TMI Blog2012 (3) TMI 227X X X X Extracts X X X X X X X X Extracts X X X X ..... /2011 - - - Dated:- 1-3-2012 - MR. JUSTICE SANJIV KHANNA, MR. JUSTICE R.V. EASWAR, JJ. For Appellant: Mr. Kamal Sawhney, sr. standing counsel with Mr. Amit Shrivastava, Adv. For Respondent: Mr. Kapil Goel, Adv. SANJIV KHANNA, J: (ORAL) The present appeal by the Revenue impugns order dated 31.2.2010 passed by the Income Tax Appellate Tribunal ( Tribunal , for short) in the case of D G Housing Projects Ltd. and relates to assessment year 2004-05. 2. Having heard counsel for the parties, the following substantial question of law is framed : Whether Income Tax Appellate Tribunal was right in setting aside the order of the Commissioner of Income Tax under Section 263 of the Income Tax Act, 1961? 3. The assessee is a company and for the assessment year in question had filed return on 31.10.2004 declaring taxable income of Rs.3,54,712/-. 4. During the year in question the assessee had sold an immoveable property (unfortunately, the details of the said property are not mentioned in the appeal and in the annexures i.e. the assessment order, order of the Commissioner of Income Tax (CIT) and the Tribunal) and had claimed long term capital loss of Rs.35.71 lac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nished reply and attended hearings on 24th March, 2009 and 26th March, 2009. 7. On 30th March, 2009, the CIT had passed an order, inter alia, holding: 4. I have carefully considered the assessee s arguments and examined the assessment record. The assessee s submissions are not acceptable for the following reasons : (i) There is an apparent understatement of the sale price of the property sold. The property purchased for Rs.69.63 lacs in 1997, yielding a rent of Rs.2.05 lacs per month, is being claimed to have been sold for only Rs.70 lacs in 2003. It cannot be understood how such a high-yielding asset can be disposed off at such a low value. It is clear that the aspect of full value of consideration receivable has not been properly examined by the Assessing Officer and the assessment order is erroneous and prejudicial to the interest of the revenue. (ii) The assessee has argued that Schedule III of the Wealth Tax Act is not applicable to the Income Tax Act and has quoted Section 55A of the Income Tax Act to support its case. However, reference need not be made to the Valuation Officer when the value of the asset is determinable as per the formula laid down in Schedule-III of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 144-A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorised by the Board in this behalf under Section 120; (b) record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject-matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word "erroneous" in section 263 emerges out of this context. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an inquiry. 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. 13. In the said judgment, Delhi High Court had referred to earlier decisions of the Supreme Court in Rampyari Devi Sarogi vs. CIT (1968) 67 ITR 84 (SC) and Tara Devi Aggarwal vs. CIT (1973) 88 ITR 323 (SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between lack of inquiry and 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 a 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. [1993] 203 ITR 108 (Bom), law on this aspect was discussed in the following manner (page 113): . . . From a rending of sub-section (1) of section 263, 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 in so far 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h law and arrived at a conclusion and such a conclusion cannot be formed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion . . . There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that 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 in 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. 16. Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore CIT must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law. We may notice that the material which the CIT can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record as it stands at the time of examination by the CIT [see CIT vs. Shree Manjunathesware Packing Products, 231 ITR 53 (SC)]. Nothing bars/prohibits the CIT from collecting and relying upon new/additional material/evidence to show and state that the order of the Assessing Officer is erroneous. 18. It is in this context that the Supreme Court in Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax, (2000) 243 ITR 83 (SC), had observed that the phrase prejudicial to the interest of Revenue‟ has to be read in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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