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TMI Blog2021 (2) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... king additions u/s. 68 of the Act and disallowance u/s. 14A of the Act. In the assessment order, the Assessing Officer held as follows:- "In the light of the facts of the case and aforesaid exposition of the legal position, with regard to the identity and creditworthiness of the subscriber companies and the genuineness of the transaction, it can be said that assessee has introduced its own unaccounted fund in the form of share application money to legalize its own black money. Accordingly, the credit of Rs. 7,15,00,000/- in the books of the assessee is considered as income of the assessee for the instant previous year and charged to income-tax. Considering the aforesaid facts and discussion, share application money of Rs. 7,15,00,000/- received by the assessee during the year is added to the total income of the assessee as unaccounted cash credit in the books of the assessee as per the provisions of section 68 of the I.T. Act." 2.1. The ld. Pr. CIT, issued a show cause notice to the assessee u/s. 263 of the Act on 04/08/2016 proposing to revise of the original assessment order dt. 04/03/2015 u/s. 263 of the Act. Thereafter, the ld. Pr. CIT passed an order u/s. 263 of the Act o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without verifying the financial position. (iii) The A.O further failed to examine the rationale behind raising the said share premium and also did not verify the method adopted by assessee for determining such abnormally huge premium specially keeping in view that prima facie there was no material in the balance sheet of the assessee warranting/justifying such huge premium. (iv) The A.O failed to collect the relevant evidences in order to reach a logical conclusion regarding the genuineness of controlling interest. (v) The A.O. failed to examine all the bank accounts for the entire period in the course of verification to find out the money trail of the share capital. (vi) The A.O. failed to adequately trace out the money trail to ascertain the genuineness of source of fund invested by share holders in the assessee company. (vii) On the whole the impugned order dated 26-12-2016 passed u/s. 263/143(3) of the Income Tax Act, 1961 prima facie suffers from lack of independent and adequate enquiry on the aforesaid issues." 2.2.1. The assessee filed a letter dt. 21/12/2019 replying to the above show cause notice wherein, he stated as follows:- "Our submission is that the A O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance with the Explanation 2(c) below section 263 (1) of the Act on the ground of lack of enquiry. Accordingly, the assessment made by the Assessing officer is set aside on the issues as outlined in para 2 above. The A.O. is directed to provide reasonable opportunity to the assessee company to produce documents & evidences which it may choose to rely upon for substantiating its own claim. Thereafter a fresh assessment order may be passed in accordance with the relevant provisions of law." 3. Aggrieved, the assessee is in appeal before us on the following grounds:- 1. For that the order dated 14.03.2019 passed u/s. 263 by the Ld. Principal CIT is barred by the law of limitation and liable to be quashed. 2. (a) For that on the facts and in the circumstances of the case, the order passed by the Ld. Principal CIT u/s. 263 of the Act is bad in law and is liable to be quashed. (b) For that on the facts and in the circumstances of the case the Ld. Principal CIT was not justified in initiating proceedings u/s. 263. 3. (a) For that the Ld. Principal CIT erred in exercising the power of revision for the purpose of directing the A.O. to hold another investigation when the A.O. had com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded the deposition of each of these shareholders and that this fact is evident from the order sheet entries and the deposition on record. d) That the Assessing Officer had taken pro-active steps in making independent enquiries, only after which he was satisfied that all the necessary ingredients of Section 68 of the Act, are existing in these transactions. e) That the ld. Pr. CIT has not asked the Assessing Officer to examine the Directors on the issue of genuineness of controlling interest as the same was not relevant. He submitted that the ld. Pr. CIT in the first round has directed the Assessing Officer to examine all the bank accounts of the investors and also to examine the source of share applicant which investigation was done by the Assessing Officer and that there was not direction to trace out the money trails so as to ascertain the source of funds. 