TaxTMI 
TaxTMI 
2020 (2) TMI 113
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....ed 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 appeal. 2. Briefly stated facts are that in this case assessment for A.Y. 2015-16 was co....
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...., 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. As per the information available on records, it is noted that the assessee has incurred loss in sharing trading. The assessee has received gifts from various family members in cash for mitigatin....
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....rder 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 jurisdictional error on the part of the Assessing Officer in exercise of his powers vested under the law. Error committed by the Assessing Officer must be an error of jurisdiction. 5. Case of assessee was selected for 'limited scrutiny' for which notice u/s 143(2) was issued on 19.09.2016 to exam....
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....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 Dewas- [1983] 15 Taxman 363 - order pronounced on 13.11.1981 - Para 10 - "However, the first argument, viz., that an assessment order without compliance with the procedure laid down in section 144B is erroneous but not prejudicial to the interests of the revenue conferring revisional jurisdiction on the Commissioner under section 263(1), has force. Under section 263(1) two pre-requisites must be present before the Commissioner can exercise the revisiona....
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.... 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 accordance with law makes certain assessment, the same cannot be branded as erroneous by the Commissioner simply because according to him the order should have been written more elaborately. This section does not visualize a case of substitution of judgment of the Commissioner for that of the ITO, who passed the order, unless the decision is held to be erroneous." [emphasis supplied] c. Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. - [2000] 243 ITR 83 - order pronounced on 10.....
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....ch 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 authority exercising powers under section 263 is under an obligation to consider the entire material about the existence of income and the tax which is realizable in accordance with law and further what tax has in fact been realised under the alleged assessment orders.[emphasis supplied] e. Hon'ble Karnataka High Court in the case of V. G. Krishnamurthy - [1985] 20 Taxman 65 - order pronounced on 19.03.1984 - Para 10 - "Section 263 can be invoked by the Commissioner only when he prima facie finds that the or....
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....ciated 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 - Revision - Of orders prejudicial to interest of revenue (erroneous order) - Assessment year 2008-09 - Assessee filed its return - Case was selected for scrutiny and statutory notice was issued - Assessing Officer made certain queries, which were replied by assessee and after inquiry, being satisfied in respect to queries replied by assessee, Assessing Officer accepted declared income and passed assessment order - Commissioner, however, issued a notice under section 263 on ground that Assessing Officer had not made inquiry on certain aspects and accepted version of assessee without making any inquiry or verifi....
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....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 - Whether where notice issued by Commissioner before commencing proceedings under section 263 referred to four issues and final order passed referred to nine issues, revisional proceedings were vitiated as a result of breach of principles of natural justice - Held, yes" [emphasis supplied] d. Hon'ble Mumbai Bench of ITAT in the case of Anil Shah - [2007] 162 Taxman 39 - order pronounced on 21.01.2006 - HEAD NOTE - "Section 263, read with section 80HHC, of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue - Assessment year 2000-01 - Whether if all relevant details have been filed by....
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....xplained 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 making any enquiries in the circumstances of the case, the Commissioner would be justified in holding the order of the ITO to the erroneous. However, in the instant case, the Tribunal had found that the assessee had furnished all the requisite information and that the ITO considering all the facts had completed the assessment. It was further held that in the circumstances of the case it could not be held that the ITO had made assessment without making proper enquiries. Accordingly, the Tribunal was justified in reversing the order passed by the Commissioner." [emphasis supplied] b. Hon'ble Delhi High Court in the case of Anil Kumar Sharma - [2010] 194 Taxman 504 - order pron....
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....ssessing 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 entered into agreement for sale of estate of rubber plantation - As purchaser could not pay instalments as scheduled in agreement, extension of time for payment of instalments was given on condition of vendee paying damages for loss of agricultural income and assessee passed resolution to that effect - Assessee showed this receipt as agricultural income - Resolution passed by assessee was not placed before Assessing Officer - Assessing Officer accepted entry in statement of account filed by assessee and accepted same - Commissioner under section 263 held that said amount was not connected with agricultural activities and was liable to be taxed under head 'Income from other sources' - Whether, ....
