TMI Blog2015 (2) TMI 938X X X X Extracts X X X X X X X X Extracts X X X X ..... before accepting the claim of the assessee. There is nothing on record to establish that the assessment order on this issue is erroneous and prejudicial to the interest of the Revenue on account of lack of enquiry. Therefore, we find no merit in the order of the ld. Commissioner of Income-tax in this regard, as the Assessing Officer has made enquiry on the issue of additional capital brought by the partners.- Decided in favour of assessee. Unsecured loans not verifiable - Held that:- In this regard, the Assessing Officer has issued questionnaire and through query No.8, the assessee was asked to furnish details of unsecured credit along with address, PAN, address of the Assessing Officer, confirmations and copy of income-tax returns. In response thereto the assessee has furnished requisite information vide reply dated 28.7.2011.Therefore, it can be presumed that the Assessing Officer has made proper verification of the information furnished before him before accepting the claim of the assessee. Since the Assessing Officer has made necessary enquiry on the issues, the order of the Assessing Officer cannot be called to be erroneous and prejudicial to the interest of the Revenue on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary there being no inquiry by the CIT, the order passed under section 263 is bad in law and be quashed. 4. Because the Assessing Officer having framed the assessment under sec. 143(3) after making detailed inquiries, by issue of from page questionnaire which return was picked up for scrutiny under CASS (Computer Assisted Simple Scrutiny) and was subject to approval by the Addl. CIT/CIT, cannot be said to be erroneous or prejudicial to the interest of revenue, the CIT has wrongly inferred it be so, the order passed be annulled. 5. Because the CIT has erred on facts and in law in holding that the Assessing Officer has failed to disallow/make addition on account of commission to foreign agents, which matter being squarely covered by the decision of jurisdictional High Court, the CIT has wrongly inferred that the Assessing Officer has erred on this aspect. (The Assessing Officer made massive inquiry as would be apparent from the voluminous papers placed before him during the course of assessment proceedings). 6. Because the CIT has erred on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of F.Y.2QQ8-G9 with respect to partners capital account vis-a-vis the Annexure (Part A) to the Tax Audit Report. c) During the year, the assessee firm has shown unsecured loans amounting to ₹ 1,00,43,191,39 from 17 parties, Out of these 17 parties, no interest has been paid in 7 cases as well as PAN has not been available in 5 cases. d) During the year, the firm has paid rent, interest, salary etc, to the 22 persons, being partners, relatives and related firms in terms of the Sec. 40A((2)(b) of the I.T. Act,1961. e) There is nothing on record which suggest about the methodology for valuation of closing stock i.e. whether it is lower of cost or market price. 3. Having formed a view that the order of the Assessing Officer was erroneous insofar as prejudicial to the interest of the revenue within the meaning of provisions of section 263 of the Act, the ld. Commissioner of Income-tax has issued a show cause notice to the assessee as to why the assessment order may not be set aside. In response thereto, the assessee has filed a written reply stating therein that all the issues were thoroughly examined by the Assessing Officer while allowing the claim of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ured loan amounting to ₹ 1,00,43,191.39 from 17 parties are concerned, the Assessing Officer has raised a query No.8 through his questionnaire dated 12.7.2011 asking the assessee to furnish confirmations of the unsecured loans along with their purposes, complete address of each depositor with date and mode of amount of deposit, proof of deposit, etc. In response thereto, the assessee vide his reply dated 28.7.2011 has furnished the list of unsecured loans as on 313.2009. Confirmations of all the creditors were also placed before the Assessing Officer. Therefore, the Assessing Officer has duly applied his mind before accepting the claim of the assessee by making necessary verification. 8. With regard to the other issue of payment of rent, interest, salary etc. to 22 persons, being partners, relatives and related firms in terms of section 40A(2)(b) of the Act is concerned, the ld. counsel for the assessee has invited our attention that the query in this regard was also raised by the Assessing Officer through questionnaire dated 12.7.2011 as item No.25, through which the assessee was asked to furnish complete details of payments made to the persons specified under section 40A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a vs. CIT [2010] 3 ITR (T) 760 (Patna Trib.) 19) Roshan Lal Vegetable Products (P) Ltd. vs. Income Tax Officer, appeal No.6(ASR) of 2010. 20) Fine Jewellery (India) Ltd. vs. ACIT [2012] 19 ITR 746 (Mumbai Trib.) 21) Amrit Singh vs. Income Tax Officer [2003] 127 Taxman 87 (Chand. Trib.) 22) Ratlam Coal Ash Co. vs. CIT, 171 ITR 141 (MP) 23) Bagaria Vegetable Products Ltd. vs. JCIT [2008] 303 ITR (AT) 278 (Pune) 24) Saw Pipes Ltd. vs. CIT [2005] 3 SOT 327 (Delhi) 25) Brij Bhushan Agarwal vs. CIT, 2 SOT 811 (Agra) 26) CIT vs. Associated Food Products Pvt. Ltd., 280 ITR 377 (MP) 27) Goyal Family Trust vs. CIT, 171 ITR 698 (Alld) 28) Hari Iron Trading Co. vs. CIT, 263 ITR 437 29) Mehtab Alam vs. CIT, I.T.A. No. 288 to 294/LKW/2014, order dated 18.11.2014. 10. The ld. D.R., on the other hand, has placed heavy reliance upon the order of the ld. Commissioner of Income-tax with the submission that the Assessing Officer has not made necessary enquiry which was required to be done by him. Simply raising query cannot be called that proper enquiry was conducted by the Assessing Officer. Therefore, the assessment order is erroneous and prejudicial to the intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .7.2011 through which he has filed partnership deed and proof of additions to the partners capital account. When these documents are available with the Assessing Officer in response to his query, it can be presumed that he has applied his mind to the information made with regard to the additional capital brought by the partners. It has been repeatedly held through various pronouncements that the Assessing Officer is not required to record findings on each and every issue, on which he is convinced with the explanations of the assessee. What is required to be seen is that whether the Assessing Officer has applied his mind to the issue or not. If it is found that the Assessing Officer has applied his mind by making necessary enquiry, the order of the Assessing Officer cannot be held to be erroneous and prejudicial to the interest of the Revenue on account of lack of enquiry. 