TMI Blog2015 (3) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... s were charged to the profit and loss account as expenses incurred during the previous year relevant to the assessment year and computed the business loss at ₹ 36109708/-. The assessing officer has allowed the carry forward of these expenses even though the assessee has not commenced its business. The order passed u/s 263 has to be upheld as, in our opinion, it has passed through test of fulfilment of both the conditions by the CIT that the order passed by the AO is erroneous as well as prejudicial to the interest of the revenue on the issue of claim of expenses allowed to the Assessee without verifying whether the assessee has set up / commenced the business during the year. We, therefore, dismiss the appeal filed by the Assessee by upholding the order passed u/s 263. - Decided against assessee. - ITA NO. 103/PNJ/2014 - - - Dated:- 16-2-2015 - Shri P.K. Bansal And Shri D.T. Garasia, Hon ble JJ. For the Appellant : Shri Salil Kapoor, Adv. For the Respondent : Shri Manjunath I. Pujari, ld. D.R. ORDER Per P.K. Bansal This appeal is filed by the assessee against the order of CIT(A), Panaji, dtd. 28.01.2014 for assessment year 2009-10 by taking the follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and other incidental expenses amounting to ₹ 469544/- (36121222 - 35651678) aggregating to ₹ 36121222/- was charged to the profit and loss account as expenses incurred during the P.Y. relevant to A.Y.2009-10 and computed business loss of ₹ 36109708/- and claimed the said loss to carry forward to subsequent years. Under the provisions of the Income Tax Act, 1961, any expenditure exclusively incurred for the purpose of business is an allowable deduction. Since, the company has not commenced its business and the loan availed was not used for the purpose of its business of development of SEZ/real estate business, the expenditure claimed is required to be denied. Failure to do so has resulted in loss allowed to carry forward of ₹ 36109708/- involving notional tax effect of ₹ 12273689/-. 3. The CIT issued show cause notice to the assessee finding carry forward of the loss of ₹ 361,09,708/- to be erroneous. The assessee objected the jurisdiction being invoked u/s 263. After disposing of the objections of the assessee, the CIT set aside the assessment order directing the assessing officer to pass fresh order after verifying the claim of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the interest of the revenue must be satisfied. The assessing officer has given a clear cut finding that lending of money to holding and subsidiary company constitutes its business activities. If the assessing officer has taken one of the views it cannot be said that the order is erroneous. Reliance was placed on the decision of the Hon‟ble High Court in the case of Income Tax Officer vs DG Housing Projects Ltd. 343 ITR 329 (Del.) for the proposition of the law CIT cannot demand the matter to the assessing officer to decide whether the finding recorded or erroneous. Attention was drawn to page 9 of the said decision in which it was held that in the absence of the findings that the order is erroneous or prejudicial to the interest of the revenue, exercise of the jurisdiction under the said section is not sustainable. Where there is inadequate investigation the order cannot be regarded to be erroneous. Reliance was also placed to the decision of Hon‟ble Delhi High Court in the case of CIT vs Vodafone Essar South Ltd, 212 Taxman 184 (Del.). Reliance was also placed on the decision of the Delhi High Court in the case of Director of Income Tax vs Jyoti Foundation, 357 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner or Deputy Director or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the power or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorised by the Board in this behalf under section 120; (b) record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of section 263 cannot be invoked. The term erroneous‟ has not been defined under the Income-tax Act but it is well settled that each and every type of mistake or error committed by the A.O. cannot be said to be an error. An order can be said to be erroneous if there is incorrect assumption of facts or incorrect application of law in the order by the A.O. If the A.O. after making the enquiries and examining the records taken one of the possible view, it cannot be said that the order passed by the A.O. was erroneous. 10. We noted in the case of the assessee the CIT invoked the jurisdiction u/s 263 on the basis of the following reasons:- During the previous year relevant to the assessment year (2009-10), the company has not commenced its business of development of SEZ/Real estate. The company has obtained loans from holding company amounting to ₹ 498100000/- in the F.Y.2007-08 and utilized for investing in shares of subsidiary company M/s Zuari Developers Pvt. Ltd amounting to ₹ 82675564/- and giving loans to subsidiary company of ₹ 421640630/-. The interest payable / paid on the above said loans amounting to ₹ 35651678/- and other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be the one which is erroneous and prejudicial to the interest of the revenue. We noted that a similar issue has arisen in the assessment year 2006-07 in I.T.A. No.139/PNJ/11 in the case of V.M. Salgaokar in which also the A.O has not carried out any enquiry and this Tribunal, vide order dated 25/08/2011 has held as under :- 12. We have heard parties with reference to material on record and case laws brought to our notice. The appellant does not dispute that he also is engaged in the business of trading of iron ore. The appellant in his return of income made claim of additional depreciation amounting to ₹ 4,42,46,711/- and declared income of Rs from the business of iron ore mining, processing and exporting as reproduced at page 1 of the Assessing Officer. The Assessing Officer simply accepted the aforesaid claim of additional depreciation as was stated in the return of income and has failed to make any enquiry as to whether the conditions contained u/s 32(1)(iia) for allowing the additional depreciation have actually