TaxTMI 
TaxTMI 
2021 (5) TMI 70
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....pplication money and premium received by the assessee during the year. 2.1. The ld. Pr. CIT, Kolkata - 4, issued a show cause notice dt. 25/07/2016, proposing to revise the assessment order passed u/s. 143(3) of the Act on 15/03/2015, by invoking his powers of revision u/s. 263 of the Act. After considering the reply of the assessee dt. 22/08/2016, the ld. Pr. CIT, Kolkata -4, passed an order u/s. 263 of the Act on 07/09/2016 (first 263 order)setting aside the original assessment order passed u/s. 143(3) of the Act on 15/03/2015 and directing the Assessing Officer to redo the assessment de novo with certain directions. At Para 4(v) of the order passed u/s. 263 of the Act, dt. 07/09/2016, the ld. Pr. CIT-4, Kolkata, held as follows:- "4(v) Considering the above facts and circumstances of the case, the assessment order passed on 15.03.2015 is set aside denovo with a direction to AO to carry out proper examination of books of accounts and Bank accounts of assessee as well as investors. A.O. is also directed to examine the source of share application, identity of investor and its genuineness and issue of purchase & sale of seeds. The assessment proceedings may be i....
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.... order, computation sheet and demand notice to the assessee." 2.2. The ld. Pr. CIT-4, Kolkata, issued a notice u/s. 263 of the Act, dt. 28/01/2019 to the assessee company, to show cause as to why the assessment order passed u/s. 143(3) r.w.s. 263 of the Act, dt. 26/12/2016, should not be revised. The sole reason for giving show cause notice, is stated as follows:- "On perusal of the records it is seen that total income as determine as per 'Order' is less than the total income as assessed as per order u/s. 143(3) of the 'Act' dated 15.03.2015. Therefore, the impugned 'Order' is erroneous, in so far as it is prejudicial to the interest of revenue." The assessee filed its explanation. The ld. Pr. CIT, after considering the explanation given by the assessee to the show cause notice, rejected the same and passed an order u/s. 263 of the Act on 27/03/2019 revising the order passed u/s. 143(3) r.w.s. 263 of the Act, dt. 26/12/2016. Para 8 of this order read as follows:- "8. In my considered opinion this is a case of lack of enquiry on the part of the AO. Not collecting the full facts and not taking enquiry to logical end which could enable t....
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....rejudicial to the interest of the revenue, warranting exercise of revisionary powers u/s. 263 of the Act once again by the ld. Pr. CIT-4, Kolkata. He submitted that, the order passed by the Assessing Officer on 26/12/2016 was a speaking order wherein, the Assessing Officer has followed the direction of the ld. Pr. CIT. In the impugned revisionary order, Ld. PCIT has pointed out certain alleged infirmities in the order of the A.O. which according to the ld. Pr. CIT made the order of the A.O. "erroneous" and "prejudicial" to the interest of the revenue. On the second impugned revisionary order passed u/s. 263 of the Act, the ld. Counsel for the assessee submitted the following point to point rebuttal:- (i) A.O. had failed to examine the net worth of shareholders in order to see the justifiability of such huge investment. It was submitted that, the A.O. has already given a finding in the assessment order that he had verified the source of fund, identity, genuineness and credit worthiness and found the same in order. Further, from the chart marked as Annexure: 'B', it is apparent that the investment made in the appellant company by the shareholder company i....
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....ailable in the record of the A.O., is given in the chart marked as Annexure: 'B'. It is worth noting here that the first PCIT has directed to examine the source of share application and not source of source. Thus, it is apparent that source of share application received by the appellant has been traced to the shareholders whose identity, genuinity and credit worthiness has admittedly been examine by the A.O. (vi) The order passed by the A.O. suffers from lack of adequate enquiry making it erroneous insofar as it is prejudicial to the interest of the revenue. It was submitted that the A.O. was obliged to follow the direction of the Ld. PCIT, which he followed strictly and completely." 4. The ld. Counsel for the assessee summed-up his arguments that, ld. Pr. CIT's order u/s. 263 of the Act, dt. 27/03/2019, is bad law for the following reasons:- a) The Assessing Officer had examined the net worth of the shareholders and had given a finding of facts, in his assessment order about the source of funds, identity, creditworthiness of the share applicant. He filed a paper book wherein at annexure-B, the details and documentation submitted by each of....