4.1. He argued that the Assessing Officer was bound by the directions of the ld. Pr. CIT given in the first round of revisionary proceedings u/s. 263 of the Act and that the Assessing Officer has followed each of these directions and after conducting detailed enquiries and obtaining necessary documents has taken a pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the interest of the revenue. On a specific query from the Bench, though not leaving his ground, the ld. D/R could not distinguish the orders of this Bench of the Tribunal, on facts, in identical circumstances, in the case of Amritrashi Infra Private Ltd. vs. Principal Commissioner of Income-tax (supra) and M/s. Omkar Infracon Private vs ITO (supra). He prayed that the order of the ld. Pr. CIT passed u/s. 263 of the Act to be upheld. 5.1. In reply, the ld. Counsel for the assessee, submitted that the judgment of the Hon'ble Supreme Court in the case of NRA Iron & Steel (P.) Ltd. (supra), is not applicable as, in that case, the shareholders were not traceable and whereas in the case of hand each of the shareholder companies' representatives appeared before the Assessing Officer in response to summons and that the Assessing Officer recorded statements on oath from them and that they filed all necessary documents including assessment orders passed in their cases u/s. 143(3) of the Act, by the Department in their cases, copies of the final accounts, copies of the returns of income filed by them, copies of the bank account statements and also evidence of sources of investmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uineness of share subscribers:- (i) audited financial statements; (ii) copy of Form filed with the ROC; (iii) copy of PAN Card of the assessee company; (iv) details and copy of share applicants; (v) bank statement reflecting the transaction; (vi) records relating to investors in order to establish identity, genuineness and creditworthiness of the share subscribers. 47. We note that the First Ld. Pr. CIT in his first revisional order, found that AO in the first assessment proceedings though has been provided with the aforesaid documents has not examined these documents, which according to him, should have been carried out by the AO. The First Ld. Pr. CIT at para (4) of his first revisional order has clearly made a finding that " From the above discussion it is evident that the assessment proceedings in the case of assessee was completed in a very casual manner and hurried manner flouting all established procedures. The assessee had discharged its onus by furnishing/documents before the AO." Further, the First Ld. Pr. CIT mainly found fault with the AO's order for non-issuance of notice u/s. 133(6) of the Act to the shareholders. The First Ld. Pr. CIT found fault wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. M/s. Kakrania Trading Pvt. Ltd. U70101WB1994PTC062137 AABCK151611 yes 3. M/s. AmbalaTrafin Pvt. Ltd. U67120WB1995PTCO74397 AACCA1184G yes 4. M/s. Subhiksha Pvt. Ltd. U52190WB2011PTC157073 AAPCS2068E yes 5. M/s. Shivarshi Construction Pvt. Ltd. U45400WB2011PTC170957 AAQCS7848M yes 6. M/s. Shivashiv Pvt. Ltd. U74999WB2012PTC 173749 AARCS0094C yes 7. M/s. Flowtop Agency Pvt. Ltd. U52190WB2012PTC 173352 AABCF9036D yes 8. M/s. SukhSagar Residency Pvt. Ltd. U45400WB2011PTC170958 AARCS1553N yes 9. M/s. Kamaldhan Developers Pvt. Ltd. U45400WB2011PTC170944 AAECK6810D yes 10 . M/s. LabhdhanImpex Pvt. Ltd. U51909WB2011PTC171524 AACCL2111J yes 11 . M/s. SubhsreeImpex Pvt. Ltd. U51909WB2011PTC171513 AARCS1845D yes 12 M/s. Maharaja Merchants U51109WB2005PTC102343 AAECM224E yes . Pvt. Ltd. 13 . M/s. Sristi Sales Pvt. Ltd. U51109WB2005PTC102121 AAICS8900L yes v) The AO to complete the assessment at the earliest without waiting for the time barring date. 50. In the second round before the AO for de novo re-assessment, the second AO as per the specific direction of the First Ld. Pr. CIT (supra), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch these details show their identity. 51. Thus, we note that the AO after verification as aforesaid, has not drawn any adverse opinion or doubted the identity of the share applicants which view of AO is a possible view in the light of the documents referred to and we also by applying the presumption in section 114 of Indian Evidence Act 1872, we presume that the quasi-judicial act of the second AO have been regularly performed. Coming to the contention of Ld. CIT, DR, that order sheet maintained by the Second AO does not reveal that AO had issued notice u/s. 133(6) of the Act to the share subscribers, we note that the AO in his reassessment/second assessment order has clearly asserted that he had issued notice u/s. 133(6) of the Act to all the share applicants as directed by the First Ld. Pr. CIT and we note from