TaxTMI 
TaxTMI 
2024 (7) TMI 1429
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....onstruction of Real Estate i.e; Construction and Sale of residential Flat. 2. The Return of income was e-filed on 27/09/2018 declaring total income amounting to Rs. 2,72,79,780/-. 3. The case was selected for scrutiny under CASS, therefore a notice under section 143(2) dt. 22/09/2019 was issued to the assessee and that the same was duly served upon the assessee in time. Reason for scrutiny was "Income from Real Estate Business." 4. Thereafter on 14/01/2020 a Notice under section 142(1) of the Act was served on the assessee firm, by virtue of which questionnaire calling basic information and so also other information were sought. 5. In response to the statutory notices and questionnaire, the assessee firm furnished necessary details on e-proceeding portal which have been examined by AO. 6. That during the year under consideration the assessee has shown income under the head "Profit and Gains from Business or Profession." 7. That the details filed by the assessee were examined. After examination of details filed on e-proceedings portal returned income amounting to Rs. 2,72,79,780/- is accepted by "AO" vide "AO" order dt. 12/06/2020. 8. In brief return of income d....
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.... the reply of the assessee. 2. Admittedly, the AO 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 AO passed the assessment order. 3. We further submit that mere suspicions that no enquiries or verification was made, does not clothe the Pr. CIT with the powers to exercise his Revisionary Powers. In the absence of the same it is an attempt at fishing and roving enquiries by the Pr. CIT. Reliance was placed on 7 judgments and orders of High Court and ITAT orders of Coordinate Bench, including Chandigarh Benches. 11. That by impugned order under section 263 the Ld. PCIT has held as follows: 4. The submissions of the assessee have carefully been considered with reference to the facts of the case from the relevant assessment records. The assessee's principal contention through the written contention is that during the course of the assessment proceedings all the requisite documentary evidences were produced before the Assessing Officer. In addition to this, the assessee has also relied on various judgements. 5. The principal issue here is the cr....
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....e actions of the Assessing Officer are therefore not those of a reasonable and prudent officer, particularly in the matter of inquiries or verifications as well as in stating his analysis and findings. The decisions of the Apex Court in Sirpus Raper Mill Limited Vs. CWT (77 ITR 6) (SC) and CIT, Shimla Vs. Green World Corporation (2009) 314 ITR 81 (SC) hold that it is the absolute discretion of the Principal Commissioner or Commissioner to revise an order passed by the Assessing Officer. The only condition is that he/she needs to apply his/her own mind and arrive at a definite conclusion, which is what has been done here. In the instant case, there is no evidence that the Assessing Officer has applied his/her mind on the matters on record that require to be examined. He/she has simply remained a visibly mute spectator and non-commentator on these matters, and has stated no evidence/cause to hold that the inquiries required to be carried out have indeed been carried out. Considering the large number and volume of unexamined matters, this has created an extremely gross and serious case of inadequacy in inquiry when such inquiry is per se mandated on the basis of the ....
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....assessment warranting exej«1se of revisional jurisdiction. CIT v. Jawahar Bhattacharjee (2012) 2tftaxmann.com 652/342 ITR 74/249 CTR 529 (Gau.) iii) Where enquiry is warranted but not made, it would certainly constitute prejudice to revenue, so that jurisdiction for the Commissioner is available for remanding the matter for such enquiry. CIT Vs Raja Industries (2012) 340 ITR 344 (P&H). iv). Honble Delhi High Court in Income Tax Officer versus DG Housing Projects Limited (2012) 343 ITR 329 (Delhi) has observed: "The Assessing Officer is both an investigator and an adjudicator. If the Assessing Officer as an adjudicator decides a question or aspect and makes a wrong assessment which is unsustainable in law, it can be corrected by the Commissioner in exercise of revisionary power. As an investigator, it is incumbent upon the Assessing Officer to investigate the facts required to be examined and verified to compute the taxable income. If the Assessing Officer fails to conduct the said investigation, he commits an error and the word "erroneous" includes failure to make the enquiry. In such cases, the order becomes erroneous because enquiry or verificatio....
