting aside assessment order would meet mandate of section 263 - Held, no ....
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....fore Ld. AO including those related to how the loss was mitigated. PAN numbers, copy of bank statements, ITR acknowledgement and confirmation letters from the donors were submitted before Ld. AO. Ld. AO had made enquiries and examined the documents submitted. Addition of Rs. 1,00,000 made on account of gift received from Jyoti Khandelwal (wife of assessee) Rs. 50,000) and Kailashchandra Khandelwal (father of assessee) Rs. 50,000 clearly depicts application of mind by Ld. AO on partly rejecting the submission made. Thus, it is not a case of non-application of mind. Invoking provisions of section 263 is not in accordance with the law. Assessee has also explained source of source which is not warranted as held by Hon'ble Jurisdictional High Court of Madhya Pradesh in the case of Metachem Industries [2000] 245 ITR 160. 2. Reliance is placed on following judicial precedents - a. Hon'ble Jurisdictional High Court of Madhya Pradesh in the case of Ratlam Coal Ash Co. - [1987] 34 taxman 443 - order pronounced on 17.08.1987 - HELD - "It is well settled that where the ITO made the assessment in undue hurry, accepting what the assessee states in the return without ma....
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....ment had not brought out material or evidence to rebut same, cash credits were not income of assessee-firm and, accordingly, set aside order of Commissioner passed under section 263 - Whether in view of finding of fact recorded by Tribunal, no substantial question of law arose out of impugned order - Held, yes - Whether, therefore, instant appeal was to be dismissed - Held, yes" [emphasis supplied] d. Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. - [2000] 243 ITR 83 - order pronounced on 10.02.2000 - HEAD NOTE - "Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - Assessment year 1983-84 - Whether in order to invoke section 263 Assessing Officer's order must be erroneous and also prejudicial to revenue and if one of them is absent, i.e., if order of Income-tax Officer is erroneous but is not prejudicial to revenue or if it is not erroneous but is prejudicial to revenue, recourse cannot be had to section 263(1) - Held, yes - Whether if due to an erroneous order of ITO, revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to interests of revenue - Held, yes - Assessee-company....
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.... of lack of inquiry - Held, no - Whether further, on facts and law, view taken by Assessing Officer was one of possible views and, therefore, assessment order passed by Assessing Officer could not be held to be prejudicial to interest of revenue - Held, yes - Whether, therefore, Tribunal was justified in setting aside order of Commissioner - Held, yes" [emphasis supplied] f. Hon'ble Delhi High Court in the case of Hindustan Marketing & Advertising Co. Limited - [2011] 196 Taxman 368 - order pronounced on 21.09.2010 - HEAD NOTE - "Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue - Assessment years 1983-84 and 1984-85 - Assesseecompany was incorporated with an object of carrying on business of marketing agents and to render marketing services, etc. - For relevant assessment years, assessee filed its returns and assessments were framed - Commissioner set aside assessment orders holding that ITO had not made adequate and detailed investigations/enquiries in respect of a major area of assessee-company's operation and source of its income - Tribunal quashed revisional order passed by Commissioner - Whether in view of fact that ITO....
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....e held as erroneous and prejudicial to the interest of revenue. We therefore set aside the finding of Pr. Commissioner of Income Tax on this issue as it was a mere change of opinion which would not enable Ld. Pr. Commissioner of Income Tax to exercise jurisdiction u/s 263 of the Act as the Ld. A.O had considered the details and the explanation offered by the assessee before accepting the claim. We therefore reinstate the action of the Ld. A.O allowing the assessee's claim of exemption u/s 10A of the Act at Rs. 12,51,79,200/- against the profits earned from SEZ units." [emphasis supplied] i. Hon'ble Bombay High Court in the case of Reliance Communication Limited - [2016] 69 taxmann.com 103 - order pronounced on 28.03.2016 - HEAD NOTE - "Section 68, read with section 263, of the Income-tax Act, 1961 - Cash credits (FCCBs) - Assessee raised funds by way of FCCBs during year under consideration - Assessing Officer completed assessment accepting income declared by assessee - Commissioner noticed that no investigation was carried out by Assessing Officer to establish name and address, genuineness and creditworthiness of actual subscribers to FCCBs in terms of section 68 - He thu....
