TMI Blog2012 (7) TMI 794X X X X Extracts X X X X X X X X Extracts X X X X ..... of the CIT must be clear, unambiguous and not debatable - A.O. having exercised his mind over the issue, it cannot be termed as erroneous and prejudicial to the interest of the Revenue - in favour of assessee. - I.T.A. No.505/AHD/2012. - - - Dated:- 22-6-2012 - SHRI MUKUL KR.SHRAWAT SHRI ANIL CHATURVEDI JJ. Appellant by : Shri J.P. Shah Respondent by : Shri B.K.S. Pandya, CIT (D.R.) ORDER PER: SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. This appeal is filed by the assessee against the order of Commissioner of Income tax-I, Ahmedabad dated 23-1-2012 for the assessment year 2007-08 passed under section 263 of the I. T. Act, 1961. 2. The only effective ground taken by the assessee reads as under:- 1. The Ld. CIT-1, Ahmedabad has erred in law and on facts in passing the order u/s. 263 dated 23-1-2012 for Assessment Year 2007-08 in the case of appellant. 3. Brief facts are that Assessee is engaged in the business of manufacturing of M.S. black pipes as well as galvanized pipes. For Assessment year 2007-08, assessee filed return of income on 2.11.2007 declaring total income of Rs 5,72,78,390. Case was taken up for scrutiny. Assessment was completed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neous and prejudicial to the interest of Revenue. The assessee thus requested the CIT to drop the proceedings u/s. 263. 5. The submissions of the assessee were not found convincing by CIT. CIT went ahead and vide revision order dated 23-1-2012 held as under: 10. I have carefully gone through the aforesaid written submission of the assessee and I do not find any merit in them for the following reasons:- (1) At the outset, it would be pertinent to mention here that the aforesaid details filed by the Ld. Counsel of the assessee before the undersigned should have been filed along with the return of income or along with the submissions made at the time of assessment before the A.O. (2) There is no merit in the submissions given by the Ld. Counsel. On the other hand, it is quite evident that under proviso (iii) to section 36 (1) of the IT Act, any amount of interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession, (whether capitalized in the book of account or not) for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore us, the Ld. A.R. reiterated the submissions made before CIT. The Ld. A.R. placed on record the copy of the covering letter dated 27.1.2009 which contained the details furnished before A.O. during the course of assessment proceedings. The assessee furnished the details of interest received and interest paid. It was submitted by the Ld. A.R. that the assessee also furnished explanation with reference to the capital work in progress before the AO. The Ld. A.R. also placed on record the copy of its annual accounts for the year ended 31st March 2007. From the balance sheet he pointed out that there has been increase in its own funds (comprising of share capital and reserves and surplus) from Rs.1793.82 lacs to Rs.2236.04 lacs i.e. by Rs 442.22 lacs. Plus depreciation of Rs.212.98 lacs. Thus the aggregate own funds were to the extent of Rs.655.20 lacs. During the same period there has been increase in capital work in progress from Rs. 770.66 lacs to Rs.1317.95 lacs i.e by Rs.547.29 lacs. From the Balance sheet he pointed that the increase in secured loans was due to increase in clean usance bill discounted facility that was against the hypothecation of debtors. It was thus contende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO comes only after the relevant facts have been examined and verified by the A.O. Unless and until the issue has been examined, there is no question of application of mind. Thus, according to the ld. D.R, since the AO had failed to make any inquiry, the CIT was fully justified in invoking the provisions of section 263. In support of his contentions, he relied on the following decisions: (a) Malabar Industrial Co. Ltd. Vs CIT (2000) 243 ITR 83 (SC) (b) Rishi Gagan (1989) 31 ITD (Bom) 515 - where it was held that in a case where the ITO passed orders without proper enquiries, the order was erroneous and prejudicial to the interest of Revenue and therefore provision of s. 263 can be invoked. (c) Gee Vee Enterprise 99 ITR 375 - where it was held that it is the duty of the AO 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 s. 263 emerges out of this context. It is because it is incumbent on the ITO to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word erroneous in s. 263 inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment 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 opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a higher figure than the one determined by the Income tax Officer. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. This is because the Income tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfies with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interests of the Revenue. But that by itself would not be enough to vest the Commissioner with the power of suo motu revision because the first requirement, namely, that the order is erroneous, is absent. Simila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and held as under (pages 338 -340): Thus in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order u/s. 263 is passed. In such cases, the order of the A.O. will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. The CIT cannot remand the matter to the A.O. to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of inquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the A.O. making the order unsustainable in law. In some cases, possibly though rarely, the CIT can also show and establish that the facts or records or inferences drawn from the facts on record per se justified and mandated further enquiry or investigation but the A.O. had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrowed funds for its acquisition and hence the provisions of sec 36(1)(iii) are not applicable and accordingly no part of interest was required to be capitalised. We find that even though these facts were brought to the notice of the Commissioner and it was submitted that it was because of the above mentioned facts no disallowance u/s 36(1)(iii) was called for, the Commissioner did not adequately deal with these contentions, and rejected the same by observing that the interest payment of Rs 1,49,85,495/- should not have been allowed as a deduction. Omission to do so resulted in the under assessment of income to that extent . 14. In the case before us, it is seen that the A.O. has after considering all the facts and after satisfying himself accepted the contentions of assessee and made no disallowance u/s. 36(1)(iii). CIT has not been able to establish and pin point unequivocally the error or the mistake made by the A.O. which makes the order unsustainable in law. As held by the Hon ble Delhi High Court, the finding of the CIT must be clear, unambiguous and not debatable. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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