TMI Blog2018 (8) TMI 754X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and context. Thus, it is difficult to agree with the allegation of the Pr.CIT on any of the issues raised in the show cause notice and the revisional Order. The Pr.CIT has drawn support from newly inserted Explanation 2 below Section 263(1) of the Act introduced by Finance Act, 2015 w.e.f. 01.06.2015 for his action. The Explanation being clarificatory would not lead to dilution of the basic requirements of Section 263(1) of the Act. The provisions of Section 263 although appears to be of a very wide amplitude and more particularly after insertion of Explanation 2 but cannot possibly mean that recourse to Section 263 of the Act would be available to the Revisional Authority on each and every inadequacy in the matter of inquiries and verification as perceived by the Revisional Authority. The Revisional action perceived on the pretext of inadequacy of enquiry in a plannery and blanket manner must be desisted from. The powers outlined under s.263 of the Act are extraordinary and drastic in nature and thus cannot be read to hold that an uncontrolled, unguided and uncanalised powers are vested with the competent authority. The powers under s.263 of the Act howsoever sweepi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e within the meaning of Section 263 of the Act and thus set aside. 2. The grounds of appeal raised by the Assessee reads as under:- 1. On the facts and in the circumstances of the case, the order passed by the learned Pr.C.I.T. u/s. 263 of the I.T. Act is ab initio void being bad in law. 2. On the facts and in the circumstances of the case, the learned Pr.C.I.T. erred in setting aside the assessment order dated 26th December, 2016 and directing the Assessing Officer to pass a fresh assessment order. 3. The assessee, as per grounds of appeal, essentially challenges the foundation of jurisdiction assumed by the Pr.CIT under s.263 of the Act and contends that the subject assessment order framed under s. 143(3) of the Act passed by the AO cannot be termed as erroneous and prejudicial to the interest of the Revenue which is a condition precedent for usurption of revisional jurisdiction. 4. The relevant facts in brief are that the return of the assessee was subjected to scrutiny assessment for AY 2014-15 and the assessment was completed by the AO under s. 143(3) of the Act vide order dated 26.12.2016 whereby the total income of the assessee was assessed at ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count of salary/remuneration paid to the higher management and other administrative expenses? If the medicines were exported, what kind and how much of expenditure was incurred and debited to the books of Baddi unit on account of export of such formulations. Similar is the case with your Sikkim unit. Non application of mind in this matter by the A.O. has rendered the impugned order as erroneous and prejudicial to the interest of revenue iii) You have debited a total expenses of ₹ 137,41 crores on account of R D expenses on which a weighted deduction has been claimed. The A.O. has not enquired as to whether separate expenses have been incurred by you on account of quality control regulatory approvals or whether they have been grouped Into R D expenses. Non application of mind in this matter by the A.O. has rendered the impugned order as erroneous and prejudicial to the interest of revenue. You have claimed an expenditure of ₹ 475,32 lakhs on account of patent expenses/patent related expenses outside India as eligible for weighted tax u/s.35 (2AB) of the I.T. Act, The explanation inserted under clause 1D to Sec.35(2AB) stated that; Explanation - fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on application of mind and non enquiry in this regard has rendered the impugned assessment order erroneous and prejudicial to the interest of the revenue. 4.1 The controversy emerging from the show cause notice is broadly summarized as under: (i) The assessee debited a sum of ₹ 55.14 crores on account of business advancement expenses allegedly incurred on gift articles distributed to various persons. The assessee was intimated that the aforesaid amount included ₹ 24.32 crores on gift items exceeding ₹ 1000 each. The learned Pr. CIT alleged that the Assessing Officer did not make inquiry regarding the persons to whom gifts were given and the record maintained for the same. (ii) The assessee has shown turnover of ₹ 52126.83 lacs from Baddi unit yielding profit of ₹ 12296.55 lacs and the Assessing Officer failed to apply his mind to this issue and to make meaningful inquiry regarding the manufacturing process, and goods being manufactured. The learned Pr. CIT has alleged that similar is the position with regard to Sikkim unit. (iv) The assessee has debited expenditure of ₹ 137.41 crores for R D expenses on which weighted d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reproduced hereunder: 5.1 Regarding Business Advancement Expenses: I. Vide para no. (i) of the above referred notice, your honor has stated that non inquiry by the Assessing Officer in the matter of Business Advancement expenses