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....case-law for each of the propositions cited by him. He submitted that this case is squarely covered in his favour by the decision of the Kolkata 'B' Bench of the Tribunal in the case of Amritrashi Infra Private Ltd. Vs. Principal Commissioner of Income-tax in ITA No. 838/Kol/2019; Assessment Year: 2012-13 order dt. 12.08.2020 and the decision of the Kolkata 'A' Bench of the Tribunal in the case M/s. Omkar Infracon Private vs ITO, Ward-12(2), Kolkata in ITA No. 896/Kol/2019; Assessment Year 2012-13, order dt. 18/03/2020, wherein under similar circumstances the order of the ld. Pr. CIT u/s. 263 of the Act, was quashed as bad in law. He further relied on the decision in the case of Kanchan Plywood Products Pvt. Ltd. in ITA No. 2411/Kol/2017; Assessment Year: 2012-13, order dt. 01/05/2019, and other decisions for the proposition that share premium cannot be taxed, even if it exceeds the fair market value, prior to the amendment brought to the Income Tax Act in the Assessment Year 2013-14. We would be considering each of these decisions as and when necessary. 5. The ld. D/R, Shri Anand Kedia, on the other hand, controverted the arguments of the assessee and submitted ....
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....artment u/s. 143(3) of the Act, and when nothing adverse was found, no addition u/s. 68 of the Act, can be made in the case of the assessee company, which is a recipient of the share application money. For this proposition, he relied on a number of case-law, which we will be referring to, as and when required. 5.1.1. He once again relied on the order of the Co-ordinate Bench of the Tribunal in the case of Amritrashi Infra Private Ltd. vs. Principal Commissioner of Income-tax (supra) and submitted that the facts of the assessee's case are identical to the facts in the case of Amritrashi Infra Private Ltd. (supra) and under those circumstances, the decision of the Tribunal in the case of Amritrashi Infra Private Ltd. (supra), has to be followed, specifically when no contrary decision is brought to the notice of the Tribunal. 6. We have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows:- 7. We find that this Bench of the Tribunal, has under identical circumstances and identical facts, in the case of Amritrashi Infra Pri....
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....he basis of evidence on which adverse inference was drawn against the assessee. Moreover, the First Ld. Pr. CIT found fault with the AO for not bothering to examine the contention of the assessee or to bring on record anything against the assessee and thus according to him, the AO with a pre-determined mind has simply jumped to the conclusion that the share capital collected by assessee as unexplained cash credit u/s. 68 of the Act. Therefore, according to the First Ld. Pr. CIT, the first original assessment order framed u/s. 143(3) of the Act dated 26-03-2015 was against the principle of natural justice and, therefore, he found it fit to order denovo assessment and gave specific direction in respect of share capital & premium collected by assessee. 48. Thereafter, the ld. Pr. CIT was pleased to direct "...............assessment order passed on 26.03.2015 is set aside de novo with the direction to the AO to carry out proper examination of books of account and bank statement of the assessee as well as the investor. The AO is also directed to examine the source of share application, entity of investor and its genuineness". (emphasis given by us). He also directed that the as....
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....71513 AARCS1845D yes 12 . M/s. Maharaja Merchants Pvt. Ltd. U51109WB2005PTC102343 AAECM224E yes 13 . M/s. Sristi Sales Pvt. Ltd. U51109WB2005PTC102121 AAICS8900L yes summoned the director of the assessee company Shri Navin Tahin before him, who duly appeared and produced the books of account on 01.12.2016 and furnished the relevant details viz., (i) copy of ITR, (ii) audited accounts, (iii) details of directors, (iv) the details of the share-applicants, (v) details of business activity, (vi) details of increase in share capital, (vii) Form 2, (viii) Form 5, (ix) bank statements evidencing payment through banking transaction, which fact the AO has acknowledged in the reassessment order. [And here we should keep in mind that the First Ld. Pr. CIT's finding of fact after perusal of original assessment records that assessee in the first round before AO has produced PAN, ROC details, audited financial statements, details and copy of share applicants, bank statements reflecting the transaction, records relating to investors to establish identity, creditworthiness & genuineness. And the finding of First Ld. Pr. CIT that assessee had dischar....
