AI Drafter 
TaxTMI 
TaxTMI 
2024 (4) TMI 930
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.... of Rs. 13,39,75,217/- was deposited in the bank accounts of the assessee. The assessee in assessment proceedings claimed that the said deposits were received from the customers for purchasing glass bangles in Firozabad Market and the assessee had only charged commission at the rate of Rs. 500/- per lac. The learned PCIT observed that during the course of assessment proceedings, no enquiry was made by the Assessing Officer in respect of the cash deposits. Accordingly, learned PCIT show caused as to why the assessment order could not be declared as erroneous insofar as prejudicial to the interests of Revenue, as the Assessing Officer failed to conduct any enquiry in respect of cash amounting to Rs. 13,39,75,217/- deposited in the bank account of the assessee. 3. In response to the show cause notice, the assessee filed its submission dated 12.03.2021 before the learned PCIT. After considering the submissions of learned counsel of the assessee, learned PCIT held that the order of the Assessing Officer is erroneous and prejudicial to the interests of revenue and hence, he set aside the order of the Assessing Officer in terms of powers vested to learned PCIT under section 263 of the ....
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.... for the last several years. Copy of the written submissions filed before the Ld. Assessing Officer are placed in the Paper Book at page 4 to 9. During the course of assessment proceedings, the submission were considered and examined as is evident from the assessment order. The statute does not provide the manner in which the enquiries are to be conducted by the Ld. Assessing Officer while framing assessment order. Merely because the Ld. Pr. CIT was not satisfied with the manner of enquiry, the assessment order cannot be treated as erroneous or prejudicial to the interest of the revenue unless the view taken by the Ld. Assessing Officer is unsustainable in law. In support, the appellant has filed copy of order of the Hon'ble High Court, Allahabad in the case of CIT Vs Bharat Explosive Limited [ ITA No. 182 of 2010 dt. 16.02.2017, which is placed at Judicial Index Paper Book Page No. 10-12. 2. The Ld. Assessing Officer has specifically stated in the assessment order that the case was discussed with Authorized Representative of the assessee from time to time as per guidelines of limited scrutiny. Thus the assessment having been passed after discussion with representative of ....
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....alleged to have been made. After seeing these details, the Bench has again asked from the counsel of the assessee as to whether any query from these parties to whom payments were made on behalf of the depositors, had ever been made by the Assessing Officer during the course of assessment proceedings. The learned counsel of the assessee candidly denied of any such enquiries. 7. The learned counsel for the assessee placed reliance on the decision in the case of Malabar Industrial Co. Ltd. vs. CIT, 243 ITR 83 for the proposition that for invoking the powers under section 263, the order of Assessing Officer must be erroneous insofar as prejudicial to the interests of revenue. He contended that twin conditions, i.e., order must be erroneous and prejudicial to the interests of revenue should be satisfied in a given case and then only 263 can be sustainable. 8. Learned counsel for the assessee also relied upon the judgments of ITAT, Mumbai Bench in the cases of The Manjari Stud Farm Pvt. Ltd. vs. ACIT (ITA No. 1106/Mum/2022 dated 09.08.2023 and Small Wonder Industries vs. CIT (ITA No. 2464/Mum/2013 dated 24.02.2017. 9. Lastly, the counsel for the assessee has drawn attention of t....
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....ment and directing a fresh assessment. [Explanation 1.]-For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed [on or before or after the 1st day of June, 1988] by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner ^20[or Deputy Commissioner] or the Income-tax Officer on the basis of the directions issued by the [Joint] Commissioner under section 144A; (ii) an order made by the [Joint] Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the [Principal Chief Commissioner or] Chief Commissioner or [Principal Director General or] Director General or [Principal Commissioner or] Commissioner authorised by the Board in this behalf under section 120; (b) "record" [shall include and shall be deemed always to have included] all records relating to any proceeding under this Act available at the time of examination by the [Principal Commissioner or] Commissioner; (c) where any order referred to i....
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....viding an opportunity of being heard to the assessee. The phrase 'erroneous in so far as prejudicial to the interest of revenue' has been subject matter of many decisions. The landmark judgment in this regard is of Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. Vs. CIT, 243 ITR 83 (SC). 16. It is settled position of law that while framing an assessment, the AO has dual role, i.e., he is an investigator and also an adjudicator of the matter. If the AO failed to carry out the investigation, vis-a-vis, the facts of the case, then such is a case of lack of enquiry and the order of the AO can be termed as erroneous. 17. While acting as an adjudicator, if the AO took some view which is contrary to law or the AO failed to consider the provisions of law of income tax, then also such an order is erroneous. 18. If the assessment proceedings are erroneously conducted and the revenue is suffering loss then such an order falls under the ambit of the provisions of section 263. Similarly, if the AO failed to consider the provisions of Income-tax or formed a view which is contrary to law, then such an order also falls under the ambit of section 263. 19. When we analyse t....
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....f the Revenue. If one of them is absent-if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue-recourse cannot be had to section 263(1) of the Act. There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an 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." "The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income-tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. The phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer.....
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....e Bench that though the order of AO was erroneous, as the AO in that case has not verified the information provided by the assessee, yet the order of the AO was not prejudicial to the interest of revenue. In view of these facts, the coordinate Bench of the Tribunal has held that provision of section 263 was wrongly invoked by the Commissioner because twin conditions, i.e., the assessee order being erroneous as well as prejudicial to the interest of revenue, were not satisfied. However, as we have already discussed hereinabove, here is the case where facts are peculiar and the AO has not conducted any enquiry, due to which, the order of AO is prejudicial to the interest of revenue. Therefore, the case law of Manjari Stud Farm Pvt. Ltd. Vs. ACIT (supra) is of no help to the assessee. 25. The last case law, which is relied upon by the counsel of the assessee was Small Wonder Industries vs. CIT (ITA No. 2464/Mum/2013. In that case also, the issue was of correctness of the claim of the assessee vis-a-vis deduction under section 80IB. In that case, the Assessing Officer has made elaborate discussion in respect of deduction under section 80IB as well as disallowance of interest u/s. 36....