has rendered the impugned order erroneous and prejudicial to the interests of the Revenue. Relevant para of the said notice is reproduced as under: i). You have debited a total amount of Rs, 55,14 Cr. on account of business advancement expenses, which have been allegedly incurred on gifts items distributed to various persons. Out of this ₹ 55.14 Cr., you have incurred on expenditure of ₹ 24.32 Cr. on gift items exceeding ₹ 1,000/- each. On perusal of the records, it is seen that the A.O. has not made any inquiry as regards to whom such gift items were distributed and what was the record maintained. The A.O. has also not enquired as to the proof/evidence of such distribution made to various stake-holders. Non inquiry in the matter has rendered the impugned order erroneous and prejudicial to the interest of Revenue. II. In this connection, the assessee company submits following details in respect of records availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ger accounts, the Assessing Officer has also viewed certain invoices and/bills, which were made available during the course of the proceedings. Based on such scrutiny of the aforesaid bills and records of the assesse company and after detailed verification of the bills and invoices on random check basis, the Assessing Officer has made disallowance of 10% of the the entire expenses of ₹ 55.14 crores, after satisfying himself of the fact that the expenses are incurred also for the persons other than Doctors and medical professionals such as associates, business associates, suppliers and such other professionals, etc. as already discussed in the submissions made before the Assessing Officer. IV. In this connection, it is also important to note that small items costing below ₹ 1000/- in each case are also of substantial amount and the balance of the total expenditure comes to ₹ 24.32 crores. Further, it is submitted that the small items costing below ₹ 1000/- in each case, given as a memento, would not be hit by the CBDT circular no. 5/2012. even if they are given to medical practitioners (as per MCI Regulation amended by Notification dated 01-02-201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade in-depth inquiries regarding the Business Advancement expenses, which was duly replied by the assessee company during the course of assessment proceedings. The Assessing Officer has also made certain disallowance as mentioned in para 5.1(III) (supra) for this matter in his assessment order at para 6 on page no. 20-21. Further, as stated above, the Assessing Officer has also made disallowance of entire expenditure of ₹ 25.99.87.036/-. being expenses on Academic / Scientific Grants to Doctors etc. 5.2 Regarding Business of Baddi and Sikkim Units: I. Vide para no. (ii) of the above referred notice, your honor has observed that the assessment order passed by the AO is erroneous and prejudicial to the interest of Revenue by stating that AO has failed to make meaningful inquiry as to: - What kind of medicines being manufactured there (whether API or formulations) - Source of getting chemistry of molecules, if API is manufactured - Source of formula / composition, if formulation is manufactured - Whether the said units required approval from PDA / other regulatory authorities and if yes, who incurred expenses for such approvals? - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... py of which is annexed herewith vide Annexure-2(a) ii. On the basis of verification of the above submissions, Assessing Officer further asked the assessee company to explain that: why the administrative expenses should not be allocated on the basis of turnover ratio of Baddi Sikkim Unit, instead of allocation of such expenses made by the assessee company on the basis of number of employees; why the donation should not be allocated to Baddi Sikkim unit; to justify the basis of allocation of R D expenses (Development cost) to Baddi Sikkim unit; and explain as to why the Discovery cost of R D and Capital expenditure on R D are not allocated to Baddi and Sikkim units In response to this, the assessee company submitted its detailed explanation vide three replies filed on 13.12.2016 on each of the question raised by the assessing officer. Copies of those replies are annexed herewith vide Annexure-2(B)(i), 2(B)(ii) and 2(B)(iii). (d) Claim for deduction u/s. 80IC and 80IE of the Act: From the copy of Form 10CCB submitted by the assessee company, the Assessing Officer verified the basic details, regarding eligibility of claim u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of other operating income claimed by the assessee company u/s. 80IC and 80IE of the Act by amount of ₹ 6,97,68,075/- and ₹ 30,81,029/respectively - para no. 9 22-23 at page no. 28-38 85-99 of the assessment order: - Reduced the claim of deduction u/s. 80G of the Act by ₹ 1,73,65,884/- and 80GGB of the Act by ₹ 1,90,25,206/- by allocating the said donations to Baddi Sikkim Unit - para no. 18 at page no. 73-77 of the assessment order. The amount of expenses / donation allocated by the assessee company and adjustment made by the assessing officer to expense and the other income