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2022 (7) TMI 384 - AT - Income TaxRevision u/s 263 by CIT - an order which is prejudicial to the interests of the revenue - CIT observed that, AO not making inquiries or verification with respect to the difference in the figures - lack of inquiry v/s inadequate inquiry - As per PCIT AO during the assessment proceedings has not verified the difference in the amount of gross value shown in the profit and loss account viz a viz gross value of the services - HELD THAT:- An inquiry made by the Assessing Officer, considered inadequate by the Commissioner of Income Tax, cannot make the order of the Assessing Officer erroneous. In our view, the order can be erroneous if the Assessing Officer fails to apply the law rightly on the facts of the case. As far as adequacy of inquiry is considered, there is no law which provides the extent of inquiries to be made by the Assessing Officer. It is Assessing Officer’s prerogative to make inquiry to the extent he feels proper. The Commissioner of Income Tax by invoking revisionary powers under section 263 of the Act cannot impose his own understanding of the extent of inquiry. There were a number of judgments by various Hon’ble High Courts in this regard. Delhi High Court in the case of CIT Vs. Sunbeam Auto [2009 (9) TMI 633 - DELHI HIGH COURT] made a distinction between lack of inquiry and inadequate inquiry. The Hon’ble court held that where the AO has made inquiry prior to the completion of assessment, the same cannot be set aside u/s 263 of the Act on the ground of inadequate inquiry. The principle which emerges is that 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 Assessing Officer adopts one of the course permissible in law and it has resulted in loss of revenue; or where two views are possible and the Assessing Officer has taken one view with which the Commissioner of Income-tax does not agree, it cannot be treated as an erroneous order causing prejudice to the interests of the Revenue unless the view taken by the Assessing Officer is unsustainable in law, or the AO has completely omitted to make any enquiry altogether or the order demonstrates non-application of mind. In the case of the assessee the AO during the course of assessment proceedings, made enquiries on this issue and after consideration of written submissions filed by the assessee and documents / evidence placed on record, framed the assessment under section 143(3) of the Act without making the addition of the amount as note above. This fact can be verified from the notice under section 142(1) of the Act by the AO and submission in reply of the assessee against such notice. Thus it is not the case that the AO has not made any enquiry. Indeed the Pr. CIT initiated proceedings under section 263 of the Act on the ground that the AO has not made enquiries or verification which should have been made in respect of cash deposited during the demonization period. It is not the case of the Pr. CIT that the Ld. AO did not apply his mind to the issue on hand or he had omitted to make enquiries altogether. In the instant set of facts, the AO had made enquiries and after consideration of materials placed on record accepted the genuineness of the claim of the assessee. There is a difference between the value of the services provided by the assessee which are subject to the provisions of service tax viz a viz the income which has to be accounted for the purpose of income tax. As such the advance received by the assessee cannot be categorised as income under the provisions of Income Tax Act whereas the services rendered by the assessee even with respect to the advances received are subject to service tax. Therefore, merely these amounts are not matching, no inference again the assessee can be drawn. Furthermore, all the details with respect to the service tax were available before the AO during the assessment proceedings. Thus it cannot be said that there was no application of mind of the AO in the given facts and circumstances. There was a specific question raised by the AO which was duly answered by the assessee as evident from the details furnished in the preceding paragraph. Thus we hold that there is no error in the assessment framed by the AO under section 143(3) causing prejudice to the interest of revenue - the revisional order passed by the learned PCIT is not sustainable - Decided in favour of assessee.
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