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2016 (5) TMI 1162 - ITAT MUMBAI

2016 (5) TMI 1162 - ITAT MUMBAI - TMI - Revision u/s 263 - CIT has taken the view that the assessing officer has completed the assessments without making proper enquiries with regard to the incriminating documents - Held that:- It cannot be held that the assessing officer did not carry out enquiry or verification which should have been done, since the facts and circumstances of the case and the incriminating document was not considered to be strong by the AO to implicate the assessee. Thus, we a .....

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that the Ld Pr. CIT has passed the impugned revision orders only to carry out fishing and roving enquiries with the objective of substituting his views with that of the AO. Hence we are of the view that the Ld Pr. CIT was not justified was not correct in law in holding that the impugned assessment orders were erroneous.

At the time of hearing, it was pointed out to Ld D.R that there are references to various names such as Mumbai Naveen, Ravi Mumbai, Vijaya Mum, Sanjeev Shetty etc. Fur .....

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he interests of the revenue, if they are not assessable in the hands of the assessee. The Ld D.R replied that these aspects require examination at the end of the assessing officer. The said stand taken by the department clearly shows that they are also not sure as to whether these entries could be considered as income in the hands of the assessee. Further, we notice that the Ld Pr. CIT has not brought on record any material to show that these amounts were paid to the assessee or on his behalf. E .....

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/Mum/2016, I.T.A. No. 2691/Mum/2016 - Dated:- 6-5-2016 - Shri B.R. Baskaran (AM) And Amit Shukla (JM) For the Assessee : Dr. P. Daniel For the Department : Shri N.P. Singh ORDER Per Bench Both the appeals filed by the assessee are directed against the common order dated 29-03-2016 passed by Ld Pr. CIT-27, Mumbai u/s 263 of the Act and they relate to the assessment years 2007-08 and 2008-09. The assessee is challenging the validity of the revision orders passed by Ld CIT. 2. The facts relating to .....

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payment details under the heading Rane C M . Based on this information, the assessing officer reopened the assessment of both the years under consideration by issuing notices u/s 148 of the Act. The AO completed the assessments u/s 143(3) r.w.s. 147 of the Act, accepting the explanations of the assessee that the said incriminating document do not relate to him. Thus the assessing officer completed the assessment without making any addition, i.e., accepting the income returned by the assessee. 3. .....

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venience. 2……On perusal of records, the fo11owing issues were noticed in the aforesaid order u/s 143(3) r.w.s 147 of the income-tax Act, 1961 dated 31.03.2015 for the A.Y. 2007-08:- (1) The case was reopened for scrutiny to verify information received from the Investigation Wing during the course of search operations in the case of' M/s. R.N. S. Infrastructure Ltd. on 16/02/2012. During the course of the search operations, certain documents were found and seized, which indicate .....

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above mentioned sheet, the following points are notable which prove the fact that payments made to "Rane-CM" is to the same person Shri Narayan T. Rane, who is the Ex-Chief Minister of Maharashtra, and who has received the above payments i. An amount of 50 lakhs is shown to have been paid on 10/4/1999 against which birthday is mentioned. The date of birth of Shri Narayan Rane, Ex Chief-Minister of Maharashtra is 10thApril, 1952 which is the same as mentioned above. ii. An amount of 50 .....

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- CM 14.3.2008 50,00,000/- NAVEEN 14.3.2008 17,00,000/- SITE The Assessing Officer did not examine and verify the above issues while completing the assessment u/s 143(3) r.w.s 147 of the Act for both the A.Ys. and accepted the assessee's explanation that he did not have any transactions with M/s. R. N. S. Infrastructure Ltd. or Shri Sunil D. Sahastrabudhe, Vice President, Finance and had not received any cash from him and assessed the total income at ₹ 21,18,945 and ₹ 13,68,103/ .....

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assessee as the order was found to be erroneous & prejudicial to the interest of the revenue within the meaning of section 263 of the Income-tax Act. 1961 and the assessee was allowed an opportunity of being heard and to show cause as to why an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment within the meaning of Section 263 of the Income Tax Act, 1961 may not be passed in his case. Similar notice was issued for A.Y. 2008-09 as well w .....