claimed by the assessee company u/s 80IC / 80IE and the amount allowed by the assessing officer are summarized as under. Particulars Disallowanc es made in relation to Baddi Unit Disallowance s made in relation to Sikkim Unit Reallocation of administrative expenses 27,74,99,662 Reallocation of Development Cost of R D 1,01,69,860 18,95,26,218 Allocation of Discovery cost of R D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not discussed about the same in his assessment order, will not make the said order erroneous. The assessee company fails to understand that when the Assessing Officer has examined all the income and expenditure as discussed in para 5.2(11), then what would be the impact which makes the assessment order prejudicial to the interest of the revenue on the basis of answers to above questions as raised by your honor in the show cause notice, which are though already discussed during the course of hearing but merely not mention in the assessment order. (c) Further, the Assessing Officer has made in-depth inquiries regarding the amount of expenditure debited to P L account of Baddi Sikkim unit of the assessee company, the basis of allocation of various expenses and amount claimed as deduction u/s. 80IC and 80IE of the Act. Thereafter, not being satisfied by the replies of the assessee company, the Assessing Officer has proceeded to modify the claim of deduction u/s. 80IC 80IE of the Act on account of other operating incomes and rejected the basis of allocation of expenses of the assessee company to both the eligible units and allocated the expenditure as per his calculations and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not made any enquiries in this regard as to nature and details of expenses incurred - as to whom paid and for what purpose? He has also not enquired if such clinical trial were made for the purpose of regulatory approvals or for R D work which would have been affected the deduction available u/s 35(2AB) of the IT. Act. Non application of mind and non inquiry in this regard has rendered the impugned order as erroneous and prejudicial to the interest of revenue. (v) You have also claimed various expenses on account of labour and job work charges, professional fees, legal expenses and other salary expenses as part of R D expenses. The A.O. has not made any meaningful inquiry with respect to these expenses as to determine whether all such expenses were related to R D because of which the impugned order has been rendered erroneous and prejudicial to the interest of revenue. II. In this connection, the assessee company submits following details of records available with Assessing Officer, inquiries made by him and replies and details submitted by the assessee company: (a) As per the provisions of section 35(2AB)(3) of the Act read with Rule 6(7A) of the Income tax Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of nature of expenses which have been excluded by DSIR in Form No. 3CL and why the same should not be disallowed while determining the amount eligible for claim of weighted deduction u/s. 35(2AB) of the Act. A copy of the above submission dated 12.12.2016 is attached herewith vide Annexure-3 for ready reference of your honor. III. The submission of the assessee company that the amount eligible for deduction u/s. 35(2AB) should not be restricted to the amount certified by DSIR in Form 3CL was rejected by the Assessing Officer and following adjustments were made by him. (a) The following Disallowances were made by the Assessing Officer on the ground that only the expenditure approved by DSIR is allowable u/s. 35(2AB) of the Act: Particulars Rs. (in lacs) Amount certified by DSIR as expenses incurred outside approved R D facility Clinical Research Expenses 1,214.01 Patent Expenses (Official Fees) outside India 57.32 Patent Expenses (Consultancy Fees] outside India 4,09.41 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 41 422.85 Professional Fees 81.89 8.59 90.48 Total 102.11 475.32 577.43 Further, it is also submitted that amount of ₹ 12.14 crores in respect of Clinical Trial Expenses and ₹ 281.53 lacs relating to Labour charges / contract manpower / consultancy charges / retainer ship has also been disallowed by the Assessing Officer in his assessment order. These details of the disallowances made by Assessing Officer are verifiable from the para 17.4 on page no. 71 to 73 of the Assessment order. On perusal of the same, it can be observed that the Assessing Officer has already made disallowance on account following R D expenses referred in your notice in the various paragraphs of the notice. Particulars Para no. of notice u/s. 263-dated 18-08-2017 Amount 1 disallowed by the Assessing Officer Patent Expenses incurred outside India Para (iii) 466.75 Lacs Expenditure on Clinica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to quality control regulatory approvals are grouped into R D expense. Further, the expenditure on Quality control is part of production cost, as it is incurred at the stage of production only and therefore, it is debited in the books of account of the respective units. As the assessee company is