TaxTMI 
TaxTMI 
2020 (10) TMI 249
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.... :- 1. That the Ld. Pr. CIT. Sambalpur has erred in law by invoking section 263 on the issues which were never the part of original assessment us 143(3) (Limited Scrutiny) and hence the order passed u/s 263 is bad in law and needs to be annulled. 2. That the limited scrutiny order passed u/s 143(3) dated 19-12-2016 was neither erroneous nor prejudicial to the interest of revenue on the facts and in the circumstances of the case, and hence the Ld. Pr. CIT, Sambalpur has erred in law by invoking section 263. Hence fresh assessment is unlawful & the order passed u/s 263 needs to be quashed. 3. That the Ld. Pr CIT Sambalpur has erred in law by utilizing section 263 for making a fresh assessment which was never intended earlier by the department as the case of the appellant is of limited scrutiny assessment. Provisions of 263 does not allow to proceed a fresh assessment which was never intended earlier by revenue. Hence the subsequent order passed us 263 needs to be quashed in toto. 4. That the order of the Ld. Pr. CIT, Sambalpur being not based on the facts of the case of the appellant and being contrary to law, should hence be quashed and the appell....
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....sessment proceedings. On such scrutiny, the finding of the Assessing Officer in the assessment order framed u/s.143(3) of the IT. Act,1961, dt. 19.12.2016 is considered to be erroneous in so far as it is prejudicial to the interest of revenue for the reasons mentioned hereunder. 3. On perusal of the assessment record, it is seen that you derive income from Transporting and service providing business. As per Form 3CD, service tax liability of Rs. 24,66,126/- has been incurred in the previous year, which was no paid on or before the due date for furnishing the return of income Similarly, service tax liability, of Rs. 7,08,245/- relating to earlier years was not paid during the previous year. The same were required to be added to the total income of the assessee u/s 43B of the IT. Act. The A.O. has failed to do so. 4. Further, the balance of loan as at 31.03,2014 outstanding against SRE! Equipment Finance Pvt. Ltd. was of Rs, 2,25,49,948/-. The assessee debited Rs. 27.59.555/- to P & L account towards "Interest on Equipment Finance', The assessee has not deducted tax al source u/s 194A while making payment/ giving credit to the account o1 SREI Finance Pvt. Ltd. ....
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....have been made; (b) The order is passed allowing any relief without inquiring into tin: claim, (c) The order has not boon made in accordance with any order, direction 01 instruction issued by the Board under section 119; or (d) The order has not been passed in accordance with any decision which is prejudicial to the assessee. rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. 8 Thus, the manner in which the Assessing Officer completed the assessment without enquiry or verification and without applying relevant provisions of the Act, which should have been made in the facts and circumstances of the case, has rendered the assessment order both erroneous and prejudicial to the interest of revenue within the meaning of section 263 of the I.T.Act. 9. In view of the above, you are directed to show-cause as to why flu-assessment order framed u/s 143(3) of the IT Act, 1961 on dt. 19 12 2018 for the A.Y.2014-15 shall not to be cancelled/ modified u/s 263 of the I T. Act 10. You are required to furnish reply to the above show-cause notice along with Audit Report, all books of accoun....
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.... introduced during the year" in the Balance Sheet of M/s Baba Langaleswar Fuel, Hence, this amount of Rs. 28,00,008/- should have been treated as unexplained cash credit u/s 68 of the IT. Act, 1961 and added to the total income of the assessee. However; the AO had not examined the allowability or otherwise of these claims and had failed to verify these issues while scrutinizing the case u/s. 143(3) of the Income Tax Act, 1961. Hence, his assessment order dated 19.12.2018 is found to be both erroneous and prejudicial to the interest of revenue within the meaning of section 263(1) of the I.T. Act, 1961. 10. While holding so, I have also taken into consideration the ratio laid down by the Supreme Court in the case of Malabar Industrial Co. Ltd. Vs. CIT (2000) 243 !TR 83 (SC). In that case, it has been held that in the following circumstances an order would be held erroneous - "An incorrect assumption of facts or 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 mine), 11. Similarly, the ....
