TaxTMI 
TaxTMI 
2025 (3) TMI 2154
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.... aside the assessment order dated 27.09.2021 with the direction to the AO to frame the assessment de-novo. 3. The facts in brief are that the assessee company is engaged in the business of financing, investment and other allied activities. It filed its original return of income on 29.10.2019 declaring total income at Rs. 3,28,38,66,670/- which was later revised on 26.11.2020 declaring total income Rs. 3,28,38,66,670/- Subsequently, assessee's case was selected for 'Complete scrutiny' as per scrutiny guideline of CBDT and the assessment was completed u/s 143(3) of the Act on 27.09.2021 accepting the returned income. 3.1 The ld.PCIT, on subsequent examination of the assessment records noticed on perusal of Col. No. 33 of the Schedule of BP in the ITR that assessee company had claimed an amount of Rs. 238,92,33,023/- as 'Any other amount as deduction'. However, during assessment proceedings, neither the AO asked any specific question/conduct inquiry about the said deduction nor did the assessee submit any detail pertaining to the same. It is stated that the assessment order being a scrutiny assessment u/s 143(3) of the Act initiated on the basis directions given by CBDT for ....
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....l to the interest of the revenue. It may be a case of inadequate enquiry but not a case of no enquiry and Explanation 2 to section 263 of the Act has been wrongly applied to the facts of the case. Moreover, the assessee in response to the show cause notice issue by him had made a detailed reply on all the issues involved with full explanation. The ld.PCIT has failed to point out any infirmity therein. The assessee has also placed reliance on various judicial decisions in support of its contentions that the ld.CIT was not correct in applying the provisions of section 263 of the Act and in cancelling the same for de novo assessment, i.e CIT vs Nirav Modi(2016) 71 Taxmann.com 272(Bom),PCIT vs Shivshahi P.Prakalp Ltd(2023) 155 Taxmann.com 408(Bom),Malabar Industrial Co. Ltd vs CIT(2000) 109 Taxman 66(SC),CIT vs Gabriel India Ltd(1993) 71 Taxman 585(Bom) and Hariom Iron Trading Co. vs CIT(2003) 131 Taxman 535(P&H). 4.1 Per contra, the ld.CIT, DR has relied on the impugned order stating that there was no enquiry worth the name on part of the AO. It is submitted that on the above two issues on which SCN was issued by the ld.CIT, while framing the assessment order, the ld.Assessing Offi....
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.... of the Act as below: Section-263. Revision of orders prejudicial to revenue. (1) The [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 [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, [including,- (i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; orxxxxxxxxxxxxxxxxxxxxxxxx (iii) xxxxxxxxxxxxxxxxxxxx Explanation 1.-xxxxxxxxxxxxxxxxxxxxxxxxxxx Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interest....
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....nce with any decision, prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. 53.3 Applicability: This amendment has taken effect from 1st day of June, 2015." 6.3 Clause (a) as reproduced above talks about the inquiry or investigation having not been made by the A.O., which 'should have been made'. In the amended provisions the phrase 'should have been done' as provided in the newly inserted Explanation means the verification/ enquiry which ought to have been done. The Act nowhere provides the exact modalities to be followed to verify a specific claim made by the assessee. It is the prerogative of the Assessing Officer to decide the extent of verification. But by the amendment made, the Act gives a specific power to the Commissioner to revise the orders made without the inquiry to the extent he thinks fit. One should not be oblivious of the fact that the fiscal statute are to be read literally and no equity or logic has to be found in these. Therefore, the parliament in its wisdom has given power to the PCIT to decide the extent of enquiry. One must appreciate the fact that, the view, what....
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....on sale of shop and FDR interest. In this situation, we have no hesitation to hold that the order of the AO which is apparently very precise and cryptic, was not passed after due examination and verification of certain issues and therefore, there was an error on the part of AO which leads to a correct conclusion of the CIT that the order of the AO is not only erroneous but also prejudicial to the interest of Revenue. We may further point out that the assessment order suffers from lack of necessary enquiry on certain important issues which have been raised by the CIT in the notice issued to the assessee and impugned order u/s 263 of the Act. Therefore, we reach to a conclusion that the assessment order is not sustainable and in accordance with the provisions of the Act which is not only erroneous but also prejudicial to the interest of the Revenue. Hence, we are inclined to hold that the issuance of notice u/s 263 of the Act and impugned order passed by the CIT u/s 263 of the Act is validly assumed jurisdiction of revisional powers u/s 263 of the Act which cannot be alleged as invalid assumption of jurisdiction or bad in law and we confirm the same." 6.6 Section 263 has been eluc....