engaged in the business of manufacture and production of pharmaceutical products, the Quality testing and approval process are required to be carried out before the finished product is packed before its removal from manufacturing plant. Accordingly, it is clear that the quality control and testing activities can be carried out at manufacturing plant only. (c) At this point, the assessee company also reiterates that the expenditure incurred on R D facility is also verified by DSIR and after verification the DSIR has excluded the expenditure amounting to ₹ 29.39 crores from the amount eligible for deduction u/s. 35(2AB) of the Act which has been duly considered by Assessing Officer as explained in Para 5.3(11) supra. On the basis of above, the assessee company submits that it is not a case that there is non-application of mind on the part of the assessing officer i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tailed breakup of selling and Publicity expenses incurred for Domestic Market and other than Domestic Market, detailed explanation for nature of such expenditure, along with break-up of Business Advancement expenses giving details of items costing more than ₹ 1000/-and those less than ₹ 1,000/-, vide submission dated 10.12.2016. Copy of the said reply is annexed herewith vide Annexure-1(a) supra. (b) On the basis of verification and examination of details submitted vide above mentioned submitted dated 10.12.2016, the assessee company was asked to show cause as to why expenses accounted under head of Business Advancement Expenses and Doctors' Sponsorship, which are grouped under Selling and Distribution Expenses should not be disallowed, in view of the CBDT Circular No. 5/2012 dated 01-08-2012, which provides for disallowance of deduction pertaining to freebies given to medical practitioners. In response to that the assessee company submitted details vide submission dated 15.12.2016, as mentioned in para 5.1(ii)(b) supra, a copy of which is annexed herewith vide Annexure-1(b) supra. III. Regarding your honor's above referred observations, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company submitted copy of Form no. 3CEB, from which the Assessing Officer verified the details of transaction entered into with associated enterprises. During the course of assessment proceedings, the assessee company also submitted the documentation relating to Transfer Pricing, which provide the basis of all the transactions with associated enterprises and gives all the details which are self-explanatory. Therefore, no further questions were required to be raised. * In this context, the assessee company submits that for providing of market information and regulatory support services in order to promote the Company's business in the respective territory and to act as a legal agent for the Company on all the matters related to regulatory matters in those territories the assessee company has entered into liaison support agreements with certain associated entities. Details of these transactions are reported in the Transfer Pricing Report u/s 92D of the Act in Form 3CEB and Transfer Pricing documentation, which has been submitted during the course of assessment proceedings. * Such expenses on liaison support services are duly incurred by the Assessee Company and payabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maceutical operations in the vicinity of ₹ 4000 Crores on average in last two years. The income returned by the assessee is also to the tune of ₹ 584.13 Crores. The learned AR contended that in this backdrop, the action of the AO requires to be evaluated. 6.1 The learned AR thereafter adverted to the specific allegations raised on various issues and submitted that the detailed reply before the Pr.CIT is self explanatory. 6.2 Rebutting the alleged inadequacy in inquiry on expenditure of ₹ 24.32 Crores on gift item, the learned AR referred to the submissions made before the Pr.CIT and submitted that the expenditure incurred towards gift is miniscule having regard to the scale of operations. The learned AR referred to page no.46 of the paper book showing break up of business advancement expenses and submitted that most of the items involved are of very small value items costing below ₹ 1000/- in each case and only items aggregating to ₹ 24.3 Crores cost above ₹ 1000/- per item. The requisite details were provided to the AO vide submission dated 17.06.2016 and 15.12.2016 to explain its position. Despite the strong basis available for admission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in toto and substantial disallowance aggregating to ₹ 3213.77 Lakhs was made as detailed in the submissions and the assessment order. The advantage of weighted deduction in respect of expenses towards quality control etc. has not been taken. The learned AR submitted that in these circumstances, where the submissions of the assessee were partly rejected after making enquiry, the allegation towards inadequacy in enquiry is totally unsustainable. As submitted, the issue towards separate expenses on quality control and regulatory approvals was also addressed to the AO as pointed out in the written submissions. Thus, non-application of mind of AO to the underlying facts is not discernible. 