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....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 had made reasonably detailed enquiries, had collected relevant material and discussed various facets of case with assessee, order of Commissioner to direct fresh assessment by going deeper into matter would not form a valid or legal basis to exercise jurisdiction under section 263 - Held, yes - Whether, therefore, impugned order of Tribunal was to be upheld - Held, yes" [emphasis supplied] g. Hon'ble Delhi High Court in the case of D.G. Housing Projects Ltd - [2012] 20 taxmann.com 587 - order pronounced on 01.03.2012 - HEAD NOTE - "Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - Assessment year 2004-05 - Assessee sold an immovable property and claimed capital l....
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.... 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 thus passed a revisional order setting aside assessment - Tribunal noted that Assessing Officer had made detailed enquiries about aforesaid aspect and mere fact that he did not make any reference to said issue in assessment order, could not make said order erroneous and prejudicial to interest of revenues - Accordingly, Tribunal set aside revisional order - Whether finding recorded by Tribunal being a finding of fact, no substantial question of law arose therefrom - Held, yes [Para 11] [In favour of assessee]" [emphasis supplied] j. Hon'ble Andhra Pradesh High Court in the case of Dr. Kodela Siva Prasada Rao - [2013] 29 taxmann.com 18 - order pronounced on 20.11.2012 - Para 12 - "From the above facts it is clear that the assessee had rec....
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....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 06.07.2018 stating - [PB 232] "2. The entire records were gone through by me and on perusal and examination of records it is found that the order dated 29.09.2017 for A.Y. 2015-16 is erroneous as also prejudicial to the interest of revenue on account of passing of the order without making proper enquiries/ investigations. 3. As per the information available on records, it is noted that the assessee has incurred loss in share trading. The assessee has received gifts from various family members in cash for mitigating loss in share trading which was deposited in saving bank a/c. The assessee had deposited total cash of Rs. 31.90 lacs in his saving bank A/c out of which Rs. 4,25,000/- were out of his own source. Instead of making through inquiries into the above transactions, the AO made....
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....d 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 order is erroneous that the provisions of section 263 will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of order being erroneous. In the instant case, the fact that case of assessee was selected for 'limited scrutiny' to examine the commodity and derivatives transactions is not under dispute. Also the fact that assessee has incurred loss from commodity and derivative transactions is not under dispute. Ld. AO further enquired as to how this loss was mitigated by assessee. Though Ld. AO travelled beyond the scope of 'limited scrutiny', assessee submitted that the loss was mitigated from the gifts received from relatives, sale of jewellery and out of personal savings. All the documentary evidences of how the loss was mitigated were also submitted before Ld. AO. Ld. Pr.CIT erred in invoking the provisions of section 263 as nei....
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....labar 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 (SC) 4 Commissioner of Income Tax V/s Nagesh Knitwears Pvt. Ltd 345 ITR 135 (Delhi HC) 5 Gee Vee Enterprises V/s Addl. Commissioner of Income Tax 99 ITR 375 (Delhi HC) 6 Bhushan Steel Ltd. V/s Asstt. Commissioner of Income Tax ITAT A Bench Delhi 7. Commissioner of Income-tax v.Deepak Kumar Garg 299 ITR 435 (Madhya Pradesh) 8. Commissioner of Income-tax v. Mahavar Traders 220 ITR 167 (Madhya Pradesh) 9. Smt. Renu Gupta v. Commissioner of Income-tax 301 ITR 45 (Rajasthan) 10. PT. Lashkari Ram v. Commissioner of Income-tax 272 ITR 309 (Allahabad) 11. Commissioner of Income-tax, Patiala v. Himachal Pradesh Financial Corpn. 186 Taxman 105 (Himachal Pradesh) 12 Commissioner of income tax V/s Prafulla C.Pant And Dharam Veer JJ 176 Taxman 184 (Uttrakhand) 13 Mofussil Warehouse & Trading Co.Ltd.V/s Commissioner Of Income tax 238 ITR 867 (Madras) 14 Durgalal & Co. V/s Commissioner Of Income tax 220 ITR 456(Delhi) 15 ....
