TaxTMI 
TaxTMI 
2024 (12) TMI 643
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.... invoking the provisions of section 263 of the Act and therefore, the impugned order dated 14.03.2024 u/s 263 kindly be quashed. 2. The ld. Pr. CIT, Jaipur seriously erred in law as well as on the facts of the case in assuming jurisdiction u/s 263 by wrongly and incorrectly holding that the subjected assessment order passed u/s 143(3) dated 04.09.2021 is prejudicial to the interests of the revenue. The assumption of jurisdiction u/s 263 being contrary to the provisions of law and facts on record, hence, the proceedings initiated u/s 263 hence, the impugned order dated 14.03.2024 deserves to be quashed. 3. The Id. Pr. CIT (Central), Jaipur erred in law as well as on the facts of the case in wrongly setting aside the assessment order dated 04.09.2021 in as much, the Id. Pr. CIT, Jaipur completely ignored/did not judiciously appreciate the detailed written submission filed before him, though was taken note of and neither a copy of the appraisal report was supplied nor an opportunity of inspection of the assessment record was provided to the appellant despite 3. the specific request made therefore, the factual allegation that the impounded Anx-3 and Anx-23 were well b....
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....rvey action carried out on 08.11.2017 at work site of the assessee, certain incriminating documents, loose papers etc., were impounded by the survey team. After analysing the said impounded documents/material, certain cash payment have been found made in contravention of the provision of section 40A(3) of the Act. Finally the assessment order u/s 143(3) dated 04.09.2021 was passed determining at assessed income at Rs. 2,51,20,840/- by making disallowance on accounts of unexplained cash credit u/s 68 of the Act of Rs. 1,13,44,912/- and disallowance on accounts of violation u/s 40A(3) of the Act at Rs. 99,77,947/-. 4. On culmination of the assessment preceding ld. PCIT called for the assessment records for examination as per the power vested upon her. Upon examination of the records she noted that the transactions details available in annexure 3 & 23 pertain to the F.Y 2016-17. But the same have neither been verified nor any supporting and corroborative evidence are available on the record. So she noted that there is a failure on part of the Assessing Officer in carrying out the requisite inquiries/examination(s) and thereby the action of the AO found erroneous and prejudice to th....
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....ted 24.08.2021, the assessee was asked to explain the details regarding annexure A-27, A-11 and A-12 only. No query was made to explain annexure A-3 & A23. As per office note of assessment order it was stated that all the documents and financial statement found during the course of survey proceedings are recorded/reflected in the regular books of accounts of the assessee and the same is verified during the assessment proceedings. An examination of order of the Assessing Officer makes it clear to me that he did not take a conscious decision relating transactions pertain to F.Y. 2016-17 of annexure A3 and A23. But, this issue is not seen to have been examined at all by the AO as no query has been raised in this regard & the assessee has not replied on the entries mentioned in these Annexure. 8. Considering all the facts and circumstances of the case and for the reasons discussed above, the assessment order dated 4/9/2021 for A.Y. 2017-18 passed by the AO is held to be erroneous in so far as it is prejudicial to the interest of the revenue for the purpose of section 263 of the Act. The said order has been passed by the AO in a routine and casual manner without applying proper....
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.... Further show cause notices u/s 263 due to change of incumbency, were issued and lastly on dated 02.03.2024. In response, the assessee filed detailed submission vide letter dated 12.02.2024 (PB- 63-70). Which is reproduced hereunder: In any case, since the assessment record are available with your good self, the opportunity of official inspection maybe provided to ascertain the availability of these two annexures in the assessment record for the subjected AY 2017-18. However, the ld. CIT didn't agree with the submissions and finally held as under:(Pg10 Pr.11) "6. The reply of the assessee has been perused. The point wise rebuttal of the reply is as under * First & the foremost point is in regard to the perusal of the seized /Impounded material before the CIT, - In this regard the learned A.R has forgotten that the copy of the Appraisal report is always available with the Commissioner of Income Tax, hence the details of the impounded material were always before the PCIT and ongoing through the record the error on the part of the Assessing officer which was also prejudicial had been observed * As regards the other points, the submission....