6.5 Adverting to the clinical research expenditure of ₹ 1214.01 Lakhs, the learned AR submitted that clinical research expenses formed part of amount eligible for deduction under s.35(2AB) of the Act and was incurred year after year having regard to the nature of pharmaceutical sector. The AO indulged in re-working of eligible amount of deduction after taking into account the expenditure approved by DSIR and after rejecting the submissions of the assessee company on many aspects. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturned income as a corollary to these factual appreciation ipso facto vindicates the fact of proper enquiry and application of mind. The assessment framed resulted in over all additions /disallowances of approximately ₹ 131 Crores. A number of written submissions filed before the AO during the course of assessment proceedings were also annexed to the detailed response to the show cause notice issued under s.263 of the Act to shun the suspicion on issues frowned upon. It was thus contended on behalf of the assessee that it was only after requisite inquiry and examination of facts and after objective analysis thereof on each and every issue raised in the show cause notice, the AO had adopted a view for or against the assessee. It was thereafter vehemently submitted that such issues were already subject matter of examination in the scrutiny assessments year-after-year in the past, additions/disallowances flowing from the action of the AO were subjected to judicial scrutiny before the appellate authorities. The learned AR thus submitted that in the light of factual position explained towards each item, the order of the AO cannot be faulted on the touchstone of Section 263 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner, in the revisional proceedings under s.263 of the Act, to take a different view on the same material. The AO in the instant case has specifically examined all the issues raised by Pr.CIT albeit not probably in the manner in which the Pr.CIT would have liked but this cannot be the ground for assumption of jurisdiction under s.263 of the Act. The learned AR thus submitted in conclusion that the assessment order under review cannot be labelled as erroneous in so far as prejudicial to the interest of the Revenue within the terms of Section 263 of the Act in the circumstances so narrated. 7. The learned DR, on the other hand, vehemently supported the action of the Revisional Authority and relied upon the order so passed under s.263 of the Act. As regards, business advancement expenditure, the learned DR submitted that the AO has not made any inquiry as regards to whom the gifts were distributed and underlying records thereon. Similarly, MCI Regulations and CBDT Circular does not permit distribution of gifts to medical practitioners. This aspect has not been examined at all. Similarly, the learned DR referred to the allocation of common expenses attributable to Baddi Sikkim Unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perusal of the show cause notice (SCN) dated 18.08.2017 issued by the Revisional Commissioner proposing to set aside the assessment order dated 26.12.2016 passed by AO under s.143(3) of the Act, we notice that the Pr.CIT is essentially dissatisfied with the degree of inquiry made in respect of issues raised therein. Firstly, as per para (i) of SCN, the Pr.CIT alleged that inquiry was not made on distribution of gift items to various individuals which include expenditure incurred of ₹ 24.32 Crores on gift items exceeding ₹ 1000/- each. Such non-inquiry was alleged to be erroneous and prejudicial to the interest of the revenue. As noted above, the assessee responded by stating that the detailed breakup of business advancement expenses amounting to ₹ 55.14 Crores incurred was provided to the AO in pursuance of specific query in this regard. This amount included the impugned expenses towards gift items. The applicability of CBDT Circular No. 5/2012 in this regard was also addressed whereby it was submitted submit that this circular is applicable only where freebies above ₹ 1000/- per item were given to the medical practitioners. Despite production of bills and r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flagged as per para (ii) of the show cause notice concerns examination of certain points in relation to Baddi unit and Sikkim unit. As an adjunct to this allegation, the Pr.CIT also asserted that the AO has failed to apply as to what kind of medicines are being manufactured and whether the units were API or it was formulation etc. We have perused the allegation as reproduced in para 4 of this order. The Pr.CIT essentially opined that the AO failed to make inquiry regarding the manufacturing process and nature of medicines being manufactured and thus alleged that assessment order is vitiated for this reason. In this connection, we take note of the reply dated 10th December, 2016 placed by assessee before the AO touching the aforesaid issue. As pointed out on behalf of the assessee, the books of accounts