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....documents called for cannot be disbelieved merely because he did not mention this event in the order sheet. Moreover, the assessee or the share applicants does not have any control over the order sheet maintained by the AO and the failure of AO to mention this action cannot be a reason to disbelieve the AO's assertion that he issued notice u/s. 133(6) of the Act. Moreover, we have to examine the re-assessment/second assessment order of AO and not the order-sheet maintained by him which has not been negatively commented upon by the Second Ld. Pr CIT and it is not the fault for which the Ld. Pr CIT exercised his power u/s. 263 of the Act. Thus, we note that second AO issued sec. 133(6) notice and collected documents running more than 352 pages. Moreover, the First Ld. Pr. CIT while setting aside the first AO's order has returned a finding that assessee in the first round itself has filed the relevant documents to prove the identity, creditworthiness and genuineness of the share capital and that assessee had discharged its onus by filing the same. So we find that during the second round, the AO issued notices to share-holders u/s. 133(6) and after perusing their replies and su....
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....e 313 PB-2) Rs. 50,00,000/- M/s. Sristi Sales Pvt. Ltd. - Rs. 1,12,25,632 (page 336 PB-2) Rs. 50,00,000/- 53. So, from a perusal of the above chart, we note that the assessee and the shareholders have brought to the notice of Second AO that they (share subscribers) have enough net worth to invest in the assessee company and the share subscribing companies pursuant to the AO's notice u/s. 133(6) of the Act have furnished their respective audited accounts from which the aforesaid facts are clearly discernible and moreover the share subscribers have also filed before the second AO the source from which they subscribed to shares of assessee (though not required as per law in force for AY 2012-13), bank statement, audited balance sheet etc except M/s. Maharaja and M/s. Sristi Sales. Thus the assessee had discharged the onus on it about the creditworthiness of the share- holders. So we note that the source of the investments has been clearly brought to the notice of the second AO during the assessment/reassessment proceedings. Further, the bank statements of all the shareholders as well as that of assessee were filed before the AO, which revealed that the s....
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.... of the Act. (ii) We note from a perusal of the paper book-2 pages 38 to 77, the details of share applicant M/s. Kakrania Trading Pvt. Ltd. It is a Private Limited Company which has a PAN AABCK151611 and its CIN number is U70101WB1994PTC062137 and the Net worth of this company as on 31.3.2012 Rs. 66,52,71,914/- (PB-page 62) and investment made in the assessee company is to the tune of Rs. 1,39,00,000/- and this share applicant has made the transaction through banking channel four times on 01.03.2012 Rs. 30,00,000 through NEFT; and by cheque on 02.03.2012 a sum of Rs. 59,00,000/-; and on 7.3.2012 and by cheque on 12.3.2012 Rs. 25 lakh each. There is board resolution for investment in assessee's company and Share Application Form, Bank statement, ITR acknowledgement, and explanation of source of fund as well as financial statement available in the PB-page 39 to 77. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed financial statements and thus we note that the assessee had duly discharged its onus to prove the identity of the share applicant by add....
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....45 lakhs through NEFT. There is board resolution for investment in assessee's company and Share Application Form Bank statement, ITR acknowledgement, explanation of source of fund as well as financial statement available in the PB-page 113 to 137 in the PB. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed financial statements and thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Further, it is noted that the share applicants had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act. (v) We note from a perusal of the paper book-2, pages 138 to 159 the details of share applicant M/s. Shivarshi Construction Pvt. Ltd. It is a Private Limited Company which has a PAN AAQCS7848M and its CIN number is U45400WB2011PTC170957 an....
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.... we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Thus the assessee has discharged the onus to prove the identity, creditworthiness and genuineness of the transactions. Further, it is noted that the share applicants had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act. (vii) We note from a perusal of the paper book-2, pages 185 to 206 the details of share applicant M/s. Flowtop Agency Pvt. Ltd. It is a Private Limited Company which has a PAN AABCF9036D and its CIN number is U52190WB2012PTC 173352 and the net worth of this company as on 31.3.2012 Rs. 15,38,94,946/- (PB-page 200) and investment made in the assessee company is to the tune of Rs. 4,49,00,000/- and this share applicant has made the transaction through banking channel on 30.03.2012 Rs. 4,49,00,000/- through Cheque.. There is board resolution for investment in assessee's company a....
