TMI Blog2020 (12) TMI 207X X X X Extracts X X X X X X X X Extracts X X X X ..... een made in this case. What the Courts of law have said on this issue is that, if an addition is not made for the reasons which are recorded for reopening of the assessment, no other addition can be made on some other grounds which do not form part of the reasons recorded for reopening. If an Assessing Officer accepts the return of income of the assessee on reopening of an assessment, such assessment order does not become an illegal assessment order. The Courts never said that the reassessment order would be bad in law. Thus, this argument of the assessee is dismissed as devoid of merit. Notice u/s. 148 of the Act has been issued to the assessee on 24/02/2016 as is evident from the copy of the notice place at page 6 of the paper book. From the order sheet entry it is clear that the assessee, on 24/03/2016, requested the Assessing Officer to treat the original return of income filed by it for the Assessment Year 2009-10, as that return of income which is filed in response to notice u/s. 148 of the Act. From the order sheet entries, it is clear that notice u/s. 143(2) of the Act was issued on 24/02/2016. This fact is also mentioned by the Assessing Officer at para 5 of his order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conducted enquiries, obtained information from third parties and on being satisfied with the identity and creditworthiness of the sundry creditors and that the genuineness of the transactions had not made any addition. That adequate enquiries were made and it is not a case of lack of enquiry or lack of application of mind and that revision cannot be made on the ground of inadequate enquiry. c) The ld. Pr. CIT did not conduct any enquiry or verification by himself for coming to a conclusion that the order requires revision. Such lack of enquiry and non application of mind by the ld. Pr. CIT makes the order bad in law. d) That the assessee is entitled to question the legality and validity of the reassessment order passed u/s. 143(3)/147 of the Act on 20/05/2016, while challenging the order passed u/s. 263 of the Act, revising the reassessment order, as it would be a jurisdictional issue which goes to the root of the matter. e) The Assessing Officer in the reassessment order dt. 20/05/2016 has not made any addition based on the order relatable to the reasons on which the revision was made and the returned income was accepted. Thus, such reassessment order is bad in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . DDIT/U-2(4)/Rungta/2015-16/2331 Dated 14.01.2016 A search and seizure operation under section 132 of the Income Tax Act 1961 was conducted on Rungta group of companies on 25/08/2015. During the course of post search investigation, a report in the form of STR received from DDIT (Inv), Unit-1, Ranchi. The STR was in the name of RECENT SUPPLIERS PVT. LTD. and related with Rungta Group of Companies by way of financial transaction. In this case one entry operator SHRI RAJENDRA BUBNA was identified and statement under oath was recorded. In his statement (copy enclosed in folder), he stated that he had provided unsecured loan through his web of Jamakharchi/paper companies to M/S. ANINDITA STEELS LIMITED [formerly known as ANINDITA TRADES INVESTMENT LTD] to the tune of ₹ 1.74 CRORES DURING THE FINANCIAL YEAR 2008-09 CORRESPONDING ASSESSMENT YEAR 2009-10. Also the statement of Sri Samir Kumar Chatterjee, Director of Recent Suppliers Pvt. Ltd. was recorded (copy enclosed in the folder) In the light of above facts, I have reasons to believe that the income of ₹ 1.74 crore chargeable to tax has escaped assessment for assessment year 2009-10 within the meanin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , has accepted these loans as genuine. The ld. Pr. CIT cannot substitute his opinion for that of the Assessing Officer. It is also seen that the ld. Pr. CIT has not conducted any verification or prima facie investigation on his own to come to a conclusion that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the revenue. He also failed to notice that enquiries were in fact made by the Assessing Officer. The law on this issue is clear. The Hon'ble Andhra Pradesh High Court in the case of Spectra Shares and Scrips Pvt. Ltd. V CIT 354 ITR 35 had considered a number of judgments on this issue of exercise of jurisdiction u/s. 263 of the Act by the Principal Commissioner of Income Tax and culled the principles laid down in the judgments as below: 24. In Malabar Industrial Co. Ltd. (Supra), the Supreme Court held that a bare reading of Sec. 263 makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law and the Commissioner was correct in invoking Sec. 263. But the Supreme Court rejected the said contention and held that when the Commissioner passed his order disagreeing with the view of the Assessing Officer, there were two views on the word profits in that section; that the said section was amended eleven times; that different views existed on the day when the Commissioner passed his order; that the mechanics of the section had become so complicated over the years that two views were inherently possible; and therefore, the subsequent amendment in 2005 even though retrospective will not attract the provision of Sec. 263. 26. In Vikas Polymers (Supra), the Delhi High Court held that the power of suo motu revision exercisable by the Commissioner under the provisions of Sec. 263 is supervisory in nature; that an erroneous judgment means one which is not in accordance with law; that if an Income Tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written differently or more elaborately; that the section does not visualize the substi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant statute on an incorrect or incomplete interpretation, a lesser tax than what was just, has been imposed. In that case, the Delhi High Court held that the Commissioner in the exercise of revisional power could not have objected to the finding of the Assessing Officer that expenditure on tools and dies by the assessee, a manufacturer of Car parts, is revenue expenditure where the said claim was allowed by the latter on being satisfied with the explanation of the assessee and where the same accounting practice followed by the assessee for number of years with the approval of the Income Tax Authorities. It held that the Assessing Officer had called for explanation on the very item from the assessee and the assessee had furnished its explanation. Merely because the Assessing Officer in his order did not make an elaborate discussion in that regard, his order cannot be termed as erroneous. The opinion of the Assessing Officer is one of the possible views and there was no material before the Commissioner to vary that opinion and ask for fresh inquiry. 