TMI Blog2019 (3) TMI 681X X X X Extracts X X X X X X X X Extracts X X X X ..... rightly invoked. Ld. Pr. CIT observed that the Ld. Assessing Officer should have made enquiries/verification, to satisfy himself with respect to the creditworthiness of the lender and genuineness of the transactions before framing the assessment, thus, the ld. Assessing Officer was directed to pass fresh assessment order after providing due opportunity of being heard to the assessee. Even in the direction by the Ld. Pr. Commissioner to the Assessing Officer is not going to cause any prejudice to the assessee because the direction has been issued to the Ld. Assessing Officer to examine the genuineness of the loan and after providing due opportunity of being heard to the assessee, the assessment be reframed. The assessee is at liberty to substantiate its claim, thus, we don’t find any infirmity in the impugned order, resultantly, the appeal of the assessee is without any merit, consequently, dismissed. - decided against assessee. - ITA NO.5015/Mum/2018 - - - Dated:- 31-12-2018 - Shri Joginder Singh, Vice President, and Shri N.K. Pradhan, Accountant Member For The Assessee : Shri Ratan Samal Ms. Ruchi M. Rathod-AR For The Revenue : Shri Rajeshwar Yadav-DR ORDE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmation was filed on 27/12/2016, thus, how the Assessing Officer can verify the genuineness of the transactions and even the details are without address. It was pointed out that there is no finding of the Ld. Assessing Officer with respect to examination of source. The crux of the argument is that standard operating procedure was not even followed by the ld. Assessing Officer, therefore, it is covered under sub-section (a)(b)(e) of explanation 263 of the Act. It was pleaded that the cases relied upon by the assessee are not applicable to the facts of the present appeal and even the Assessing Officer did not raise any query with respect to the claimed loan as there is no whisper of the same in the assessment order. At this stage, a query was raised by the Bench whether there is discussion in the assessment order with respect to taking loan, the ld. counsel for the assessee fairly agreed that YES , there is no whisper. 2.2. We have considered the rival submissions and perused the material available on record. Before adverting further, it is our bounded duty to examine section 263 of the Act, which is reproduced hereunder for ready reference and analysis:- 263. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is passed without making inquiries or verification which should have been made; ( b) the order is passed allowing any relief without inquiring into the claim; ( c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or ( d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.] ( 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 passed. ( 3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation .- In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rification of the investment. Identical is the situation for other persons. In that situation, the Hon'ble High Court reached to a particular conclusion, whereas, in the case of the present assessee, the genuineness and source of loan was not examined by the ld. Assessing Officer and even there is no whisper in the assessment order with respect to issue in hand, therefore, the cases relied upon by the assessee may not help the assessee. It is a clear case that the assessment order was framed in a slip shot manner and without application of mind, therefore, the assessment order is erroneous as well as prejudicial to the interest of Revenue. 2.5 In another decision in Narayn Tatu Rane vs Income Tax Officer (2016) 70 taxman.com 227 (Mum. Trib.). In this case, since, the commissioner had not brought any material on record to substantiate the inference and merely passed the revisional order only to carry out fishing and roving enquiries with objective of substituting his view with that of the Assessing Officer, in that situation the revisional order was held to be not justified, whereas, it is not so in the present appeal. 2.6. In the case of M/a Amira Enterprises Ltd. vs Pr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... An expenditure may not be an allowable deduction under section 10(2)(v ) of 1922 Act on the ground that the repairs are not current repairs and yet, it may be allowed under section 10(2)(xv) of 1922 Act provided its conditions are fulfilled. In the instant case, merely because some columns and beams were repaired by the company it did not necessarily follow that the expenditure incurred on it was in the nature of a capital expenditure. That apart, it was not the finding of the Tribunal in the instant case that any structural alteration was made. By a mere patch work, the building would have lasted only for 5 to 10 years and the money that would have been spent in it would have been a complete waste. Therefore, plastering of certain portions of the concrete works with cement and some columns and beams by the process of guniting became absolutely essential. No doubt, that process had extended the life of the building by many more years, but not exceeding its original life. Further, the repairs had not improved in original condition. It was an admitted fact that the building needed an extensive repair. The company had, no doubt, made extensive repairs by incurring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ult of the expenditure what is being done is to preserve and maintain an already existing asset. If the amount is spent for the purpose of bringing into existence a new asset or obtaining a new advantage then such an expenditure would not be revenue expenditure. The mere quantum of expenditure is not by itself decisive of the question whether it is of the nature