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.... Cuttack in ITA No.381/CTK/2014 on the same ground of failure to conduct further enquiries where circumstances demands so, has held as under "We rely on various judicial pronouncements, wherein, it was held that the Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income Tax Officer should ham made further inquiries before accepting the statements made by the assessee in his return, ft was also held that the Income Tax Officer is not only an adjudicator hut also an investigator, it is his duty to ascertain the truth of the facts stated in the return of income. When the circumstances of the case are such so as to provoke an enquiry, it is his duty to make proper enquiry. Failure to make enquiry in such circumstances would make the assessment order erroneous. The Hon'ble Apex Court in the case of Smt Tara Devi Aggarwai vs. CIT, 88ITR 323 (SC), has held that the CIT may consider an order of the AO to be erroneous not only it contains some apparent error of reasoning or of law or of fact on the face of it but also because it is a stereotyped order which simply accepts what the assesses has stated in his return and fails....
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....e passed latest by 31.12.2019, as mandated u/s 153(3) of the Act. 7. Feeling aggrieved from the order of the ld. Pr.CIT, the assessee filed appeal before the Income Tax Appellate Tribunal. 8. Ld. AR before us has filed written submission as under :- The following further submission for the A.Y 2014-15 is being made before your Honours pursuant to the Appeal filed before your Honours against the Order passed by the Ld. Principal Commissioner of Income Tax, Sambalpur, for the A.Y.2014-15 dated 28/03/2019, directing set aside of the assessment order dated 19/12/2016 for adjudication of the fresh issues in relation to service tax liability, disallowance u/s.40(a)(ia) of the Act of interest payment on equipment finance and addition made alleging unexplained income u/s.68 of the Act, as discussed in the said order (dated 28/03/2019) and further directing the AO to reframe the assessment accordingly after proper appreciation of facts and in accordance with law. The issue involved in the appeal before your Honours is laid put as below: * That the revision order passed by the Ld.Pr.CIT u/s.263 of the Act, on issues which were never the part of original asses....
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....ating to the assessee which were not within the purview of the limited scrutiny and accordingly issued show cause notice dated 01/03/2019 (enclosed at pages 15-17 of the P/b), requiring the assessee to explain why the assessment order framed u/s. 143(3) of the Act dated 19/12/2016 should not be considered to be erroneous in so far as it is prejudicial to the interest of revenue for the following reasons (which were never part of the limited scrutiny, as discussed above): (i) Addition of Rs. 24,66,126/- & Rs. 7,08,245/- proposed to be made u/s.43B of the Act on account of service tax liability. (ii) Disallowance of Rs. 27,59,555/- u/s.40(a)(ia) of the Act on account of interest payment on equipment finance. (iii) Addition of Rs. 28,00,006/- as unexplained income u/s.68 of the Act. Thus, in view of the facts stated as above, it clearly follows that the case of the assessee was selected for limited scrutiny on the basis of AIR information as evident from the assessment order dated 19/12/2016 passed u/s.143(3) of the Act (refer page no. 13 of the P/b) on the following grounds viz. Contract Receipts/Fees Mismatch, Sales Turnover Mismatch & Tax Credit ....
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....-established that a decree passed by a Court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the Court to pass any decree and such a defect cannot be cured even by consent of parties." In the present case of the assessee, clearly the Ld. PCIT has completely failed to appreciate the provisions of section 263 of the Act which lays down two basic requirements of invoking the said section i.e. only when the order passed by the AO is erroneous & is prejudicial to the interests of Revenue. Relevant extract of sub-section (1) of section 263 of the Income Tax Act, 1961, reproduced as under: "Sec. 263 (1) The 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, he may....
