TaxTMI 
TaxTMI 
2026 (8) TMI 1337
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.... order u/s. 263 of the Act, dated 19.03.2026 are extracted as follows: "The assessee has filed its Return of Income for the Asstt. Year 2022-23 on 17.10.2022 declaring Total Income at Rs. 6,10,41,300/-. Subsequently, the case was selected for scrutiny through CASS for scrutiny for the reasons (i) Substantial increase in capital in a year (ii) High interest expenditure and huge advance in excess of total proprietors/partners fund. Subsequently, assessment order u/s. 143(3) r.w.s. 144B of the Income Tax Act, 1961 was passed on 21.03.2024 by accepting the returned income of Rs. 6,10,41,300/-. On perusal of the assessment records, it was observed that the business receipt of the assessee during the F.Y. 2021-22 relevant to Asstt. Year 2022-23 is Rs. 1,03,42,914/- upon which TDS of Rs. 2,06,84,591/- has been claimed by the assessee. However, it was found that the assessee has shown business receipt of Rs. 1,00,18,40,156/-. Thus, there is a difference of Rs. 3,23,88,758/- in the business receipt as per 26AS details and as per books of account of the assessee. Further, it was evident that there are two major deductors from which the assessee has received contractual receipts of R....
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....,894+80,23,890+1,21,119). 3. Since the issues discussed supra have not been properly and adequately verified by the AO while passing the assessment order, therefore, the assessment order passed u/s 143(3) r.w.s. 144B of the Act is erroneous in so far as it is prejudicial to interest of the 'revenue in light of section 263 of the Income Tax Act, 1961." 3. At the time of hearing, the Ld. Counsel for the assessee demonstrated that the issue of unsecured loan had been in detailed verified and examined by the A.O during assessment proceedings and having examined the same he has taken plausible view in the matter, after which, the Pr. CIT does not get jurisdiction to impose his view on the issue when plausible view has already been taken by the A.O after due verification. The Ld. Counsel further submitted that as per Page 26 to 107 of the paper book, details of unsecured loan were filed before the A.O. In this regard, he also demonstrates that specific question has been asked by the A.O for furnishing details of unsecured loan through notice u/s. 142(1) of the Act, dated 11.10.2023 a/w. questionnaire and at point No.3, the said specific query on unsecured loan had been en....
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.... Act. It was held to be a settled principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction etc. One has to see from the records as to whether there was any application of mind. Distinction between "lack of inquiry" and "inadequate inquiry" was also highlighted in the said decision. It was held that if there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under Section 263 of the Act, merely because he has different opinion in the matter and it is only in cases of "lack of inquiry" that such a course of action would be open. 18. Similar view was taken by the Bombay High Court in the case of Gabriel India Ltd. [supra]. Based on logical and rational reading of the provisions contained in Sub-section (1) of Section 263 of the Act, it was observed that suo motu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under the Act, it is found that any order passed therein by the Income Tax Officer is 'erroneous insofar as it is prejudicial to the interests of the Revenue'. ....
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....enue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous ; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent-if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue-recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of 'mis-take or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. 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. 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 scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task i....
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....d "inadequate inquiry". If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of "lack of inquiry", that such a course of action would be open. In Gabriel India Ltd.'s case (supra), law on this aspect was discussed in the following manner : ". . . ".......From a reading of sub-section (1) of section, it is clear that the power of suo motu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is 'erroneous insofar as it is prejudicial to the interests of the revenue'. It is not an arbitrary or unchartered power. It can be exercised only on fulfilment of the requirements laid down in sub-section (1). The consideration of the Commissioner as to whether an order is erroneous insofar as it is prejudicial to the interests of the revenue must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of whi....
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.... by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed...... We may now examine the facts of the present case in the light of the powers of the Commissioner set out above. The Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation on that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. Such decision of the Income-tax Officer cannot be held to be "erroneous" simply because in his order he did not make an elaborate discussion in that regard . . ." (pp. 113-117) 13. When we examine the matter in the light of the aforesaid principle, we find that the Assessing Officer had called for explanation on this very items, from the assessee and the assessee had furnished his explanation vide letter dated 26-9-2002. This fact is even taken note of by the Commissioner himself in Para 3 of his order dated 3-11-2004. This order also reproduces the re....
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....and therefore, it is not necessary that in all cases the Commissioner is bound to express final view, as held by this Court in Gee Vee Enterprises' case (supra). But, the least that was expected was to record a finding that order sought to be revised was erroneous and prejudicial to the interest of the revenue. [see : Seshasayee Paper & Board Ltd.'s case (supra)]. No basis for this is disclosed. In sum and substance, accounting practice of the assessee is questioned. However, that basis of the order vanishes in thin air when we find that this very accounting practice, followed for number of years, had the approval of the income-tax authorities. Interestingly, even for future assessment years, the same very accounting practice is accepted. 17. It is in this context the question that assumes importance is as to whether powers could be exercised under section 263 of the Act when two views are possible and following observations of the Tribunal, in this backdrop, become relevant : "38. Still further, the Hon'ble Supreme Court in Malabar Industrial Co. Ltd.'s case (supra) has held that when two views are possible and the Assessing Officer has taken one of the po....
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....t also becomes clear that the judgments under which Mr. Sanjeev Sabharwal, learned counsel for the revenue, had taken umbrage would not be applicable in the instant case and, therefore, would not come to his rescue. In Saravana Spg. Mills (P.) Ltd.'s case (supra) where the Supreme Court expounded the principle of "current repairs", clear finding recorded was that ring frames would constitute independent and separate machine capable of independent and specific functions, as is clear from the following observations : "In our view, the Assessing Officer was right in holding that each machine including the Ring Frame was an independent and separate machine capable of independent and specific function and, therefore, the expenditure incurred for replacement of the new machine would not come within the meaning of the words "current repairs". In the present case it is not the case of the assessee that a part of the machine (out of 25 machines) needed repairs. The entire machine had been replaced. Therefore, the expenditure incurred by the assessee did not fall within the meaning of "current repairs" in section." In the present case, finding is just the opposite, viz., dyes and tools a....
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....e categorical findings in this regard and for this purpose, he himself has to make enquiry and investigation whatever he deems fit in the circumstances. The Hon'ble High Court of Delhi in the case of Pr. CIT Vs. Delhi Airport Metro Express Pvt. Ltd. (ITA No.705/2017), dated 05.09.2017 has held that purpose of exercising jurisdiction u/s. 263 of the Act, the conclusion that the order of the A.O is erroneous so as to be prejudicial to the interest of the Revenue has to be preceded by him on a minimal enquiry. If the Pr. CIT is of the view that the A.O did not undertake any enquiry, it becomes incumbent on the Pr. CIT to conduct such enquiry. 8. Further, the Hon'ble High Court of Delhi in the case of Income Tax Officer vs. D.G. Housing Projects Ltd. (2012) 20 taxmann.com 587 (Del HC) has held that the Pr.CIT has to come to the conclusion and himself decide that the order is erroneous by conducting necessary enquiry before passing order u/s. 263 of the Act. That why the order of the A.O is erroneous and prejudicial to the interest of the Revenue has to be recorded through specific findings by the Ld. Pr. CIT. The Ld. Pr. CIT therefore cannot summarily remand the matter to the file o....