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....ible. Therefore, the High Court had rightly held that the exercise of the jurisdiction by the Commissioner under section 263(1) was justified. It was shown at any stage of the proceedings that the amount in question was fixed or quantified as loss of agricultural income and, admittedly, it was not so found by the Tribunal. The further question whether it would be agricultural income within the meaning of section 2 (1A) did not arise for consideration. It was evident from the order of the High Court that the findings recorded by the Tribunal that the appellant stopped agricultural operation in November 1982 and the receipt under consideration did not relate to any agricultural operation carried on by the appellant, were not questioned before it. Thought the High Court was not correct in holding that the amount was paid for breach of contract as indeed it was paid in modification/relaxation of the terms of the contract, it was to be held that the High Court was justified in concluding that the said amount was a taxable receipt under the head 'Income from other sources'. 4. In a recent decision of Hon'ble Apex court in the case Shri Amitabh Bacchan, (CIVIL APPEAL NO.50....
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....C of the Act could not have been simply dropped on the ground that the claim has been withdrawn. We, therefore, are of the opinion that the learned C.I.T. was perfectly justified in coming to his conclusions insofar as the issue No.(iii) is concerned and in passing the impugned order on that basis. The learned Tribunal as well as the High Court, therefore, ought not to have interfered with the said conclusion. In the light of the discussions that have preceded and for the reasons alluded we are of the opinion that the present is a fit case for exercise of the suo motu revisional powers of the learned C.I.T. under Section 263 of the Act. The order of the learned C.I.T., therefore, is restored and those of the learned Tribunal dated 28th August, 2007 and the High 23 Court dated 7th August, 2008 are set aside. The appeal of the Revenue is allowed. 5. In the case of Rampyari Devi Saraogi, Hon'ble Supreme court, (67 ITR 84 SC) held that CIT was justified in invoking section 263 of I.T. Act 1961 as the ITO had accepted the initial capital. Ornaments and presents received at the time of marriage and other gifts from father-in-law without making any inquiry. Further it was held tha....
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....on the face of the record the orders were prejudicial to interest of the revenue, and even if the facts which the Commissioner introduced regarding the enquiries made by him had been indicated to the assessee, the result would have been the same. The assessee, had not in any way suffered from the failure of the Commissioner to indicate the results of the enquiries. Moreover, the assessee would have full opportunity of showing to the ITO whether he had jurisdiction or not and whether the income assessed in the assessment orders which were originally passed was correct or not. The appeal was liable to be dismissed and decision of High Court was to be affirmed. 6. The jurisdictional MP High Court, in the case of Mahaver Trader, (220 ITR 167 Madhya Pradesh) while setting aside the order of ITAT held that ITO had not examined the issue of allowability of deduction us 80HH and 80J in the light of conditions laid down for grant of relief under said sections. Further, it was observed by the Hon'ble court that the Tribunal instead of approaching the matter in the proper perspective had on their own started making enquiries and found that order passed by A.O. was correct which was no....
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....s under:- In the case in hand, after hearing the authorised representative, the Commissioner has recorded a clear finding that the order of the Assessing Officer was erroneous as well as prejudicial to the interests of the Revenue. From the order of the Assessing Officer, it is clear that for want of time, the Assessing Officer had done only a semblance of enquiry and that too, in a very slipshod manner, as is clear from the post script in the order of the Assessing Officer. The Assessing Officer accepted the version of the assessee without proper enquiry and as a result a substantial amount of taxable income was not brought to tax. In such a case the assessment order would be erroneous and prejudicial to the interests of the Revenue because law enjoins upon the Assessing Officer to make the assessment order bringing all taxable income to tax. The enquiry held in a perfunctory manner could not be said to be a proper enquiry before passing the assessment order. This cannot be a ground to shut out the jurisdiction of the Commissioner of Income-tax that an adequate enquiry was conducted by the Assessing Officer. We may clarify that the order of the Commissioner of Income-tax is in....