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....tiated u/s 263 of the Act." Again, similar observation that the Ld. PC1T cannot exceed his jurisdiction by invoking revisionary power u/s.263 of the Act by holding the order of AO as erroneous in so far as prejudicial to the interest of Revenue on those items which are not emanating from the AIR, was made by the Hon'ble Mumbai Tribunal in the case of Mrs. Sonali Hemant Bhavsar vs Pr.Cit-29, ITA No.742/M/2019 (order copy enclosed). Relevant extract of the observation of the Hon'ble Tribunal reproduced as under: "After hearing both the parties and perusing the materials before us, we observe from the notice issued under section 143(2) of the Act for limited scrutiny dated 19.09.2016 and find merits in the contentions of the assessee that the said limited scrutiny cannot be expanded unless the AO converted it into complete scrutiny with the approval of Ld. Pr.CIT and if the AO after considering the submissions of the assessee does not come to the conclusion of potential escapement the Ld. Pr. CIT cannot hold the order to be erroneous on the ground that AO ought to have reached to such conclusion............" In the instant case, undisputedly....
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....d merits in the contentions of the assessee that the said limited scrutiny can not be expanded unless the AO converted it into complete scrutiny with the approval of Ld. Pr. CIT and if the AO after considering the submissions of the assessee does not come to the conclusion of potential escapement the Ld. Pr. CIT can not hold the order to be erroneous on the ground that AO ought to have reached to such conclusion. The case of the assessee is squarely covered by the decision of Kolkata Bench in the case of Sanjeev Kr. Khemka vs. Pr. CIT in ITA No.1361/Kol/2016 A.Y. 2011-12 dated 02.06.2017 wherein the co-ordinate bench of the Tribunal has held as under: "4. We have heard the rival contentions of the parties and perused the materials on record. The primary issue in the case on hand revolves whether it is a case selected under CASS for limited scrutiny or regular scrutiny. It can be seen from the grounds of appeal that the assessee wants to contend that the very initiation of proceedings Mrs. Sonali Hemant Bhavsar u/s 143(3) of the Act on the basis of regular scrutiny under the Act was bad in law. The proceedings under section 143(3) of the Act should have been limite....
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.... 2. Whether the impugned assessment order passed u/s 143(3) dated 24-10- 2013 was valid in the eyes of law or a nullity as has been claimed by the assessee? 3. If the impugned assessment order passed u/s 143(3) was illegal or nullity in the eyes of law, then, whether the CIT had a valid jurisdiction to pass the impugned order u/s 263 to revise the non est assessment order?" On question no. 1 and 3 which is relevant to the present case the Hon'ble Mumbai bench of the Tribunal has taken the view that when the original assessment proceedings are null and void in the eyes of law for want of proper assumption of jurisdiction then such validity can be challenged even in collateral proceedings. The Mumbai bench took the view that the proceedings u/s 147 of the Act are primary proceedings and proceedings u/s 263 of the Act are collateral proceedings and in such collateral proceedings, the validity of initiation of the original proceedings u/s Mrs. Sonali Hemant Bhavsar 147 of the Act can be challenged. The Mumbai bench of the Tribunal in this regard has placed reliance on several decisions, the principal decision being that of the Hon'ble Supreme Court in the case....
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....ssessee. Subsequently, Ld. CIT u/s 263 of the Act observed certain errors in the order of AO, therefore, he was of the view that the order passed by the AO is erroneous in so far as prejudicial to the interest of Revenue on account of no proper-enquiry before completing assessment as discussed below:- (i) The assessee has deposited in its bank account in HDFC bank Goa for Rs. 17.56 lakh and out of that there was a withdrawal only for Rs. 1.50 lakh but the AO has made the addition only to the extent of Rs. 4 lakh on account of unexplained cash credit. Therefore, certain unexplained cash credit of the assessee has been under assessed by the AO. ii) There was another bank account of the assessee in HDFC bank in Goa where total deposits of Rs. 19,31,750/- was made by the assessee but the Mrs. Sonali Hemant Bhavsar AO found credited amount of Rs. 5,76,056/- only. Thus, total deposits made in the bank were not brought to tax; (iii) There was transactions of Rs. 3 76,225/- through credit card which was not explained and thus the entire amount was liable to be added to the total income of assessee but the AO has added only a sum of Rs. 2,98,225/- to the total inc....
