TaxTMI 
TaxTMI 
2024 (5) TMI 696
X X X X Extracts X X X X
X X X X Extracts X X X X
....le 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 Tribunal on merits and in accordance with law. In view of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ced 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) have been sent only on a test check basis. ii) it is further seen that only that extract of the bank statement has b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3(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 findings of the ld. Pr. CIT that the bank statement reflected only the impugned transactions were also factually wrong. The ld. counsel referring to the 3rd point noted by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....een 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 the Assessing Officer, should have made enquiries on those points. At this stage, it will be relevant to discuss the relevant provisions of Section 263 of the Act. "Section 263....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ions 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 assessee and after considering the same the Assessing Officer passed the assessment order. The ld. Counsel for the assessee, has demonstrated before us that all the four points, which the Ld. PCIT has held that the Assessing officer was supposed to examine, have ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessee 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. 9.2. Further, the Coordinate Kolkata Bench of the Tribunal in the case of 'M/s Rani Sati Agro Tech Pvt. Ltd. vs. ITO' in ITA No.85/Kol/2022 order dated 19.06.2023 while analysing the provisions of section 263 of the Act has considered various case laws, the rel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 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 is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue - Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. CIT [197....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eflect 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 'erroneous' is meant contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the possi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 of revision. This is for the reason that if a query is raised during the course of scrutiny by the AO, which was answered to the satisfaction of the AO, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the AO called for interference and revision. In the instant ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r 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. (vii) The AO exercises quasi-judicial power vested in his and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not fee stratified with the conclusion. (viii) The CIT, before exercising his jurisdiction under s. 263 must have material on record to arrive at a satisfaction. (ix) If the AO has made enquiries du....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provision shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. CIT cannot be taken as final one, without scruti....