TaxTMI 
TaxTMI 
TaxTMI 
2024 (12) TMI 643
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....nd 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 before the Id. AO who allegedly did not considered, is factually in....
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....ing 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 the interest of the revenue. Ld. PCIT thus issued a show cause notice to the assessee on 2....
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.... 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 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....
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.....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 of the A.R is not tenable as The Hon'ble Supreme Court in the case of Malabar Industrial Limited V/s CIT 243 ITR it has observed as under- " An incorrect assumption of facts or an incorrect application of law will satisfy....
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....his 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 the observation made in this order after allowing reasonable opportunity to the assessee." Hence this appeal. Submissions: The impugned order passed u/s 263 is completely beyond the scope of S. 263 of the Act on various grounds, as discussed here....
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....enue, 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 such examination by the AO during and at the time of making of the subjected assessment order. 2.1. At the outset, it is submitted that the AO in this case, acting as a quasi-jurisdictional authority, after making a detailed enquiry and examination of the relevant facts and material available on record to....
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....ising 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 portal the relevant portion of reply is stated as under: - A-3 & A-23 pertains to F.Y. 2016-17. The annexure A-30 is totally related expenditure only and no receipts, Annexure A-13 is identical copy of Annexure A-1 and the Annexure A-22 is modified type of pocket ledger to keep handy details payable vis-à-vis payments. Original impounded documents are availabl....
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....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 on the impounded material and issues discussed in the appraisal report". 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 he recorded in the impugned order which clearly shows an attempt on his part to held the subjected assessment order to be erroneous in any manner whatsoever. In other words, in one way or the other. 3.5. It is also stand....
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.... 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 relevant issues to the extent he was supposed looking to the nature of the issue involved and the evidences and material already available therein together with the material provided during the assessment proceedings. Thus, ld. AO framed the assessment in accordance with the available judicial guideline. 5.2. The CIT nowhere 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 ....
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....f 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 of the record. The power of appeal and revision is contained in Chapter XX of the Act which includes Section 263 that confer suo motu power of revision in the learned C.I.T. The different shades of power conferred on different authorities under the Act has to be exercised within the areas specifically delineated by the Act and the exercise 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....
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....on 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: "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." 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 FC....
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.... 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 04.09.2021 1-18 2. Copy of Assessment order for AY 2018-19 dated 19.04.2022 19-54 3. Copy of Show Cause Notice u/s 263 dated 20.10.2022 55-56 4. Copy of Show Cause Notice u/s 263 dated 11.08.2023 57-58 5. Copy of Show Cause Notice u/s 263 dated 25.01.2024 59-60 6. Copy of Show Cause Notice u/s 263 dated 08.02.2024 61-62 7. Copy of our detailed Reply dt. 12.02.2024 to the above SCN dated 08.02.2024 along with Acknowledgment 63-70 8. Copy of Show Cause Notice u/s 263 dated 02.03.2024 71-72 Case laws relied upon: S.No. Particulars Page No 1. CIT vs. Sunbeam Auto Ltd. [2010] 189 Taxman 436 (Delhi) 1-15 2. Narain Singla vs. PCIT [2015....
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....y, 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 assessment order to be erroneous in any manner whatsoever. The ld. AR of the assessee also submitted that the ld. PCIT failed to place on record the impact or error and she merely based on the assumption and presumption and thus the case does not fall within the provision of section 263 of the Act. 8. The ld DR is heard who relied on the findings recorded in the order of the ld. PCIT and advanced the similar contentions as stated in the order of the ld. CIT(A). The ld. DR stated that neither the assessee shows from the submission so made before the ld. AO nor that found discussed in the order of the assessment. The ld. AO has not verified the annexure as per the appraisal report available in this case and therefore, the assessment made in the case of the assesse....
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....rial 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 erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind" and therefore, she hold the order erroneous and prejudicial to the interest of the revenue. 10. As we note that there is an allegation on the part of the ld. PCIT while examining the assessment record that the while conducting the assessment proceeding the ld. AO has not specifically dealt with the Annexure 3 & 23 and therein the transactions pertaining to the F. Y. 2016-17 have not been satisfactorily examined by the assessing officer and he has not placed on record supporting and corroborative evidence so as to demonstrate that the same were verified and that failure alleged to have been on the part of the ld.AO resulted into passi....
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.... / 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. DR while hearing the case has not argued or demonstrated as to what is the impact of this observation. The provision of section 263 cannot be invoked to correct each and every type of mistake or error committed by the AO; it is only when an order is erroneous as also prejudicial to Revenue's interest, then the provision for revision will be attracted. Ld. PCIT though having the details of the impact of annexure A-3 and A-23 did not demonstrate the impact and merely expressing assumption and presumption she invoked the provision of section 263 of the Act. The pre-requisites to the exercise of jurisdiction by the Commissioner u/s 263, is that the order of the Assessing Officer is established to be erroneous in so far as it is prejudicial to the interest of the Revenue. The Comm....
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....d 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, dated 20.01.2022 initially ld. CIT alleged failure of the AO to consider these impounded annexures based on his examination of the assessment record however, such an allegation was factually wrong because there was no indication nor any evidence brought on record to support this allegation. On the contrary the correct facts that has been argued and placed on record by the ld.AR of the assessee in his written submission so filed and the same were not challenged by the revenue while arguing the case of the assessee. The submission reads asunder : "on 04.09.2021 when the AO passed the Assessment Order for subjected AY 2017-18, he was not having in his possession the impounded two annexures namely Annexure-3 and Annexure-23. On the contrary, aforesaid discussion made in the ass....