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....sing Officer makes it clear to me that he did not take a conscious decision relating transactions pertain to F.Y. 2016-17 of annexure A3 and A23. But, this issue is not seen to have been examined at all by the AO as no query has been raised in this regard & the assessee has not replied on the entries mentioned in these Annexure. 8. Considering all the facts and circumstances of the case and for the reasons discussed above, the assessment order dated 4/9/2021 for A.Y. 2017-18 passed by the AO is held to be erroneous in so far as it is prejudicial to the interest of the revenue for the purpose of section 263 of the Act. The said order has been passed by the AO in a routine and casual manner without applying proper mind on the Impounded material and issue discussed in the appraisal report. The AO has not verified the details which were required to be verified under the scope of scrutiny. The order of the AO is, therefore, liable to revision under the explanation (2) clause (a) of section 263 of the Act. The assessment order is set aside and restored to the file of Assessing officer to examine the entries in Annexure A-3 & A-23 of the Impounded material afresh in the light of ....
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....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 the Assessing Officer adopts one of two courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the Revenue, unless the view taken by the Assessing Officer is unsustainable in law." Ratio of these cases fully apply on the facts of the present case in principle. 2. Beyond the scope of AO's inquiry on facts and in law: In the present case jurisdiction u/s 263 of the Act is on the ground that the while completing assessment proceedings the AO did not verify/ examine the transaction details available in Annexure 3 & 23 which pertain to AY 2017-18 and was not satisfactorily examined by the assessing officer. Such a stand by the CIT however, is not only contrary to the facts available on record but also ignoring the scope of inquiry by a quasi-judicial authority and ignoring the possibility of ....
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....d that such impounded record came to his possession only after the completion of the assessment for subjected AY 2017-18 hence it is wrong to find any fault of the AO and it is legally unjustified to hold the subjected order to be erroneous. In absence of the related impounded documents, it was impossible for the AO to have sought explanation by raising queries from the assessee. The law is well settled that no one can be expected to perform something which is impossible. 3.2. In fact, the AO, during the course of assessments proceeding for AY 2018- 19 had duly taken note all the impounded annexures being A-3, A-13 & A-23 at which were available before him, discussed at page 6 onward of the assessment order and after getting the reply, finally reduced the related amounts from the total addition of Rs. 4.87 Cr. made therein based on these two annexures observing that they were related to AY 2017-18 (AY 2018-19) and completed the assessment vide order dated 19.04.2022 u/s 143(3) (PB 19- 54). The relevant findings are reproduced hereunder: "Disallowance u/s 40A(3) of the Act:- 5.3 The assessee submitted its reply dated 09.04.2022 uploaded 11.04.2022 on ITBA ....
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....examination during assessment proceedings. 3.4. Change of stand by the CIT: Having failed to justify his stand taken in the SCN that upon examination of assessment record it came to his notice that the AO failed to consider these two Annexures surprisingly however, in the impugned order the ld. CIT has now come up with new story /new theory in as much as at page 4 he has referred to the appraisal report and finding fault of the AR that he has forgotten that a "copy of the appraisal report is available with the Commissioner of Income Tax, hence the details of the impounded matter were always before the PCIT and ongoing through the record the error on the part of the Assessing officer which was also prejudicial had been observed". Thereafter, in para 7.1 page 5 he has again referred to and relied upon the appraisal report and in particular S.NO. 89 observing that the subjected annexures A3 and A23 were considered therein for F.Y. 17-18 (A.Y. 2018-19) solely based on the appraisal report, and repeatedly alleged that the AO made no enquiry, "he did not take a conscious decision and he completed the assessment in a routine and casual manner without applying proper mind....
