TaxTMI 
TaxTMI 
2022 (8) TMI 578
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....forwarding, Handling & storage of liquid Cargo. The assessee has files its original return of income on 01-11-2017 and declared income of Rs. 7,14,60,410/- only. The case of the assessee was selected for complete scrutiny under CASS. The assessment was completed by the AO on 25- 12-2019 after Disallowing the deduction claimed u/s 80IA(4)(i) of Act for Rs. 4,85,50,551/- only. 4. The PCIT on examination of the case records of the assessee, found that there was an investment in quoted and unquoted shares and mutual funds, which can earn exempt income. The amount of investment as on 01-04-2016 and as on 01-04-2017 was Rs. 4,47,86,678/- and Rs. 4,47,86,478/- respectively. According to the learned PCIT, there should have been disallowance u/s 14A r.w. rule 8D, but the AO failed to do so. It is clear that the AO has not properly examined this issue during the assessment proceedings by the AO. Accordingly, the PCIT initiated the proceedings under section 263 of the Act vide show cause notice dated 04 February 2022. 4.1 The assessee in response to such show cause notice submitted that the issue is covered in assesse's own case by the appellate authority in the preceding years and ther....
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.... inquiry made by the Assessing Officer, considered inadequate by the Commissioner of Income Tax, cannot make the order of the Assessing Officer erroneous. In our view, the order can be erroneous if the Assessing Officer fails to apply the law rightly on the facts of the case. As far as adequacy of inquiry is considered, there is no law which provides the extent of inquiries to be made by the Assessing Officer. It is Assessing Officer's prerogative to make inquiry to the extent he feels proper. The Commissioner of Income Tax by invoking revisionary powers under section 263 of the Act cannot impose his own understanding of the extent of inquiry. There were a number of judgments by various Hon'ble High Courts in this regard. 8.2 Delhi High Court in the case of CIT Vs. Sunbeam Auto 332 ITR 167 (Del.), made a distinction between lack of inquiry and inadequate inquiry. The Hon'ble court held that where the AO has made inquiry prior to the completion of assessment, the same cannot be set aside u/s 263 of the Act on the ground of inadequate inquiry. The relevant observation of Hon'ble Delhi High Court reads as under: "12. ..... There are judgments galore laying down the princip....
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....f the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. 15. Thus, even the Commissioner conceded the position that the Assessing Officer made the inquiries, elicited replies and thereafter passed the assessment order. The grievance of the Commissioner was that the Assessing Officer should have made further inquires rather than accepting the explanation. Therefore, it cannot be said that it is a case of 'lack of inquiry'." 8.3 The Hon'ble Bombay High Court in case of Gabriel India Ltd. [1993] 203 ITR 108 (Bom), discussed the law on this aspect in length in the following manner: "The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting....
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....ect of on-money receipts, however, said order was set aside by Tribunal holding that AO had made detailed enquiries in respect of such on-money receipts and said view was also confirmed by High Court, SLP filed against decision of High Court was liable to be dismissed. The facts of this case were that pursuant to search proceedings, assessee filed its return declaring certain unaccounted income. The Assessing Officer completed assessment by making addition of said amount to assessee's income. The Principal Commissioner passed a revised order under section 263 on ground that Assessing Officer had failed to carry out proper inquiries with respect to assessee's on money receipt. In appeal, the Tribunal took a view that Assessing Officer had carried out detailed inquiries which included assessee's on-money transactions and Tribunal, thus, set aside the revised order passed by Commissioner. The Hon'ble High Court upheld Tribunal's order. The Hon'ble Supreme Court while dismissing the SLP filed by the Department held as under:- "We have heard learned counsel for the Revenue and perused the documents on record. In particular, the Tribunal has in the impugned judgm....
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....facts before us, we note that in the case of the assessee, the AO, during the course of assessment proceedings, made enquiries on this issue and after consideration of written submissions filed by the assessee and documents / evidence placed on record, and then framed the assessment under section 143(3) accepting the return of income. This fact can be verified from the notice under section 142(1) of the Act by the AO and submission in reply of the assessee against such notice. i. Notice dated 08-01-2019: Furnish details of expenses incurred in respect of earning of exempted income and whether disallowance of same is made as per section 14A if not, reason thereof. Further provide calculation of disallowance as per Rule 8D of the income Tax Rules, 1962 ii. Reply dated 18-01-2019 In the opinion of the management, no expenses are incurred by the assessee against the exempt income as such no expenses can be treated as disallowance u/s.14A. As such no calculation for the same are given. iii. Notice dated 11-12-2019: From the perusal of the ITR6 of the assessee company it is noticed that you have earned exempt income of Rs.587/- theref....