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TMI Blog2015 (3) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... omplying to notice did 13/04/2012. 3. BECAUSE the Ed. CIT had no material, evidence or basis to hold that the assessment in question was either erroneous or prejudicial to the interest of revenue and therefore provision of section 263 applied to the case. 4. The order passed by the ld. CIT on 06/11/2012 is therefore illegal and against the facts of die case and deserves to be cancelled / set aside in its entirety. 2. The facts in brief borne out from the record are that on scrutiny of the assessment order and record, the ld. Commissioner of Income-tax has observed that a sum of Rs. 27,75,722/- has been debited in the trading account for the year ending on 31.3.2008 under the head "provisions to be made for expenses in current year" and this claim was allowed by the Assessing Officer without examining the details of the same. The ld. Commissioner of Income-tax further observed from the narration given in the books of account and also in view of the fact that an identical amount was reflected as receipt in the books of account for assessment year 2009- 10, that the provisions made in this year was in the nature of contingent liability and, therefore, could not have been allowed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue. He accordingly cancelled the assessment order and directed the Assessing Officer to pass a fresh assessment order as per law after giving the assessee an opportunity of being heard. 6. Aggrieved, the assessee has preferred an appeal before the Tribunal with the submission that during the course of assessment proceedings, the Assessing Officer has applied his mind on all the three issues by making necessary enquiries. Being convinced with the explanations furnished by the assessee, the Assessing Officer has allowed the claim of the assessee, therefore, it cannot be said that the Assessing Officer has accepted the claim of the assessee without making any enquiry or application of mind. 7. With regard to the debit of Rs. 27,75,722/- in the trading account for the year ending on 31.3.2008 under the head "provisions to be made for expenses in current year", the ld. counsel for the assessee has invited our attention to the query letter dated 29.11.2010 appearing at page 427 of the compilation of the assessee and reply of the assessee dated 9.12.2010 appearing at pages 31 & 32 of the compilation of the assessee, with the submission that through the aforesaid query, the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payments were made through credit cards to purchase journals or books, tickets, etc., of which details were furnished before the Assessing Officer during the course of assessment proceedings. Being convinced with the details furnished by the assessee, the Assessing Officer has accepted the claim of payment of credit cards as business expenditure and allowed the same. 10. Therefore, it cannot be said that the Assessing Officer has allowed the claim of the assessee without making necessary enquiries. Since the order of the Assessing Officer was passed after due application of mind, the same cannot be revised under section 263 of the Act on the ground that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. 11. The ld. D.R., on the other hand, has submitted that the Assessing Officer has not made such enquiries as are required by a prudent Officer before accepting the claim of the assessee. Therefore, the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue on account of lack of enquiry. The ld. D.R. has further contended that with regard to the income from house property, the assessee has not furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re sought. These order sheet entries are appearing at pages 422 to 428 of the compilation of the assessee. Through these documents, it is clear that the Assessing Officer has made queries on all the three issues. 15. The assessee has filed reply dated 9.12.2010 in response to query letter dated 29.11.2010 appearing at pages 31 & 32 of the compilation of the assessee. Through this letter, the assessee has explained the provisions for expenses under the liability side of the balance sheet at Rs. 27,75,727/- as on 31.3.2008 as against Rs. 42,74,368/- as on 31.3.2007 appearing in the trading account for the year ending on 31.3.2008, with the submission that the assessee was subscription agents engaged in the business of subscribing foreign journals/magazines/periodicals for government libraries and research institutions of national repute, for which they have been granted permission by the Reserve Bank of India. It was further explained that subscription period of journals/magazines/periodicals is for the calendar year namely January to December. It was further explained that supplies of journals, etc. commence only after receipt of full payment in advance by the publishers and accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are extracted hereunder for the sake of convenience:- "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 pronouncements and the Tribunal has concluded that on account of insufficient enquiry, the assessment order cannot be held to be erroneous and prejudicial to the interest of the Revenue. The relevant observations of the Tribunal in this regard are extracted hereunder:- 22. So far as the legal position is concerned, it is settled position of law that the assessment order cannot be set aside or revised for inadequate enquiry by the ld. Commissioner of Income-tax under section 263 of the Act. 23. In the case of Malabar Industrial Co. Ltd. Vs. CIT, 243 ITR 83 (SC), it has been held by the Hon'ble Apex Court that the ld. Commissioner of Income-tax can invoke section 263 of the Act if the order of the Assessing Officer is erroneous and it is also prejudicial to the interest of the Revenue. Both the conditions must coexist. If due t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 between lack of proper enquiry and inadequate enquiry and have held that there is a distinction between "lack of enquiry" and "inadequate enquiry". 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. Such a course of action is open only in cases of "lack of inquiry". The contention of the Revenue that the Assessing Officer did not consider as to whether the expenditure in question was capital or Revenue expenditure cannot be accepted. Although apparently the assessment order does not give any reason while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse 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 capital investment made by the partners, which had been called into question by the Commissioner, was duly reflected in the respective assessments of the partners who were income-tax assessees and the unsecured loan was duly reflected in the assessment order of the said creditor, which was also an assessee. Their Lordships in that case has held that provisions of section 263 of the Act have not been rightly invoked. 30. Again in the case of CIT vs. Ganpat Ram Bishnoi (supra), their Lordships of Hon'ble Rajasthan High Court have also expressed similar view by holding that record of the proceedings clearly shows that the Assessing Officer has framed assessment after due application of mind and holding enquiry into all areas, which according to the ld. Commissioner of Income-tax, have not been at all enquired into and the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olved 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 in which cash of Rs. 2 crores were found. While framing the assessments, questionnaires were issued with regard to the availability of cash and source and the same were duly replied by the assessees. According to the assessees, this cash belongs to certain other parties/concerns in whose cases assessments were also framed under section 153C of the Act. Therefore, in the case of the assessees as well as in the case of other concerns, to which the cash relates, this issue was examined by the Assessing Officer. Under these circumstances, it cannot be said that the Assessing Officer has not applied his mind to the factum of seizure of cash during the course of search operation. 35. In the revisional order, the ld. Commissioner of Income-tax has made an observation that the Assessing Officer ought to have made certain more enquiries but he has not made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 Delhi High court re-affirmed similar view. The relevant observations of the Hon'ble High Court is extracted hereunder:- "Revisionary power under section 263 of the Act is conferred by the Act on the Commissioner/Director of Income-tax when an order passed by the lower authority is erroneous and prejudicial to the interests of the Revenue. Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interests of the Revenue but orders which are passed after inquiry/investigation on the question/issue are not per se or normally treated as erroneous and prejudicial to the interests of the Revenue because the revisionary authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken. In CIT v. DG Housing Projects Ltd. [2012] 343 ITR 329 (Delhi), it ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 2. At the most, it can be said that there can be insufficient enquiry, but for that reason the assessment order cannot be held to be erroneous and prejudicial to the interest of the Revenue and the ld. Commissioner of Income-tax cannot set aside the same directing the Assessing Officer to make enquiry in a particular manner." 18. Therefore, in the light of the aforesaid various judicial pronouncements, we are of the view that the Assessing Officer has made a proper enquiry with regard to the debit entry of Rs. 27,75,722/- in trading account for the year ending on 31.3.2008 under the head "provisions to be made for expenses in current year" and credit card payments. Therefore, on these two issues, the assessment order cannot called to be erroneous and prejudicial to the interest of the Revenue. We accordingly set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X
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