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....er in passing assessment order after accepting revised return filed by the assessee, Commissioner was well within his powers under Section 263 to direct fresh assessment Virbhadra singh (HUF) vs PCIT [2017] 86 Taxmann.com 113 (Himachal Pradesh). 7 . In view of the discussion above, the assessment order passed u/s 143(3) of the Act dated 12.06.2020 is prima facie erroneous as also prejudicial to the interests of revenue, as the order has not been passed in accordance with the law applicable in the impugned matter, which should have been done. There is thus a failure on the part of the Assessing Officer to act in accordance with law, which has created an error in law. It is such failure which calls for revision of the assessment order u/s 263 of the Act. 8. Having considered the facts and circumstances of the instant case, I am of the considered opinion that the assessment order u/s 143(3) of the Act dated 12.06.2020 passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of revenue in accordance with the Explanation 2(a) below section 263(1) of the Act, as the order has been passed without making inquiries or verification which s....
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....ugned order is passed there is yet another, an assessment order under section 147 r.w.s. 144 read with section 144B of the Income Tax Act bearing no. ITBA/AST/s/147/2022-23/1051272920(1) dt. 24/03/2023 wherein notice under section 148 dt. 31/03/2022 and notice under section 142(1) dt. 31/10/2022 came to be issued to the assessee firm. Notice under section 142(1) dt. 13/10/2022 was replied by letter dt. 27/10/2022. The issue involved in these proceedings under section 147/148 was with regard to following issue which was identified by the Department which issue as per said order dt. 24/03/2023 is reproduced below: 3.1 Complete description of issues (issue wise) The case of the assessee was reopened for scrutiny to verify that the assessee M/s Exotic Realtors and Developers have made purchases from M/s. Sahibzada Timbers on 11.08.2017, 01.10.2017 and 06.10.2017 and the cash component involved in the bill was Rs. 3,50,000/-, Rs. 10,000/- and Rs. 22,832/- respectively (total Rs. 3,82,832/-). The synopsis of all submissions of the assessee relating to the issue and indicating the date of submission are as follows as per said order dt. 24/03/2023 (para 3.2) which is a....
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....Income as per original return of income filed on 27.09.2018 Rs. 2,72,79,780/- 2. Variation Rs. NIL 3. Total Income: Rs. 2,72,79,780/- [5] Assessed u/s 147 r.w.s. 144 r.w.s. 144B of the Income Tax Act, 1961. Interest charged u/s 234A, 234B & 234C of the Income Tax Act, as applicable. The calculation sheet is enclosed as the part of the assessment order. 13.2 Basis above assessment order dt. 24/03/2023 under section 147 r.w.s 144 read with Section 144B of the Income Tax Act, the Ld. AR vehemently contended that assessee has gone through the rigours of the proceedings under section 143(3) , 147/ 148 by playing two innings as there are two separate independent assessment orders one dt. 12/06/2020 under section 143 (3) and another under section 147/148 r.w.s 144 read with section 144B of the Income Tax Act. In addition to this the assessee firm has gone through further rigours of proceedings under section 263. The Ld. AR further contended that in prior A.Y 2017-18 the assessee's firm was scrutinized too by same officer and nothing adversial was found against them save and except minor addition of Rs. 4486/- that too on account of interest on late payment....
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....nder section 263 of the Act. Basis this the Ld. AR contended that the Ld. AO has examined the material on record, passed assessment order which is well merited. 13.7 The Ld. AR then relied upon decision of Hon'ble Delhi High Court reported in [2011] 335 ITR 83 Delhi [Anil Kumar Sharma case] which speaks of distinction between " lack of inquiry and inadequate inquiry". 13.8 The Ld. AR then relied upon decision in case of Vodafone Essar South Ltd. reported in [2012] 28 Taxmann.com 273 Delhi High Court which speaks about even if thee is some inquiry by the AO in the original proceedings even if inadequate that cannot clothe the Commissioner with jurisdiction under section 263 merely because he can form another opinion. In the instant case, the assessee was specifically queried regarding the nature and character of the one time regulatory fee paid by it as well as the bank and stamp duty charges, detailed explanation and other documents required by the AO were produced at the stage of original assessment. The Ld. AR basis this further contended that clearly this was not a case of "no enquiry". The lack of any discussion on this cannot lead to the assumption that the AO did not....
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....e is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in Law. In some cases possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under Section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspe....