of revenue or capital. A sum can be allowed as cost of repairs even though the expenditure in a particular year is heavy on account of the fact that it is undertaken to remedy the effect of several years of wear and tear or neglect and also in spite of the fact that such expenditure may not be necessary for several years to come after repairs have been effected. It is thus clear that what the court is required to find out is whether as a result of the expenditure a new asset or a new advantage is being brought into existence. The court will also have regard to the aspect as to whether as a result of the expenditure what is being done is to preserve and maintain an already existing asset. In the instant case, it was clear as to why and in what circumstances the guniting work was undertaken by the assessee in relation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aintaining and preserving an asset which it already possessed and thus though to some extent the life of the asset had been prolonged and the asset was made to give better service then it was doing in the past, the expenditure would have to be regarded as revenue expenditure. II. Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1963-64 - During relevant assessment year, assessee-company paid certain amount to its deceased employee as gratuity, calculating quantum of 2 years' salary payable to deceased at time of his dealth - ITO disallowed assessee's claim in respect of aforesaid expenditure - AAC finding that gratuity fixed for non-covenanted staff was only 12 months' salary, held that gratuity payment in excess of 12 months' salary was ex-gratia payment - He thus, allowed deduction of amount representing 12 months' salary as legitimate business expenditure and disallowed rest as being in nature of ex-gratia payment - Tribunal confirmed AAC's order - Whether, on facts, Tribunal rightly affirmed AAC's order, and therefore, order passed by Tribunal could not be interfered with - Held, yes FACTS-II ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther finding was that it was the object of the assessee to house its own office as also the offices of the companies managed by it. The findings of the Tribunal had not been challenged nor was it contended at any stage that the housing of the offices of the managed companies was not a part of the business of the assessee. Had this point been mooted at the proper stage the agreements between the assessee and the managed companies could have been considered to ascertain whether the assessee was in any way liable to arrange for office of the managed companies. Following the decision of the Supreme Court in CIT v. Kirkend Coal Co. [1969] 74 ITR 67 the question which was neither raised nor argued before the Tribunal could not be raised at this stage. Even otherwise, it could not be said that it would not be conducive to the business of the assessee if all the companies managed by it were housed in the same building. It would lead to some economy and greater efficiency in management. In view of aforesaid, it could be concluded that amounts paid as interest and the municipal taxes were allowable as deduction. As regards renovation expenses for the assessment year 1961-6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2014] 361 ITR 220/[2012] 206 Taxman 254/19 taxmann.com 26 (Delhi) (para 8), xviii. CIT v. Dwarkadhish Capital (P.) Ltd. [ 2011] 330 ITR 298/[2010] 194 Taxman 43 (Delhi) (paras 9, 10), xix. CIT v. Kinetic Capital Finance Ltd. [ 2013] 354 ITR 296/[2011] 202 Taxman 548/14 taxmann.com 150 (Delhi) (paras 9, 10), xx. Zafa Ahmad Co. v. CIT [2013] 214 Taxman 440/30 taxmann.com 267 (All.) (paras 9, 10), xxi. Anil Rice Mills v. CIT [2006] 282 ITR 236/[2005] 149 Taxman 313 (All.) (paras 9, 10), xxii. CIT v. Five Vision Promoters (P.) Ltd. [ 2016] 380 ITR 289/236 Taxman 502/65 taxmann.com 71 (Delhi) (para 11), xxiii. CIT v. Gabriel India Ltd. [ 1993] 203 ITR 108/71 Taxman 585 (Bom.) (para 12), xxiv. Hari Iron Trading Co. v. CIT [2003] 263 ITR 437/131 Taxman 535 (Punj. Har.) (para 12), xxv. CIT v. Leisure Wear Exports (P.) Ltd. [ 2012] 341 ITR 166/[2011] 202 Taxman 130/11 taxmann.com 54 (Delhi) (para 13), xxvi. Omar Salay Mohamed Sait v. CIT [1959] 37 ITR 151 (SC) (para 14), xxvii. Lalchand Bhagat Ambica Ram v. CIT [1959] 37 ITR 288 (SC) (para 14), xxviii. Reliance Jute Industri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ading Co. (248 ITR 292)(Ker.) and CIT vs. Green World Corpn. (314 ITR 81)(SC). For invoking revisional jurisdiction u/s. 263 of the Act, the assessment order must contain grievous error which is subversive of the administration of Revenue. Further, exact error must be disclosed by the Commissioner as was held in CIT vs. G.K. Kabra (211 ITR 336)(AP). Section 263 of the Act enables the Commissioner to have a re-look at the orders or proceedings of the lower authority to effect correction, if so needed, particularly, if the order is erroneous and prejudicial to the interest of the Revenue. The object of the provision is to raise revenue for the state and section 263 is enabling provision conferring jurisdiction upon the Commissioner to revise the order. The provision is intended to plug the leakage of the revenue by the erroneous and prejudicial order . Our view find support from the ratio laid down in following decisions:- i. CIT vs Infosys Technologies ltd. (2012) 341 ITR 293 (Karn.), ii. CIT vs Jawahar Bhattacharyaji (2012) 341 ITR 434 (Guwahati) (FB), iii. CIT vs Leisure wear Exports Ltd. (2012) 341 ITR 166 (Del.), iv. CIT vs Triveni Engineering Works Ltd. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wa Engineering Corporation vs CIT (1996) 134 taxation 493, 494 (All.), CIT vs Digvijay Traders (1997) 137 CTR (MP) 224, CIT vs Regional Agro Industrial Development Cooperative Society Ltd. (1998) 143 taxation 293 (Kerala), CIT vs Agarwal Enterprises (1998) 100 taxman 360 (All.) and CIT vs Kailash Apartment Pvt. Ltd. (200) 243 ITR 795 (Del.). Totality of facts, clearly indicates that the assessment order has been framed without full enquiries, therefore, the ld. Commissioner justifiably invoked revisional jurisdiction. 2.19. The Hon'ble Apex Court in Rajmandir Estates Pvt. Ltd. (2017) 77 taxman.com 285 (SC), wherein, there was lack of requisite enquiry into increase of share capital and nonapplication of mind, the Commissioner was held to be justified in invoking the revisional jurisdiction, which is reproduced hereunder:- Section 68, read with section 263 of the Income-tax Act, 1961 - Cash credit (Share application money) - Assessment year 2009-10 - During relevant year, assessee-company had increased its share capital by issuing 7.93 lakhs shares of ₹ 10 each at a premium of ₹ 390 - Assessing Officer completed assessment without holding requisite inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed an appeal under Section 260A of the Act before the High Court of Bombay. The aforesaid appeal i.e. ITA No. 293 of 2008 was summarily dismissed by the High Court by the impugned order dated 7th August, 2008 holding that as the C.I.T. had gone beyond the scope of the show cause notice dated 7th November, 2005 and had dealt with the issues not covered/mentioned in the said notice the revisional order dated 20th March, 2006 was in violation of the principles of natural justice. So far as the question as to whether the Assessing Officer had made sufficient enquiries about the assessee's claim of expenses made in the re-revised return of income is concerned, which question was formulated as question No. 2 for the High Court's consideration, the High Court took the view that the said question raised pure questions of fact and, therefore, ought not to be examined under Section 260A of the Act. The appeal of the Revenue was consequently dismissed. Aggrieved, this appeal has been filed upon grant of leave under Article 136 of the Constitution of India. 5. We have heard Shri Ranjit Kumar, learned Solicitor General appearing for the appellant Revenue and Shri Shyam Divan, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0th March, 2006 have to be understood to be in breach of the principles of natural justice. The learned Tribunal also specifically considered the three (03) common issues mentioned above and on such consideration arrived at the conclusion that the reasons disclosed by the learned C.I.T. in the order dated 20th March, 2006 for holding the assessment to be liable for cancellation on that basis are not tenable. Accordingly, the learned Tribunal allowed the appeal of the assessee and reversed the order of the suo motu revision dated 20th March, 2006. 8. At this stage, it may be appropriate to reproduce hereunder the provisions of Section 263 of the Act to appreciate the arguments advanced and to understand the contours of the suo motu revisional power vested in the learned C.I.T. by the aforesaid provision of the Act. 263 - Revision of orders prejudicial to revenue.-(1) The Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is implicit in the requirement cast by the Section to give the assessee an opportunity of being heard. It is in the context of the above position that this Court has repeatedly held that unlike the power of reopening an assessment under Section 147 of the Act, the power of revision under Section 263 is not contingent on the giving of a notice to show cause. In fact, Section 263 has been understood not to require any specific show cause notice to be served on the assessee. Rather, what is required under the said provision is an opportunity of hearing to the assessee. The two requirements are different; the first would comprehend a prior notice detailing the specific grounds on which revision of the assessment order is tentatively being proposed. Such a notice is not required. What is contemplated by Section 263, is an opportunity of hearing to be afforded to the assessee. Failure to give such an opportunity would render the revisional order legally fragile not on the ground of lack of jurisdiction but on the ground of violation of principles of natural justice. Reference in this regard may be illustratively made to the decisions of this Court in Gita Devi Aggarwal v. CIT [1970] 76 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee as in the case of Section 34. Section 33-B merely requires that an opportunity of being heard should be given to the assessee and the stringent requirement of service of notice under Section 34 cannot, therefore, be applied to a proceeding under Section 33-B. (Page 827- 828). [ Note: Section 33-B and Section 34 of the Income Tax Act, 1922 corresponds to Section 263 and Section 147 of the Income Tax Act, 1961] 11. It may be that in a given case and in most cases it is so done a notice proposing the revisional exercise is given to the assessee indicating therein broadly or even specifically the grounds on which the exercise is felt necessary. But there is nothing in the section (Section 263) to raise the said notice to the status of a mandatory show cause notice affecting the initiation of the exercise in the absence thereof or to require the C.I.T. to confine himself to the terms of the notice and foreclosing consideration of any other issue or question of fact. This is not the purport of Section 263. Of course, there can be no dispute that while the C.I.T. is free to exercise his jurisdiction on consideration of all relevant facts, a full opportunity to contro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Electro House (supra). The learned Tribunal in its order dated 28th August, 2007 had not recorded any finding that in course of the suo motu revisional