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....required further investigation. (6) Long term capital gain of Rs. 19,74,763/- was not properly verified. (7) Loan transactions and Mrs. Sonali Hemant Bhavsar interest on loans required proper verification. (8) Salary was received in cash without TDS, which should have been viewed adversely. (9) LIC premium was paid for a minor but assessee's capital account did not reflect the same. (10) Lastly, the assessee declared income from commission/brokerage in the previous two AYs but no such income was shown in this year. "An incorrect assumption of facts or an incorrect application of law will always make the order passed by the Assessing Officer erroneous. The Assessing Officer has not made proper enquiry before completing assessment regarding above issues. By not checking the above issues and by not making adequate enquiry the Assessing Officer has not assessed the proper income and the order has become erroneous and prejudicial to the interest of the revenue. In view of the above, the order dated 29/03/2014 passed by ACIT, Circle-43, Kolkata is found to be erroneous and prejudicial to the interest of revenue and hence it is set....
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....per enquiry was not made by the AO. Therefore, Ld. CIT held that the order of AO is erroneous and prejudicial to the interest of revenue. However, after examining the order of Authorities Below and other relevant records our observations are as follows:- a) deposit of cash of Rs. 17.56 lakh in HDFC bank a/c No.03151930000609 From the order or AO, we find that the AO at the time of assessment proceedings has applied his mind while determining the undisclosed income from the said bank account for Rs. 4 lacs. Thus the AO after considering the bank statements of the assessee has consciously made the addition of Rs. 4 lakh as unexplained cash credit against which assessee claimed to have filed appeal before Ld. CIT(A). Therefore, in our considered view, the allegation of Ld. CIT that proper enquiry was not made by the AO is not true. b) Deposit of cash Rs. 19,31,750/- in HDFC bank A/c 0315100006743 From the order of AO we find that AO has already made the addition of the entire amount as unexplained cash credit. Therefore, the allegation of the ld. CIT-A that the order of AO is erroneous and prejudicial to the interest of Revenue is not true. c) Credi....
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....s upon the department to prove that it is within the taxing provision." We also rely on the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Max India Limited reported in 295 ITR 282 wherein it was held as under : "When the CIT passed the impugned order under s. 263, two views were inherently possible on the word "profits" occurring in the proviso to s.80HHC(3) and therefore, subsequent amendment of s. 80HHC made in the ITA No.1361/Kol/2016 A.Y. 2011-12 S.K. Khemka Vs. Pr. CIT-15 Kol. Page 12 year 2005, though retrospective, did not render the order of the AO erroneous and prejudicial to the interest of the Revenue, and CIT could not exercise powers under s. 263." In view of the above proposition, and respectfully following principle laid down by the Hon'ble courts and keeping in view all these discussion, as also bearing in mind entirety of the case, we deem it fit and proper to uphold the grievance of the assessee and quash the impugned revision order as devoid of jurisdiction. The assessee gets the relief, accordingly. 10. On the other hand, ld. DR relied on the order of ld. Pr.CIT and submitted that the limited scrutiny can be c....
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....ereas he was unable to demonstrate the action of the AO who has travelled beyond the limited scrutiny that means the order of AO has been accepted. In one hand, the assessee has accepted the assessment framed by the AO whereas in other hand, the assessee has challenged the order of Pr.CIT for examining in details. In our opinion, the contention of ld. AR regarding revisionary power exercised by the Pr.CIT in case of limited scrutiny, is not accepted on the basis of recent decision of the coordinate bench of the Tribunal in case of Baby Memorial Hospital Ltd. (supra). If there is an escapement of income or potentiality of income involved in the issues which has not been done by the AO while completing the limited scrutiny assessment the AO could have obtained the permission from the ld. Pr.CIT if he finds that there is a potentiality of the income. The case law relied on by the ld. DR is for the assessment year 2014-2015 and the assessee's case is also for the assessment year 2014-2015, therefore, the case is squarely covered by decision of the of coordinate bench of the Tribunal in case of Baby Memorial Hospital Ltd. (supra), wherein the Tribunal has observed as under :- 3....