been satisfied. Even the appellant‟s return did not contain such details from which a conclusion in accordance with law could be drawn. The imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject matter of assessment in assessment year 2008-09, not an year in appeal before us is of no consequence in case of exercise of jurisdiction u/s 263 for the different year. Under the peculiar facts, the case laws referred including those on possibility of two views on the issues before us cannot impress us to say that the exercise of jurisdiction u/s 263 of the Act is initiated as the opinion on the basis of such case laws needs to be tested in the circumstance when Assessing Officer himself has made enquiries and taken a possible decision in accordance with law. 15. in the present case, the learned CIT is found satisfied that the assessment order passed is both erroneous as well as prejudicial to the interests of Revenue and thus the twin conditions of section 263 of the Act as are also enunciated by Apex Court in Malabar Industrial Co. Ltd. vs. CIT [2000] 243 ITR 83 (SC) stand duly satisfied. The learned CIT also directed the Assessing Officer to call for information on both the issues and examine it and take decision afresh on merits after providing opportunity of being heard to the assessee. This would cause no prejudice to the assessee. Having regard to the judgment rende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation , it will be difficult to hold that the order of the assessing officer, who had conducted inquiries and had acted as an investigator, is erroneous, without CIT conducting verification / inquiry. In that case the CIT had doubts about the valuation and sale consideration received even though the CIT has recorded that the consideration receivable was examined by the assessing officer but was not properly examined and therefore he took the view that the assessment order is erroneous and directed the assessing officer to make further inquiry. On these facts the Hon‟ble High Court decided the question of law in favour of the assessee. This decision is not applicable in our opinion to a case where no inquiry has been conducted by the assessing officer. 17. In the case of DIT vs Jyoti Foundations, 357 ITR 388 on which the Ld. A.R has relied we noted in this case, the Hon‟ble High Court has observed as under :- Held, dismissing the appeal, that inquiries were certainly conducted by the Assessing officer. It was not a case of no inquiry. The order under section 263 itself recorded that the Director felt that the inquiries were not sufficient and further inquiries or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has rightly held that the exercise of the jurisdiction by the Commissioner u/s 263(1) was justified. 22. This itself proves non application of mind on the part of the Assessing Officer and allowing the expenditure as revenue expenditure to the assessee without making an enquiry will tantamount that the order is erroneous and prejudicial to the interest of the Revenue. Hon'ble Supreme Court in the case of Malabar Industrial Co. (Supra) while holding so has relied on the decision of Hon'ble Supreme Court in the case of Rampyari Devi Saraogi vs. Commissioner of Income-tax 67 ITR 84(SC). In this case the Income Tax Officer accepted the return of the assessee in respect of the initial capital, gift received and sale of jewellery, the income from business etc. without any enquiry or evidence whatsoever. For that reason the CIT held the order to be erroneous. In revision, he cancelled the order and ordered the Income Tax Officer to make fresh assessment 23. Thus, the law as may be stated after going through both the decisions of Supreme Court is very clear that if the assessment has been made without making the inquiry and application of mind, the order is erroneous and pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us on the ground that in the circumstances of the case the Assessing Officer should have made further inquiries before accepting the statements made by the assessee in the return. The reason is obvious. Unlike the civil court which is neutral to give a decision on the basis of evidence produced before it, an Assessing Officer is not only an adjudicator but is also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further enquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances 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. The word 'erroneous' in that section includes cases where there has been failure to make the necessary inquiries. It is incumbent on the Assessing Officer to investigate the facts stated in the return when circumstances make such an inquiry prudent and the word 'erroneous' in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an enquiry has not been made and not because there is anything wrong wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vt. Ltd. reported in [2012] TIOL Page 75 where it has been held that if Assessing Officer had not dealt with the details and examined the issues then there was an error on the part of the Assessing Officer upon which action u/s 263 can be justified. Thus, considering all these aspects, we are of the view that learned Commissioner has rightly taken cognizance u/s 263 of the Act because Assessing Officer has not conducted any inquiry on these two issued. 27. This clearly proves that the Tribunal has also taken the view that lack of inquiry will tantamount to be that the order is erroneous and prejudicial to the interest of Revenue. The CIT has already restored this issue to the file of the Assessing Officer and the Assessing Officer, after giving proper opportunity to the assessee has to re-decide the issue whether the assessee is entitled for the deduction. 28. The Ld. A.R has taken one more plea that the CIT has issued two notices dated 25.10.2013 as well as 28.10.2013 and in this regard relied on the decision of Indian Tubes Co. Ltd (supra) as well as Smt Nilofer Hameed. Those decisions are not applicable in the case of the assessee as they relate to the issues of two notic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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