TMI Blog2010 (7) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of proceedings under section 263 and thereafter direction of ld. CIT to pass a fresh order. 3. The briefly stated facts discussed by ld. CIT (A) in first para of his order passed under section 263 are as under :- "This is a case of individual deriving income from manufacturing and export of Gems Jewellery. Return declaring income of Rs. 2,64,140 was filed on 25-10-2007. Notice under section 143(2) was issued by ITO, Ward 7(2), Jaipur on 11-8-2008, the assessee sought and allowed adjournment on 20-8-2008 fixing the case for hearing on 14-10-2008. As per order sheet noting dated 20-8-2008 Shri P.C. Bafna, CA along with Shri J.P. Matolia, Manager of the assessee attended and filed details along with written submission and the case was adjourned to 20-11-2008. On 20-11-2008 both above mentioned persons attended the proceedings and furnished details. The case was adjourned to 17-12-2008. On 17-12-2008 both the above mentioned persons appeared before the Assessing Officer and filed details. Books of account produced and case was adjourned to 5-1-2009. On 5-1-2009 only Sh. P.C. Bafna, CA attended and filed details. Books of account produced and the case was discussed and asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the ld. CIT has not come to conclusion that any income has escaped for want of examination at the end of the Assessing Officer. Simply he wanted to make assessment proceedings in the manner he wanted. It was further explained that various queries were raised and they have already been answered before the Assessing Officer. However, detailed explanations along with evidences were filed before ld. CIT which he has not taken into consideration at all and by simply saying that Assessing Officer has not examined the case properly, he set aside the order. The attention of the Bench was drawn on reasons given by ld. CIT in his order and para-wise reply against query raised by ld. CIT and considered by Assessing Officer. Attention of the bench was drawn on copy of detailed reply filed before ld. CIT which is placed on record. Reliance is placed on various case laws mentioned in the written note filed by assessee. In reply, the ld. D/R has filed written note which is also placed on record. 5. We have heard rival contentions and considered them carefully. The reasons on which basis the notice issued by ld. CIT are as under : (a) In the order sheet, there is no mention of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am Dharampura, Machwa, Jaipur. Copy of sale deed filed as per letter dated 31-8-2009 (PB 8). In the detail of immovable properties as on 31-3-2007, this land is appearing (PB 68). In assessment proceedings for AY 2006-07, this land is also appearing in the list of immovable properties as on 31-3-2006. Thus this land is not purchased during the year. The purchase of flat at Status Enclave, Bani Park, Jaipur appears not fair and reasonable, AO has not examined this issue. This flat was purchased in March 1999. Copy of sale deed filed as per letter dated 31-8-2009 (PB 8). In the detail of immovable properties as on 31-3-2007, this flat is appearing (PB 68). In assessment proceedings for AY 2006-07, this flat is also appearing in the list of immovable properties as on 31-3-2006. Thus this flat is not purchased during the year. Club expenditure is claimed as business expenditure which is required to be disallowed after ascertaining commercial expediency, withdrawal for household expenditure at Rs. 2,98,844 is inadequate. These aspects were not examined by the AO. AO has not examined the bank account in which foreign exchange are realized and whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . All bank accounts were filed to the AO (PB 70) and the same was examined with reference to books of account. The payment to the parties are for gold bullion purchased which is duly account for. Demat account for share transaction was not examined. No shares was purchased or sold during the year as is evident from Demat Account (PB 10 53-58). The fact that there is no purchase and sale of shares during the year is evident from the copy of the return and the details of investment in mutual funds, shares and capital account filed with the return for AY 2006-07 and 2007-08. No enquiry as regards the income and transactions with assessee's other concern M/s. Rajkrishna Developers Pvt. Ltd. was made. M/s. Rajkrishna Developers Pvt. Ltd. has not commenced any business during the year. Assessee has only made investment of Rs. 50,000 in the shares of this company (PB 10) which is also coming from the last year. Hence question of any income does not arise. Investment in shares of this company is verifiable from the details of investment filed with the return for AY 2006-07 and 2007-08. The income in relation to hired premises at O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der passed by the Assessing Officer after considering the reply of the assessee and causing necessary enquiry cannot be held to be erroneous. 