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ng officer by giving a detailed reply, wherein the assessee had denied the entire transactions noted down in the incriminating documents. It was further submitted that the assessing officer was satisfied with the explanations and replies given by the assessee and accordingly he did not make any addition. The assessee further contended that the assessing officer has applied his mind on the incriminating documents, correctly appreciated the facts and has come to reasoned conclusion that no additio .....

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Vikas Polymers (341 ITR 537)(Delhi) (iv) CIT Vs. Arvind Jeweller (259 ITR 502)(Guj) 5. The Ld Pr. CIT was not convinced with the contentions of the assessee and accordingly held that the assessment order is erroneous and prejudicial to the interests of revenue. Accordingly he set aside the assessment orders of both the years under consideration and directed the AO to redo the assessment de novo. The Ld Pr. CIT also observed that the AO may pass the assessment order within six months under the g .....

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re-lay-out expenses which was allowed by the Assessing Officer while the CIT was of the view that it was a capital expenditure. Hon ble Bombay High Court held that the Commissioner could not be vested with the power to re-examine the accounts and determine the income himself at a higher figure. The claim was allowed by the Assessing Officer on being satisfied with the explanation of the assessee and such decision cannot be held to be erroneous simply because in his order he did not make an elabo .....

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le and thus, there was no material before the Commissioner to vary that opinion and ask for fresh inquiry. In the case of the assessee, on the other hand, on examination of records as they exist now, it is evident that the Assessing Officer did not appreciate the full facts of the case and vital evidences being the date of birth, the date of assumption of the public office and the constitutency etc. which all linked the transactions in the seized document with the assessee and thereby passed an .....

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tion 263. This decision also being distinguishable, is not applicable to the facts of the case of the assessee. Thus, all the decisions relied upon by the Ld A.R being distinguishable on facts are not applicable to the facts of the case of the assessee. 8. The objection of the assessee that the order is no erroneous for the purpose of section 263 of the Act is also not borne out from the facts of the case. The relevant facts of these cases relied upon are not similar to the facts of the case of .....

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the amount was paid to Shri Narayan Rane for the election expenses. Further, it is also observed that no notices u/s 133(6) were issued to M/s R.N.S Infrastructure Pvt Ltd and neither was any opportunity given to the assessee to cross examine the said person Shri Sunil Sahasrabudhe (VP - Finance) on the basis of whose statement the case was reopened. Merely on the basis of the assessee s submissions and arguments, the proceedings u/s 148 were completed. It is, therefore, evident that the inform .....

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mon order passed by Ld CIT, the assessee has filed these appeals before us. 7. The Ld A.R submitted that the assessing officer had reopened the assessment of both the years under consideration on the basis of the incriminating documents found during the course of search conducted in the hands of M/s R.N.S infrastructure in order to assess the income escaped in the hands of the assessee. He submitted that the objection raised by the assessee for reopening of the assessment was overruled by the AO .....

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erroneous, since the assessing officer did not make enquiries in the way the Ld CIT thought that it should have been done. He submitted that the Ld CIT has initiated the revision proceedings in respect of the very same issue, since he was of the view that the assessing officer should have conducted the enquiries in a particular manner and the enquiries made by the AO were not sufficient. Thus, the Ld CIT has initiated revision proceedings in order to carry out fishing and roving enquiries in the .....

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. He further submitted that the provisions of sec. 263 do not visualise a case of substitution of the judgement of the Commissioner for that of the Income tax Officer who passed the order unless the decision is held to be erroneous, as held by Hob le Delhi High Court in the case of CIT Vs. Sunbeam Auto Ltd (2011)(332 ITR 167). 8. He further contended that the assessment order cannot be considered to be prejudicial to the interests of the revenue, if the assessing officer has taken one of the pos .....

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ered to be prejudicial to the interest of the revenue. He further submitted that the Ld Pr. CIT has also not shown as to how the assessment order is erroneous one. He further submitted that the Ld CIT can initiate revision proceedings only if both the conditions specified in sec. 263 of the Act is satisfied, viz., the assessment order was erroneous and it was prejudicial to the interest of the revenue. For this proposition he placed strong reliance on the decisions rendered by Hon ble Supreme Co .....