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....inion Vs. Direction" 1. Section 263(1) - "The Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act,.....................after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify..............." To invoke provisions of section 263, Pr. CIT is required to examine the record of any proceeding under this Act and conduct such enquiries as he deems to be necessary. 2. The term 'record' has been explained in Explanation 1(b) as "record" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal Commissioner or Commissioner Record shall include all the documentary evidences which were submitted before Ld. AO and also those submitted before Ld. Pr.CIT. To invoke the provisions of section 263, Ld. Pr.CIT is required to examine all the documentary evidences including those which were before Ld. AO. 3. Ld. Pr.CIT issued show cause notice u/s 263 dated 06.....
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....A.Y. 2015-16 is erroneous in so far as it is also prejudicial to the interest of revenue on account of passing of the order without making required enquiries/investigations......................Therefore, the assessment for A.Y. 2015-16 framed on 29.09.2017 is hereby set-aside to the file of AO to re-examine issue of source of the cash deposited by the assessee, indicated in the preceding discussion..............It would be not out of place to mention that the AO shall re-examine only the issues which have been indicated for further investigation in the preceding discussion." [emphasis supplied] From the above following is evident - a. Ld. Pr.CIT erred in not passing an order and instead stating that he is of 'considered opinion'. Ld. Pr.CIT is required to pass an order and not form an opinion. Order is different from forming an opinion. b. Ld. Pr.CIT has stated that assessment order was passed without making required enquiries/investigations. Explanation 2 to section 263 cannot be invoked in case of 'inadequate enquiry. The provision cannot be invoked to correct each and every type of mistake or error committed by assessing officer. It is only when an or....
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....cts and circumstances of the case, submissions made, judicial precedents and documents on record appeal of the assessee be allowed." 4. Ld. CIT/D.R. opposed these submissions and supported the orders of the authorities below. In reply, the ld. CIT/DR, relying upon judicial pronouncements, filed the following submission: "The gist of decision in favour of revenue on section 263 of IT Act 1961 A number of decisions of Hon'ble Apex Court, High Court, and Tribunals have been relied upon and the copies of decisions have been filed with the Hon'ble bench, which support the view of the department that lack of inquiry, inadequate inquiry, admission of claim without supporting material and no discussion in the assessment order are sufficient and good reasons for invoking section 263 of IT Act 1961 by the CIT. The list of cases along with the gist of decisions replied upon are hereby filed. S. No. CASE LAW Reported 1 Malabar Industrial Co. Ltd. V/s Commissioner of Income Tax 243 ITR 83 (SC) 2. Smt. Taradevi Aggrawal V/s Commissioner of Income Tax 88 ITR 323 (SC) 3 Rampyaridevi Saraogi V/s Commissioner of Income Tax 67 ITR 84 (S....
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.... jurisdiction by CIT under section 263(1) was justified. In this case the damages received by the appellate in lieu of agricultural income was wrongly allowed by the A.O. as agricultural income when the same was finally treated as income from other source. The operative part of decision is as under. In the instant case, the Commissioner noted that the ITO passed the order of nil assessment without application of mind. Indeed, the High Court recorded the finding that the ITO failed to apply his mind to the case in all perspective and the order passed by him was erroneous. It appeared that the resolution passed by the board of the appellantcompany 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 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 ITO was erroneous was irresistible. Therefore, the High Court had rightly held that the exercise of the jurisdiction by the Commissioner u....
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....Bacchan is as under:- There can be no doubt that so long as the view taken by the Assessing Officer is a possible view the same ought not to be interfered with by the Commissioner under Section 263 of the Act merely on the ground that there is another possible view of the matter. Permitting exercise of revisional power in a situation where two views are possible would really amount to conferring some kind of an appellate power in the revisional authority. This is a course of action that must be desisted from. However, the above is not the situation in the present case in view of the reasons stated by the learned C.I.T. on the 3 (2000) 243 ITR 83 (SC) 4 (2007) 295 ITR 282 (SC) 22 basis of which the said authority felt that the matter needed further investigation, a view with which we wholly agree. Making a claim which would prima facie disclose that the expenses in respect of which deduction has been claimed has been incurred and thereafter abandoning/withdrawing the same gives rise to the necessity of further enquiry in the interest of the Revenue. The notice issued under Section 69-C of the Act could not have been simply dropped on the ground that the cl....