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....w, it is the responsibility of the Ld Pr. CIT to show that the enquiries or verification conducted by the AO was not in accordance with the enquries or verification that would have been carried out by a prudent officer. Hence, in our view, the question as to whether the amendment brought in by way of Explanation 2(a) shall have retrospective or prospective application shall not be relevant." (ii) M/S Arun Kumar Garg HUF vs. PCIT, ITA No. 3391 /del/2018, dt. 08.01.2019 "5.6 Although, there has been an amendment in the provisions of section 263 of the Act by which Explanation 2 has been inserted w.e.f. 1.6.2015 but the same does not give unfettered powers to the Commissioner to assume jurisdiction under section 263 to revise every order of the Assessing Officer to re-examine the issues already examined during the course of assessment proceedings. The Mumbai IT AT Bench has dealt with Explanation 2 as inserted by Finance Act, 2015 in the case of Narayan Tatu Kane vs. ITO reported in (2016) 70 taxman.com 227 to hold that the said Explanation cannot be said to have overridden the liability as interpreted by Hon 'ble Delhi High Court, according to which the Commissi....
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...., since the facts and circumstances of the case and the incriminating document was not considered to be strong by the AO to implicate the assessee. Thus, we are of the view that the assessing officer has taken a plausible view in the facts and circumstances of the case. Even though the Ld Pr. CIT has drawn certain adverse inferences from the document, yet it can seen that they are debatable in nature. Further, as noticed earlier, the Ld Pr. CIT has not brought any material on record by making enquiries or verifications to substantiate his inferences. He has also not shown that the view taken by him is not sustainable in law. Thus, we are of the view that the Ld Pro CIT has passed the impugned revision orders only to carry out fishing and roving enquiries with the objective of substituting his views with that of the AO. Hence we are of the view that the Ld Pr. CIT was not justified was not correct in law in holding that the impugned assessment orders were erroneous." 5.4.1 In view of above, we note that notice u/s. 263 of the Act issued by the Pr. CIT is vague and only for making deeper enquiry and re-considering the evidences already on record duly considered duri....
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....y Supreme Court and jurisdictional High Court / Other High Courts. 16.2 At the outset and at threshold we hold that assessment order dt. 12/06/2020 basis which revisionary proceedings were initiated under section 263 culminating into the impugned order has accepted the return of income amounting to Rs. 2,72,79,780/- dt. 27/09/2018 . The said acceptance of returned income is arrived after a proper inquiry and verification because prior to thereto notices under section 143(2) and 142(1) were duly served to the assessee firm and that they were suitably replied with all material information so that computation of income is done in just and proper way for purpose of levy of tax on it. We have minutely perused the notices and replies which are more than two to three and it contains and answers all query of Ld. AO. We also hold that notice dt. 14/01/2020 under section 142(1) is appropriately answered with relevant enclosure by the assessee firm. We have seen both the notice and reply from pape book volume II. Further we notice that vide notice under section 142(1) dt. 17/02/2020 the Ld. AO raised few more query and that the same were replied by the assessee. We have perused the further....
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....scussed in detail by the Assessing Officer. The least that the Tribunal could have done was to refer to the assessment record to verify the contentions of the assessee. Instead of doing that, the Tribunal has merely been swayed by the fact that the Assessing Officer has not mentioned anything in the assessment order. During the course of assessment proceedings, the Assessing Officer examines numerous issues. Generally, the issues which are accepted do not find mention in the assessment order and only such points are taken note of on which the assessee's explanations are rejected and additions/disallowances are made. As already observed, we have examined the records of the case and find that the Assessing Officer had made full inquiries before accepting the claim of the assessee qua the amount of Rs. 10 lakhs on account of discrepancy in stock. Not only this, he has even gone a step further and appended an office note with the assessment order to explain why the addition for alleged discrepancy in stock was not being made. In the absence of any suggestion by the Commissioner as to how the inquiry was not proper, we are unable to uphold the action taken by him under section 263 o....
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.... of the case the Assessing Officer should have made further inquiries before accepting the statements made by the assessee in his return." In the instant case we hold that by issuing notices periodically and after perusing the reply to such notices the Ld. AO has accepted the return of the assessee. He has not accepted the return blindly. The queries were raised from time to time and were duly answered therefore, it cannot be said in law that no inquiry was conducted by the Ld. AO. The issue here is that whether it is incumbent upon the Ld. PCIT to conduct the inquiry at least primafacie or bare minimum before passing the impugned order under section 263 to which we hold that it is but incumbent upon the Ld. PCIT to hold bare minimum inquiry before passing the impugned order which in the instant case has not happened. The Ld. DR has also placed reliance on order of Coordinate Bench in case of Bassera Realtors (P.) Ltd. Vs. CIT reported in [2015] 55 taxmann.com 327 wherein in para 28 it has been held that " The next thrust of the contention is that Ld. Commissioner has issued a show cause notice which is a verbatim copy of the proposal given by the Assessing Officer which has been d....