14. The issue whether the assessment can be held to be erroneous and prejudicial to the interest of the Revenue on account of lack of enquiry or insufficient enquiry was examined by the Tribunal in the case of Mehtab Alam vs. ACIT in I.T.A. Nos. 288 to 294/LKW/2014 in the light of various judicial pronouncemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Such decision of the Income Tax Officer cannot be held to be erroneous simply because in his order he did not make any elaborate discussion in that regard. Therefore, the Hon'ble High Court has held that without finding the order of the Income Tax Officer as erroneous, the ld. Commissioner of Income-tax cannot set aside the same and direct the Income Tax Officer to reexamine the facts. 26. Again in the case of CIT vs. Max India Limited [2007] 295 ITR 282 (SC), their Lordships of the Hon'ble Apex Court have re-examined the scope of provisions of section 263 of the Act and has held that where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law. 27. Similar view was again reiterated by the Hon'ble Delhi High Court in the case of CIT vs. Sunbeam Auto Ltd., 332 ITR 167 (Del) and their Lordships have observed that for inadequate enquiry, the order of the Assessing Officer cannot be held to be erroneous. Their Lordships have examined the difference be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dships have held hat for invoking the jurisdiction under section 263 of the Act, both the twin conditions namely (1) the order of the Assessing Officer sought to be revised is erroneous; and (2) it is prejudicial to the interest of the Revenue, must coexist. If one of them is absent i.e. if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but it is prejudicial to the revenue-recourse cannot be had to section 263(1) of the Act. It is a pre-requisite that the Commissioner must give reasons to justify the exercise of suo motu revisional powers by him to reopen a concluded assessment. A bare reiteration by him that the order of the Income-tax Officer is erroneous insofar as it is prejudicial to the interest of the revenue, will not suffice. if a query is raised during the course of scrutiny by the Assessing Officer, which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the Assessing Officer called for interference and revision. In that case the assessee explained that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oval according by the Addl. CIT for framing the assessment order and thus there was no case for setting aside the assessment order for the assessment years in question. 33. Though the assessee has also placed reliance upon the judgment of the Hon'ble jurisdictional High court in the case of Mohd. Ayub vs. Income Tax Officer (supra) in support of his contention that combined show cause notice for initiating action under section 263 of the Act cannot be issued and if issued, the order consequent thereto is not valid in law, but in this judgment the jurisdictional High Court has dealt with the issue of common notice issued for reopening of assessment under section 147 of the Act. Undisputedly notice under section 148 of the Act was issued to assume jurisdiction to reframe assessment after reopening of assessment. Therefore, the controversy involved in this case is not covered by this judgment. However, an analogy can be drawn in favour of the assessee, but on merit we find force in the contention of the assessee. 34. Turning to the facts of the case, we find that these assessments are framed under section 153A of the Act consequent to the search operation upon the assessees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaken the exercise of examining as to whether the expenditure incurred by the assessee in the replacement of dies and tools was to be treated as revenue expenditure or not. 16. In the case of Income Tax Officer vs. Dg. Housing Projects Ltd. (supra), the Hon'ble Delhi High Court has held that a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order erroneous and prejudicial to the interests of the Revenue and cases where the Assessing Officer conducts an enquiry but the finding recorded is erroneous and which is also prejudicial to the interests of the Revenue. In the latter cases, the Commissioner has to examine the order or the decision taken by the Assessing Officer on the merits and then form an opinion on the merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interests of the Revenue. In the second set of cases, the Commissioner cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not. 17. In the case of Director of Income-tax vs. Jyoti Foundation (supra), the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces 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. 18. In the instant case, undisputedly the Assessing Officer has raised queries through questionnaire and in response thereto the assessee has filed reply furnishing complete details which were duly examined by the Assessing Officer before accepting the claim of the assessee. There is nothing on record to establish that the assessment order on this issue is erroneous and prejudicial to the interest of the Revenue on account of lack of enquiry. Therefore, we find no merit in the order of the ld. Commissioner of Income-tax in this regard, as the Assessing Officer has made enquiry on the issue of ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be erroneous and prejudicial to the interest of the Revenue. 22. With regard to the last issue relating to the valuation of closing stock, a query was raised vide letter dated 12.7.2011 through query No.19 and the same was duly replied by the assessee vide letter dated 4.8.2011. Copy of the same is available at page 128 of the compilation of the assessee. On this issue also, the assessee has furnished relevant information pursuant to the query raised by the Assessing Officer. Therefore, it can be presumed that the Assessing Officer has applied his mind to the information furnished before him before accepting the claim. As held in the foregoing paragraphs that the Assessing Officer is not required to record reasons and findings on each and every issue, on which he is satisfied with the explanations of the assessee and the ld. Commissioner of Income-tax cannot set aside the order of the Assessing Officer only for the simple reason that the finding of the Assessing Officer is not acceptable to him. If the Assessing Officer has applied his mind by making necessary enquiry to the explanations furnished before him while accepting the claim of the assessee, the order of the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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