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ade by Hon ble Apex Court:- 37. In Beni Vs. Bisan Dayal (AIR 1925 Nag 445: 89 IC 371), it was observed that entries in books of account are not by themselves sufficient to charge any person with liability, the reason being that a man cannot be allowed to make evidence for himself by what he chooses to write in his own books behind the back of the parties. There must be independent evidence of the transaction to which the entries relate and in absence of such evidence no relief can be given to th .....

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itted that the incriminating document contained sufficient entries to indicate that the payment was made to the assessee only. He submitted that a part of sum was given to the assessee on his birth day and further, a reference is there as Rane C M , which is nothing but Rane Chief Minister . He submitted that the assessee has not rebutted this inference before the assessing officer. He further submitted that there is a reference to a place called Kudal and the said place happened to be the assem .....

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g officer should have made necessary enquires and should have provided opportunity to the assessee to cross examine them. Accordingly he submitted that the assessing officer has completed the assessment upon incorrect presumption of facts and without making proper enquiries and without taking a view. The Ld D.R placed reliance on the decision rendered by Hon ble Madras High Court in the case of CIT Vs. Amalgamations Ltd (238 ITR 963) to contend that the incorrect assumption of facts renders the .....

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election etc. has led the AO to frame the assessment in an arbitrary manner and hence the said assessment order is liable for revision as held in the case of CIT Vs. V.P. Agarwal (68 Taxman 236)(All). He further submitted that the Explanation 2 given under sec. 263(1), which was inserted by the Finance Act 2015 w.e.f. 1.6.2015, provides that the order passed without making inquiries or verification which should have been made shall be deemed to be erroneous in so far as it is prejudicial to the .....

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assessee at all in the statement taken from him u/s 132(4) of the Act. He submitted that the assessing officer has accepted the explanations of the assessee by considering all these factual details and hence he did not make any addition. He further submitted that the assessment orders of the two years under consideration have been passed by two different assessing officers and both have taken the view that no addition was called for on the basis of the impugned incriminating document. The Ld A.R .....

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NS infrastructure did not implicate the assessee in the statement taken with regard to the impugned document. He further submitted that the Ld CIT did not show as to how the entries made in the document could be considered as income in the hands of the assessee, even if it is taken for a moment that the entries made in the document did relate to the assessee. Accordingly the Ld A.R submitted that the Ld CIT has not brought on record any corroborative material to show that the said document relat .....

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the issue, we would like to discuss about the legal position with regard to the power of Learned CIT to invoke revision proceedings under section 263 of the Act. The scope of revision proceedings initiated under section 263 of the Act was considered by Hon'ble Bombay High Court, in the case of Grasim Industries Ltd. V CIT (321 ITR 92) by taking into account the law laid down by the Hon'ble Supreme Court. The relevant observations are extracted below: Section 263 of the Income-tax Act, 19 .....

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be considered by the Commissioner to be erroneous in so far as it is prejudicial to the interests of the Revenue . This provision has been interpreted by the Supreme Court in several judgments to which it is now necessary to turn. In Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83, the Supreme Court held that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it is only when an order is erroneous that the section will be .....

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enue is explained in the judgment of the Supreme Court (headnote) : The phrase prejudicial to the interests of the Revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views ar .....

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, the assessing officer has reopened the assessment only to assess the income, if any, that has escaped the assessment for the years under consideration. The assessments have been reopened only on the basis of the impugned incriminating document found at the premises of M/s RNS infrastructure. We also notice that the search team has recorded a statement from VP - Finance of M/s RNS Infrastructure Ltd u/s 132(4) of the Act on 16.12.2012 and he was confronted with the impugned incriminating docume .....

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officer and accordingly he has also reopened the assessments of the two years under consideration. 14. The assessing officer has also furnished to the assessee the reasons for reopening of the assessments and the assessee has also objected to the reopening. The assessing officer has specifically addressed those objections and has also rejected the same. In the notice issued u/s 142(1) of the Act, the assessing officer has asked the assessee to clarify about the impugned incriminating document a .....

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s without making proper enquiries with regard to the incriminating documents. According to Ld Pr. CIT, the AO should have made further enquiries in this matter. Accordingly he has passed the impugned revision order. 16. We have noticed earlier that the Ld Pr. CIT can revised the order only if it is shown that the assessment order is erroneous in so far as prejudicial to the interests of the revenue. The question as to when an order can be termed as erroneous was explained by Hon ble Bombay High .....

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mmissioner for that of the Income-tax Officer, who passed the order, unless the decision is held to be erroneous. Cases may be visualised where the Income tax officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of records, may be of the opinion that the estimate made by the officer concerned .....

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issioner does not feel satisfied with the conclusion…. There must be some prima facie material on record to show that the 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 impsed The Hon ble High Court has considered the definitions given to the words erroneous , erroneous assessment and erroneous judgment in Black s Law Dictionary and and accordingly .....

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t when two views are possible and the Assessing Officer has taken one of the possible view, then the order cannot be held to be prejudicial to the interest of the Revenue. Since the Commissioner of Income tax could not come to a definite finding that the expenditure in question was a capital expenditure in the proceedings under section 263, in our opinion, the order of the assessing officer could not be held to be erroneous. 18. In the case of Nagesh Knitwears P Ltd (2012)(345 ITR 135), the Hon .....

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cases, the order of the Assessing Officer will be erroneous because the order is not sustainable in law and the said finding must be recorded. The Commissioner of Income tax cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the Commissioner of Income tax must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verifica .....

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t be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under section 263 of the Act. In such matters, to remand the matter/ssie to the Assessing Officer would imply and mean the Commissioner of Income tax has not examined and decided whether .....

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ould have shown that the view taken by the AO is unsustainable in law. In the instant case, the Ld Pr. CIT has failed to do so and has simply expressed the view that the assessing officer should have conducted enquiry in a particular manner as desired by him. Such a course of action of the Ld Pr. CIT is not in accordance with the mandate of the provisions of sec. 263 of the Act. The Ld Pr. CIT has taken support of the newly inserted Explanation 2(a) to sec. 263 of the Act. Even though there is a .....

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tainable in law and order for revision. He can also force the AO to conduct the enquiries in the manner preferred by Ld Pr. CIT, thus prejudicing the independent application of mind of the AO. Definitely, that could not be the intention of the legislature in inserting Explanation 2 to sec. 263 of the Act, since it would lead to unending litigations and there would not be any point of finality in the legal proceedings. The Hon ble Supreme Court has held in the case of Parashuram Pottery Works Co. .....

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de. In our considered view, this provison shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. CIT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO vis-à-vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for claus .....

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conducted by the AO was not in accordance with the enquries or verification that would have been carried out by a prudent officer. Hence, in our view, the question as to whether the amendment brought in by way of Explanation 2(a) shall have retrospective or prospective application shall not be relevant. 21. In the instant case, as noticed earlier, the AO has accepted the explanations of the assessee, since there is no fool proof evidence to link the assessee with the document and M/s RNS Infras .....

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Court has held in the case of Central Bureau of Investigation Vs. V.C. Shukla and Others (supra) that the entries in the books of account by themselves are not sufficient to charge any person with liability. Hence, in our view, it cannot be held that the assessing officer did not carry out enquiry or verification which should have been done, since the facts and circumstances of the case and the incriminating document was not considered to be strong by the AO to implicate the assessee. Thus, we .....

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that the Ld Pr. CIT has passed the impugned revision orders only to carry out fishing and roving enquiries with the objective of substituting his views with that of the AO. Hence we are of the view that the Ld Pr. CIT was not justified was not correct in law in holding that the impugned assessment orders were erroneous. 22. We have also seen that, in order to invoke the provisions of revisional proceedings, it is required to be shown that the assessment order was not only erroneous, but also pr .....

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it is established that these payments can be taken as income in the hands of the assessee, they cannot be assessed in his hands. In that case, it cannot be said that these entries would cause any prejudice to the interests of the revenue, if they are not assessable in the hands of the assessee. The Ld D.R replied that these aspects require examination at the end of the assessing officer. The said stand taken by the department clearly shows that they are also not sure as to whether these entries .....

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