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....Kolkata High Court wherein the following question were found arising in the appeal. (a) Whether in the light of the views expressed in the case of Lovely Exports (supra) & Steller Investment (supra) the order under section 263 directing further investigation is legal? (b) Whether the order passed by the assessing officer under section 143(3) /147 of the Income Tax Act is erroneous and also prejudicial to the interest of the revenue? Both the above mentioned question were answered in affirmative by Hon'ble Court and held as under:- " The assessee with an authorised share capital of Rs. 1.36 crores raised nearly a sum of Rs. 32 crores on account of premium and chose not to go in for increase of authorised share capital merely to avoid payment of statutory fees is an important pointer necessitating investigation. Money allegedly received on account of share application can be roped in under Section 68 of the Income Tax Act if the source of the receipt is not satisfactorily established by the assessee. Reference in this regard may be made to the judgement in the case of Sumati Dayal - Vs- CIT (supra) wherein Their Lordships held that any sum "found credited in the books of the ....
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.... by Mr. Poddar has no application for reasons already discussed. It is not true that the Commissioner in this case has merely on the basis of suspicion held that this was or could be a case of money laundering. We as a matter of fact have discussed this issue in great detail and need not reiterate the same. The order passed by the Commissioner is by no means an act of substituting his own views to that of the assessing officer. It is true that the assessing officer had requisitioned the necessary details by his notice u/s.142(1) but he thereafter did not apply his mind thereto. The judgement in the case of J. L. Morrison (India) Ltd. has no manner of application because in that case the question essentially was whether the receipt was of a capital or revenue nature. The facts and circumstances were not in dispute. Moreover the view taken by the assessing officer was not shown nor was held by the Court to be an erroneous view. Whereas in this case we have demonstrated in some detail as to why is the order of the assessing officer erroneous and prejudicial to the revenue." 9. The High Court of Allahabad, in the case of Bhagwan Das (272 ITR 367- Allahabad) has held that where the A.....
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....ption to the assessee in respect of income from agriculture and poultry farming without any discussion and with out any application of mind, respectfully following the aforesaid decision, we are of the opinion that the Tribunal had committed error in holding that the assessment ordering so far as it grant ed exemption to income from Agriculture and Poultry farming was not erroneous or prejudicial to the interest of Revenue. We, therefore, answer the question referred to us in the negative, i.e., in favour of the Revenue and against the assessee. Since nobody has put in appearance on behalf of the assessee, there shall be no order as to costs. 10. In case of Bhushan Steel, Hon'ble ITAT A Bench Delhi, (ITA No 1641 to 1646/Del/2014) observed that CIT was within his powers to set aside the order of A.O. where, the A.O. had allowed the expenses debited to P & L account without proper inquiries although during the course of search in Bhushan group and survey in other cases, it was noticed that Bhushan group has been inflating expenses and various parties were used for the said purpose. It has been held as under:- In view of foregoing discussions, we are inclined to hold that th....
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.... 183 shows that where Parliament intended to provide an option, it provided so expressly. Where a person is taxed wrongfully, he is no doubt entitled to be relieved of it in accordance with law, but that is a different matter altogether. The person lawfully liable to be taxed can claim no immunity because the Assessing Officer (Income Tax Officer) has taxed the said income in the hands of another person contrary to law." ITA No. 1641 to 1646/Del/2014 AY: 2006-07 to 2010-11. Therefore, it is well-settled principle that the Revenue authorities are duty bound to tax right person and right person alone. By "right person" is meant the person who is liable to be taxed, according to law, with respect to a particular income. The meaning of "wrong person" is obviously used as the opposite of the expression "right person". In our humble understanding, the ratio of this decision clarifies that merely because of a wrong person is taxed with respect to a particular income, the AO is not precluded from taxing the right person with respect to that income. Same is the case here when assessee company made a bogus claim of expenditure then the assessee cannot avail immunity from tax liability by s....
