TMI Blog2014 (4) TMI 528X X X X Extracts X X X X X X X X Extracts X X X X ..... ing it as erroneous and prejudicial to the interest of Revenue for getting it revised by the Commissioner u/s 263 of the Act. The assessee has clearly explained the debit and credit entries as discussed in the written submission and also explained the cost of improvement shown by the assessee and the status of the land etc. - this is not a case of no verification or no proper verification - The verification done by the AO is also to be treated as proper unless some specific instruction or prescription of a particular section of the Act has not been carried out by the AO or else the AO has not conducted enquiry as demanded by law - The twin conditions of Section 263 are not found to co-exist – thus, the order of the CIT(A) set aside – Decided in favour of Assessee. - ITA No. 508/JP/2013 - - - Dated:- 31-1-2014 - Shri Hari Om Maratha And Shri N. K. Saini,JJ. For the Petitioner : Shri Sarvan Kumar Gupta For the Respondent : Shri A. K. Khandelwal ORDER Per Hari Om Maratha, JM:- This appeal of the assessee for the assessment year 2005-06 is directed against the order of the ld. CIT dated 07-03-2013 passed u/s 263 of the I.T. Act, 1961 ( the Act for shor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty u/s 50C of the Act at Rs. 16,38,872/-.As per the, ITO, the assessee did not offer income for taxation and therefore, action u/s 148 of the Act read with Section 147 was initiated. 2.3 Against this show cause, the assessee made detailed submission which are incorporated in the order itself. Similar objections have been raised before us also. Therefore, for ready reference, we incorporate entire written submission filed by the assessee before us as under:- 1. Action u/s 263 on the Proposal of the Assessing Officer itself to the ld. CIT is invalid: At the very outset it is submitted that the proceeding or action u/s 263 in the present case itself invalid. Because as per the order of ld. CIT. It is very clear that the action u/s 263 in the present case has been taken on the proposal of the AO of the same ward on the very issues in the proposal letter. He has not made any amendments on the issues. Thus, the action u/s 263 has not been taken by the ld. CIT Suo Moto. The action u/s 263 can only be taken by the CIT when he has found any error in the assessment order. The AO itself can not propose to take any action u/s 263 for the assessment made by the his predecessor. At the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 240/- vide assessment order dt. 27.09.2010(PB 5-7). Thus in the light of the settled legal position the CIT cannot be said to be justified in holding that if the necessary inquiry were not done by the AO the order becomes erroneous and automatically, it shall also be prejudicial to the interest of the revenue. The ld. CIT has not gone in to the merit of the assessee s case or argument or contentions, if so than how it can be said or found out whether any prejudice in fact has been caused to revenue or not by lack of inquiry on the part of the AO. If no loss of revenue is caused and the result remains the same even after conduct the inquiry. It is very settled principal and legal position by various courts or judgments that it will be wrong to say that merely because proper enquiry was not conduct, the assessment would become prejudicial also. It was incumbent upon the CIT to have shown as to how the order was prejudicial to the interest of the Revenue. In the present case the appellant has furnished a detailed reply (PB 39- 43) to the show cause notice by making the reference to the facts of the case. Despite that the CIT did not proved or bring any material or circumstantial evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nquiries may be endless. For someone, some enquiries may be sufficient (here AO), however, the same may be insufficient for the other(CIT). There is no straight jacket formula to make inquiry in the assessment proceedings. What is required is that the AO should frame the assessment in accordance with the provisions of the Act, as interpreted and in the light of the relevant judicial pronouncements, as available on the date of framing the assessment or material available before him. The AO being a quasi-judicial authority can also take support from one set of the decisions, if there, in case is a diversions of opinion. He can t be directed to make an assessment in a particular manner, as specifically prohibited by S. 119. In case of Chorma Business Ltd v/s DCIT 82 TTJ 540(Cal) it has been held that AO before making the assessment, having called for details and having discussed the matter with the A/R of the assessee, such an order cannot be called erroneous and prejudicial to the interest of the Revenue only because the AO made a brief assessment order without discussing such details therein. Further, the CIT also did not give any finding as to whether the share transaction loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 Mere alleged insufficiency of enquiry in opinion of Commissioner by Assessing Authority, could not permit him to invoke revisional jurisdiction u/s 263 Therefore, essential twin conditions for invoking revisional jurisdiction, were not satisfied 5. On perusal of the order in the present case the ld. CIT has taken action u/s 263 only on the assumption and presumption that the no verifications has been made by the AO on the issues and not verified. Kindly refer CIT v/s Paras Cotton Co. 288 ITR 211(Raj.) where held that CIT could not have acted on mere assumption. Mere suspicion cannot take place of proof and the order of CIT u/s 263 cannot be sustained. In CIT vs Anupam Charitable Trust 164 ITR 129 (Raj) also It is held that to proceed u/s 263 on mere suspicion is not permissible. 