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TMI Blog2013 (10) TMI 428X X X X Extracts X X X X X X X X Extracts X X X X ..... crutiny assessment under Section 143(3) of the Income Tax Act, 1961 ('Act' for Short) vide assessment order dated 31.01.2005. Returned income of Rs.10,13,38,953/- was substantially accepted except for disallowance of interest of Rs.1,83,503/-. The respondent had claimed deduction under Section 80HHF of Rs.14,73,12,763/- which was specifically mentioned and allowed in the assessment order. 3. The Commissioner of Income Tax issued show cause notice u/s 263 of the Act dated 19.03.2007 observing :- "On perusal of assessment record of A.Y. 2002-03, it is seen that order u/s 143(3) was finalized on 31/01/2005 allowing deduction claimed u/s 80HHF of Rs.14,73,12,763/-. Essential conditions for allowing deduction u/s 80HHF include export or transfer of any film software, television software, music software, telephone news software including telecast rights. There is nothing on the record to suggest that eligible items were actually exported/transferred outside the India at the relevant time. It was necessary on the part of Assessing Officer to examine/verify that eligible items have actually been exported outside the country. This has not been done by AO. From t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ike copy of bill raised by VSNL, copy of certificate from VSNL stating that satellite space segment was leased to NDTV for up-linking news signal from India to be down linked at Hong Kong and a one copy of software export declaration (Softex) from certified by official of Software Technology Park of India (STPI) to show the item exported." 5. The Commissioner thereafter recorded and has given the following findings:- "5. I have considered the facts of this case, submission of the assessee's counsel and the evidences furnished before the A.O. as well as before the undersigned in support of the claim that news items were actually exported through VSNL to STAR TV, Hong Kong. It is seen that evidences filed during the course of assessment proceeding merely proved that foreign exchange was received from STAR TV, Hong Kong against the invoices of export. These did not clearly establish the actual export of eligible item for the purposes of Sec. 80HHF. The A.O. accepted the claim of the assessee without any enquiry/verification. The evidences furnished during the course of this proceeding like certificate from VSNL and Softex from in respect one invoice were never furnished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner's order dated 29.03.2007 in exercise of power under section 263 of the Act has been set aside. Revenue has impugned and challenged the findings recorded in the order passed by Tribunal dated 31.03.2008, by raising the aforesaid two substantial questions of law. Tribunal has exhaustively referred to the replies of the respondent dated 25.11.2004, 21.12.2004 and 20.01.2005, submitted before the Assessing Officer. The written replies are quoted in the impugned order. It was evident that the Assessing Officer had asked the respondent to justify deduction under Section 80HHF on export/transfer of software programme to 24 hours news channel STAR TV, Hong Kong. The respondent had filed and relied on, agreement dated 21.02.1997 between them and STAR TV, Hong Kong, under which, the news software was exported and payments received in foreign exchange through banking channels etc. We shall refer to one of the replies given by the respondent subsequently. In paragraph 12 of the impugned order. Tribunal concluded that the Assessing Officer had after detailed verification accepted deduction under section 80HHF as claimed. The said claim under Section 80HHF was also accepted from Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ression prejudicial to the interest of the Revenue is of wide import and is not confined to mere loss of tax. 10. In Gee Vee Enterprises (supra) failure on the part of the Assessing Officer to conduct inquiry, it was held, makes the order of the Assessing Officer erroneous. This is because an Assessing Officer is an investigator cum adjudicator. Failure to carry out any investigation, makes the order erroneous because the assessing officer errs and commits an error in not examining the subject matter/issue which ought to have been verified. It is incumbent upon the Assessing Officer to investigate and verify facts, deductions, income etc. Thus failure to make any inquiry results in an erroneous order. The said view of the Delhi High Court is a reiteration of the law expounded in Rampyari Devi Saraogi vs. CIT [1968] 67 ITR 84 (SC) and Tara Devi Aggarwal vs. CIT (1973) 88 ITR 323 (SC). After referring to these two decisions, in DG Housing Projects Ltd. (supra), it has been observed:- "These two decisions show that it is not necessary for the Commissioner to make further inquiries before cancelling the assessment order of the Income-tax Officer. The Commissioner can reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 98. 