proceedings, hearing of which was spread over many days and attended to by the authorized representative of the assessee, opportunity of hearing was not afforded to the assessee and that the assessee was denied an opportunity to contest the facts on the basis of which the learned C.I.T. had come to his conclusions as recorded in the order dated 20th March, 2006. Despite the absence of any such finding in the order of the learned Tribunal, before holding the same to be legally unsustainable the Court will have to be satisfied that in the course of the revisional proceeding the assessee, actually and really, did not have the opportunity to contest the facts on the basis of which the learned C.I.T. had concluded that the order of the Assessing Officer is erroneous and prejudicial to the interests of the Revenue. The above is the question to which the Court, therefore, will have to turn to. 14. To determine the above question we have read and considered the order of the Assessing Officer dated 30th March, 2004; as well as the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . on the three (03) issues mentioned in the show cause notice and also dealt with in the revisional order dated 20th March, 2006. The aforesaid three (03) issues are: ( i) Assessee maintaining 5 bank accounts and AO not examining the 5th bank account, books of account and any other bank account where receipts related to KBC were banked. ( ii) Regarding claim of deposits of ₹ 52.06 lakhs in Special Bench A/c No.11155 under the head Receipts on behalf of Mrs. Jaya Bachchan and ( iii) Regarding the claim of additional expenses in the re-revised return. 16. On the above issues the learned Tribunal had given detailed reasons for not accepting the grounds cited in the revisional order for setting aside the assessment under Section 263 of the Act. The reasons cited by the learned Tribunal insofar as the first two issues are concerned may not justify a serious relook and hence need not be gone into. The third question would, however, require some detailed attention. The said question is with regard to the claim of additional expenses made by the assessee in its re-revised return which was subsequently withdrawn. 17. The assessee in the re-revised re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed had been incurred. In this regard, the following findings/reasons recorded by the learned C.I.T. in the order dated 20th March, 2006 would be of particular relevance: Withdrawal of claim by assessee can be for variety of reasons and this does not mean that Assessing Officer should abandon enquiries regarding sources for incurring expenses. Assessee follows cash system of accounting and the claim regarding additional expenses was made through duly verified revised return. The claim was pressed during assessment proceedings carried on by A.O. after filing revised return and it was specially stated in letter dated 13.02.2004 that expenses were for security purposes and that payments have been made out of cash balances available etc. Under the circumstances, the Assessing Officer was expected to examine the matter further to arrive at a definite finding whether assessee incurred expenses or not and in case, actually incurred, then what were sources for incurring these expenses. Assessing Officer was satisfied on withdrawal of the claim and in my view, his failure to decide the matter regarding actual incurring of additional expenses and sources thereof resulted into erron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the learned C.I.T. under Section 263 of the Act. The order of the learned C.I.T., therefore, is restored and those of the learned Tribunal dated 28th August, 2007 and the High Court dated 7th August, 2008 are set aside. The appeal of the Revenue is allowed. SLP(C) No.861 of 2013 23. Leave granted. 24. Pursuant to the revisional order dated 20th March, 2006 under Section 263 of the Income Tax Act setting aside the assessment order for the assessment year 2001-2002 and directing fresh assessment, a fresh assessment had been made by the Assessing Officer by order dated 29th December, 2006. Against the said order the respondent assessee filed an appeal before the learned Commissioner of Income Tax (Appeals). By order dated 18th October, 2007 the learned Commissioner of Income Tax (Appeals) had set aside the assessment order dated 29th December, 2006 as in the meantime, by order dated 28th August, 2007 of the learned Income Tax Appellate Tribunal the revisional order dated 20th March, 2006 under Section 263 of the Act was set aside. The Revenue's appeal before the learned Tribunal against the order dated 18th October, 2007 was dismissed on 11th January, 2000 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served as under :- i . The order is passed without making inquiries or verification which should have been made; ii. The order is passed allowing any relief without inquiring into the claim; iii. The order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or iv. The order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. In view of the above, the Ld. Pr. CIT observed that the Ld. Assessing Officer should have made enquiries/verification, to satisfy himself with respect to the creditworthiness of the lender and genuineness of the transactions before framing the assessment, thus, the ld. Assessing Officer was directed to pass fresh assessment order after providing due opportunity of being heard to the assessee. Even in the direction by the Ld. Pr. Commissioner to the Assessing Officer is not going to cause any prejudice to the assessee because the direction has been issued to the Ld. Assessing Officer to examine the genuineness of the loan and after p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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