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....6.04.1961. On 21.03.1961, the assessee made a declaration giving the facts regarding initial capital, the ornaments and presents received at the time of marriage, other gifts received from her father-in-law, etc., which should have any ITO on his guard. But the ITO without making any enquiries to satisfy himself passed the assessment order on30.03.1961, for assessment years 1952-53 to 1957-58, and on 26.04.1961, for the assessment years 1958-59 to 1960-61. No bank account or any proper books of account were maintained by the assessee or produced before the ITO. A short stereotyped assessment order was made for each assessment year. Profit from speculation was shown as Rs. 3,085 and interest Rs. 600, and Rs. 500 was added for want of books of account and evidence. No evidence whatsoever was produced in respect of the money-tending business done and interest income shown to have been received by the assessee. No names were given as to the parties to whom the loans were advanced, with amounts and rate of interest and as to when the interest income was received. It was not necessary to further detail the reasons given by the Commissioner because on the face of the record the o....
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....for reassessment after complying with the conditions laid down for grant of benefit under sections 80HH and 80J. Therefore, the finding recorded by the Tribunal appears to be not correct because all the materials which ought to have been utilised by the Income-tax Officer were not there and it is not understandable that how the Tribunal have on their own, assessed the situation. Therefore, we are of the opinion that the view taken by the Tribunal is not correct and we answer the aforesaid question in favour of the Revenue and against the assessee. The Incometax Officer may examine the matter afresh in the light of the decision of the Commissioner of Income-tax without taking notice of any adverse observations, if any, made by the Commissioner of Income-tax. 7. Similarly, Hon'ble jurisdictional MP High Court in the case of Deepak Kumar Garg (299 ITR 435 Madhya Pradesh) upheld the order of CIT passed under section 263 of Income Tax Act, 1961, for the reasons that the A.O. had done semblance of inquiry that too in snap-shod manner and accepted the version of assessee without proper inquiry causing loss of substantial taxable income. The gist of decision is reproduced as u....
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....s. 8. In a recent decision, in the case of Rajmandir Estate Pvt. Ltd., Hon'ble Kolkata High Court, (GA No. 509 of 2016 with ITAT No. 113 of 2016) had upheld the order of CIT passed u/s 263 of Income tax Act. In this case, the AO had passed the assessment order u/s 143(3) read with section 148 of income tax Act 1961. There was a huge increase in share capital by way of share premium. The AO had called for various details pertaining to increase in share capital and reserve and surpluses on account of issue of 7,92,737 shares of Rs. 10 each at a premium of Rs. 390/-. The AO had also conducted the enquiries from share subscribers u/s 133(6) of Income tax Act 1961 and most of the 39 applicants responded and the appellant had even filed complete details and sources of these companies for making share subscription. However the CIT had invoked the section 263 of Income Tax Act 1961 for the reasons that the AO had not conducted the requisite enquiry and had not applied mind. Therefore the order of AO was considered as erroneous and prejudicial to the interest of revenue. The Hon'ble Tribunal confirmed the view of CIT in setting aside the order of AO. The appellant preferred in appe....
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....however point out that the Special Bench of Delhi High Court in the case of Sophia Finance Ltd. (supra) held that "the ITO may even be justified in trying to ascertain the source of depositor". Therefore, the submission that the source of source is not a relevant enquiry does not appear to be correct. We find no substance in the submission that the exercise of power under Section 263 by the Commissioner was an act of reactivating stale issues. In the case of Gabriel India Ltd. (supra) the CIT was unable to point out any error in the explanation furnished by the assessee. Whereas in the present case we have tabulated the evidence which was before the assessing officer which should have provoked him to make further investigation. The assessing officer did not attach any importance to that aspect of the matter as discussed above by us. The judgement in the case of Leisure Wear Exports Pvt. Ltd. (supra) relied upon by Mr. Poddar has no applicability because the evidence furnished by the assessee in this case does suggest a cover up. We also have held prima facie that neither the transaction appears to be genuine nor are the applicants of share are creditworthy. The ju....
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....ommissioner suo motu under it, is that the order of the Income-tax Officer is erroneous insofar 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 is prejudicial to the revenue recourse cannot be had to section 263(1) of the Act. There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption 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." [Emphasis supplied] (p. 87) Thus an order, which has been passed without application of mind, will also fall under the expression erro....
