TMI Blog2012 (11) TMI 551X X X X Extracts X X X X X X X X Extracts X X X X ..... time of assessment proceedings in the matter regarding allowability of the claim made by the assessee - having regard to the entirety of the facts and circumstances of the case, speaks about the non-applicability of mind, and non investigation into the issue raised by the CIT - order passed by the CIT u/s 263 of the Act, on this issue is upheld - appeal is disposed of - In the result, appeal of the assessee is partly allowed. - ITA No. 202/CHD/2011 - - - Dated:- 31-7-2012 - Ms. Sushma Chowla And Shri Mehar Singh , JJ. Appellant by : Shri Sudhir Sehgal Respondent : Smt. Jyoti Kumari ORDER PER MEHAR SINGH, AM The present appeal filed by the assessee is directed against the order dated 24.01.2011 passed by the ld. CIT u/s 263 of the Income-tax Act,1961 (in short 'the Act'). 2. In this appeal , the assessee has raised the following Grounds of Appeal: 1. That the Worthy Commissioner of income Tax, Patiala has erred in assuming the jurisdiction u/s 263 of the I.T. Act and holding that the order as passed by the .Assessing Officer u/s 143 (3) vide order, dated 27.10.2008 is erroneous and prejudicial to the interest of revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eply reads as, Copies of the expenses debited to Prof it Loss Account are enclosed. Ld. 'AR' further referred to page No. 41 42. These papers represent explanation filed by the assessee in respect of bad debts. The assessee submitted that certain goods were supplied to M/s Narang General Stores, Hanuman Garh before 31.3.1996. However, during the year under consideration, the same were written off, as irrecoverable u/s 36(1) (vi i) read with Section 36(2) of the Act. Ld. 'AR' placed reliance on the decision of the Hon'ble Supreme Court reported in T.R.F. Ltd. V CIT (2010) 323 ITR 397 (S.C) . 4. Ld. 'DR' supported the order passed by the CIT and placed reliance on the decision, in the case of Arthi Nursing Home V Ito 119 TTJ 415. 5. We have carefully perused the rival submissions, facts of the case and the judicial precedents cited by the parties. A bare perusal of the questionnaire, issued by the AO, and the reply filed by the assessee reveals that appellant has filed explanation in respect of issue of bad debt raised by the CIT in his impugned notice u/s 263 of the Act. 5(i) In this context, it is pertinent to reproduce the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal is applicability of the provisions of section 263 of the Act viz, the revisionary jurisdiction of CIT. Therefore, the decision which is rendered in the context of bad debt relating to the merit of the case, has nothing to do with the jurisdiction of the CIT under Section 263 of the Act. 6(i) A perusal of the assessment order clearly reveals that AO passed the assessment order in a perfunctory and mechanical manner, without any application of mind, to issues raised by the CIT, in the impugned order u/s 263 of the Act. A bare perusal of the impugned questionnaire issued by the AO and the reply filed by the assessee thereto, reveals that both are single line question and single line reply thereto. No direct and specific question has been raised by the AO in respect of the issues raised by the CIT in the impugned order passed u/s 263 of the Act. Therefore, question of submission of reply by the assessee does not arise. Similarly, on perusal and consideration of the fact situation of the case and relevant records, we are of the considered opinion that the AO has failed to conceive the specific issues which were the subject matter of the impugned order passed u/s 263 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t considered by the AO. In view of this, to this extent the order of CIT is not sustainable. 9. Next issue, which is covered u/s 263 of the Act, pertains to interest free advance to Shri Gaurav Goyal, M/s Hari Dev Brothers and M/s Shaha Soap Mills, Sunam. The CIT found that on the one hand, the assessee had paid interest to the bank and P.F.C. and had raised interest bearing loans and on the other hand, assessee had given interest free advances. The CIT recorded finding that AO had not made any investigation at the time of assessment proceedings in the matter regarding allowability of the claim made by the assessee. Accordingly, ld. CIT, by placing reliance on the decision of M/s Malabar Industrial Co. V CIT 243 ITR 83 (S.C) and in the case of Tara Devi Aggarwal V CIT (1973) 88 ITR 323 (S.C) set aside the order of assessment passed by the AO on 27.10.1988 u/s 143(3) . The CIT has also listed 7 cases in para 4 of his assessment order u/s 263 of the Act to support this view. 10. The AO, is an Adjudicator as well as an Investigator, while exercising quasi-judicial power, for the purpose of framing assessment under the scheme of Income-tax Act. It is his statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in conditions are satisfied, namely; (i) the order of the AO, sought to be revised is erroneous; and (ii) it is prejudicial to the interest of revenue. 12. The Hon'ble Apex Court further held that an incorrect assumption of facts or an incorrect application of law, will satisfy the requirement of the order, being erroneous. In the same category, falls orders passed, without applying the principle of natural justice or without application of mind. The phrase pre-judicial to the interest of the revenue is not an expression of art and is not defined in the Act. Understood in its ordinary meaning, it is of vital import and is not confined to loss of tax. I f, due to an erroneous order of the ITO, revenue is loosing tax, lawfully payable by a person, it will certainly be prejudicial to the interest of revenue. In the present case, AO has failed to make any enquiry as prompted by the facts of the case in respect of the issues raised by the CIT in the order passed u/s 263 of the Act. The AO, as indicated earlier, has not perceived the issue raised by the CIT u/s 263 of the Act, the question of application of mind, making of enquiry as Investigator and passing the speaking ..... X X X X Extracts X X X X X X X X Extracts X X X X
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