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....such report may be made available to him however, the same was completely ignored without paying any attention there to. 4.2. Reliance is placed on PCIT vs. Shreeji Prints (P.) Ltd. 2021] 130 taxmann.com 294 (SC) Surat-2 (DC 47-51) held as under: "5 The Tribunal has found that in the order passed by the PCIT, Explanation 2 of section 263 of the Act, 1961 is made applicable. The Tribunal observed that the PCIT has not mentioned in the show cause notice to invoke the Explanation 2 of section 263 of the Act 1961. Therefore, by invocation of Explanation in the order without confronting the assessee and giving an opportunity of being heard to the assessee is not appropriate and sustainable in law." 5. Not a case of complete/total lack of inquiry: 5.1. It was further not a case of complete failure but it was, at the worst, (if assumed so though not admitted), could be a case of partial non-enquiry even ignoring the fact and contention that these two annexures were never within the knowledge of the AO. S. 263 contemplates only a complete failure but not a failure in the part. Thus, the AO made all the possible inquiries, sought clarifications on all the....
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....iled under appropriated provision of law: The law is well settled that there are different provisions enacted in the statute which have got their own significance. There are remedial provisions for the department which could be taken u/s 147 by reopening the concluded assessment or u/s 154 by making a rectification or lastly u/s 263 by revising the erroneous order. However, all the provisions operate in their own/respective fields and cannot be used interchangeably or no provision can overlap the other. Therefore, if the facts and circumstance of the case suggest that the AO can get the jurisdiction from a particular provision of law, it is only that provision which has to be invoked but not the other. Reliance is place on the case of CIT vs. Amitabh Bachchan [2016] 286 CTR (SC) 113. (DC 31-40) wherein held that: "9. Under the Act different shades of power have been conferred on different authorities to deal with orders of assessment passed by the primary authority. While Section 147 confers power on the Assessing Authority itself to proceed against income escaping assessment, Section 154 of the Act empowers such authority to correct a mistake apparent on the face....
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.... reference to the impounded document, alleging not considered, unless demonstrated showing some income, cannot be a good basis. This so-called appraisal report is not evidence by itself and a merely internal document making a prima facie opinion on the impounded documents by someone other than the AO and therefore, can't be said to be binding upon AO. The CIT even did not mention the amount of income escaping Kindly refer the case of CIT vs. Trustees of Anupam Charitable Trust [1987] 31 Taxman 335 /167 ITR 129 (Raj.) wherein it was held as under: "The error envisaged by section 263 was not one which depended on possibility or the guess work but it should be actually an error either of fact or law. Unless the Commissioner categorically says that there was some income from speculative business which could not qualify for deduction much less exemption under section 11, it cannot be said that there was any error in the order of the ITO relating to the assessment year 1971-72. This error was not relevant to the assessment year 1975-76". 9. Supporting Case laws: 9.1 In CIT v/s Rajasthan Financial Corporation (1996) 134 CTR 145 (Raj) (DC 27-30) held that: ....
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....e assessment, but, certain checks and balances are provided in the Act by conferring powers on the ld. Addl.CIT to grant judicious approval u/s 153D of the Act to the draft assessment orders placed by the ld. AO." 10. Lastly, the ld. CIT cited a decision in the case of CIT vs. Paville Projects Pvt. Ltd. however, firstly, the citation is not complete nor was made available to the assessee during the course of hearing hence deserves to be ignored. Otherwise also, neither he reproduced the relevant part of the impugned order 263 nor he has demonstrated how the same have the ld. CIT hence also the same deserves to be completely ignored. Hence, it cannot be said that the impugned assessment order was erroneous and therefore prejudicial to the interest of the revenue, for want of enquiry by the AO. In view of the above legal and factual position, the impugned order is completely beyond the scope of sec. 263 and therefore, deserves to be quashed." 6. To support the contention so raised in the written submission reliance was placed on the following evidence / records / decisions: S No. Particulars Page No. 1. Copy of Assessment order for AY 2017-18 dated....
