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TMI Blog2019 (8) TMI 897X X X X Extracts X X X X X X X X Extracts X X X X ..... ether the ITAT is right in upholding the order of CIT passed under Section 263 which has been passed without controverting the appellant's explanation/submissions dated 15.10.2009, 05.11.2009 and 04.12.2009 before the A.O. In compliance of his queries in relation to verification of loan creditors and trade creditors?" 3. The case relates to the assessment year 2007-2008. The assessee filed return of income on 31.10.2007 declaring income of Rs. 10,59,560/-. The said return was processed under Section 143(1) of the Act. Case of the assessee was selected for scrutiny and notice under Section 143(2) of the Act was issued by the Assessing Officer on 26.09.2008, further notice under Section 142(1), dated 25.03.2009, along with questionnaire raising 28 queries was issued and served on the assessee. The assessee on 15.10.2009 filed his replies to the queries raised in notice dated 25.03.2009. It appears that Assessing Officer further required the assessee to furnish explanation, which was submitted by the assessee in form of written submission on 05.11.2009. On 15.12.2009, order under Section 143(2) of the Act was passed by the Assessing Officer, accepting the return of income of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had wrongly applied the law laid down by the Apex Court in case of Malabar Industrial Company vs. CIT (2000) 109 Taxman 66 (SC). 9. The second limb of argument of the counsel for the assessee is that mere non-discussion and non-mentioning about the reply to the queries submitted by the assessee cannot lead to an assumption by the CIT as well as ITAT that Assessing Officer has not applied his mind, he relied upon the decision in case of CIT vs. Krishan Capbox Ltd. (2015) 372 ITR 310 (Allahabad). 10. It was further contended that the queries raised during assessment proceedings and the same not having been dealt in the assessment order would not lead to the conclusion that no enquiry was made and the Assessing Officer has not applied his mind. Reliance has been placed on the decision of CIT vs. Mahendra Kumar Bansal (2008) 297 ITR 99 (Allahabad). Another decision which has been relied on by the counsel for the assessee is in the case of CIT vs. Goyal Private Family Specific Trust (1988) 171 ITR 698 (Allahabad). 11. Per contra, Sri Gaurav Mahajan, learned counsel appearing for the Department submitted that the assessment order dated 15.12.2009 is totally silent in respect of unsecu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ITO is erroneous insofar as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied with twin conditions, namely, (i). the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent - if the order of the ITO is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenuerecourse cannot be had to Section 263(1). 7. There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue' is not an expression of art and is not defined in the Act. Understood in its ordinary meaning, it is of wide import and is not confined to loss of tax. The High Court of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. In the instant case, the Commissioner noted that the ITO passed the order of nil assessment without application of mind. Indeed, the High Court recorded the finding that the ITO failed to apply his mind to the case in all perspective and the order passed by him was erroneous. It appears that the resolution passed by the board of the appellantcompany was not placed before the Assessing Officer. Thus, there was no material to support the claim of the appellant that the said amount represented compensation for loss of agricultural income. He accepted the entry in the statement of the account filed by the appellant in the absence of any supporting material and without making any inquiry. On these facts, the conclusion that the order of the ITO was erroneous is irresistible. We are, therefore, of the opinion that the High Court has rightly held that the exercise of the jurisdiction by the Commissioner under Section 263(1) was justified." 15. In the present case, the CIT himself while relying upon the reply submitted by the assessee had partially accepted the claim as far as investment in share capital was concerned but it did not accept the documentary evidence and reply submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder. 19. The argument of the counsel for the assessee that mere non-discussion and non-mentioning about the reply in the order of the assessing authority would not lead to an assumption that there was no application of mind and the order is erroneous. In Krishna Capbox (P.) Ltd. (supra), this Court held as under:- 9. The Tribunal further considered the question whether discussion of queries and reply received from assessee, in assessment order, is necessary or not. Relying on two judgments of Delhi High Court in CIT Vs. Vikash Polymers [2012] 341 ITR 537/ [2010] 194 Taxman 57 and CIT v. Vodafone Essar South Ltd. [2012] 28 taxmann.com 273/ [2013] 212 Taxman 184 (Delhi), it held that once inquiry was made, a mere non discussion or nonmention thereof in assessment order cannot lead to assumption that Assessing Officer did not apply his mind or that he has not made inquiry on the subject and this would not justify interference by Commissioner by issuing notice under Section 263 of the Act. 10. In Vikash Polymers (supra) relevant part of the observations in this regard read as under (page 548 of 341 ITR): "This is for the reason that if a query was raised during the course of sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 143(1) of the Act the Commissioner is within his power in taking action in terms of Section 263(1) of the Act. Similar view has been taken in by the Patna High Court in the case of Smt. Kaushalya Devi [1988] 171 ITR 686. 14. As held by this Court in the case of Goyal Private Family Specific Trust [1988] 171 ITR 698, we are of the considered opinion that merely because the Income- tax Officer had not written lengthy order it would not establish that the assessment order passed under Section 143(3)/148 of the Act is erroneous and prejudicial to the interests of the Revenue without bringing on record specific instances, which in the present case, the Commissioner of Income Tax has failed to do." 21. It is clear that after the notice was issued by the Assessing Officer raising 28 queries from the assessee, which was also replied by him along with the documentary evidence in regard to each of the query, thus the assessment order passed under Section 143(3) of the Act would not render the same as erroneous and prejudicial to the interest of Revenue, unless the Commissioner exercising power under Section 263 brings on record to show that the order of the Assessing Officer is err ..... X X X X Extracts X X X X X X X X Extracts X X X X
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