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....e order is also prejudicial to the interest of revenue. The argument of the ld. Counsel of the assessee about revenue neutrality is not applicable to the facts and circumstances of the present case. In the case of ITO vs Ch. Atchaiah (1996) 218 ITR 239(SC), speaking for Hon'ble Apex Court their lordships held as follows:- "In our opinion, the contention urged by Dr. Gauri Shankar merits acceptance. We are of the opinion that under the present Act, the Income Tax Officer has no option like the one he had under the 1922 Act. He can, and he must, tax the right person and the right person alone. By "right person", we mean the person who is liable to be taxed, according to law, with respect to a particular income. The expression "wrong person" is obviously used as the opposite of the expression "right person". Merely because a wrong person is taxed with respect to a particular income, the Assessing Officer is not precluded from taxing the right person with respect to that income. This Bhushan Steel Ltd., New Delhi vs Assessee on 30 March, 2015 Indian Kanoon - http://indiankanoon.org/doc/164679238/ 11 is so irrespective of the fact which course is more bene....
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....irmed the decision of CIT with the observation that "inadequate inquiry" falls in the category of "No inquiry" which results in to making the order us erroneous and prejudicial to the interest of revenue. The relevant part of decision is as under:- "Whether the enquiry conducted by the Assessing Officer in such cases can be as a proper enquiry?" Though the Assessing Officer issued notices under section133(6) but it failed to comprehend the rationale or logic behind issuing shares at such a high premium, nor to examine any of the directors of the companies which were subscribers to share capital. It is highly improbable for any person having sound mind to purchase at arm's length the shares of a private limited company, hardly having any worth, with face value of Rs. 10 at a premium of Rs. 190. This mere fact should have been cornerstone for the Assessing Officer to embark upon further enquiry to unearth the truth. The genuineness of transactions of issue of share at such hefty premium in this background of the matter was under dark cloud and it skipped the attention of the Assessing Officer. [Para 17.c.] Upon analysis of the business model of the asse....
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....n for a complete non-application of mind by the Assessing Officer and of passing the assessment order in undue haste. [Para 17.h.] Thus, there can be no escape from an axiomatic conclusion that in all these cases the enquiry conducted by the Assessing Officer's is exceedingly inadequate and hence fall in the category of 'no enquiry' conducted by the Assessing Officer, what to talk of charactering it as an 'inadequate enquiry'. The highly inadequate enquiry conducted by the Assessing Officer resulting in drawing incorrect assumption of facts, makes the orders erroneous and prejudicial to the interests of the revenue. [Para 17.i.] Whether Commissioner can set aside the assessment order and direct the Assessing Officer to conduct a thorough enquiry, thereby interfering with the jurisdiction of the Assessing Officer conferred on him in terms of sections 142(1) and 143(2) of the Act? A careful perusal of the provisions of section 142(1)/143(2) unveils that it is the prerogative of the Assessing Officer to require the information 'on such points or matters' as he may require. Ordinarily it is not possible for the Assessing Officer to....
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....e. In such later cases, only when the Assessing Officer, after collection of the initial documents, embarks upon further investigation, that it can be said that he initiated enquiry. Where the facts of a particular transaction cry hoarse about its non-genuineness and even a casual look at such facts, prima facie, divulges foul play, then the alarm bell must ring in the mind of the Assessing Officer for making further examination. Collection of papers on record in such circumstances cannot be construed as conducting a proper enquiry. If in such circumstances, the Assessing Officer simply gathers documents and keeps them on record, then such nominal enquiry falls within the overall category of 'no enquiry' because of the inaction on the part of the Assessing Officer to read a writing on the wall. [Para 19.a.] Thus, the instant case is a glaring example of not making relevant enquiry, which amounts to 'no enquiry' and hence it becomes a case of non-application of mind by the Assessing Officer. [Para 19.e.] If the Assessing Officer has taken a possible view, can still the revision be ordered? Where the Assessing Officer fails to conduct an enq....
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....prejudicial to the interest of the revenue on that score itself. 12. In a recent decision of D. Bench of Hon'ble Kalkata ITAT in the case of Jubilee Commitrade (P) Ltd. Kalkata (ITA No 1179/Kal/2016), The Hon'ble bench has confirmed the order of CIT setting aside the order of A.O. In this case, the Hon'ble Bench has relied upon the order of B-Bench of Kalkata ITAT in the case of Subhlakshmi Vanijya (P) Ltd. The CIT had invoked the section 263 of IT Act-1961 for the reasons that the A.O. had failed to examine the capacity of subscribes of shares capital although most of the details and confirmations were duly called for and filed. It was held by the bench:- We have considered his submissions and are of the view that as was done in the similar group of cases which was considered by this Tribunal and in which the lead order was passed in the case of Subhlakshimi Vanijay Pvt. Ltd. (supra), the CIT ought to have set aside the order of AO and direct the AO to make fresh enquiry with regard to the receipt of share capital and share premium by the assessee during the previous year. As rightly pointed out by the Ld. Counsel for the assessee, since the proceedin....