7. It was further submitted that it appears that the CIT has passed the order under section 263 for making de novo assessment on the possibility or guesswork based on his subjective satisfaction without any objective material and without considering the material and evidence filed before him. Therefore the order passed by CIT under section 263 for starting fishing and roving enquiry is not valid in law. Reliance was placed on various case laws i.e., in case of CIT v. Shree Manjunathesware PackingProducts Camphor Works [1998] 231 ITR 53/96 Taxman 1 (SC), CIT v. Gabriel India Ltd. [1993] 203 ITR 108/71 Taxman 585, (Bom.). CIT v. Trustees of Anupam Charitable Trust [1987] 167 ITR 129/31 Taxman 335 (Raj.), CIT v. Sakthi Charities [2000] 244 ITR 226/110 Taxman 451 (Mad.), CIT v. Goyal (P.) Family Specific Trust [1988] 171 ITR 698/[1987] 35 Taxman 522 (All.), Rayon Silk Mills v. CIT [1996] 221 ITR 155 Guj.) and CIT v. Taj Printers [1989] 178 ITR 384/[1990] 48 Taxman 331 (All.). 8. The ld. D/R on the other hand has explained the facts of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer verbally required the assessee to file the details as called for in assessment year 2006-07. Accordingly the related details were filed vide letter dated 14-10-2008, 20-11-2008, 17-12-2008 and 5-1-2009. The Assessing Officer by considering the same and the fact that assessee's income is exempt assessment year 10B and further that since assessment year 2003-04, the case of the assessee has taken up for scrutiny and assessment passed after accepting the return income, passed the order accepting the return income. The Assessing Officer has also given a finding in the order that details filed were examined on test check and the requisite information and clarification has been obtained. In these circumstances, order of the Assessing Officer cannot be held to be erroneous or prejudicially to the interest of the revenue. (3) The CIT (A) in his show-cause notice has raised 17 queries. All these were replied by the assessee as reproduced on pages 5-10 of the order. After considering the said reply, the CIT has not made any discussion as to why the said details furnished by the assessee with necessary evidence are still required to be further examined by the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is seen that another Assessing Officer who may have come in place of the Assessing Officer who passed assessment originally referred the matter to the ld. CIT for invoking provisions of section 263. This is clear from para 2 at page 1 of the order of ld. CIT where he has observed: "Proposal under section 263 of the Act was received from the Assessing Officer through Addl. CIT, Range-7, Jaipur vide letter No. 1380 dated 17-7-2009". From these observations it is clear that ld. CIT has not examined the record himself but he has received proposal from Assessing Officer through Additional Commissioner, Range-7. The provisions of section 263 are very clear by which it is provided that "the CIT may call for and examine the record of any proceedings under this Act, and if considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of revenue, he may after giving the assessee an opportunity of being heard and after making or cause to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying assessment, or cancelling the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sory jurisdiction and can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise the power of revision under this sub-section, viz., (i) the order should be erroneous; and (ii) by virtue of the order being erroneous prejudice must have been caused to the interests of the revenue. An order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him. the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order, unless the decision is held to be erroneous. Cases may be visualised where the Income-tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimates himself. The Commissioner, on perusal of the records, may be of the opin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the Income-tax Officer to re-examine the matter. That was not permissible. The Tribunal was justified in setting aside the order passed by the Commissioner of Income-tax under section 263." 