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....ny after getting the notice under section 133(6) of the Act. (ix) We note from a perusal of the paper book-2, pages 227 to 261 the details of share applicant M/s. Kamaldhan Developers Pvt. Ltd. It is a Private Limited Company which has a PAN AAECK6810D and its CIN number is U45400WB2011 PTC 170944 and the net worth of this company as on 31.3.2012 Rs. 56,18,94,080/- and investment made in the assessee company is to the tune of Rs. 12,54,00,000/- and this share applicant has made the transaction through banking channel on 31.03.2012 Rs. 12,54,00,000/- through NEFT. There is board resolution for investment in assessee's company and Share Application Form, Bank statement, ITR acknowledgement, explanation of source of fund as well as financial statement available in the PB-page 228 to 261 in the PB. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed financial statements. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed financial....
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....,76,00,0000/- through NEFT. There is board resolution for investment in assessee's company and Share Application Form, Bank statement, ITR acknowledgement, explanation of source of fund as well as financial statement available in the PB-page 285-303 in the PB. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed financial statements. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Thus the assessee has discharged the onus to prove the identity, creditworthiness and genuineness of the transactions. Further, it is noted that the share applicants had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act. (xii) We note from a perusal of the paper book-2, pages 304 to 326 the details of share applicant M/s. Maharaja Merchants Pvt. Ltd. It is a Private Limited Company which has a PAN AAECM224E and its CIN number is U51109WB2005PTC102343 and the net worth of this company as on....
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....the view thus taken by the AO cannot be termed as unsustainable in law. 54. So, from the aforesaid facts revealed during the second round, we note that AO has discharged his duty as an Investigator and enquired as per the direction of the First Ld. Pr. CIT dated 23.08.2016 u/s. 263 of the Act (First 263 order) and further we note that the Second Ld. Pr. CIT while issuing the Show Cause Notice while exercising his revisional jurisdiction for second time has not made even a single allegation about the non-compliance/failure on the part of Second AO in respect of the specific direction given by the First Ld. Pr. CIT dated 23.08.2016 while setting aside the original assessment order passed by the AO dated 26.03.2016. In other words, in the impugned order the second Ld. Pr. CIT has not found fault with the action of the second AO in giving effect to the specific directions given by him while passing the first revisional order on 23.08.2016. Thus, we note that when the second AO while framing the reassessment order pursuant to the specific direction of the First Ld. Pr. CIT's order dated 23.08.2016 (first revisional order) has complied with the specific directions of the Fir....
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....ents of the documents running more than 352 pages (PB-2) could not be factually controverted by the Second Ld. Pr. CIT. And still if the Ld. Pr. CIT is not satisfied and wanted to interfere invoking jurisdiction u/s. 263 of the Act, he has to show that the enquiry conducted by AO was flawed or the enquiry conducted by AO was on a wrong direction or on wrong assumption of fact/law or that the AO misdirected himself in factual investigation or applied the law erroneously in respect of the facts collected by him. For doing so, in the facts discussed supra, he second (Ld. Pr. CIT) should himself had conducted an enquiry or at least conducted a preliminary enquiry and was able to bring some evidence/material on record to upset the AO's satisfaction in respect of identity, creditworthiness or genuineness of the share subscribers and thus recorded a finding of fact that the decision of AO's enquiry was faulted or wrong and in that process tried to show that it has resulted in a view which is "unsustainable in law" which would have justified his action of passing the impugned order u/s. 263 of the Act, which unfortunately is not the case. Since the AO's view on the facts collec....
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....ng process of framing the second assessment order due to the failure of second AO's omission to collect the additional documents. However, we note that the Second Pr. CIT has not carried out any such exercise or even spelled out in his impugned order, which all documents the second AO failed to collect for considering the total facts; and even if we presume he has conducted such an exercise, then he has not been able to bring out any adverse factual finding to upset the view of Second AO. So we find no merit in the vague allegation of second Pr. CIT that the second AO has not collected the full facts necessary to decide the issue of share capital & premium. So we note that the Second AO, the assessing authority who is a quasi- judicial office has discharged his dual role as an investigator as well as an adjudicator. Looking from another angle of doctrine of merger canvassed before us, we note from the facts of this case that the second Ld. Pr. CIT - 4 by passing the second revisional order dated 14.03.2019 has substituted the First Pr. CIT's order passed u/s. 263 of the Act dated 23.08.2016 with his own order which he cannot do since the second assessment order/re-assessmen....