the perusal of some letters written by the share applicants clearly referring to the AO's sec. 133(6) notice (refer inter-alia page 32 of PB-I). So, the clear assertion of the Second AO in his order that pursuant to his issue of notice u/s. 133(6), he received the documents called for cannot be disbelieved merely because he did not mention this event in the order she ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000/- M/s. Subhiksha Pvt. Ltd. Page 115Paper Book- 2 Rs. 222,397,317 (page 128 PB-2) Rs. 45,00,000/- M/s. Shivarshi Construction Pvt. Ltd. Page 146Paper Book-2 Rs. 53,89,95,046 (page 153 PB-2) Rs. 4,66,00,000/- M/s. Shivashiv Pvt. Ltd. Page 170Paper Book-2 Rs. 14,29,56,146 (page 178 PB-2) Rs. 6,55,00,000/- M/s. Flowtop Agency Pvt. Ltd. Page 193Paper Book-2 Rs. 15,38,94,946 (page 200 PB-2) Rs. 4,49,00,000/- M/s. Sukh Sagar Residency Pvt. Ltd. Page 212 Paper Book-2 Rs. 56,18,93,960 (page 220 PB-2) Rs. 2,31,00,000/- M/s. Kamaldhan Developers Pvt. Ltd. Page246-247Paper Book-2 Rs. 56,18,94,080 (page 254 PB-2) Rs. 12,54,00,000/- M/s. Labhdhan Impex Pvt. Ltd. Page 270PaperBook-2 Rs. 56,18,94,080 (page 277 PB-2) Rs. 3,80,00,000/- M/s. SubhsreeI mpex Pvt. Ltd. Page 290 of paper book Rs. 76,60,93,960 (page 297 PB-2) Rs. 2,76,00.000/- M/s. Maharaja Merchants Pvt. Ltd. - Rs. 1,54,58,399 Rs. 50,00,000/- (page 313 PB-2) M/s. Sristi Sales Pvt. Ltd. - Rs. 1,12,25,632 (page 336 PB-2) Rs. 50,00,000/- 53. So, from a perusal of the above chart, we note that the assessee and the shareholders have bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee-company including the share premium comes to Rs. 1,30,00,000/-. The payment has been made through banking channel and deposit amount of Rs. 1,05,00,000/- took place as on 01.03.2012 by NEFT and Rs. 25,00,000/- as on 06.03.2012. The Board Resolution for investment of the Company is filed and the share application form, ITR acknowledgment, Bank statement, explanation of source of funds as well as financial statements have been filed by the assessee at P. B page 3-37 and thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Further, it is noted that the share applicant had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act. (ii) We note from a perusal of the paper book-2 pages 38 to 77, the details of share applicant M/s. Kakrania Trading Pvt. Ltd. It is a Private Limited Company which has a PAN AABCK151611 and its CIN number is U70101WB1994PT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Further, it is noted that the share applicants had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act. (iv) We note from a perusal of the paper book pages-2,112 to 137, the details of share applicant M/s. Subhiksha Pvt. Ltd. It is a Private Limited Company which has a PAN AAPCS2068E and its CIN number is U52190WB2011PTC157073 and the Net worth of this company as on 31.3.2012 Rs. 22,23,97,317/- (PB-page 128.) and investment made in the assessee company is to the tune of Rs. 45,00,000/- and this share applicant has made the transaction through banking channel on 02.03.2012 a sum of Rs. 45 lakhs through NEFT. There is board resolution for investment in assessee's company and Share Application Form Bank statement, ITR acknowledgement, explanation of source of fund as well as financial statement available in the PB-page 113 to 137 in the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paper book pages-2, 160 to 184 the details of share applicant M/s. Shivashiv Dealcom Pvt. Ltd. It is a Private Limited Company which has a PAN AARCS0094C and its CIN number is U74999WB2012PTC 173749 and the net worth of this company as on 31.3.2012 Rs. 14,29,56,146/- (PB-page 178) and investment made in the assessee company is to the tune of Rs. 6,55,00,000/- and this share applicant has made the transaction through banking channel on 29.03.2012 Rs. 6,55,00,000/- through Cheque. There is board resolution for investment in assessee's company and Share Application Form Bank statement, ITR acknowledgement, explanation of source of fund as well as financial statement available in the PB-page 161 to 184 in the PB. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed financial statements and thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hare Application Form, Bank statement, ITR acknowledgement, explanation of source of fund as well as financial statement available in the PB-page 208-226 in the PB. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed financial statements and thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Thus the assessee has discharged the onus to prove the identity, creditworthiness and genuineness of the transactions. Further, it is noted that the share applicants had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act. (ix) We note from a perusal of the paper book-2, pages 227 to 261 the details of share applicant M/s. Kamaldhan Developers Pvt. Ltd. It is a Private Limited Company which has a PAN AAECK6810D and its CIN number is U45400WB20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh funds to invest in the assessee-company and the transaction has happened through banking channel. Thus the assessee has discharged the onus to prove the identity, creditworthiness and genuineness of the transactions. Further, it is noted that the share applicants had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act. (xi) We note from a perusal of the paper book-2 pages 284 to 303 the details of share applicant M/s. Subhsree Impex Pvt. Ltd. It is a Private Limited Company which has a PAN AARCS1845D and its CIN number is U51909WB2011PTC171513 and the net worth of this company as on 31.3.2012 Rs. 76,66,93,960/- (P.B-2, page-297) and investment made in the assessee company is to the tune of Rs. 2,76,00,000/- and this share applicant has made the transaction through banking channel on 31.03.2012 a sum of Rs. 2,76,00,0000/- through NEFT. There is board resolution for investment in assessee's company and Share Application Form, Bank statement, ITR acknowledgement, explanation of source of fund as well as financial statement available in the PB-page 285-303 in the PB. This share applicant regularly filed Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al statement available in the PB-2, page 328 to 352. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Thus the assessee has discharged the onus to prove the identity, creditworthiness and genuineness of the transactions. Thus from the discussion above, it is noted except the last two investors the other eleven (11) share applicants out of thirteen (13) share-holders had furnished the source of investment made in the assessee-company after getting the notice from second AO under section 133(6) of the Act. Thus we note that the AO on the basis of the aforesaid documents has taken a plausible view and did not draw any adverse inference against the assessee, and the view thus taken by the AO cannot be termed as unsustainable in law. 54. So, from the aforesaid facts revealed during the second round, we note that AO has discharged his duty as an Investigator and enquired as per the direction of the First Ld. Pr. CIT dated 23.08.2016 u/s. 263 of the Act (First 263 order) and fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was no detailed or independent enquiry but finally concluded that there was lack of enquiry. So, the Ld. Second Pr. CIT accepts that there was enquiry made by the second AO, however, he concludes that there was lack of enquiry. So when there was an enquiry conducted by AO then the AO has discharged the duty of an investigator. And we note that all the documents referred to above are available is the assessment folder before the Second Ld. Pr. CIT and he could have easily examined the veracity of these documents from the department's data base by click of a mouse and could have recorded his finding of fact if he found anything wrong with these share subscribers and could have pointed out the adverse fact, if any, which the Second Ld. Pr. CIT has not made in the impugned order. So the inference that can be drawn is that the veracity of the factual contents of the documents running more than 352 pages (PB-2) could not be factually controverted by the Second Ld. Pr. CIT. And still if the Ld. Pr. CIT is not satisfied and wanted to interfere invoking jurisdiction u/s. 263 of the Act, he has to show that the enquiry conducted by AO was flawed or the enquiry conducted by AO was on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions/omission of AO in conducting the investigation was erroneous, which unfortunately is not the case before us. And equally bad is the bald allegation/fault that second AO has not collected total facts cannot be accepted being vague and based on conjectures and surmises and so meritless. Since the assessee company has discharged its onus as discussed supra, and still if the Second Pr. CIT had to find the order of Second AO erroneous for lack of enquiry or for not collecting the entire facts, then the Second Pr. CIT ought to have called for the additional facts which he thinks that the Second AO has not collected from the assessee or the shareholders and then explained in his impugned order as to what effect those additional documents would have made on the second assessment order/reassessment order or in other words the impact on the decision making process of framing the second assessment order due to the failure of second AO's omission to collect the additional documents. However, we note that the Second Pr. CIT has not