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....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 same is related to FY 2016-17 initiated for transactions which are found in contravention of provisions of section 40A(3) of the Act." Thus, it is evident that these papers were considered by the AO in AY 2018-19, only when came to his possession after the completion of the order for this year. 3.3. In the impugned order the CIT is completely silent with regard to the factual submissions made before him that the AO was not in possession of the related impounded documents before him during the course of the assessment proceedings. There is no categorical finding recorded by him that these two impounded documents were well available before the AO. The ld. CIT thus, ignored/ citrated a vital contention raised before him relating to a jurisdictional fact. Thus, it can't be contended that such record was available before the AO for examinat....
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....t 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 bind by such report. 3.7. Reliance placed on the case of CIT vs. G.M. Mittal Stainless Steel (P.) Ltd. [2003] 130 Taxman 67 (SC) (DC 41-44). 4. Appraisal report was never made a ground in the Show Cause Notice: 4.1. 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 c....
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....ht 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 orders under section 263 of the Act, merely because he has a different opinion in the matter. It is only in cases of "lack of inquiry" that such a course of action would be open." In another case of Narain Singla v. PCIT [2015] 62 taxmann.com 255 (Chandigarh - Trib.) (DC 16-26) it was held that when AO was fully aware of matter, he had appraised evidences filed by assessee and then had formed a view to accept same, Commissioner was unjustified in invoking jurisdiction under section 263. Whether if there was an enquiry, even inadequate, that would not, by itself, give occasion to Commissioner to pass order under section 263, merely because he has a different opinion in matter; it is only in case of 'lack of inquiry' that such a cause of action can be open. However, the ld. CIT is completely silent on this aspect. 6. Remedy to be availed under appropriated provision of law: The law is well settled that there are different provisions enacted in the statute ....
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....ht 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 light of the above submissions, factual position and the judicial guidelines. Thus, the subjected assessment order may be prejudicial to the interest of the revenue however, cannot be held erroneous because, twin conditions are not fulfilled. 7. S.263 Explanation not invoked: Interestingly, the ld. CIT did not invoke Explanation to S.263 which is normally interpreted / taken support by the invoking of S.263 in absence of which, the ld. CIT could not have at all complained of lack of inquiry or not making proper inquiries. Otherwise also he has not suggested what further inquiries could and should have been made in the admitted facts and circumstances of the present case. 8. Suspicion is not a good basis for revision: The CIT cannot invoke section 263 merely based on suspicion and exploring the possibility of some income, merely making reference to the impounded document, alleging not considered, unless demonstrated showing some income, cannot be a good basis. This so called appraisal report is....
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....Wing and seek explanation/clarifications from the assessee on the contents of the seized documents. When the scheme of the Act provides for a leeway to both the ld. AO as well as the ld. Addl. CIT to even ignore the conclusions drawn in the appraisal report by the Investigation Wing and take a different stand in the assessment proceedings, the fact of ld. Addl.CIT getting involved in the search assessment proceedings right from the receipt of copy of appraisal report, as argued by the ld. DR, has no substance. In other words, irrespective of the conclusions drawn in the appraisal report by the ITA Nos.1282 to 1285/Del/2020 & ITA No.1078/Del/2021(By Assessee) ITA No.1867/Del/2021 (By Department) 8 Investigation Wing, both the ld. AO and the ld. Addl.CIT are supposed to independently apply their mind in a judicious way before drawing any conclusions on the contents of the seized documents while framing the search assessments. The law provides only the ld. AO to frame the 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....
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....ng Officer, as the case may be,] shall include- (i) an order of assessment made by the Assistant Commissioner 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 82[or the Transfer Pricing Officer, as the case may be,] 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; 82[(iii) an order under section 92CA by the Transfer Pricing Officer;] (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 Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer 82[or the Transfer Pricing Officer, as....
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....ase of PCIT Vs. Om Rudra Priya Holiday Resort Private Limited [ (2019) 109 Taxmann.com (Rajasthan) wherein the consistent view is taken by holding that ; 5. Having heard learned counsel for the revenue and perused the impugned judgment as also the material on record, we find that the Tribunal has analytically examined all the arguments which were advanced on behalf of the revenue. The Tribunal has noted that the assessing officer during the course of assessment proceedings had issued a query letter dated 03.03.2015 wherein various queries were raised including the details of additions of Rs. 2,20,03,275/- as per the schedule of fixed assets of the audit report and copies of supporting books and vouchers for acquisition of the fixed assets were also called from the assessee. The assessing officer also asked the assessee to furnish the valuation report of the cost of construction as shown in the books of accounts. In response thereto, the assessee produced the valuation report dated 14.05.2013. The assessing officer also called for relevant documents submitted with the Baroda Rajasthan Gramin Bank including application form and other record in the shape of project report for availi....
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....e DVO once the assessing officer was satisfied with the cost of construction and cost of fixed assets as recorded in the books of account. The Tribunal further held that even if the Principal Commissioner found that the decision of the assessing officer accepting the cost of construction/cost of fixed assets is contrary to the facts or otherwise not permissible as per the provisions of the IT Act, then the order of the assessing officer could have been reversed by giving a concluding finding on the issue. The Principal Commissioner has set aside the impugned order only for the purpose of referring the same to the DVO. It is thus evident that the Principal Commissioner was not sure about the correctness of the cost of construction or cost of fixed assets either shown in the project report or recorded in the books of account. In the facts of the case, when the assessing officer has taken a broad view by accepting the cost of fixed assets as recorded in the books of account which were also supported by the valuation report, then the order of the assessing officer cannot be held to be erroneous on the ground of lack of enquiry. It is settled position of law that when the assessing offi....
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....or orders which are subversive of the administration of revenue. There must be some grievous error in the order passed by the Income Tax Officer, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the Commissioner might think to be prejudicial to the interests of Revenue Administration". In our view this interpretation is too narrow to merit acceptance. 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. 10. 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 Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income Tax Officer has taken....