14. The ratio of Hon'ble Bombay High Court is squarely applicable on the facts of present case as in this case also the assessment was completed under section 143(3) after making enquires from the assessee who filed detailed replies along with supporting evidence. It is not necessary that Assessing Officer should write a lengthy order discussing all the details filed on behalf of the assessee, but the necessity is that Assessing Officer should have applied his mind. It is further seen that the assessments of the assessee are completed under section 143(3) since assessment year 2003-04. The facts in the earlier years are similar to the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with effect from June 1, 1988. The Explanation was again amended by the Finance Act, 1989. By the amendments made by the Finance Acts of 1988 and 1989 a definition of the term "record" was provided. It has been provided that "record" shall include and shall be deemed always to have included all records relating to any proceeding under the Act available at the time of examination by the Commissioner. It cannot be said that the correct and settled legal position, with respect to the meaning of the word "record" till June 1, 1988, is that it meant the record which was available to the Income-tax Officer at the time of passing of the assessment order. Such a narrow interpretation of the word "record" is not justified in view of the object of the provision and the nature and scope of the power conferred upon the Commissioner. The revisional power conferred on the Commissioner under section 263 is of wide amplitude. It enables the Commissioner to call for and examine the record of any proceeding under the Act. It empowers the Commissioner to make or cause to be made such enquiry as he deems necessary in order to find out if any order passed by the Assessing Officer is erroneous in so f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In case of Sakthi Charities (supra), the Hon'ble Madras High Court has observed that where the Commissioner of Income-tax has merely set aside the order of the ITO directing the officer to hold further investigation without recording any finding that the order passed by the ITO was in any way erroneous or prejudicial to the interests of the revenue, the Tribunal was quite justified in holding that the order did not call for any interference in the revision done by the Commissioner of income-tax. 19. This ratio is also squarely applicable on the facts of the present case for the reason that ld. CIT has not given any instance how the order of Assessing Officer is erroneous or prejudicial to the interests of the revenue except mentioning that Assessing Officer has not examined the details filed before him. However, the ld., CIT could not point out how these details are not acceptable or how they are not correct. 20. The Hon'ble Allahabad High Court in the case of Goyal (P.) Family Specific Trust (supra) has held that : "the orders of the Assessing Officer may be brief and cryptic, but that by itself is not sufficient reason to brand the assessment order as erroneous and prejudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of 5 per cent as declared by assessee. The ld. CIT directed the Assessing Officer to apply 10 per cent net profit rate. This order of ld. CIT was confirmed by Hon'ble Rajasthan High Court. It is seen that in this specific order a very low rate was applied and the order of the AO was held erroneous and prejudicial to the interest of revenue. But in the present case no such facts are involved. Rather fact of assessee's case are much stronger as assessee's entire profit are liable to deduction under section 10B. 26. Reliance has also placed on the observation of the Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. (supra) that an incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. 27. In the present case nothing has been brought on record by ld. CIT that how the Assessing Officer has assumed incorrect facts or has applied the provisions of law incorrectly. Therefore, the observation of Hon'ble Apex Court in the present case does not apply. Rather the decision of Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. (supra) supports the case of the assessee. It has been held by the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law has completed the assessment. Moreover, the assessee was entitled for deduction under section 10B. This is not a case of department that assessee is not entitled for deduction under section 10B, therefore, whatever the resulted income would have been there, those will qualify for deduction. In view of these facts, there was no loss of revenue even. Therefore, the order of Assessing Officer cannot be termed as erroneous or prejudicial to the interests of the revenue. Reliance has been placed on the decision of K.A. Ramaswamy Chettiar's case (supra). 30. In this case the order of Assessing Officer was set aside as the Assessing Officer has not made any enquiry. The Hon'ble Madras High Court has examined the order passed under section 263 and it was found that Assessing Officer has not made any enquiry at all. But in the present case the assessment was completed under section 143(3) and ld. CIT himself admits that suo moto details were filed before Assessing Officer. If the details were filed suo moto and they were in consonance with the Balance Sheet and Profit Loss account filed along with the return, then it cannot be said that these details were not considered by the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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