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....assessee had filed all details and the AO examined the same, and thereafter had issued notice u/s. 133(6) of the Act and verified the details, and issued summon u/s. 131 to the directors of the assessee company as well as to all the shareholders. And we note that all of them responded and duly appeared before the AO and their statements were recorded and only one shareholder an individual was new and all the shareholder's companies were group companies and the new individual share subscriber was father of a director. (b). We note that next fault pointed out by the Ld. Pr. CIT was "the AO failed to carryout detailed investigation as to how they decided to invest in a company at premium which was never a known company". According to us, the Ld. Pr. CIT did not appreciate the facts in the proper perspective and did not had taken notice of the important fact that these were the promoters who started the company in the year 2010 for the business of making ash-fly bricks and the only new shareholder individual was father of an existing director; and the assessee company in this assessment year had started expansion activities of the business of making/manufacturing ....
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....ond round had filed before AO all the relevant bank statements. Before us also all copies and details of bank accounts, have been filed and we find that AO during the assessment proceeding called for the same and examined it, so he has not made any adverse observation against it. So, Ld. Pr. CIT's allegation in respect of non examination of bank accounts are baseless and deserves to be rejected. (f) The other fault pointed out by the Ld. Pr. CIT is that the AO failed to trace out the money trail We note that the assessee company is into manufacturing of bricks using fly ash and had set up its factory and the share holder are the promoters/group companies and no allegation has been levelled against the shareholders that they are entry providers. We note that earlier contribution made by them have been accepted in previous years, and also the fact remains that the earlier years of assessment have not been reopened though there was sufficient time for the same. In the light of the documents discussed supra, we are of the opinion that assessee has discharged the onus on it. (g) The last fault taken note by the Ld. Pr. CIT is that the reassessment order pr....
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....ed order the Ld. Pr. CIT has not found fault with the action of the AO in giving effect to the specific directions given by him while passing the first revisional order on 10.06.2016. Thus, we note that when the AO while framing the reassessment order pursuant to the specific direction of the Ld. Pr. CIT's order dated 10.06.2016 (first revisional order) has complied with the specific directions of Ld. Pr. CIT and based on the inquiry conducted and after perusal of the documents running more than 794 pages which reveals the identity, creditworthiness and genuineness of the share capital and premium collected by the assessee from the share subscribers, the satisfaction of AO as envisaged in sec. 68 of the Act is a plausible view and the share subscribers/directors participating in the reassessment proceedings along with the audited financial statements and other documents referred supra, the assessee had discharged the onus on it about the identity, creditworthiness and genuineness of the share capital and premium collected by the assessee from the respective share subscribers. Since the aforesaid exercise was carried out by the AO in the original as well as reassessment proceedi....
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....essee succeeds on the legal issue raised and, therefore, on the facts and circumstances discussed (supra), we are inclined to quash the impugned order of Ld. Pr. CIT dated 12.03.2019. The case on hand has identical facts and circumstances and thus, this case-law is applicable on all fours, to the case on hand. 9. In the case on hand, we find that Section 143(3) orders have been passed by the revenue in the case of following share applicant companies:- M/s. Rohan Finance & Securities Ltd. M/s. Swastik Securities and Finance Ltd. M/s. Visudh Marketing Pvt. Ltd. M/s. Goldline Comtrade Private Limited M/s. Gajbandan Barter Pvt. Ltd., assessment order 25/03/2015 9.1. When the assessment orders of the share applicant companies have been passed u/s. 143(3) of the Act, by the Department, it cannot be said that the identity and creditworthiness of the share applicant companies have not been proved. It is so held by the ITAT Kolkata Bench in the following cases:- 1) M/s. Omkar Infracon (P) Ltd. vs. ITO in ITA No. 896/Kol/2019, Assessment Year: 2012-13, order dt. 18/03/2020 2) Amritrashi Infra Private Ltd. vs. Pr. CIT in ....