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....r invest in the shares of other companies, so on and so forth. This is a striking example of circulation of capital from one company to another and the rotation is continuing in all the companies under consideration. It cannot be a sheer coincidence that hundreds of companies brought into existence, having link with each other and none of them doing any worthwhile business activity, come together to issue shares at such a huge premium. At best, this argument could have been taken into consideration if these companies had issued shares to its related companies at premium and invested the proceeds in some other business activity and not purchasing the shares of other related companies through such a circular route. This shows that the transactions of issuing shares at a premium to related companies and then purchasing the shares of other related companies at a huge market price and none of the companies has any worthwhile business activity, when considered on an overall basis, is nothing but a smokescreen. [Para 17.f.] There remains no doubt whatsoever that in the given circumstances, the Assessing Officer conducted half-baked enquiry ignoring vital aspects which were required to b....
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....t, what is important in this regard is that the operation of section 142(1)/143(2) comes to an end when an assessment is completed after examining such point or matters which the Assessing Officer feels to inquire before finalizing the assessment. It is only thereafter that the revisional powers of the Commissioner under section 263 can come into play for ascertaining if the Assessing Officer examined all the relevant points, which ought to have been examined. If the Commissioner, on examination of records of assessment, comes to the conclusion that the Assessing Officer failed to enquire into certain other relevant aspects which, in fact, necessitated thorough investigation, then he has all the power to revise the assessment order. In the instant case, the assessment already stands finalized and now the Commissioner is examining whether the Assessing Officer properly examined the facts of the case. In such circumstances, it is impermissible to have a recourse to the provisions of sections 142(1) and 143(2) for demolishing the order under section 263. [Para 18.b.] Whether inadequate inquiry conducted by the Assessing Officer empowers the Commissioner to revise the assessment orde....
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.... the Assessing Officer can't be said to have taken a possible view and it is not further required on the part of the Commissioner to expressly show where the assessment order went wrong. The very fact that no enquiry was conducted or no proper enquiry was conducted in the required circumstances, is sufficient in itself to invoke the provisions of section 263. [Para 21.g.] From an overview of the above discussed judgments, it is crystal clear that where the AO fails to conduct an enquiry or proper enquiry, which is called for in the given circumstances, the CIT is empowered to set aside the assessment order by treating it as erroneous and prejudicial to the interests of the revenue. In such circumstances, it is not further required on the part of the CIT to expressly show where the assessment order went wrong. The very fact that no enquiry was conducted or no proper enquiry was conducted in the required circumstances, is sufficient in itself to invoke the provisions of section 263. We, therefore, answer all the five aspects discussed above by holding that : i) the enquiry conducted by the AO in such cases can't be construed as a proper enquiry; ii) CIT u/s 263 can set ....
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....clusion that the receipt of share capital and share premium was not satisfactorily explained by the assessee. As rightly contended by the Ld. Counsel for the assessee, the CIT ought to have set aside the order of the AO and directed the AO to conduct fresh enquiry on the lines indicated in the order of this Tribunal in the case of Subhlakshmi Vanijya Pvt. Ltd. (supra). We therefore modify the order of CIT and direct the AO to make fresh enquiry with regard to the receipt of share capital and share premium during the previous year after affording Assessee opportunity of being heard. With these observations the appeal of the assessee is treated as partly allowed. 13. The jurisdictional Indore Bench of ITAT, in a recent decision dated 21.11.2016, in the cases of (1) P.G. Infrastructure & Service Pvt. Ltd. Bhopal, (2) S.N. Vijaywargiya, Bhopal, (3) People's International Services P. Ltd., Bhopal, (ITA No. 607 to 609/Ind/2016) has confirmed the order of PCIT, Bhopal passed under section 263 of Income Tax Act. 1961 on the ground that the A.O. has not been in a position to conduct proper inquiry. Although in these cases, the jurisdiction of the cases were transferred to the Assess....
