TMI Blog2012 (8) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... J. Assessee by : Shri R.C. Shah Revenue by : Shri Vinod Tanwani O R D E R PER ANIL CHATURVEDI, ACCOUNTANT MEMBER: This appeal by the assessee is against the order of the Commissioner of Income Tax-I, Ahmedabad dated 23.01.2012 for the asstt.year 2007-2008 passed under Section 263 of the Income Tax Act, 1961. The assessee is aggrieved by the action of the CIT-I, Ahmedabad under Section 263 in setting aside the order dated 31-12-2009 passed by the AO passed under Section 143(3) of the Act. 2. Assessee is a company engaged in the business of project consultant, construction, contractor and software developer. For A.Y 2007-08, the assessee filed return of income on 31.10.2007 declaring total income of Rs.4,227,427/-. The case was taken up for scrutiny assessment completed u/s. 143(3) vide order dated 31.12.2009 wherein the taxable income was determined at Rs.82,63,407/-after making various additions/disallowances including the disallowance of Rs.3,63,541 u/s 40a(ia). The CIT issued a show cause notice dated 19.12.2011 to assessee requiring the assessee to show cause as to why the assessment order u/s 143(3) should not be treated as erroneous and prejud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rge calculated at 10% where the income or the aggregate of such income paid or likely to be paid and subject to deduction exceeds Rs.10 lacs in case the payee is an individual, HUF, AOP, BOI and Rs.1 crore where the payee is a domestic company. In the present case, as none of the payments exceeded the threshold limit of Rs.10 lac or Rs. 1 crore, the TDS was deducted at the appropriate rate including education cess but excluding surcharge and therefore there was no question of short deduction of TDS. It was further submitted that the question of disallowability u/s.40a(ia) was examined by the AO during the assessment proceedings and the AO had disallowed a sum of Rs.3,83,541/- u/s 40a(ia) after examining the issue in detail and therefore it can be concluded that the disallowance made by AO was after application of mind. On the allowability of deduction u/s.40a(ia), the Ld. A. R. also placed before us the copy of the order dated 21.10.2011 of Kolkata Tribunal in the case of DCIT Vs S.K.Tekriwal (ITA No 1136/Kol/2010) wherein it was held that the conditions laid down u/s 40a(ia) of the Act for making addition is that tax is deductible at source and such tax has not been deducted. If b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erroneous and prejudicial to the interest of Revenue have been considered by the Supreme Court in the case of Malabar Industrial Co. Ltd (2000) 243 ITR 83 (SC) wherein their lordship have held as under (relevant portion from Head Notes): The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent-if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue-recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. 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. 11. The Bombay High Court in the case of CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erroneous, is absent. Similarly if an order is erroneous but not prejudicial to the interests of the Revenue, then the power of suo motto revision cannot be exercised. Any and every erroneous order cannot be the subject-matter of revision because the second requirement must be fulfilled. 12. It is also well-settled that order passed by the Assessing Officer would be erroneous only if the Assessing Officer has not considered all materials or had not done proper examination or enquiry or verification or if the Assessing Officer had completely omitted the issue, in question, from consideration and made the assessment in an arbitrary manner. 13. In the case of CIT Vs. Hero Auto Ltd (2012) 343 ITR 342 (Del), the Hon ble Delhi High Court has held as under: (page 344) Thereafter, he has referred to the second claim of the respondent assessee and has observed that there was lack of inquiry and this vitiated the assessment order. Reference was made to the decision of this court in Gee Vee Enterprise (1975) 99 ITR 375 (Del). There is no discussion in the order of the Commissioner as to how and in what manner the enquiry was lacking and what was the fault and default committed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atable. The matter cannot be remitted for a fresh decision to the AO to conduct further inquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction u/s 263 of the Act. In such matters, to remand the matter /issue to the AO would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the AO to decide the aspect/question. This distinction must be kept in mind by the CIT while exercising jurisdiction u/s.263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of the Revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of alleged inadequate investigation , it will be difficult to hold that the order of the AO, who had conducted enquiries and had acted as an investigator, is erroneous, without the CIT conducting verification /inquiry. The order of the AO may be or may not be wrong. The CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X
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