TaxTMI 
TaxTMI 
2024 (5) TMI 696
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....A/3184/2017). It was pleaded before the Hon'ble Calcutta High Court that the appeal of the assessee was dismissed along with other appeals, however, the specific grounds canvassed by the assessee in its appeal were not considered by the Tribunal. The Hon'ble High Court set aside the order passed by the Tribunal and restored the matter back to the Tribunal for decision afresh observing as under: "As observed by us, since we are not going into the merits of the impugned order nor the correctness of the said order of the learned Tribunal, we leave it to the Department to canvass all points at the appropriate stage. Thus, we are of the considered view that the matter has to be sent back to the learned Tribunal to take a decision on merits and in accordance with law, specifically with regard to the grounds canvassed by the appellants before it. For the above reasons, the appeal is allowed and the stay application stands closed and the order passed by the learned Tribunal is set aside and the appeal in ITA No.1088/KOL/2016 for the assessment year 2009-10 stands restored to the file of the learned Tribunal and the said appeal shall be heard and decided by the learned Tri....
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....the assessee filed written submissions, a gist of which has been reproduced in the order of the ld. Pr. CIT itself, which read as under: "i) that the assessee had voluntarily offered income for tax and that the A.O had passed the order after applying his mind. ii) that the A.O had conducted proper inquiry regarding the identity and creditworthiness of the shareholders. Confirmation letters along with PAN, copy of bank statement & balance sheet of the subscribing companies had been filed before the A.O. iii) That share capital could not be added under section 68 of the I T Act where the identity of the shareholders was established. iv) Reliance was placed on several authorities in support of the submissions which are dealt with later in this order. It is accordingly, requested that in view of the aforementioned submissions, the proceeding u/s 263 should be dropped." 4.1 The ld. Pr. CIT however observed that the Assessing Officer has not made proper and adequate enquiries relating to the share application money received by the assessee during the year. He in this respect noted the following facts: "i) the notices u/s. 133(6) ha....
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....t of revenue was not based on any specific findings of the ld. Pr. CIT. The ld. counsel, in this respect, pointing out 1st point of the ld. Pr. CIT that the notices u/s 133(6) have been sent only on test check basis has submitted that the said observation of the ld. Pr. CIT was factually wrong. He, in this respect, has submitted that in this case the share application money was received by the assessee from 9 share applicants, the details of which have been furnished at page 19 of the paper-book and that the notices u/s 133(6) were issued by the Assessing Officer to all the 9 share subscribers and all of them had filed necessary details and evidences including the confirmation of subscription of shares to the assessee company. The ld. counsel inviting our attention to the 2nd point has submitted that the ld. Pr. CIT has observed that only the extract of the bank statement has been submitted which reflects only the impugned transaction and is not for the whole year. The ld. counsel in this respect has invited our attention to the relevant pages of the paper-book to submit that in fact the concerned shareholders have furnished the bank statements of the entire year and that the findi....
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.... regarding the identity and creditworthiness of the shareholders. Confirmation letters along with PAN, copy of bank statements and balance sheet of subscribing companies had been filed before the Assessing Officer. That the identity, creditworthiness of the share-subscribers was duly established before the Assessing Officer. The ld. Pr. CIT without pointing out any discrepancy, error or infirmity in the details furnished by the assessee, has simply noted that the Assessing Officer has not made the requisite enquiries. Under the circumstances, the ld. Pr. CIT was supposed to go through the said details and should have pointed out as to which of the fact or explanation needs what further enquiries. The Ld. Counsel has demonstrated that all the factual discripancies pointed by the Ld. PCIT regarding lack of enquiry by the Assessing Officer, were, infact, factually wrong. The Assessing Officer had not only raised the necessary queries but also asked the assessee to furnish the necessary details and evidences, which the assessee duly furnished and the same also stood examined by the Assessing Officer. The Ld. PCIT, however, without going through the such details, simply observed that th....