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....ment. 4. Against this, the assessee is in appeal before us. The Ld. AR submitted that this was a limited Scrutiny assessment and the reasons for which the case was selected for scrutiny for furnishing of details specific to the CASS reasons. It was submitted that the details were furnished in response to notice issued u/s. 142(1) of the Act dated 27/06/2016 and after verification the Asst. Commissioner had accepted the explanation given by the assessee, so proper enquiry was made in the limited scrutiny case and therefore, the A.O had applied his mind to the facts of the case and therefore, his order is not erroneous or prejudicial to the interest of the Revenue. Hence, it was submitted that the order of the Commissioner is invalid. 4.1 The learned AR had submitted that in a limited scrutiny assessment, the Assessing Officer has to restrict himself to the issues raised in the limited scrutiny and cannot make any addition on other issues. In support of this submission, the learned AR had relied on the following Tribunal orders:- (i) Nitin Killawala & Associates v. ITO [ITA No.1611/Mum/2013 - order dated 16.09.2015] ITAT Mumbai Benches. (ii) Ms.Yik....
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.... Benches. (iv) Rakesh Kumar v. CIT [6187/Del/2015 - order dated 20.12.2018] ITAT New Delhi Benches. (v) M/s. R & H Property Developer Pvt.Ltd. v. Pr.CIT [1906/Mum/2019 - order dated 30.07.2019] ITAT Mumbai Benches. (vi) Mrs.Sonali Hemant Bhavsar v. Pr.CIT [742/Mum/2019 - order dated 17.05.2019] ITAT Mumbai Benches. 4.5 The learned AR had submitted that in response to the show cause notice u/s 263 of the I.T. Act, when the assessee has filed replies, the PCIT has to give positive finding on merits while setting aside the matter u/s 263 of the I.T. Act on how the assessment order is erroneous and prejudicial to the interest of the revenue. In support of his submission, the learned AR relied on the judgment of the Hon'ble Karnataka High Court in the case of CIT v. Narayana Pai (T) [98 ITR 422]. The Explanation 2(a) to section 263 of the I.T. Act, states that the assessment order shall deem to be erroneous and prejudicial to the interest of the revenue if I.T.A. No.420/Coch/2019 such an order was passed without making inquiry or verification, which should have been made. x x x x x 6. The Ld. DR submitted that in this case, the assessm....
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....curred in cases selected for scrutiny under Computer Aided Scrutiny Selection ('CASS') for verification of specific information obtained from third party sources which apparently did not match with the details submitted by the tax payer in the return of income. 2. Therefore, for proper administration of the Income-tax Act, 1961 ('Act'), Central Board of Direct Taxes, by virtue of its powers under section 119 of the Act, in supersession of earlier instructions/ guidelines on this subject, ere by directs that the cases selected for scrutiny during the Financial Year 2014-20 5 under CASS, on the basis of either AIR data or CIB information or for non re- conciliation with 26AS data, the scope of enquiry should be limited to verification these particular aspects only. Therefore, in such cases, an Assessing Officer shall confine the questionnaire and subsequent enquiry or verification only to the specific point(s) on the basis of which the particular return has been selected for scrutiny. 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....
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..... DR relied on the order of the Pr. CIT. 7. We have heard the rival submissions and perused the record and also gone through all the case laws cited by the parties. Section 263 of the Income-tax Act seeks to remove the prejudice caused to the revenue by the erroneous order passed by the Assessing Officer. It empowers the Commissioner to initiate suo moto proceedings either where the Assessing Officer takes a wrong decision without considering the materials available on record or he takes a decision without making an enquiry into the matters, where such inquiry was prima facie warranted. The Commissioner is well within his powers to treat an order as erroneous on the ground that the Assessing Officer should have made further inquiries before accepting the wrong claims made by the assessee. The Assessing Officer cannot remain passive in the face of a claim, which calls for further enquiry to know the genuineness of it. In other words, he must carry out investigation where the facts of the case so require and also decide the matter judiciously on the basis of materials collected by him as also those produced by the assessee before him. The Assessing Officer was statutorily re....
