TaxTMI 
TaxTMI 
2022 (12) TMI 747
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.... assessee in the various grounds of appeal is against the invalid exercise of jurisdiction u/s 263 of the Act by Ld. PCIT thereby wrongly setting aside the assessment framed u/s 143(3) vide order dated 28.12.2018. 4. Facts in brief are that the assessee filed the return of income u/s 139 of the Act declaring a loss of Rs. 11,37,14,654/-. The assessment was framed u/s 143(3) vide order dated 28.12.2018 assessing the total loss at Rs. 11,27,41,073/-. The Ld. PCIT upon perusal of the assessment record observed that the assessee has raised unsecured loans amounting to Rs. 42.00 crores during the instant financial year and has also paid interest amounting to Rs. 7,92,64,627/- thereon. The Ld. PCIT further observed that the AO has only obtained loan confirmations from the parties by issuing notices u/s 133(6) of the Act and no further enquiry/verification was carried out u/s 131 of the Act in order to verify the genuineness of the loans. Accordingly, the Ld. PCIT came to the conclusion that the AO has made incomplete enquiry and only accepted the loan transactions on the basis of loan confirmations which makes the assessment order as erroneous as well as prejudicial to the interest of....
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...."Prejudicial to the Interests of the Revenue" is of wide import and is not confined to only loss of taxes. If the A.O. has accepted the claim of the assessee without any enquiries then such assessment order passed by the A.O. was held to be erroneous. 8. In this regard it is mentioned that mere non enquiry would also render a particular order passed by lower authority as erroneous and prejudicial to the interests of Revenue. This position has been clearly confirmed by Hon'ble Supreme Court in the case of Rampyari Devi Saraogi w. CIT [1968] 67 ITR 84 & Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC). The reasoning for this proposition has been explained by Hon'ble Delhi High Court in the case of Gee Vee Enterprise v. Addl. CIT [1975] 99 ITR 375 in the following para :- "It is not necessary for the Commissioner to make further inquiries before cancelling 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 further inquiries before accepting the statements made by the assessee in his return. The reason is obvious. The positio....
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....ned assessment order dated 28.12.2018 is liable to be set-aside. Therefore, I set-aside the said assessment order directing the A.O. to frame the assessment afresh after considering the aforesaid observations, Hon'ble Supreme Court and Hon'ble High Court decisions and as per law. 11. In the result, the assessment order u/s 143(3) dated 28.12.2018 for A.Y. 2016-17 is set-aside to the file of the Assessing Officer with a direction to pass a fresh assessment order after considering the issues discussed in Para 2 above, the aforesaid observations, as per law and after giving an opportunity of being heard to the assessee." 5. The Ld. A.R. vehemently submitted that the assumption of jurisdiction u/s 263 of the Act by Ld. PCIT is invalid and is against the provisions of the Act and also the various judicial precedents. The Ld. A.R. submitted that the case of the assessee was selected for scrutiny under CASS and assessment was completed u/s 143(3) vide order dated 28.12.2018 after making an addition of Rs. 9,71,589/- u/s 14A of the Act. The Ld. A.R submitted that during the course of assessment proceedings, the AO examined the issue of raising a fresh unsecured loan amounting t....
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.... AO after considering the material and explanation of the assessee had come to the definite conclusion than the revisionary jurisdiction u/s 263 of the Act cannot be invoked merely because the AO has taken a particular view with which the Ld. PCIT did not agree. In defense of its arguments, the Ld. A.R relied on the decision of Hon'ble Gujarat High Court in the case of JCIT vs. Arvind Jewellers in [2003] 259 ITR 502 (Guj). The Ld. A.R also relied on the decision of Calcutta High Court in the case of PCIT vs. Kesoram Industries Ltd. in [2019] 109 taxman 390 (Cal) wherein the Hon'ble High Court has held that where the AO has made an enquiry with the respective to the issues raised in the revisionary proceedings then the exercise of jurisdiction u/s 263 of the Act cannot be invoked. The Ld. A.R. argued that the Ld. PCIT has not carried out any verification/enquiry as to how the assessment order is erroneous and prejudicial to the interest of the revenue and even not taken into account the submissions of the assessee. The ld AR contended that the ld PCIT ,without giving any reason, came to the conclusion that the AO has not made any enquiry/verification which is wrong and against the s....
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....olding that the assessee has not paid Rs. 7,92,64,627/- as interest on loans of Rs. 42.00 Cr but as a matter of fact Rs. 4,84,23,454/- was paid on the said loans during the year from various parties. The ld AR also submitted that in the present case the AO has examined the issue and accepted the same without discussing the same in the assessment order. The AR argued that in that scenario , it is not open to the PCIT to invoke the jurisdiciuton u/s 263 of the Act unless the order is contrary to the facts on records or is not in accordance with law as has been held in the case CIT vs. Gabriel India Ltd. (1993) 203 ITR 108(Bom).The ld AR therefore prayed before the bench that for the foregoing reasons the revisionary order may kindly be quashed. 6. Per Contra, the ld DR vehemently opposed the arguments of the ld AR by submitting that the ld AO has not properly examined the issue of unsecured loans nonetheless the information were called for from the lenders by issuing notices u/s 133(6) of the Act but no further investigations were made by issuing summons u/s 131 of the Act and thus strongly defended the revisionary order passed u/s 263 of the Act. 7. We have heard the rival sub....
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....s u/s 133(6) with which the ld. PCIT is not agreeing with. In our opinion, where the Ld. PCIT feels that the AO has made inadequate enquiries then the PCIT is duty bound to carry out the necessary enquiry/investigation and pinpointing on the basis of such investigation/enquiry as to how the order framed by the AO is erroneous as well as prejudicial to the interest of the revenue but merely cancelling the assessment on the basis of observations that AO has carried out in adequate enquiry is not permissible under the Act. The case of the assessee finds support from the decision of Hon'ble Delhi High Court in the case of ITO vs. D.G. Housing Projects Ltd. in [2012] 343 ITR 329 (Del) wherein it has held as under: Section 263 has been enacted to empower the Commissioner to exercise power of revision and revise any order passed by the Assessing Officer, if two cumulative conditions are satisfied. Firstly, the order sought to be revised should be erroneous and secondly, it should be prejudicial to the interest of the revenue. The expression 'prejudicial to the interest of the revenue' is of wide import and is not confined to merely loss of tax. The term 'erroneous'....
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....satisfied for exercise of jurisdiction under section 263. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the Commissioner has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. [Para 16] This distinction must be kept in mind by the Commissioner while exercising jurisdiction under section 263 and in the absence of the finding that the order is erroneous and prejudicial to the interest of revenue, exercise of jurisdiction under section 263 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 Commissioner conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. Commissioner cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the Commissioner to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unles....
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.... on merits and then hold and form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the revenue. In the second set of cases, the Commissioner cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not. [Para 19] 8. Besides before exercising jurisdiction u/s 263 of the Act the Ld. PCIT has to satisfy the twin conditions as stipulated in Section 263 of the Act and even if one of the two conditions is satisfied even then the jurisdiction u/s 263 of the Act is not available. In the present case the Ld. PCIT has failed to demonstrate as to how the order is erroneous and prejudicial to the interest of the revenue more particularly when the issue proposed in the order u/s 263 of the Act has been examined by the AO on the basis of evidences furnished by the assessee as well as the evidences gathered from the loan creditors u/s 133(6) of the Act. The case of the assessee finds support from the decision of Hon'ble Supreme Court in the case of Malabar Industrial Company Ltd. vs. CIT reported in [2000] 243 ITR 83 (SC) wherein the Apex court has held that ....