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....ble for the AO. The law is well settled that the Assessment order cannot be held to be erroneous simply on the allegation of inadequate enquiry unless there is an established case of total lack of enquiry. It is further submitted that the ignorance/ non- consideration of the appraisal report was never made a part of the various SCN'S issued u/s 263 and therefore, the CIT could not have adapted such reasoning/ basis in the impugned order for the first time which was not earlier confronted to the assessee. On the contrary, in the present case on sole basis while holding the assessment order erroneous is the appraisal report. However, such document was never confronted to the assessee nor the assessee was ever show-caused w.r.t the appraisal report. On the contrary, the assessee specifically requested the ld. CIT that such report may be made available to him however, the same was completely ignored without paying any attention there to. Thus, there are serious contradictions in the approach of the ld. CIT. While issuing the SCN and confronting the assessee and in the ultimate finding she recorded in the impugned order which clearly shows an attempt on his part to held the subjected as....
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.... noted that no query was made to the assessee to explain annexure A-3 & A-23 pertain to the F.Y 2016-17. But the same have neither been verified nor any supporting and corroborative evidence are available on the record. So she noted that there is a failure on part of the Assessing Officer in carrying out the requisite inquiries/examination(s) and thereby the action of the AO found erroneous and prejudice to the interest of the revenue. Ld. PCIT thus issued a show cause notice to the assessee on 20.10.2022 and 11.08.2023. The assessee filed the replied online which was considered by the ld. PCIT and she has countered that submission on the point that the Appraisal report is always available with the Commissioner of Income Tax, hence the details of the impounded material were always before the PCIT and on going through the record the error on the part of the Assessing officer which was also prejudicial had been observed. Thus, relying on the decision of Hon'ble Supreme Court in the case of Malabar Industrial Limited V/s CIT 243 ITR wherein it has been held that - "An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being e....
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....ment order which is either wise has prejudice caused to the revenue, if so ld. PCIT should have placed on record while passing the order if not while issuing the show cause notice. Without pinpointing specific error on the part of the ld. AO or proving the prejudiced to the revenue the assessment order which is passed after hearing the assessee on the as much 10 dates of hearing starting from 20.08.2018 to 27.08.2021. The observation of the ld. PCIT as stated herein above she merely invoked the provision only on the reasons that ld. AO has not raised question and assessee has not filed any reply. On the other hand when the ld. AO has categorically mentioned in the office note that "all documents and financial statement found during the course of survey proceeding are recorded / reflected in the regular books of accounts of the assessee and the same is verified during the assessment proceedings." Thus, here we note that when the specific observation with that of the general observation the specific will prevail because that general statement of the ld. PCIT has not been proved as correct by placing anything on record so as to demonstrate the impact of her observations. Even the ld. ....
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.... AO wherever make up mind to add the same has been mentioned and discussed in the assessment order and thereby AO raised specific queries w.r.t. all the documents impounded, which were made available to him, which fact is evident from the discussion made by him in the subjected assessment order dated 04.09.2021 (PB- 1-18) para 5 pg. 3 showing the list of the Annexures being A-27, A- 11, A-12. Such document has been discussed show at pages 3, 4, 6, 8, 11 and on 13 of the assessment order. Accordingly, huge disallowance of Rs. 99,77,947/- u/s 40A (3) and addition on account of unexplained cash credit u/s 68 of Rs. 1,13,44,912/- were made. Thus, merely non mentioning the annexure and not asking the details merely itself does not hold the order prejudicial or erroneous. This could have been held so if the ld. PCIT by placing on record the relevant material based on which she is making the statement, without doing so the assessment order otherwise only not refer those annexure does not hold liable to be revision as per provision of section 263 of the Act. 11. We also take note of the facts as submitted by the ld. AR of the assessee in his written submission that "In para 4 of the SCN....