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.... hereby set aside for the limited purpose of verifying whether the foreign exchange loss qualifies for being a revenue expenditure and secondly to rework MAT income after adding back the provision for doubtful debts, as necessary examination/verification has not been made during the assessment. 7.4 In this case, the assessment was based on limited scrutiny with reference to AR information and no addition was made by the Assessing Officer on that count. In our opinion, even in a case of limited scrutiny assessment, the Assessing Officer is duty bound to make a prima facie enquiry as to whether there is any other item which requires examination and in the assessment, the potential escapement of income thereof exceeded Rs. 10 lakhs. He ought to have sought the permission of CIT/DIT to convert the 'limited scrutiny assessment' into a 'complete scrutiny assessment'. If there is no escapement of income, which would have been more than Rs. 10 lakhs, the Pr. CIT could not exercise jurisdiction u/s. 263 of the I.T. Act. In the present case, the assessee itself agreed that the Pr. CIT is justified in giving direction to rework MAT income after adding back the provisi....
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.... also made deliberation by application of mind and thereafter adjudicated the issues by way of inserting deliberation in the assessment order. 29. Ld A.R. has placed into service CBDT Circular/instruction No.5/2016 dated 14.7.2016 regarding scope of enquiry in cases under ' Limited Scrutiny' selected through CASS 2015 and 2016 but in the same instruction/circular, in paras 2 to 6, it has also been provided that in a case which was originally earmarked for ' Limited scrutiny', the AO shall be required to form a reasonable view that there is possibility of under assessment of income if the case is not examined under 'Complete scrutiny' and the case may be converted from limited scrutiny to complete scrutiny, which requires administrative approval from pr. CIT/CIT/Pr. DIT/DIT, as prescribed in para 3(d) of earlier instruction dated 29.12.2015. 30. From a careful reading of the impugned order passed u/s.263 of the Act, we clearly observe that the assessee company had shown gross turnover /revenue from operation of Rs. 63,97,71,157/- for financial year 2013-14 but as per statement in 26AS, the assessee had shown Rs. 16,91,82,966/- from works contract bit it had disclos....
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....ceedings under this Act, which include scrutiny assessment records and if after applying his mind to such record or proceedings, he consider that any order passed by the AO is erroneous and prejudicial to the interest of the revenue, then, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry, he deems necessary, pass such order thereon, as the circumstances of the case justify, which includes an order of enhancement or modification assessment or cancelling the assessment with a direction to pass fresh assessment order. Since both the issues were not considered by the AO in the original assessment order, Ld. Pr. CIT consider it necessary to direct the AO to enquiry the matter and reframe the assessment accordingly. 33. In the case of Gee Vee Enterprises vs. Addl. CIT [99 ITR 375], the Hon'ble Delhi High Court held as under :- "It is not necessary for the Commissioner to make further inquiries before canceling the assessment order of the Income-tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income-tax Officer should have made furthe....
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....nclude that there was no cost of acquisition. It was also to be considered whether the spontaneous growth required any care or attention by way of protection from animals and the like and, if so, whether the assessee did not incur any cost in that regard. Any decision either way without considering these aspects would certainly be erroneous and any decision in favour of the assessee without considering these aspects would be prejudicial to the interests of the Revenue. The order passed by the Commissioner of Income-tax and the order passed by the Tribunal sustaining the same as a whole were valid." 36. In the case of Addl. CIT vs. Mukur Corporation [111 ITR 312], Hon'ble Gujarat High Court held as under :- "that the words "prejudicial to the interests of the revenue' in section 263 have not been defined but they must mean that the orders of assessment challenged are such as are not in accordance with law, in consequence whereof the lawful revenue due to the State has not been realized or cannot be realized. In the present case, it was obvious that the Income-tax Officer had committed an error in not making enquiry into the details as regards both the deductions an....