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.... Bhagwandas; 272 ITR 367 (All) PG Infrastructure ITA Nos. 607,608 & 609/Ind/2016 15 (iv) Pratap Footwear vs. ACIT; (2003) SOT 638 (Jabalpur)(Tri) (v) CIT vs. Amitabh Bachan (supra); Civil Appeal No.5009 of 2016 (SC) We further find that the Hon'ble jurisdictional High Court in the case of CIT vs. CIT vs. Deepak Kumar Garg; 299 ITR 435 has categorically held as under :- "Held, that from the order of the Assessing Officer, it was clear that for want of time, the Assessing Officer had done only a semblance of enquiry and that too, in a very slip-shod manner. The Assessing Officer accepted the version of the assessee without proper enquiry and as a result a substantial amount of taxable income was not brought to tax. The Commissioner of Income tax had recorded a categorical finding that the order of the Assessing Officer for want of adequate enquiry was erroneous and prejudicial to the interests of the revenue and after setting aside the assessment order, remanded the matter to the Assessing Officer for fresh assessment on the merits. The learned CIT also directed the Assessing Officer to observe the rules of natural justice and to provide opportunity of hearing to the assessee....
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....ced on the decision of "B" bench of Hon'ble ITAT Kolkata in the case of Shubhlakshmi Vanijya Pvt. Ltd. 60 taxmann.com 60 wherein Hon'ble ITAT, while examining the retrospective applicability of proviso to section 68 of IT Act 1961 has beautifully analyzed the issue of applicability of amendments and laid down the above principles while examining the issue. Therefore it is imperative to examine the applicability of Explanation 2 to section 263 of IT Act 1961 in the light of principal laid down in the decision as discussed supra. The existing provisions of the Act after the insertion of explanation 2 stands as under: "E.-Revision by the [Principal Commissioner or] Commissioner (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 erroneousin 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 or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or mod....
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....e made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed.] (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, [National Tax Tribunal,] the High Court or the Supreme Court. Explanation.-In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded." The explanation 2 has been inserted in section 263 w.e.f. from 1st June, 2015 by Finance Bill 2015 to declare the law which reads as under:- " [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....
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....in the case of the assessee or any other person." This amendment will take effect from 1st day of June, 2015." "NOTES ON CLAUSES FINANCE BILL 2015 Clause 65 of the Bill seeks to amend section 263 of the Income-tax Act relating to revision of orders prejudicial to revenue. The existing provisions contained in sub-section (1) of section 263 provide 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 interest of revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made an enquiry, as he deems necessary, pass an order modifying the assessment made by the assessing officer or cancelling the assessment and directing fresh assessment. It is proposed to amend sub-section (1) of the aforesaid section to insert an Explanation so as to provide 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, sho....
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....O has not followed the terms of Explanation 2 (a) and (b) of section 263(1) of IT Act 1961. The relevant part of decision of Hon'ble Bench is reproduced here under: Now, as can be seen above , the amendment to section 263 of the Act by insertion of Explanation 2 to Section 263 of the Act is declaratory & clarificatory in nature and is inserted to provide clarity on the issue as to which orders passed by the AO shall constitute erroneous and prejudicial to the interest of Revenue ,it is , inter-alia, provided that if the order is passed without making inquiries or verifications by AO which, should have been made or the order is passed allowing any relief without inquiring into the claim; the order shall be deemed to be erroneous and prejudicial to the interest of Revenue. The Hon'ble Supreme Court in the case of Malabar Industrial Company Limited v. CIT (2000)109 Taxman 66 (SC) held that if the AO has accepted the entry in the statement of account filed by the taxpayer without making enquiry , the said order of the AO shall be deemed to be erroneous in so far as it is prejudicial to the interest of the Revenue. In our considered opinion, the facts of the case of the assessee compa....