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.... are necessary to form a view as to whether the order of the AO is erroneous and prejudicial to the interest of Revenue or not? PCIT did not even bother to consider reply and details furnished by the assessee what to say of calling for any enquiry etc. PCIT has directed the A.O. to make further fishing and roving enquiries which even do not germane from the facts and issues involved. Even we find that the Ld. PCIT has directed the A.O. to make further fishing and roving enquiries which even do not germane from the facts and issues involved." The Ld. AR has further relied upon the following order: PR. COMMISSIONER OF INCOME TAX - 3, NEW DELHI VERSUS DELHI AIRPORT METRO EXPRESS PVT. LTD. COURT [2017] 398 ITR 8 DELHI HIGH wherein it has been held that - "In the context of the present case if, as urged by the Revenue, the Assessee has wrongly claimed depreciation on assets like land and building, it was incumbent upon the PCIT to undertake an inquiry as regards which of the assets were purchased and installed by the Assessee out of its own funds during the AY in question and, which were those assets that were handed over to it by the DMRC. That basic exercise of determining to....
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....der section 147 r.w.s 144 read with section 144B of the Income Tax Act dt. 24/03/2023 much before the impugned order dt. 27/03/2023 whereby even under section 147, the return of income of the assessee firm was accepted as it is and no addition / disallowance was made. Since this assessment order under section 147 dt. 24/03/2023 was available; it became part of record and by virtue of Section 263(1)(b) the word "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 PCIT. Since this order dt. 24/03/2023 was available before date of impugned order dt. 27/03/2023 the Ld. PCIT should have considered the same as it become part of record within the meaning of Section 263 (1)(b) of the Act, failure due to non examination of order dt. 24/03/2023 vitiates the impugned order of Ld. PCIT and makes it illegal, not proper and contrary to law. 16.10 We hold that by virtue of the meaning of the word " Record " as assigned under section 263 which includes all records relating to any proceedings under the Act available at the time of examination makes it incumbent upon PCIT to examine t....
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....ustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in Law. In some cases possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under Section 263 of the Act. In such matters, to remand the matter....
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.... various projects undertaken by the firm during the year (project wise) and how many units were ready for possession and out fo these in how many units the possession was given to the purchaser during the year (project wise)" the necessary reply to query raised was given too pages 631 to 634 of paper book. On page 634 we notice that assessee firm has averred that " In addition to our above reply, if any kind of information is required by your side will be our pleasure to submit." 16.14 In view of the aforesaid the assessee firm has furnished in timely manner all necessary information and all the query which were raised too were promptly attended to with a rider that if Department wants any other information they would be pleased to do the needful in pleasurable manner. 16.15 The Ld. AO in the assessment proceedings examined all these paper and accepts the return of income as it is. The fact that from time tot time the Ld. AO has sought more and more details and have raised queries clearly goes to show that assessment was not done by him blindly but with open eyes. A person or AO would raise a query or queries provided he has applied his mind. Assessing Officer's do not get dr....
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....erges crystal clear from "Records" before us is that during the course of assessment two major queries were raised one relating to percentage of completion of various projects by the assessee, how many units were ready for possession and out of these how many units the possession was given to the purchaser (page 632 of paper book Vol-II) and the another was purchase made from M/s Sahibzada Timbers. Hence inquiry was held and it cannot be said in law that the assessment in case of assessee firm was made without conducting any inquiry or no inquiry. It is now well settled law that inadequate inquiry or insufficient inquiry cannot be a ground to order revision of assessment under section 263. PCIT Vs. M/s Clix Finance India Pvt. Ltd. 2024 (3) TMI 157-Delhi High Court. 16.21 The Ld. PCIT has held the assessment order to be erroneous and prejudicial to the interest of Revenue that assessment order is cryptic and silent on various material issue that deserved complete and error free examination what is sacrosanct in such examination mandated through assessment proceedings is the need to examine the statement of accounts, computation of income and various facts / documents appended wit....