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2018 (1) TMI 74 - AT - Income TaxRevision u/s 263 - provisions of section 40(a)(ia) applicability - accepting the returned loss filed by the assessee was erroneous and prejudicial to the interests of the revenue - Held that:- It is an admitted position that the AO before completing the assessment did not make any enquiries questioning whether provisions of section 194A of the Act were applicable to factoring charges and consequently factoring charges cannot be allowed as a deduction in computing income from business in view of the provisions of section 40(a)(ia) of the Act for non-deduction of tax at source. The law with regard to exercise of jurisdiction u/s.263 of the Act on the ground that the AO failed to make enquiries which he ought to have made in the given circumstances of a case is well settled. 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. We derive support for the proposition as stated above from the decision of the Hon’ble Delhi High Court in the case of Gee Vee Enterprises (1974 (10) TMI 29 - DELHI High Court). In the light of the law on the issue and in the light of the admitted fact that the AO did not make any enquiries which were required to be made on the issue in question, the order of the AO became both erroneous and prejudicial to the interest of the revenue calling for exercise of revisional jurisdiction u/s.263 of the Act. We therefore uphold the exercise of jurisdiction u/s.263 of the Act by the CIT by the impugned order. the observations of the Pr. CIT with regard to the retrospective operation of second proviso to section 40(a)(ia) of the Act should not influence the AO or the appellate authorities in the proceedings pursuant to the impugned order. This is because the Pr. CIT in the impugned order has not considered the question as to whether in the absence of the decision of jurisdictional High Court, whether the view favourable to the assessee rendered by the non-jurisdictional High Court or the view against the assessee by the non-jurisdictional High Court should be taken into consideration. In any event, we are of the view that when the assessment is set aside on the ground that the AO did not make proper and adequate enquiries before concluding the assessment, the Pr. CIT ought not to have expressed any view on the other issues that might arise for consideration in the assessment proceedings, pursuant to the order u/s. 263 of the Act. With the aforesaid modifications, we confirm the order of the Pr. CIT.
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