6.1 Reliance is also place upon the decision of on Rishi Kumar Gupta V/s CIT (2004) 90 TTJ (Agra-Trib) 645, wherein it has been held that, In the instant case we have seen that it is not a case of no enquiry, but a case of proper enquiry, which is a matter of subjectivity. It is not the commissioner to decide that up to what extent enquiry is to be made, but in fact, it is the assessing officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parison of gross profit rate with earlier years. However, the commissioner invoked on the ground that the assessment was completed in undue Haste without conducting proper enquiries with regard to the cost of raw materials sales as per menu and other relevant factors for proper assessment. The assessee argued that it was necessary for assuming jurisdiction that there should be a proper and valid reason and the conclusion of the commissioner should be based on the facts. It was submitted that in the instant case the commissioner had not come to a definite conclusion as to how the order passed by the Assessing officer were erroneous and prejudicial to the interest of the revenue. It was vehemently argued that the entire approach of the commissioner was faculty cryptic and on that basis, no order u/s sec 263 could have been passed. It was held that the power of commissioner u/s 263 is quasi-judicial in the character the commissioner, has not to record his subjective satisfaction but to come to a conclusion that the order passed by the Assessing Officer was erroneous prejudicial to the interest of the revenue. Thus as the assessment has been made after relevant enquiries same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o correct each and every type of mistake or error committed by the Assessing Officer and it is only when an order is erroneous, that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice for the requirement or order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interest of the revenue and if the Assessing Officer has adopted one of the courses permissible under law or where two views are possible and the Assessing Officer has taken one view under with which the CIT does not agree, it cannot be treated as an erroneous order, unless the view taken by the Assessing Officer is unsustainable under the law. (vi) If while making the assessment, the Assessing Officer examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income, the CIT, while exercising his power under section 263, is not permitted to substitute his estimate of income in place of the income estimated by the Assessing Officer. (vii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and other entries by cheque were on account of business transaction. Thus on perusal of bank account the debit and credit entries are itself verifiable and explanatory and there is no abnormal entries. Hence how it can be said that the AO has not verified the bank entries. The ld. CIT has not provided a single instance that which entries are not verified and there born out any undisclosed income. If so than how it can be said that order of the ld. AO was being erroneous and prejudicial to the interest of the revenue. Regarding cost of improvement for Rs. 4,95,000/- shown by the assessee and status of land as plot or house: In this regard it is submitted that as in this matter the case was reopened due to the difference in cost between the sale consideration and value determined by the stamp duty officer. In the computation of total income filed with the return the assessee has declared the Short Term Capital Loss at Rs. 1,18,000/- by giving the calculation(PB 1-3). In the course of assessment proceeding the point regarding cost of improvement has been duly examined by the AO which is clearly proved from the record itself because the AO has demanded the proof of cost of improveme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would find that there is an addition of Rs. 1,79,872/- has been made in the income of assessee on account of Capital Gain and assessee has not preferred any appeal for that addition. Thus it cannot be said he had not applied his mind in making assessment of income of Assessee. The reliance is placed on decision of Rajasthan High Court ,In the case of Commissioner of Wealth tax vs. Girdhari lal 258 ITR 331 It is held : When the Assessing officer after going through the material on record and after considering the explanation of the assessee, made some additions and rejected the books of accounts, it could not be said that he had not