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....ator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word "erroneous" in section 263 emerges out of this context. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct." Reference may also made to decisions of the Supreme Court in Rampyari Devi Saraogi versus CIT, (1968) 67 ITR 84 (SC) and Tara Devi Aggarwal (Smt) versus CIT, (1973) 88 ITR 323 (SC) wherein it has been observed that where the Assessing Officer had accepted a particular contention or issue without inquiry whatsoever, the order was erroneous and prejudicial to the interest of Reven....
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....uiries and verifications.. The first situation could be this. Even if necessary inquiries and verifications are not made, the Commissioner can, based on the material before him, in certain cases straight away come to a conclusion that an addition to income, or disallowance from expenditure or some other adverse inference, is warranted. In such a situation, there will be no point in sending the matter back to the Assessing Officer for fresh inquiries or verification because an adverse inference against the assessee can be legitimately drawn, based on material on record, by the Commissioner. In exercise of his powers under section 263, the Commissioner may as well direct the Assessing Officer that related addition to income or disallowance from expenditure be made, or remedial measures are taken. The second category of cases could be when the Commissioner finds that necessary inquiries are not made or verifications not done, but, based on material on record and in his considered view, even if the necessary inquiries were made or necessary verifications were done, no addition to income or disallowance of expenditure or any other adverse action would have been warranted. Clear....
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....e Pvt. Ltd. It emerges that the present is a case where the AO failed not only to spell out any finding about the DDIT investigation report and assessment proceedings of M/s. Upaj Leasing & Finance Pvt. Ltd. but also to scrutinize the highlighted aspects in the said report qua the genuineness and creditworthiness of aforenoted loan transactions. Therefore, this is the minimum inquiry which atleast was expected to have been made by the AO. 25. At this juncture, it is apposite to point out that clause (a) of Explanation 2 of Section 263 of the Act introduces a deeming fiction to the effect that the order passed by the AO shall be considered erroneous and prejudicial to the interests of the Revenue, if the order is passed without making inquiries or verification, which should have been made. Henceforth, since neither there is any facet of discussion about the aforenoted aspects in the assessment order nor the assessment record duly reflects that the AO has done inquiry in the light of the findings of the investigation report. We find that the present is a fit case to invoke the revisional powers under Section 263 of the Act." 6.11 The co-ordinate bench of ITAT, in Shrenik ....
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....count also. In support of this proposition, the Ld.PCIT took support of the decision rendered by Hon'ble Karnataka High Court in the case of Infosys Technologies Ltd., [341 ITR 293], wherein the Hon'ble Karnataka High Court has held that non-discussion of claim of deduction allowed by the AO in the assessment order would make it erroneous and prejudicial to the interest of the Revenue. Accordingly, the Ld.PCIT held that the assessment orders passed by the AO for both the years under consideration are rendered erroneous and prejudicial to the interest of the Revenue. Accordingly, he set aside the assessment orders passed for both the years and restored them to the file of the AO for the limited purpose of conducting enquiry with regard to the claim of depreciation of intangible assets and taking decision as per law. The assessee is aggrieved by the revision orders so passed by the Ld.PCIT in both the years under consideration. 4. We heard rival contentions and perused the record. We may first refer to the decisions rendered by Hon'ble High Courts, wherein the law relating to the scope of revision proceedings initiated u/s 263 of the Act have been laid down. We may first ref....
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....ssible and the Income-tax Officer 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 Income-tax Officer is unsustainable in law." The principle which has been laid down in Malabar Industrial Co. Ltd. [2000] 243 ITR 83 (SC) has been followed and explained in a subsequent judgment of the Supreme Court in CIT v. Max India Ltd. [2007] 295 ITR 282." 4.1. Under the provisions of sec. 263 of the Act, the Ld Pr. CIT can revise the order only if it is shown that the assessment order is erroneous in so far as prejudicial to the interests of the revenue. The question as to when an order can be termed as "erroneous" was explained by the Hon'ble Bombay High Court in the case of Gabriel India Ltd (203 ITR 108) as under:- "From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an income tax officer acting in accordance with the law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should h....