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.... facts and circumstances of these cases, we are of the considered view that in short time from 29.03.2014 to 30.03.2014, it was practically impossible for the Assessing Officer to have examined the returns of the assessee vis-à-vis the details and particulars filed in support of the returns and form an opinion and frame a detailed assessment order on the issues in the returns of income. Therefore, we have no hesitation in accepting the arguments of the ld. Departmental Representative and upholding the present orders passed u/s 263 of the Income-tax Act, 1961, by the Commissioner of Income-tax. Thus grounds of appeal in all the appeals under consideration are dismissed." Respectfully following the above decisions, we are of the view that there was no occasion for the Assessing Officer to make any inquiry and the Assessing Officer accepted the return without proper inquiry as a result of which substantial amount of taxable income was not brought to tax. We also hold that no rule of universal application can be laid down for exercise of revisional powers u/s 263 of the act. It will depend on the facts of each and every case but the Commissioner of Income Tax must be sa....
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.... been made prospective or retrospective, and if retrospective, then from which date. However, some times what happens is that the substantive provision, as originally enacted or later amended, fails to clarify the intention of the legislature. In such a situation if subsequently some amendment is carried out to clarify the real intent, such amendment has to be considered as retrospective from the date when the earlier provision was made effective. Such clarificatory or explanatory amendment is declaratory. As the later amendment clarifies the real intent and declares the position as was originally intended, it takes retroactive effect from the date when the original provision was made effective. Normally such clarificatory amendment is made retrospectively effective from the earlier date. It may also happen that the clarificatory or explanatory provision introduced later to depict the real intention of the legislature is not specifically made retrospective by the statute. Notwithstanding the fact that such amendment to the substantive provision has been given prospective effect, the judicial or quasi judicial authorities, on a challenge made to it, can justifiably hold such amendme....
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....ssioner or] Chief Commissioner or [Principal Director General or] Director General or [Principal Commissioner or] Commissioner authorised by the Board in this behalf under section 120; (b) "record" [shall include and shall be deemed always to have included] all records relating to any proceeding under this Act available at the time of examination by the [Principal Commissioner or] Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal [filed on or before or after the 1st day of June, 1988], the powers of the [Principal Commissioner or] Commissioner under this sub-section shall extend [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 be....
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....015 and notes to clauses to Finance Bill, 2015 which are as under: Further, it is essential to refer to the memorandum to finance bill 2015 and notes to clause so as to understand the real intention of the legislature in inserting Explanation 2 to section 263 of IT Act 1961 which is reproduced here under for ready reference: "MEMORANDUM TO FINANCE BILL 2015 "The existing provisions contained in sub-section (1) of section 263 of the Incometax Act provides that if the Principal Commissioner or Commissioner considers that any order passed by the assessing officer is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making an enquiry pass an order modifying the assessment made by the assessing officer or cancelling the assessment and directing fresh assessment. The interpretation of expression "erroneous in so far as it is prejudicial to the interests of the revenue" has been a contentious one. In order to provide clarity on the issue it is proposed to provide that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prej....
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....visions of section 263 of IT Act 1961, the memorandum to finance bill 2015 and notes on clauses of finance bill 2015 as reproduced above makes it evident beyond doubt that said Explanation 2 to section 263 of IT Act 1961 was brought in just as clarificatory or explanatory to the original intent of section 263 of IT Act 1961. The intention of legislature has been to explain and clarify the originally enacted statue so as to declare the position as was originally intended. The language of the Explanation 2 starts as "for the purpose of this section, it is here by declared that the order by......" which goes to prove that the relevant insertion of explanation has been declaratory. Therefore, taking support from decision of Hon'ble B bench of ITAT Kolkata on the principles of applicability of amendments in the case of Shubhlakshi Vanijya Pvt. Ltd., as discussed supra, the insertion of Explanation 2 to section 263 of IT Act 1961 has to be considered as having retrospective effect. Therefore, it was mandated on the part of Assessing Officer not to pass the assessment order without making inquiries or verification which should have been made and allow the relief without inquiring....