2) On March 21, 1998 proximate to the channel launch, there was a new Agreement ("Second Agreement") signed between NDTV, STAR TV of Hong Kong and NTVL, Subsequently, an Agreement dated November finality of "Second Agreement" (of March 21, 1998). All agreements have been placed on record. These agreements are valid through the year relevant to the assessment year commencing from A.Y. 1999-2000 upto A.Y. 2003-04, and applicable to Assessment Year 2002-03 (subject year). 3) It is submitted that once the Second Agreement was signed, the First agreement stood novated, altered and replaced to the effect that: a) The principal agreement was now between STAR TV of Hong Kong and NDTV. b) NTVI had no legal role to play in fulfilling, executing or enforcing any terms and conditions of the contract. The above position is absolutely clear only from the combined reading of the two agreements but also from the conduct of the parties and the manner in which the transactions, pursuant to the contract(s) were carried out. 4) The following facts may also be noted; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2002-03 as claimed. 12. It is not disputed that the reply was furnished to the Assessing Officer. The assessment order records that the case was discussed. In paragraph 4 of the impugned order dated 29.03.2007, the Commissioner, has referred to this contention of the assessee. He has not controverted or denied the said contention in paragraphs 5 and 6 of the order passed by him. In paragraph 5, Commissioner has observed that evidences were furnished before the Assessing Officer as well as before him to show/establish news items were actually exported through VSNL to STAR TV, Hong Kong but these did not clearly establish actual export of eligible items. But why and what reason there was a doubt in the mind of the Commissioner is not elucidated. Silence or word "clear" do not show that the order was erroneous. Commissioner has thereafter mentioned that certain evidences were also filed before him in support but these were not furnished before the Assessing Officer. Thereafter, Section 80HHF is referred to and stated that the worldwide copyright continued to remain with the respondent. Commissioner duly referred to the contention of the respondent that the section envisaged export or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, 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 reading 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the income himself at a higher figure. It 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 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..." 14. In the present case, the claim of the assessee was allowed by the Assessing Officer on being satisfied with the explanation furnished and evidence produced. Assessing Officer was satisfied that the export was made and consideration was received in foreign exchange within the stipulated time. The reply dated 20.01.2005 sets out the mode and manner in which software was exported. In DG Housing Projects Ltd. (supra) after referring to the decision in Sunbeam Auto Ltd. (supra), it was observed:- "Thus, in cases of wrong opinion or finding on the merits, the Commissioner of Income-tax has to come ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer may be or may not be wrong. The Commissioner of Income-tax cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the Commissioner of Income-tax to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the Commissioner of Income-tax 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, the Commissioner of Income-tax must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the Commissioner of Income-tax must come to the conclusion that the order is erroneous and is unsustainable in law. We may notice that the material which the Commissioner of Income-tax 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 Commissioner of Income-tax (see CIT v. Shree Manjunathesware Packing Products and Camphor Works [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment was erroneous in accepting export was made. Mere ipsi dixit is not sufficient to establish that the assessment was erroneous. Even with regard to the eligibility under Section 80HHF, no finding has been recorded except recording that decision of Mumbai Branch of the Tribunal in K.R. Films Pvt. Limited (supra) has not been accepted by the Revenue. Why and for what reason, Section 80HHF should be interpreted differently, is not stated or elucidated. The Section itself is not examined and interpreted. Without recording the said finding, the Commissioner could not have stated or averred that the claim allowed under Section 80HHF was erroneous. 18. In the present case, jurisdictional pre-conditions stipulated in Section 263 of the Act are not satisfied. The Assessing Officer did conduct investigation and accepted the claim under Section 80HHF on being satisfied that the conditions stipulated in the said Section are satisfied. It is not the case of "no investigation". It is also not a case where per-se further investigation was required. Commissioner in his order, as noticed above, has been tentative and hesitant and did not decide whether the claim under Section 80 HHF has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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