carried out any such exercise or even spelled out in his impugned order, which all documents the second AO failed to collect for considering the total facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as exercised second time by the ld. Pr. CIT, this Bench of the Tribunal in the case M/s. Omkar Infracon Private (supra) held as under:- "13. Further, we note that even though the re-assessment order dated 5.11.2016 was set aside again by the impugned order of Pr. CIT, we note that one of the faults pointed out by the Ld. Pr. CIT to invoke his revisionary jurisdiction were- "(a) Detailed investigation/verification in the nature of independent enquiry regarding identify, credit worthiness, and genuineness of transaction that was intended to be carried but not done and merely accepted the submissions of the assessee" However, we are unable to agree with this allegation of Ld. Pr. CIT. We note that AO in this case had issued during the first and second round of assessment notice u/s. 142(1) of the Act, pursuant to which the assessee had filed all details and the AO examined the same, and thereafter had issued notice u/s. 133(6) of the Act and verified the details, and issued summon u/s. 131 to the directors of the assessee company as well as to all the shareholders. And we note that all of them responded and duly appeared before the AO and their statements were recorded and only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 pages;] and the AO after personally summoning the individual share holders and directors of corporate shareholders and after recording their statements, and after verifying the documents produced before him, has accepted the share capital/premium infused into the assessee company which action of AO cannot be called a perverse order and according to us, the AO from the actions discussed above has discharged his duty as an investigator and adjudicator and taken a plausible view which cannot be called an un-sustainable view on facts or law. (e) The other fault taken note by the Ld. Pr. CIT is that the AO failed to examine all bank accounts for the entire period. To this allegation of Ld. Pr. CIT, we are unable to comprehend the same since the assessee during the first and second round had filed before AO all the relevant bank statements. Before us also all copies and details of bank accounts, have been filed and we find that AO during the assessment proceeding called for the same and examined it, so he has not made any adverse observation against it. So, Ld. Pr. CIT's allegation in respect of non-examination of bank accounts are baseless and deserves to be rejected. (f) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transaction as well as the source of the investment etc. So, from the aforesaid actions carried out by the AO during the reassessment proceeding cannot be found fault with for lack of enquiry and thus, we note that AO has discharged his duty as an Investigator as per the direction of Ld. Pr. CIT dated 10.06.2016 u/s. 263 of the Act (First 263 order) and further we note that the Ld. Pr. CIT while issuing the Show Cause Notice while exercising his revisional jurisdiction for second time has not made even a whisper about the non-compliance/failure on the part of AO in respect of the specific direction given by the Ld. Pr. CIT dated 10.06.2016 while setting aside the original assessment order passed by the AO dated 20.03.2015. And in the impugned order the Ld. Pr. CIT has not found fault with the action of the AO in giving effect to the specific directions given by him while passing the first revisional order on 10.06.2016. Thus, we note that when the AO while framing the reassessment order pursuant to the specific direction of the Ld. Pr. CIT's order dated 10.06.2016 (first revisional order) has complied with the specific directions of Ld. Pr. CIT and based on the inquiry cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the light of the discussion on fact as well as on law, we are of the considered opinion that AO's action (reassessment) pursuant to the first revisional order of Ld. Pr. CIT dated 10.06.2016, to accept the share capital and premium as a possible view in facts and law as per the ratio laid by the Hon'ble Supreme Court in Malabar Industrial Co. Ltd. Vs. CIT 243 ITR 83 (SC) the AO's action/reassessment order cannot be termed as erroneous and prejudicial to the interest of the Revenue. Therefore, the condition precedent for usurping revisional jurisdiction u/s. 263 of the Act is absent and, therefore, the Ld. Pr. CIT lacked jurisdiction to assume second time revisional jurisdiction u/s. 263 of the Act. Therefore, the assessee succeeds on the legal issue raised and, therefore, on the facts and circumstances discussed (supra), we are inclined to quash the impugned order of Ld. Pr. CIT dated 12.03.2019. 