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....e impugned revision orders passed by Ld.PCIT holding the assessment orders as erroneous and prejudicial to the interests of revenue, in the facts and circumstances of the case, cannot be found fault with. Since the assessee contends that the depreciation claimed by the assessee is in accordance with the law laid down by the Hon'ble Supreme Court in the case of Smiffs Securities Ltd (supra), we direct the AO to examine this issue of depreciation claimed on intangible assets by taking into consideration the above said decision of Hon'ble Supreme Court. As directed by Ld.PCIT, the AO should decide this issue in accordance with law without being influenced by any of the observations of Ld PCIT and after affording adequate opportunity of being heard to the assessee." 6.13 Hon'ble Delhi High Court in the case of M.R Apparels Private Limited vs Principal Chief Commissioner of Income dated 26.09. 2024 in Appeal Number in ITA 287/2024 & CM APPL. 29090/2024(Del)(HC) held as below: "11. We find no merit in the appellant's contention. Concededly, the audit report could not have commented upon the dishonour of cheques, as the report was issued prior to the date of the cheques ag....
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....derstood 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: "In this context, (it must) be regarded as involving a conception of acts 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 me....
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....icial to the interest of the Revenue. Having gone through the assessment order as well as the order passed by the Commissioner of Income Tax, we are also of the opinion that the assessment order was not only erroneous but prejudicial to the interest of the Revenue also. In the facts and circumstances of the case, it cannot be said that the Commissioner exercised the jurisdiction under Section 263 not vested in it. The erroneous assessment order has resulted into loss of the Revenue in the form of tax. Under the Circumstances and in the facts and circumstances of the case narrated hereinabove, the High Court has committed a very serious error in setting aside the order passed by the Commissioner passed in exercise of powers under Section 263 of the Income Tax Act. 8. In view of the above and for the reasons stated above, present appeal succeeds. The impugned judgment and order passed by the High Court is hereby quashed and set aside and that the order passed by the Commissioner passed in exercise of powers under Section 263 of the Income Tax Act is hereby restored." 7. We have also examined the case laws relied upon by the ld.AR. In the case of CIT vs Nirav Modi....
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....CIT has rightly pointed out that the issues of deduction of Rs 238.92 cr. claimed u/s 37 in respect of the sum debited under the head 'Any other amount as deduction was not enquired or verified. Even basic details were not requisitioned by the AO. Likewise, the ld.PCIT is correct in concluding that the AO did not examine the issue of Dividend Stripping as laid down u/s 94(7) of the Act which was prima facie discernible and required further enquiry and investigation has not been touched upon by the AO. The broad principle that emerges from various decisions relied upon above is that if AO has merely accepted the assessee's explanation on various issues without proper inquiry then the same would come within the ambit of 'lack of inquiry' and not 'inadequate inquiry'. Moreover, there cannot be any dispute that in the instant case, there is no inquiry at all by the AO. The ld.CIT has merely set aside the assessment order for framing it de novo. Therefore, the AO would examine the issues involved and needless to say, he would also allow the assessee opportunity of hearing following the principles of natural justice. In view of these facts, we are of the view that the assessee sh....
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....t due on the basis of the assessment is determined as per the notice of demand. Assessed u/s 143(3) rws 144B of the income tac act. Please note:All NeAC be read as NaFAC. Appreciate your cooperation in the faceless e-assessment proceedings under E-Assessment Scheme, 2019. Yours faithfully. Additional / Joint / Deputy / Assistant Commissioner of Income Tax/ Income-tax Officer, National Faceless Assessment Centre, Delhi E TAX DEPARTMENT Copy to: Assessee Yours faithfully. Additional / Joint / Deputy / Assistant Commissioner of Income Tax! Income-tax Officer, National Faceless Assessment Centre, Delhi lls Commercial Credit Indiabulls Limit mited KrCopy Lazahlen True Copy Due: 2021 47943:13:06 IST Document 3 GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT National Faceless Assessment Centre Delhi To, INDIABULLS COMMERCIAL CREDIT LIMITED M 62 63 1ST FLOOR, CONNAUGHT PLACE NEW DELHI 110001,Delhi India PAN: AABCI5559G Assessment Year: 2019-20 Date: 11/08/2021 DIN: ITBA/AST/F/142(1)/2021- 22/1034778573(1) Notice under sub-section (1) of Section 142 of the Income Tax Act, 1961 Dear Taxpayer....