of Baddi unit and Sikkim units are maintained separately and the allocation of common expenditure is made on rational basis consistently followed year after year. The AO has examined the issue reasonably and had also posed several queries to the assessee in the course of the assessment proceedings towards basis of allocation of common expenses and R D expenses and also discovery cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owards quality control and regulatory approval in relation to R D expenses on which the assessee has claimed weighted deduction. In this regard, we refer to the reply of the assessee before the Pr.CIT clarifying the issue. The Pr.CIT has not rebutted the explanation of the assessee anywhere. It was pointed out by the assessee before the Pr.CIT that it had already informed the AO vide submissions dated 10.12.2016 filed in the course of assessment proceedings that all manufacturing and direct expenses incurred for each unit have been accounted directly in the respective books of accounts of given unit. It was clarified that expenditure relating to quality control and regulatory approvals were not grouped into R D expenses. The quality control has been claimed as an ordinary expenditure in the respective books of various units as it is a part of the production costs. The assessee further clarified that after verification, the approving authority namely DSIR excluded the expenditure amounting to ₹ 29.39 Crores from the amount eligible for weighted deduction under s. 35(2AB) of the Act. This aspect was also duly taken note of by AO while framing the assessment. In view of the uneq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll as in transfer pricing documentation during the course of assessment proceedings. It is the case of the assessee that the expenses incurred towards promoting its business in foreign territory were allowed after thorough verification of transfer pricing documentation. The applicability of CBDT Circular No. 5/2012 (supra) on account of items costing less than ₹ 1000/- given as a freebies to medical practitioners is, at best, a debatable issue in view of the language employed the circular. The AO has examined all the aspects and has recorded a conscious finding on each issue. The action of the Revisional Commissioner is not tenable on this score either. 8.8 On a broader reckoning, we note that it is the case of the assessee that the AO has recorded a conscious finding after considering the factual matrix in the given context and in the light of prevailing legal position and having regard to the past history of the case on each and every issue raised by Pr.CIT. We notice that the assessment so framed has run into more than 100 pages and has resulted in approximate additions/disallowances of whopping ₹ 131 Crore. All the issues raised by the Pr.CIT has been duly touche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 which is reproduced hereunder: 53. Revision of order that is erroneous in so far as it is prejudicial to the interests of revenue. 53.1 The provisions contained in sub-section (1) of section 263 of the Income-tax Act, before amendment by the Act, provided that if the Principal Commissioner or Commissioner considers that any order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making an enquiry pass an order modifying the assessment made by the Assessing Officer or cancelling the assessment and directing fresh assessment. 53.2 The interpretation of expression erroneous in so far as it is prejudicial to the interests of the revenue has been a contentious one. In order to provide clarity on the issue, section 263 of the Income-tax Act has been amended to provide that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner.- (a) the order is passed without making inquiries or verificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeting inquiries. The action of the Revisional Commissioner based on such expectation requires to be struck down. 9.3 The use of expression which should have been made in clause (a) to Explanation 2 to Section 263 of the Act is significant. This impliedly tests the action of AO on the touchstone of reasonableness and rationality in approach. It clearly suggests that context also holds the key in the matter of enquiry. The action of the AO requires to be evaluated contextually. If the aforesaid Explanation is read in a abstract manner de horse the test of reasonableness and context, the powers of Revisional CIT would be rendered invincible and almost every assessment order can be possibly frustrated. A nuanced understanding of Explanation suggests that inadequacy in inquiry ought to be of cardinal nature to ignite the potent powers of review. 9.4 As noted, the assessee is a very big player in the pharma sector and enormity of operation is to be kept in mind. Thus what is relevant is to weigh as to what countervailing circumstances were prevailing which ought to have provoked such enquiry by a reasonable person instructed in law. In the instant case, apart from noticing that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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