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....ason to interfere with the order of ld Pr. CIT by directing the AO to reframe the assessment after conducting proper enquiry on the issues and, therefore, we affirm the same. 13. Further in the case of M/s Akash Ganga Promoters & Developers, ITA No.164/CTK/2019, order dated 18.12.2019, wherein the similar issue of limited scrutiny is involved, however, the Tribunal has decided the issue in favour of the assessee because in this case the AO has made sufficient, adequate and proper enquiry and thereafter took both the issues to a logical conclusion by way of adjudication and deliberation in the assessment order and he was satisfied that there was no escapement of revenue, therefore, there was no room for further enquiry by the Pr.CIT. For the sake of convenience, we would like to reproduce the relevant observations of the Tribunal in this regard, are as under :- 15. On careful consideration of rival submissions, first of all, we may point out that undisputedly, the case of the assessee for the assessment year 2015-16 was selected for limited scrutiny on two points i.e. (i) real estimate business with high closing stock (verify whether assessee has adopted percentage compl....
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....interest of the revenue. 18. Now, we proceed to adjudicate the next contention of the assessee that the p- ld Pr. CIT proceeded to initiate revisional proceedings, issued notice and passed the impugned order u/s.263 of the Act without application of mind on the proposal put forward by the Assessing Officer and draft notice prepared by the AO issued to the assessee. 19. In the present case the Assessing Officer passed limited scrutiny assessment order u/s.143(3) of the Act on 21.3.2017 and assessment proceedings terminated on the said date. From the order sheet of the Assessing Officer placed at page 52 of paper book vide dated 14.1.2019, we observe that subsequently, the AO. i.e. JCIT, Ragne-2, Sambalpur vide letter dated 5.7.2018 send a proposal to ACIT, Sambalpur for initiation of proceedings u/s.263 of the Act. From the second para of said order sheet, we note that the ACIT, Sambalpur mentioned that on analysis of the facts of the case, it is seen that the assessee has shown profit @ 3.24% on total turnover which is too low. Ld ACIT further noted that the AO asked the assessee to produce the documentary evidences related to the business of the assessee like bil....
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.... requirement for invoking the revisional proceedings is that the ld. Pr. CIT/CIT shall call and examine the assessment records of any proceedings under this Act, which include scrutiny assessment records and if after applying his mind to such record of proceedings, he consider that any order passed by the AO is erroneous and prejudicial to the interest of the revenue, then, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry, he deems necessary, pass such order thereon, as the circumstances of the case justify, which includes an order of enhancement or modification assessment or cancelling the assessment with a direction to pass fresh assessment order. In the present case, from the order sheet dated 14.1.2019, it is vivid that the JCIT, Range-2, Sambalpur sent a proposal for initiation of revisional proceedings u/s.263 of the Act to ACIT, Sambalpur and ld ACIT, Sambalpur after making observation regarding requirement of examination of certain issues forwarded the proposal to Ld. PCIT alongwith draft notice u/s.263 which was approved by ld PCIT in a manner in which administrative actions are proved. Hence, we are compel....
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.... view taken in above decisions are unanimous that the Income-tax Officer is not only an adjudicator but also an investigator. It is his duty to ascertain the truth of the facts stated in the return. When the circumstances of the case are such so as to provoke an enquiry, it is his duty to make proper enquiry. First he should investigate the matters on the basis of which the assessee has prepared income tax return thereafter he should reach to a logical conclusion that the income shown is as per the Income Tax Act. Failure to make enquiry in such circumstances would make the assessment order erroneous and prejudicial to the interest of the revenue. We concur with the submissions of Ld. CIT-DR that it was a case of lack of inquiry and there was no application of mind by AO on the issues which formed subject matter of revisional jurisdiction u/s 263. Therefore, we do not find any illegality in the action of Ld. Pr. CIT in exercising the said jurisdiction. In the totality of facts and circumstances of the case, the case is squarely covered by the decision in the case of Baby Memorial Hospital Ltd. (supra) and in the case of Maa Tarini Industries Ltd. (supra). The ld. AR has referred to....