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....judicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue: or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue. Rampyaridevi Saraogi v. CIT (1968) 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal V. CIT (1973) 88 ITR 323 (SC)". 25. In Max India Ltd. (3 Supra), reiterated the view in Malabar Industrial Co. Ltd. (Supra) and observed that every loss of Revenue as a....
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....he interests of the Revenue, will not suffice; that the reasons must be such as to show that the enhancement or modification of the assessment or cancellation of the assessment or directions issued for a fresh assessment were called for, and must irresistibly lead to the conclusion that the order of the Income Tax Officer was not only erroneous but was prejudicial to the interests of the Revenue. Thus, while the Income Tax Officer is not called upon to write an elaborate judgment giving detailed reasons in respect of each and every disallowance, deduction, etc., it is incumbent upon the Commissioner not to exercise his suo motu revisional powers unless supported by adequate reasons for doing so; that if a query is raised during the course of the scrutiny by the Assessing Officer, which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the Assessing Officer called for interference and revision. 27. In Sunbeam Auto Ltd.(5 Supra), the Delhi High Court held that the Assessing Officer in the assessment order is not required to g....
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....t jurisdiction. It held that the Commissioner cannot initiate proceedings with a view to start fishing and roving inquiries in matters or orders which are already concluded; that the department cannot be permitted to begin fresh litigation because of new views they entertain on facts or new versions which they present as to what should be the inference or proper inference either of the facts disclosed or the weight of the circumstance; that if this is permitted, litigation would have no end except when legal ingenuity is exhausted; that to do so is to divide one argument into two and multiply the litigation. It held that cases may be visualized where the Income Tax Officer while making an assessment examines the accounts, makes inquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the account or by making some estimate himself; that the Commissioner, on perusal of the record, may be of the opinion that the estimate made by the Officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income Tax Officer; but that would not ves....
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.... u/s. 263 of the Act can be culled out: a) 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 erroneous but is not prejudicial to the Revenue or if it is not erroneous but it is prejudicial to the Revenue - recourse cannot be had to Sec. 263 (1) of the Act. b) Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue: or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law. c) To invoke suo motu revisional powers to reopen a concluded assessment under Sec. 263, the Commissioner must give reasons; that a bare reiteration by him that the order of the Income Tax Officer is erroneous ....
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....en those events which arose subsequent to the order of assessment. 10.1. Now we examine the principles laid down in the following judgements.:- DIRECTOR OF INCOME TAX vs. JYOTI FOUNDATION 357 ITR 388 (Delhi High Court) It was held that revisionary power u/s. 263 is conferred on the Commissioner/Director of Income Tax when an order passed by the lower authority is erroneous and prejudicial to the interest of the Revenue. Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interest of the Revenue, but orders which are passed after inquiry/investigation on the question/issue are not per se or normally treated as erroneous and prejudicial to the interest of the Revenue because the revisionary authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken. INCOME TAX OFFICER vs. DG HOUSING PROJECTS LTD 343 ITR 329 (Delhi) Revenue does not have any right to appeal to the first appellate authority against an order passed by the Assessing Officer. S. 263 has been enacted to empower the CIT to exercise power of revision and revise any ord....
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....r, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under s. 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. This distinction must be kept in mind by the CIT while exercising jurisdiction under 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 Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ....
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....start with the presumption that the assessment order was regularly passed. There is evidence to show that the assessing officer had required the assessee to answer 17 questions and to file documents in regard thereto. It is difficult to proceed on the basis that the 17 questions raised by him did not require application of mind. Without application of mind the questions raised by him in the annexure to notice under Section 142 (1) of the Act could not have been formulated. The Assessing Officer was required to examine the return filed by the assessee in order to ascertain his income and to levy appropriate tax on that basis. When the Assessing Officer was satisfied that the return, filed by the assessee, was in accordance with law, he was under no obligation to justify as to why was he satisfied. On the top of that the Assessing Officer by his order dated 28th March, 2008 did not adversely affect any right of the assessee nor was any civil right of the assessee prejudiced. He was as such under no obligation in law to give reasons. The fact, that all requisite papers were summoned and thereafter the matter was heard from time to time coupled with the fact that the view taken by him ....