TMI Blog2020 (3) TMI 1020X X X X Extracts X X X X X X X X Extracts X X X X ..... the business income at Nil since no income can arise out of non existent sales and purchases. Therefore, order passed by the AO should not be erroneous. Another stand of the PCIT was that that sufficient/proper enquiries were not conducted by the Ld. AO during the assessee s assessment u/s 143(3) for the relevant Assessment Year. We are of the view that the assessee cannot be held to be at fault and subjected to revision proceedings u/s 263(1) for inadequate enquiry' being conducted by the Ld. AO.In other words, fresh enquiry cannot be conducted on completed assessments on the premise that the enquiries and investigations conducted during assessment were not proper/incomplete/inadequate. AO has considered the documents and submissions made by assessee and AO has also considered the assessment order for A.Y. 2011-12 passed in assessee`s case and taking into account all the facts and circumstances the AO has adopted one of the courses permissible in law and even if it has resulted in loss to the revenue, the said decision of the AO cannot be treated as erroneous and prejudicial to the interest of the revenue as held in Malabar Industries Ltd. vs. CIT [ 2000 (2) TMI 10 - S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pr. CIT further erred in not appreciating that the judicial and official acts have been regularly performed by the A.O. while taking a possible view in the matter and furthermore without application of mind the questions/queries raised in the notice u/s. 142(1) of the Act could not have been formulated and hence jurisdiction invoked u/s. 263 of the Act was beyond the sanction of law. 5. That, the Ld. Pr. CIT acted beyond the scope of provisions of sec.263 of the Act in assuming that the A.O. had taken the trading result at nil without investigation in spite of the fact that after thorough scrutiny the A.O. had rejected the book results and treated the entire purchase and sale as paper transactions and hence direction to estimate NP at 1% on non-existing paper transaction is without any valid reason and basis and hence bad in law. 6. That, therefore, as the assessment order u/s. 143(3) of the Act is neither erroneous nor prejudicial to the interest of the revenue and moreover the said assessment is already a subject matter of appeal before the Ld. CIT(A) and the matter is thus debatable, the impugned order u/s.263 of the Act of the Ld. Pr. CIT directing to reframe the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee company is engaged in the business of trading of iron steels. For the relevant assessment year, return of income was filed by the assessee company on 30/09/2013 at a total income of Nil and carried forward loss of ₹ 5,65,64,157/-. Subsequently, the case was selected for scrutiny under CASS and accordingly notices u/s. 143(2) u/s. 142(1) were served on the assessee. Thereafter, on transfer of jurisdiction over this case to the DCIT , Circle 1(2), notice u/s. 142(1) along with questionnaire were duly served on the assessee. In response to the above, the AR of the assessee company appeared from time to time and produced details and documents as per questionnaire issued. From perusal of the details filed, the AO alleged that assessee has made fake claim of Input Tax Credit. Again, on examination of the accounts of the relevant assessment year and from perusal of the records of A.Y. 2011-12, wherein the book of accounts of the assessee company was rejected and the profit was computed @1% of total sales engaged in the same line of business, the AO observed that during the relevant year also the assessee has failed to produce copy of bill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a direction to pass a fresh assessment order after considering the aforesaid observations, as per law and after giving an opportunity of being heard to the assessee. 6. Aggrieved by the order of ld. PCIT, the assessee is in appeal before us. 7. The ld. Counsel, Shri Ravi Tulsiyan, begins by pointing out that after conducting proper enquiry and taking note of the details submitted by the assessee, the A.O. had framed the assessment order holding that both the sales and purchases were bogus.The entire trading result of the assessee company and the resultant loss claimed by the assessee was disallowed. As far as addition of 1% of turnover done by the predecessor of the AO in AY 2011-12 is concerned, the same was a subject matter of appeal which has still not been disposed of. The initiation of proceedings under section 263 of the Income Tax Act, 1961 relating to A.Y. 2011-12 was also challenged by assessee as it failed to meet the twin conditions of the order being erroneous and prejudicial to the interest of Revenue. In the assessee`s case under consideration, the AO has taken one of the possible views therefore, order passed by AO u/s 143(3) of the Act is neither erroneous nor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law . 10. Taking note of the aforesaid dictum of law laid down by the Hon ble Apex Court, let us examine whether order passed by the AO is erroneous and prejudicial to the interest of Revenue. It is abundantly clear that recourse to Section 263(1) of the Income Tax Act, 1961cannot be taken by the Principal Commissioner if either of the above conditions are not satisfied, i.e. if the impugned assessment order is erroneous but not prejudicial to the interest of the revenue; or if the impugned assessment order is prejudicial to the interest of the revenue but not erroneous. We note that Finance Act, 2015 inserted Explanation 2 in the section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing aside the assessment order passed in the assessee s case for the relevant A.Y. on 09.02.2016 for a fresh assessment by observing that the AO has failed to make any enquiry in the assessee s case with regard to rejection of books of accounts and treatment of business income in line with the Assessment Order passed for the A.Y. 2011-12 rendering the Assessment Order passed u/s 143(3) of the Income Tax Act, 1961 on 09.02.2016 as erroneous and prejudicial to the interest of the Revenue. 11. We note that page 3, para 6 of the Assessment Order passed u/s 143(3) of the Income Tax Act, 1961 on 09,02.2016 by the Ld. AO for theA.Y. 2013-14, wherein the Ld. AO referring to the Assessment Order passed u/s 143(3) of the Income Tax Act, 1961 for the A.Y, 2011-12held as follows: Further on examination of record of preceding year viz: Assessment Order 2011-12 it observed that Deputy Commissioner of Sales Tax Bureau (Investigation)(Unit-1) on dated 4.3.2014 made investigation and found huge quantity of Input Tax Credit claimed by dealer on purchase which were invalid as per the provision of WB VAT Act 2003 on account, Transport Agency was fake, Vehicle used for transportation is fake, T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny has been disallowed and thereby Business income of assessee company from trading activity computed as NIL. The above finding of the assessing officer establishes beyond doubt that the Ld. AO had conducted detailed enquiries and investigations before passing the Assessment Order u/s 143(3) of the Income Tax Act, 1961 on 09.02.2016 in the assessee s case for the relevant Assessment Year and that too in light of the Assessment Order passed u/s 143(3) of the Income Tax Act, 1961 in the assessee s case for the A.Y. 2011-12. The Ld. AO on examination of the assessee s accounts of the relevant Assessment Year and from perusal of the records of A.Y. 2011-12, wherein the book of accounts of the assessee company was rejected and the profit was computed @1% of total sales engaged in the same line of business, observed that during the relevant year also the assessee has failed to produce copy of bills of purchase and sale of goods to examine the actual purchases and sales. The AO further held that no labour payment was made for loading and unloading of goods and no transportation cost was claimed by assessee for inward and outward movement of goods. Finally, the Ld.AO arrived at the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m in accordance with law and arrived at a conclusion such a conclusion cannot be found to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. There must be some prima facie material on record to show that 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 imposed. On the identical facts, the Hon ble Bombay High Court in the case of Grasim Industries Ltd. vs. CIT reported in (2010) 321 ITR 0092 (Bom) held as follows: The above judicial precedents clarify that if a query was raised at the time of assessment and the same was responded to by the assessee would not lead to the conclusion that the AO has not applied his mind to render the assessment order erroneous and prejudicial to the interests of the revenue. On the identical facts our view is fortified by the judgment of the Hon ble Delhi High Court in the case of CIT vs. Leisure Wear Exports Pvt. Ltd. reported in (2012) 341 ITR 166 (Delhi)wherein it was held as follows: The power of revision is not meant to be exercised for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X
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