9. In the case on hand, we find that Section 143(3) orders have been passed by the revenue in the case of following share applicant companies:- M/s. Goldline Comtrade Private Limited, assessment order dt. 25/06/2014 M/s. Swastik Securities and Finance Ltd., assessment or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 Income Tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but it is prejudicial to the Revenue - recourse cannot be had to Sec. 263 (1) of the Act. It also held at pg-88 as follows: "The phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue: or where two views are possible and the Income-tax Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 substitution of the judgment of the Commissioner for that of the Income Tax Officer, who passed the order unless the decision is not in accordance with the law; that to invoke suo motu revisional powers to reopen a concluded assessment under Sec. 263, the Commissioner must give reasons; that a bare reiteration by him that the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, will not suffice; that the reasons must be such as to show that the enhancement or modification of the assessment or cancellation of the assessment or directions issued for a fresh assessment were called for, and must irresistibly lead to the conclusion that the order of the Income Tax Officer was not only erroneous but was prejudicial to the interests of the Revenue. Thus, while the Income Tax Officer is not called upon to write an elabor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. It held that 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 versions which they present as to what should be the inference or proper inference either of the facts disclosed or the weight of the circumstance; that if this is permitted, litigation would have n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer 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 indicate the results of the enquiry made by him, as she would have a full opportunity for showing to the income tax officer whether he had jurisdiction or not and whether the income tax assessed in the assessment years which were originally passed were correct or not" 31. From the above decisions, the following principles as to exercise of jurisdiction by the Commissioner u/s. 263 of the Act can be culled out: a) The Commissioner has to be satisfied of 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 erroneous but is not prejudicial to the Revenue or if it is not erroneous but it is prejudicial to the Revenue - recourse cannot be had to Sec. 263 (1) of the Act. b) Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 that by the application of the relevant statute on an incorrect or incomplete interpretation, a lesser tax than what was just, has been imposed. g) The power of the Commissioner under Sec. 263 (1) is not Commissioner is entitled 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. 10.1. Now we examine the principles laid down in the following judgements.:- DIRECTOR OF INCOME TAX vs. JYOTI FOUNDATION: 357 ITR 388 (Delhi High Court) It was held that revisionary power u/s. 263 is conferred on the Commissioner/Director of Income Tax when an order passed by the lower authority is erroneous and prejudicial to the interest of the Revenue. Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interest of the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uiry, 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 possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under s. 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. This distinction must be kept in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 322 (SC), not applicable; Malabar Industrial Co. Ltd. v. CIT reported in 243 ITR 83, relied on. (Para 72) As regard the third question as to whether the assessment order was passed by the Assessing Officer without application of mind, it was held that the Court has to start with the presumption that the assessment order was regularly passed. There is evidence to show that the assessing officer had required the assessee to answer 17 questions and to file documents in regard thereto. It is difficult to proceed on the basis that the 17 questions raised by him did not require application of mind. Without application of mind the questions raised by him in the annexure to notice under Section 142 (1) of the Act could not have been formulated. The Assessing Officer was required to examine the return filed by the assessee in order to ascertain his income and to levy appropriate tax on that ba ..... X X X X Extracts X X X X X X X X Extracts X X X X
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