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.... Original impounded documents are available with department and explanation with regards to A-3, A-23, A-30, A- 13, A-22 may be verified. The reply of the assessee was considered and found to be acceptable in respect d Annexure A-3, A-23 and A-13. In respect of other annexure assessee did no produce any documentary evidence in support of its claim further assessee did no produce books of account to verify its claim this point is noted vide order sheet entry dated 13.04.2022. The reply of the assessee in respect of Annexure A-3, A-23 and A-13 is discussed as under: - x x x x 5.3.2 Annexure related to F.Y. 2016-17: - On verification of annexure A-3 and A23 it was found that these annexure were related to F.Y. 2016-17 therefore these amount are reduced from the disallowance of Rs 4,86,59,393/- for A.Y. 2018-19 under the head violation of section 40A(3) of the Income Tax Act, 1961. Annexure Total Dr Entries in violation of section 40A(3) A-3 Rs. 42,39,255/- A-23 Rs. 81,81,960/- Total Rs. 1,24,21,215/- As such, Rs. 1,24,21,215/- which pertains to annexure A-3 & A-23 is reduced from proposed disallowance of Rs. 4,86,59,393/- as the sa....
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....ssment order to be erroneous in any manner whatsoever. In other words, in one way or the other. 3.5. It is also stands established by his own admission that the appraisal report always remains with the CIT and not with the AO. If that is so, how the AO could have been blamed not to have looked into and applied his mind on the appraisal report. 3.6. Even assuming, such appraisal report was with the AO than too, he could not have been blamed in as much as again by his own admission the CIT says that the transactions emanating from these annexures A3 and A23 were entered and shown in the said report as relating to F.Y. 17-18 (A.Y. 2018-19). Needless to say that the AO while making the assessment for a particular year (that is A.Y. 17-18 here), will focus only and only on that part of the appraisal report (if assuming was available with him) or on other impounded document or report etc. which relate to or pertain to the year before him but not to various other years which may be a part of the said appraisal report/various other impounded document which has got nothing to do with the assessment proceedings for that year (i.e. A.Y. 17-18). Even otherwise also he was not....
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.... denies that each and every other impounded document or other information available before the AO during the course of assessment proceeding, were duly considered by him rather, he himself admits in the impugned Order by referring the above office note put by the AO which is self-explanatory that the AO did make enquiry which was within his reach and was humanly possible for the AO. 5.3. The law is well settled that the Assessment order cannot be held to be erroneous simply on the allegation of inadequate enquiry unless there is an established case of total lack of enquiry. Kindly refer CIT vs. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del) (DC 1-15) wherein Delhi High Court was considering the aspect, when there is no proper or full verification, and it was held that: "One has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate that would not by itself give occasion to the CIT to pass order....
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....ercise of power under one provision cannot trench upon the powers available under another provision of the Act. In this regard, it must be specifically noticed that against an order of assessment, so far as the Revenue is concerned, the power conferred under the Act is to reopen the concluded assessment under Section 147 and/or to revise the assessment order under Section 263 of the Act. The scope of the power/jurisdiction under the different provisions of the Act would naturally be different. The power and jurisdiction of the Revenue to deal with a concluded assessment, therefore, must be understood in the context of the provisions of the relevant Sections noticed above. While doing so it must also be borne in mind that the legislature had not vested in the Revenue any specific power to question an order of assessment by means of an appeal." That just to take an example, the ld. CIT himself used the word escaped in the impugned order which shows (without conceding) that proper course might have been to initiate re-assessment proceeding u/s 147/148 however, it was not done and patently wrong provision of law has been invoked which is completely without jurisdiction in the ....