28. In Gabriel India Ltd. (Supra), the Bombay High Court held that a consideration of the Commissioner as to whether an or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led to examine any other records which are available at the time of examination by him and to take into consideration even those events which arose subsequent to the order of assessment. 30. In Rampyari Devi Saraogi (Supra), the Commissioner in exercise of revisional powers cancelled assessee's assessment for the years 1952-1953 to 1960-61 because he found that the income tax officer was not justified in accepting the initial capital, the gift received and sale of jewellery, the income from business etc., without any enquiry or evidence whatsoever. He directed the income tax officer to do fresh assessment after making proper enquiry and investigation in regard to the jurisdiction. The assessee complained before the Supreme Court that no fair or reasonable opportunity was given to her. The Supreme Court held that there was ample material to show that the income tax officer made the assessments in undue hurry; that he had passed a short stereo typed assessment order for each assessment year; that on the face of the record, the orders were pre-judicial to the interest of the Revenue; and no prejudice was caused to the assessee on account of failure of the Commissioner to indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not by itself lead to the conclusion that the order of the Assessing Officer called for interference and revision. e) The Commissioner cannot initiate proceedings with a view to start fishing and roving inquiries in matters or orders which are already concluded; that the department cannot be permitted to begin fresh litigation because of new views they entertain on facts or new circumstance; that if this is permitted, litigation would have no end except when legal ingenuity is exhausted f) Whether there was application of mind before allowing the expenditure in question has to be seen; that if there was an inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under Sec. 263 merely because he has a different opinion in the matter; that it is only in cases of lack of inquiry that such a course of action would be open; that an assessment order made by the Income Tax Officer cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately; there must be some prima facie material on record to show that the tax which was lawfully exigible has not been imposed or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the taxable income. If the Assessing Officer fails to conduct the said investigation, he commits an error and the word erroneous includes failure to make the enquiry. In such cases, the order becomes erroneous because enquiry or verification has not been made and not because a wrong order has been passed on merits. Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under s. 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in Law. In some cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relying upon new/additional material/evidence to show and state that the order of the Assessing Officer is erroneous. COMMISSIONER OF INCOME TAX vs. J.L. MORRISON (INDIA) LTD. 366 ITR As regard the submission on behalf of the Revenue that power under Section 263 of the Act can be exercised even in a case where the issue is debatable, it was held that the case of CIT vs. M.M. Khambhatwala was not applicable. The observation that the Commissioner can exercise power under Section 263 of the Act even in a case were the issue is debatable was a mere passing remark which is again contrary to the view taken by the Apex Court in the case of Malabar Industrial Company Ltd. Max India Ltd. If the Assessing Officer has taken a possible view, it cannot be said that the view taken by him is erroneous nor the order of the Assessing Officer in that case can be set aside in revision. It has to be shown unmistakably that the order of the Assessing Officer is unsustainable. Anything short of that would not clothe the CIT with jurisdiction to exercise power under Section 263 of the Act. CIT vs. M.M. Khambhatwala reported in 198 ITR 144; CIT vs. Ralson Industries Ltd. reported in 288 ITR 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the AO was erroneous and prejudicial to the interest of Revenue. Mere audit objection and merely because a different view could be taken, were not enough to say that the order of the AO was erroneous or prejudicial to the interest of the Revenue. The jurisdiction could be exercised if the CIT was satisfied that the basis for exercise of jurisdiction existed. No rigid rule could be laid down about the situation when the jurisdiction can be exercised. Whether satisfaction of the CIT for exercising jurisdiction was called for or not, has to be decided having regard to a given fact situation. In the present case, the Tribunal has held that the assessee had disclosed that out of sale consideration, a sum of ₹ 1 lakh was to be received for sale of permit. If that is so, there was no error in the view taken by the AO and no case was made out for invoking jurisdiction under s. 263. 8. Applying the propositions of law to the facts of this case, we hold that the order passed u/s. 263 of the Act, d. 19/03/2019, as bad in law. It is wrong both on facts as well as law. Enquiries were made by the Assessing Officer and the Assessing Officer on such enquiries has taken a possible ..... X X X X Extracts X X X X X X X X Extracts X X X X
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