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....r necessary verification which should have been made, the order becomes erroneous in so far as it is prejudicial to the interest of revenue. A proviso added from 01-04-1988 to Section 43B of the Act from 01-04-1984 came up for consideration in Allied Motors Private Limited v. CIT (1997) 91 taxman 205(SC) before Hon'ble Supreme Court and it was given retrospective effect from the inception of the section on the reasoning that the proviso was added to remedy http://www.itatonline.org 18 ITA 1994Mum/13 & ITA 2836/Mum/14 unintended consequences and supply an obvious omission so that the section may be given a reasonable interpretation and that in fact the amendment to insert the proviso would not serve its object unless it is construed as retrospective . In CIT v. Podar Cement Pvt. Limited (1997) 92 Taxman 541(SC) , the Hon'ble Supreme Court held that amendment introduced by the Finance Act,1987 in so far the related to Section 27(iii) ,(iiia) and (iiib) which redefined the expression 'owner of house property', in respect of which there was a sharp divergence of opinion amongst the High Courts, was clarificatory and declaratory in nature and consequently retrospective. Similarly , in B....
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.... the assessment orders u/s 143(3) of the Act dated 28.12.2010 and other documents filed before us, we have observed that the AO has not made any enquiry whatsoever with respect to the claim of deduction of expenses of Rs. 17.72 crores towards Provision for Warranty, Sales tax and excise duty and liquidated damages claimed by the assessee company while computing the income of the assessee company and the claim of the assessee company was accepted without any inquiry, examination or verification whatsoever by the AO and In the absence thereof of enquiry, examination and verification of the claim of the asssesee company for deduction of provisions for Warranty, Sales tax and excise duty and liquidated damages amounting to Rs. 17.72 crores , we find no infirmity in the order dated 06.02.2013 of the CIT passed u/s 263 of the Act setting aside the assessment order dated 28.12.10 passed u/s 143(3) of the Act as erroneous in so far as prejudicial to the interest of the Revenue and directing the AO to assess the income of the assessee company after making necessary enquiries, examination and verifications , which order of the CIT dated 06.02.2013 , we uphold . We order accordingly.....
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.... and Rs. 50,000/- was received from father Shri Kailash Chandra Khandelwal. No concrete evidence was with regard to the source of these receipts could be produced by the assessee. Hence, he made addition of Rs. 1 lakh. Regarding remaining amount, the A.O. accepted the contention of the assessee. So far sale of jewellery is concerned, the assessee has filed invoices of sale of jewellery at paper book page Nos.120 to 193. From page Nos.120 to 143, the jewellery sold by the assessee are enclosed. From page Nos.124 to 159, the invoices in the name of Jyoti Khandelwal, wife of the assessee are enclosed and from page Nos.160 to 170, invoices are related to Shri Kailash Chandra Khandelwal, father of the assessee and from page Nos.171 to 192, invoices in the name of mother of the assessee Smt. Lakshmibai Khandelwal is enclosed. The assessee has also furnished copy of the circular issued by the CBDT in Instruction No.7/2014 dated 26.9.2014. Paras 3 & 4 of the circular reads as under: "3. The reason(s) for selection of cases under CASS are displayed to the Assessing Officer in AST application and notice u/s 143(2), after generation from AST, is issued to the taxpayer with the ....
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....isdictional High Court or Supreme Court in the case of the assessee or any other person. In the present case, Principal CIT has revised the order on the ground that the A.O. has failed to make enquiries or verification, which should have been made. Ld. Principal CIT has not specified that what enquiries the A.O. has not made. There is no material suggesting that the Principal CIT has expressed his view about insufficiency of enquiry on the material placed on record. The issue regarding whether the assessment order is erroneous or prejudicial on the ground of insufficiency of enquiry has been dealt by the Hon'ble Delhi High Court in the judgement of ITO Vs. DG Housing Projects Ltd. (2012) 20 Taxmann.com 587, which has been followed by this Tribunal in various cases. Hon'ble High Court while adverting to the issue held that in cases of wrong opinion for finding on merit, the CIT has to come to the conclusion and himself decide that order is erroneous, by conducting necessary enquiry, if required and necessary before the order u/s 263 of the Act is passed. In such cases, the order of the A.O. will be erroneous because the order passed is not sustainable in law and the said finding....