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....be erroneous simply because in his order not make an elaborate discussion in that regard." 9.2 In [2016] 76 taxmann.com 226 (SC) CIT v. Reliance Communication Ltd (DC 45-46) Held: IT: "SLP dismissed against High Court's ruling that where assessee raised funds by way of FCCBs and Assessing Officer made detailed enquiries about genuineness and creditworthiness of actual subscribers to such FCCBs in terms of section 68, mere fact that AO did not make any reference to said issue in assessment order, would not entitle Commissioner to pass a revisional order" 9.3 In ACIT, Central Circle-20, New Delhi vs. Shiv Kumar Nayyar [ITA No.1867/Del/2021] "8. .....The copy of the appraisal report submitted by the Investigation Wing to the ld. AO and ld. Addl.CIT are merely guidance to the ld. AO and are purely internal correspondences on which the assessee does not have any access. The scheme of the Act mandates due application of mind by the ld. AO to examine the seized documents independently dehors the appraisal report of the Investigation Wing and seek explanation/clarifications from the assessee on the contents of the seized documents. When the scheme of....
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....Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer ^81a[or the Transfer Pricing Officer, as the case may be,] is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, ^81b[including,- (i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) an order modifying the order under section 92CA; or (iii) an order cancelling the order under section 92CA and directing a fresh order under the said section.] 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 ^82[or the Transfer Pricing Officer, as the case may be,] shall include- ....
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....reme Court in the case of the assessee or any other person. After going through the provision of the Act we also take note of the fact nowhere in the order she invoked the explanation (2) of provision of section 263 of the Act thereby she was not sure as to whether the order falls any of the criteria given vide explanation 2 of the provision of section 263 of the Act. Thus, we do not agree with the view of the ld. PCIT that without establishing that how the order is erroneous or prejudicial the law does not permit such action. We get support of our view from the decision of our Jurisdictional High Court decision in the case of CIT v/s Rajasthan Financial Corporation (1996) 134 CTR 145 (Raj) (DC 27-30) wherein the High Court have held that: "Once Assessing Officer has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the Assessing Offer allowed the claim being satisfied with the explanation of assessee, the decision of the Assessing Officer cannot be held to be erroneous simply because in his order not make an elaborate discussion in that regard." Similar view is....
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....eport, the assessing officer was satisfied with the cost of fixed assets as shown in the balance sheet. There was no dispute that the project report produced by the assessee before the bank at the time of taking the loan for the purpose of construction of hotel building was only a projected estimated of the cost and not the actual cost of construction incurred by the assessee. It was stated that the assets must be as per the actual cost of construction and not on the projected cost of acquisition. In these facts, the Tribunal took the view that if the order passed by the assessing officer is without any investigation or enquiry on an issue, then it would be erroneous so far as it is prejudicial to the interest of the revenue on the ground of lack of enquiry. However, it was not a case of complete lack of enquiry on the part of the assessing officer rather the assessing officer has conducted a detailed enquiry on this issue and called for all the relevant records from the bank for the purpose of examining the cost of construction of the hotel building. It could be a case of inadequate enquiry so far as not referring the matter to the DVO, however, it was not mandatory for the assess....
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....venue. The phrase "prejudicial to the interests of the Revenue" is not an expression of art and is not defined in the Act. When this phrase is understood in its ordinary meaning, it is of wide import and is not confined to loss of tax. Relevant discussion is found in Paras 8, 9 and 10 of the Report, which are reproduced as follows: "8. The phrase "prejudicial to the interests of the Revenue" is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The High Court of Calcutta in Dawjee Dadabhoy & Co. v. S.P. Jain [1957] 31 ITR 872 (Cal), the High Court of Karnataka in CIT v. T. Narayana Pai [1975] 98 ITR 422 (Kant), the High Court of Bombay in CIT v. Gabriel India Ltd. [1993] 203 ITR 108 (Bom), and the High Court of Gujarat in CIT v. Minalben S. Parikh [1995] 215 ITR 81 (Guj) treated loss of tax as prejudicial to the interests of the Revenue. 9. Mr Abraham relied on the judgment of the Division Bench of the High Court of Madras in Venkatakrishna Rice Co. v. CIT [1987] 163 ITR 129 (Mad) interpreting "prejudicial to the interests of the Revenue". The High Court held: ....