applied his mind. It is not necessary that the every assessee in the line of business should be the same rate of profit. When the assessing officer had considered all the relevant material on record, it was basically a question of facts and it could not be interfered with unless the finding of the Tribunal was found perverse. Considering the material on record, it could be said that finding of the Tribunal was perverse. Therefore, the Tribunal was correct in cancelling the order under section 263. It is submitted that department can as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enquiry as he deems necessary. It is only on fulfillment of these twin conditions that the CIT may pass an order exercising his power of revision. Minutely examined, the provisions of the section envisage that the CIT may call for the records and if he prima facie considers that any order passed therein by the AO is erroneous insofar as it is prejudicial to the interest of the Revenue, he may after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. The twin requirements of the section are manifestly for a purpose. Merely because the CIT considers on examination of the record that the order has been erroneously passed so as to prejudice the interest of the Revenue will not suffice. The assessee must be called, his explanation sought for and examined by the CIT and thereafter if the CIT still feels that the order is erroneous and prejudicial to the interest of the Revenue, the CIT may pass revisional orders. If, on the other hand, the CIT is satisfied, after hearing the assessee, that the orders are not erroneous and prejudicial to the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but had not been able to point out defects conclusively in the material, for arriving at a conclusion that particular income had escaped assessment on account of non-application of mind by the AO. The Tribunal was right and the order of revision was not valid. The reliance is also placed in the order of the Hon ble ITAT Agra Bench in the case of Rishi Kumar Gupta v. CIT [2004] 90 TTJ (Agra) 645 has held that CIT was not justified in setting aside the assessment on the ground that AO had failed to make Proper enquiry . It is for the AO and not for the CIT to decide upto what extent enquiry is to be made. It will be useful to reproduce the held portion of the case: Held that when the AO proceeded to make the assessment order, he was fully aware of those documents, which were found during the course of survey and for his satisfaction he required the assessee to produce books of account, bills, vouchers, details of the students and other explanations. It is not a case of no enquiry, but a case of no proper enquiry. According to CIT s notice as well as order under s. 263, the AO has conducted enquiries, but he failed to conduct proper enquiries. The use of word proper enquirie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied in setting aside assessment order - Held, no However the ld. CIT has not applied his mind on these submissions and passed the order which is illegal and bad in law as per very settled legal positions as above. 9. Hence in view of the above submission the order of the CIT may kindly be Set-aside or direction of the CIT u/s 263 may kindly be quashed. 2.4 On the other hand, the ld. DR supported the order of the ld. CIT . 2.5 After considering the rival submissions of both the parties, we have found that this order deserves to be set aside not only facts but also on legal provisions. Before, we give our reasons in support of the above findings, we would like to discuss the scheme of revisionary jurisdiction vested to the ld. CIT u/s 263 of the Act as under:- 2. The subject of revision under section 263 has been vastly examined and analyzed by various Courts including that of Hon ble Apex Court. The revisional power conferred on the CIT vide section 263 is of vide amplitude. It enables the CIT to call for and examine the records of any proceeding under the Act. It empowers the CIT to make or cause to be made such an enquiry as he deems necessary in order to find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interest of the revenue and if the Assessing Officer has adopted one of the courses permissible under law or where two views are possible and the Assessing Officer has taken one view under with which the CIT does not agree, it cannot be treated as an erroneous order, unless the view taken by the Assessing Officer is unsustainable under the law. (vi) If while making the assessment, the Assessing Officer examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income, the CIT, while exercising his power under section 263, is not permitted to substitute his estimate of income in place of the income estimated by the Assessing Officer. (vii) The Assessing Officer exercise quasi-judicial power vested in him and if he exercise such power in accordance with law and arrives as a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not feel satisfied with the conclusion. (viii) The CIT, before exercising his ..... X X X X Extracts X X X X X X X X Extracts X X X X
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