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....company that the CIT should have set aside the orders passed by the AO after giving appeal effect to the orders of the tribunal in the first round has to be rejected as the basic facts remains that the AO has not made any enquiry, examination or verification of the claim of the assessee company with respect to claim of deduction of provision of Rs. 17.72 crores with respect to provisions for warranty, sales tax, excise duty and liquidated damages , the order of the Tribunal would have adjudicated issues arising out of the orders of the authorities below whereby the facts still remains that the AO has not made any enquiry, examination or verification of the claim of the assessee company with respect to claim of deduction of provision of Rs. 17.72 crores with respect to provisions for warranty, sales tax, excise duty and liquidated damages. The order of the Tribunal in the first round of litigation has not been incidentally enclosed by the assessee company in the documents/paper book filed with the Tribunal. It is an established principle under the Act that provisions and contingent expenses are not allowed as deduction while computing the income of the assessee. It is only an ascert....
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....he assessee had incurred loss in share trading. The assessee had received gifts from various family members in cash for mitigating loss in share trading, which was deposited in savings bank account. The assessee had deposited total cash of Rs. 31.90 lakhs in his savings bank account out of which Rs. 4,25,000/- were out of his own source. Ld. Principal CIT was of the view instead of making thorough enquiries into the aforesaid transactions, the A.O. made lumpsum addition of Rs. 1 lakh on account of gift received from father and wife. It is the contention of the Ld. D.R. that the issue mentioned in the notice for initiating scrutiny proceedings are intertwined with the issue of receipt of gift. Therefore, the A.O. erred in not making thorough enquiry regarding source of gift. Non making of enquiry has caused prejudice to the interest of the revenue. However, the contention of the assessee is that the A.O. even exceeded his jurisdiction for making enquiry regarding the gifts received. The A.O. has duly mentioned this fact about the receipt of the gifts. Moreover, the A.O. wherever he found he was not satisfied regarding the source of gift has made addition. Hence, it cannot be constr....
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....roceedings, it is found that there is potential escapement of income exceeding Rs. 10 lakhs (for non-metro charges, the monetary limit shall be Rs. 5 lakhs) on any other issue(s) apart from the AIR/CIB/26AS information based on which the case was selected under approval of the Pr. CIT/DIT concerned. However, such an approval shall be accorded by the Pr. CIT/DIT in writing after being satisfied about merits of the issue(s) necessitating wider and detailed scrutiny in the case. Cases so taken up for detailed scrutiny shall be monitored by the Jt. CIT/Addl. CIT concerned." 8. Therefore, it is not the case where there was no enquiry at all by the A.O. The assessee had furnished certain evidences, which the assessing officer has gone through. There is no dispute that the Ld. Principal CIT can exercise the revisionary jurisdiction u/s 263 of the Act. If he considers that any order passed by the A.O. is erroneous in so far as it is prejudicial to the interest of the revenue. Explanation (2) to section 263 of the Act further clarifies that an order passed by the A.O. shall be deemed to be erroneous in so far as it is prejudicial to the interest of the revenue, if in the opinion of the Pri....
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....e clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the A.O. who conduct further enquiries without a finding that the order is erroneous finding that order is erroneous the condition or requirement which must be satisfied for exercise of jurisdiction u/s 263 of the Act. In such matters, to remand the matter/issue to the A.O. would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the A.O. to decide the aspect/question. The Hon'ble Court further held that this distinction must be kept in mind by the CIT while exercising jurisdiction u/s 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of alleged "inadequate investigation", it will be difficult to hold that the order of the A.O., who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/enquiry. The order of the A.O. may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneo....