TMI Blog2018 (4) TMI 319X X X X Extracts X X X X X X X X Extracts X X X X ..... een made by the Ld. assessing officer which are diligent assessing officer should have made more specifically when the identical issue is litigated by the revenue. In view of this we do not find any infirmity in the order of the Ld. CIT in assuming jurisdiction under section 263 of the income tax act and holding that the order passed by the Ld. assessing officer is erroneous and prejudicial to the interest of the revenue. Accordingly, both the grounds of appeal filed by the assessee are dismissed. - ITA No. 5351/Del/2016 - - - Dated:- 3-4-2018 - Shri Sudhanshu Srivastava, Judicial Member And Shri Prashant Maharishi, Accountant Member Assessee by : Shri Sanjay Gupta, CA Revenue by : Smt Paramita Tripathy, CIT DR ORDER Per Prashant Maharishi, A. M. 1. This appeal is filed by Red Ice productions private limited, appellant, against the order of The Principle Commissioner Of Income Tax, Delhi 7, New Delhi [ The Ld PCIT ] for A. Y. 2011-12 u/s 263 of The Income Tax Act, 1961 on 08/03/2016 wherein the order passed by the Deputy Commissioner Of Income Tax, Circle 15 (1), New Delhi [ The Ld AO ] dated 28/2/2014 passed u/s 143 (3) of the Income Tax Act 1961 [ The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that the provisions of section 263 cannot be invoked. It was further stated that the even otherwise the valuation adopted by the principal CIT is incorrect and the assessee with the proportionate expenses to be added to the work in progress provided calculation to him. 5. The Ld. PCIT held that during the course of hearing before the Ld. assessing officer, he has issued a questionnaire requiring the assessee to give particulars of the issue pending in the appellate proceedings for earlier years. In reply to which the assessee informed the assessing officer about pending appeal before the coordinate bench in which issue concerning valuation of work in progress was involved. The assessee submitted that in arriving at the value of work in progress indirect expenses relatable to the specific project are included in it. It was stated that the assessee has employed direct cost method for valuing the WIP which remain incomplete at the end of the year therefore according to the Ld. PCIT there was not even the prime facie material to suggest that the Ld. AO had applied his mind to the details put forth by the assessee. He further held that in the previous year assessment order th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee and therefore to determine the true and correct value of work in progress as on 31/3/2011 by including in the value of all cost whether direct or indirect which had relation with the projects remained unfinished as on 31/3/2011. 6. Therefore, assessee aggrieved with the order has preferred an appeal before us submitting that that there was no error in the order passed by the Ld. assessing officer. The first contention was that that assessee has informed the Ld. assessing officer as per letter dated 12/8/2013 about the issue of valuation of work in progress pending before the coordinate bench. Secondly, It was further stated that assessee was further asked to submit the detail on this issue for assessment year 2011 12 in response to which the assessee submitted a detailed reply as per letter dated 28/11/2013. The Ld. authorized representative further stated that the method of valuation of work in progress was accepted by the Ld. assessing officer after due verification and application of mind. He therefore submitted that the Ld. principal CIT was in error in holding that the Ld. assessing officer has not applied his mind. Hence it was submitted that the assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act is to be exercised in the case of no Inquiry and not in the case of inadequate Inquiry whereas the case of the assessee is not even a case of lack of Inquiry. He further relied upon the decision of the Hon ble Delhi High Court in case of CIT versus Sunbeam Auto Limited [332 ITR 167] wherein Hon ble Delhi High Court has held that if there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass order under section 263 of The Act. . He further relied on the decision of the Hon ble Delhi High Court in case of CIT versus Anilkumar Sharma 335 ITR 83. Further with respect to the amendment in the provisions of section 263 of the income tax act by which explanation 2 is inserted w.e.f. 1/6/2015, it was submitted that it does not give unfettered powers to the Commissioner to assume jurisdiction under section 263 of the income tax act to revise every order of the AO to examine the issue already examined during the course of assessment proceedings. He further referred to the decision of coordinate bench Mumbai in Narayan Tatu Rane V ITO [2016] 70 Taxmann.com 227 wherein it has been held that the said explanation cannot be said to have overridde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve measures by revising the assessment order passed by the Assessing Officer, if after examining records , such assessment order passed by the Assessing Officer, he (the Commissioner of Income-tax) found that such an order passed by the Assessing Officer is erroneous and prejudicial to the interest of revenue. In Malabar industrial Co Ltd versus CIT 243 ITR 83 (SC) Hon ble Supreme Court held the Commissioner has to satisfy twin conditions namely (i) that the order is erroneous, (ii) that it is prejudicial to the interest of revenue. As held in several judicial precedents that Commissioner does not have power to revise the order of the Ld. assessing officer where there are two views possible and the Ld. assessing officer has taken one of the possible view. It is further held by jurisdictional high court that in case of lack of inquiry , the CIT can assume jurisdiction u/s 263 of the act but not in case of inadequate inquiry. On the issue of adequacy of inquiry there is change in law w.e.f. 1/6/2015. There is an amendment in section 263 of The Income Tax Act by The Finance Act 2015 wherein w.e.f. 1/6/2015 explanation (2) has been inserted. It provides that the order passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct expenditure to be located to the work in progress. The issue before us in this appeal is not whether the work in progress has been correctly valued or not but whether the Ld. assessing officer has made the adequate enquiries as required to be made in this particular case ith respect to valuation of work in progress. According to us the assessing officer has not considered the assessment order for assessment year 2009 10. Therefore it is apparent that the necessary enquiries that should have been made by the assessing officer has not been made in the present case. As the order under section 263 of the income tax act has been passed on 8/3/2016 which is after the introduction of explanation 2 to section 263 of the income tax act, we are in agreement with the argument of the Ld. CIT departmental representative that the order passed by the Ld. assessing officer is erroneous and prejudicial to the interest of the revenue as requisites Inquiry which are required to be made for verification has not been made by the Ld. assessing officer. We are also fortified by the reason that during the course of assessment proceedings the Ld. assessing officer has not made any enquiry about the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies 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. 10. According to interpretation provided by the coordinate bench it also talks about the diligent enquiries of the assessing officer which will prevent the Ld. principal CIT to revise the same on the ground of not making enquiries is or verification which should have been made. As we ve already held that in the present case the Ld. assessing officer has not examined the valuation of the work in progress with respect to the components of the value of the stock, according to us that enquiry has not been made by the Ld. assessing officer which are diligent assessing officer should have made more specifically when the identical issue is litigated by the revenue. In view of this we do not find any infirmity in the order of the Ld. CIT in assuming jurisdiction under section 263 of the income tax act and holding that the order passed by the Ld. assessing officer is erroneous and prejudicial to the interest of the revenue. Accordingly, both ..... X X X X Extracts X X X X X X X X Extracts X X X X
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