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....g Officer is erroneous and prejudicial to the interest of Revenue? A perusal of the impugned order of the ld. Pr. CIT reveals that the Ld. Pr. CIT had asked the assessee about the validity of the assessment order for want of necessary enquiries and verifications by the Assessing Officer relating to share application money and premium, to which the assessee had given a detailed reply. Once a point wise reply was given by the assessee, then a duty was cast upon the Ld. Pr. CIT to examine the reply of the assessee and form a prima-facie opinion as to whether the order of the Assessing Officer was erroneous so far as it was prejudicial to the interest of Revenue. We further note that the Ld. Pr. CIT did not raise any query as to what enquiries were made by the Assessing Officer before proceeding to pass the assessment order in question. The opinion of the Commissioner that the Assessing Officer had not made proper enquiries or verifications should be based on his objective satisfaction and not a subjective satisfaction from the assessment order. Admittedly, the Assessing Officer asked the assessee to furnish the necessary details from time to time which were duly furnished by the asses....
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....Officer should have made enquiry, were duly enquired into by the Assessing Officer. The observations of the Ld. PCIT, therefore, were a general observation and no specific observation has been made in respect of any of the details or evidence furnished by the assessee and as to why the ld. Pr. CIT was not satisfied about such details/replies furnished by the assessee. Simply because the ld. Pr. CIT felt that the Assessing Officer should have made further enquiries on the same issue or that the case was to be examined from some another angle, the same, in our view, cannot be a valid ground to set aside the assessment order. If such an action is allowed by the ld. Pr. CIT in revision jurisdiction, then there would be no end to litigation and there would not be any finality to the assessment. The Explanation 2 to Section 263(1) of the Act does not give unbridled powers to the ld. PCIT to simply set aside the assessment order by saying that the Assessing Officer was required to make further enquiries without pointing out as to what was lacking in the enquiries made by the Assessing Officer and why the ld. Pr. CIT was not satisfied with the reply and evidence furnished by the assessee. ....
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.... "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 phrase 'prejudicial 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 ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO 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 ITO is unsustainable in law. It has been held by this Court that where a sum not earned by a person ....
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....ization. These two basic ingredients have to be satisfied as sine qua non for exercise of such power. On a perusal of the material brought on record and the order passed by the CIT it is perceptible that the said authority has not kept in view the requirement of s. 263 of the Act inasmuch as the order does not reflect any kind of satisfaction. As is manifest the said authority has been governed by a singular factor that the order of the AO is wrong. That may be so but that is not enough. What was the sequitur or consequence of such order qua prejudicial to the interest of the Revenue should have been focused upon. That having not been done, in our considered opinion, exercise of jurisdiction under s. 263 of the Act is totally erroneous and cannot withstand scrutiny. Hence, the Tribunal has correctly unsettled and dislodged the order of the CIT. [Emphasis supplied]" 12. In the light of the provisions of section 263 of the Act and a settled position of law, powers u/s 263 of the Act can be exercised by the Pr. Commissioner/Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and also prejudicial to the interest of the Revenue. By &#....
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.... of these twin conditions that the CIT may pass an order exercising his power of revision. Minutely examined, the provisions of the section envisage that the CIT may call for the records and if he prima facie considers that any order passed therein by the AO is erroneous insofar as it is prejudicial to the interest of the Revenue, he may after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. The twin requirements of the section are manifestly for a purpose. Merely because the CIT considers on examination of the record that the order has been erroneously passed so as to prejudice the interest of the Revenue will not suffice. The assessee must be called, his explanation sought for and examined by the CIT and thereafter if the CIT still feels that the order is erroneous and prejudicial to the interest of the Revenue, the CIT may pass revisional orders. If, on the other hand, the CIT is satisfied, after hearing the assessee, that the orders are not erroneous and prejudicial to the interest of the Revenue, he may choose not to exercise his power o....
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....ue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view with which the CIT does not agree. If cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under law (vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power under s 263 is not permitted to substitute his estimate of income in place of the income estimated by the AO. (....
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....of enquiry by itself renders the order being erroneous and prejudicial to the interest of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer 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, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not." 9.3. Further, the Coordinate Mumbai Bench of the Tribunal in the case of 'Narayan Tatu Rane v. ITO' reported in [2016] 70 taxmann.com 227 (Mum. - Trib.) has held that Explanation 2(a) to section 263 of the Act does not authorise or give unfettered power and to revise each and every order on the ground that the Assessing Officer should have made more enquiries and verifications. The relevant part of the order of the Tribunal is reproduced as under: "20. Further clause (a) ....