TaxTMI 
TaxTMI 
2021 (10) TMI 789
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....ssessee filed NIL return of income. The Assessing Officer, vide order dated 30.3.2016, accepted the return of the assessee and completed the assessment u/s 143(3) read with section 153A of the Act. 2.1 Subsequently, on perusal of the records, it came to the knowledge of the Ld. Pr. CIT that the assessee had earlier filed its return on 26.11.2011 showing total income at Rs. NIL and that during the course of assessment proceedings, the then Assessing Officer had made a reference to the Transfer Pricing Officer (TPO) u/s 92CA of the Act vide letter dated 26.7.2013 to determine the Arms Length Price (ALP) of the international transactions with Associated Enterprises. The Ld. Pr. CIT also noted that the search and seizure operation was conducted while the assessment was pending. It was further noted by the Ld. Pr. CIT that the assessment which was completed u/s 143(3) read with section 153A of the Act vide order dated 30.3.2016 was completed accepting the returned income of Rs. NIL without the report of the TPO. Ld. Pr. CIT observed that the assessment had been completed hurriedly and without waiting for the report of the TPO which was subsequently received by the AO vide order dated....
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....ow cause notice dated 15.12.2016 issued by learned Principal Commissioner of Income Tax is based on legally misconceived assumption, therefore, the proceedings initiated under section 263 are illegal, invalid and unsustainable. 2 That the learned Principal Commissioner of Income Tax has erred both in law and on facts in directing upward adjustment to the international transaction entered by the assessee, while doing so, the learned PCIT has failed to appreciate that the learned assessing officer had regularly sent reminders to the learned TPO and in absence of any positive response for over 6 months passed the assessment order with due application of mind and not under any haste. 3. That the learned Principal Commissioner of Income Tax has further erred both in law and, on facts in directing assessing officer to make an adjustment of Rs. 23.23 crores on account of alleged understatement of arm's length price in respect of international transactions entered between the assessee company and its associated enterprises ("herein after referred to as AE")." 3.0 The Ld. AR submitted that it is undisputed that the fact of a reference having been made to the Transfer Pr....
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....er the observations of the Ld. PR. CIT, coupled with the failure of the assessee to establish with evidence that the AO had inquired and considered and, thereafter, adjudicated the issue, we are constrained to hold that this is a clear case of lack of inquiry by the AO. Even the assessment order is very cryptic in as much as it does not even mention as to what issues were before the AO. In such circumstances, we hold that the order passed by the Ld. Pr. CIT revising the assessment passed u/s 143(3) read with section 153A is completely in order and we uphold the same. 5.1 In the case of Gee Vee Enterprises (99 ITR 375) speaking for High Court of Delhi their lordships made a clear distinction between the cases of "inadequate inquiry" and "lack of inquiry" by also considering the ratio of the decision of Hon'ble Apex Court in the case of Rampyari Devi Sarogi vs CIT (671 ITR 8) and Tara Devi Aggarwal vs CIT (88 ITR 323) and held that it is incumbent upon the ITO to further investigate the facts stated in the return when circumstances would make such an inquiry prudent with the word "erroneous" in Section 263 includes failure to make such an inquiry. It was further held that the orde....
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....ry on business at the address given in the return. The Commissioner was also of the view that the Income-tax Officer was not justified in accepting the initial capital, the sale of ornaments, the income from business, the investments etc., without any inquiry or evidence whatsoever and that the order of assessment was erroneous and prejudicial to the interests of the revenue. The High Court held that there were materials to justify the Commissioner's finding that the order of assessment was erroneous in so far as it was prejudicial to the interests of the revenue. 5.3 These two decisions show that it is not necessary for the Commissioner to make further inquiries before cancelling the assessmen t 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 further inquiries before accepting the statements made by the assessee in his return.The reason is obvious. The position and function of the Income Tax Officer is very different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a civil cou....
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.... can be corrected by the Commissioner in exercise of revisionary power. As an investigator, it is incumbent upon the Assessing Officer to investigate the facts required to be examined and verified to compute the taxable income. If the Assessing Officer fails to conduct the said investigation, he commits an error and the word ''erroneous" includes failure to make the enquiry. In such cases, the order becomes erroneous because enquiry or verification has not been made and not because a wrong order has been passed on merits. 12. Delhi High Court in Gee Vee Enterprises v. Additional Commission of Income-Tax, Delhi-1, (1975) 99 ITR 375, has observed as under:- "The reason is obvious. The position and function of the Income-tax Officer is very different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a civil court in the absence of any rebuttal. 'The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income- tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of ITA No. 591/2008....
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.... "We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Income-tax Act. As noted above, the submission of learned counsel for the Revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order, which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in ....
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....e elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Income tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may he of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be formed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion ... There must be some prima facie material on....
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....n under Section 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. 17. This distinction must be kept in mind by the CIT while exercising jurisdiction under Section 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 ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will....