TMI Blog2021 (6) TMI 445X X X X Extracts X X X X X X X X Extracts X X X X ..... as to find that whether the order is erroneous and prejudicial to the interest of revenue. As relying on DG HOUSING PROJECTS LTD [ 2012 (3) TMI 227 - DELHI HIGH COURT] revisionary powers by Ld. Pr. CIT/CIT can be held to be correct if the Ld. Pr. CIT had examined and verified the said transactions himself and given a finding on merit. In the instant case, this aspect was completely missed out. The information of large cash deposit in Saving Bank Account had come before Ld. Pr. CIT. He should have called for the records so as to find out the details of Saving Bank account in which alleged large cash was deposited. It was not done so. Pr. CIT should have noted that how a partnership firm can open a saving bank account, it was again not done so. It is quite possible that the reasons on the basis of which case of the assessee was selected for scrutiny itself had some short comings or error which at least when Ld. Pr. CIT was issuing the show cause notice should have taken note of. Going through impugned order we find that the Ld. Pr. CIT has only mentioned the reasons and the brief submission made by the assessee and with a very brief analysis of facts just referred to plet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aj Auto Ltd., Pune. The case was selected through CASS for complete scrutiny for the following reasons: a) Low Income shown by large contractors. b) Mismatch in amount paid to related persons u/s. 40A(2)(b) reported in Audit Report and ITR. c) Higher Turnover reported in Service Tax Return compared to ITR and assessee has deposited large amount of cash in saving bank account. Statutory notice u/s. 143(2) of the Act and 142(1) of the Act were duly served upon the assessee with detailed questionnaire placed at pages 1 to 5 of the paper book dated 23.3.3021. Assessee filed the reply with necessary evidences and also produced the documents. After examining the same Ld. AO completed the assessment. He made disallowance of donation expenses of ₹ 64,391/- and other expenses at ₹ 3,00,000/-, thereby assessing income at ₹ 62,50,011/-. 3. Subsequently, Ld. Pr. CIT, Bhopal invoked the provisions of section 263 of the Act and issued following show cause notice to the assessee (relevant extract is reproduced below): Please refer to the order u/s. 143(3) of the IT Act, 1961 dated 26.04.2017 passed by the DCIT-5(1), Bhopal for A.Y. 2015-16, whereby tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llegation of cash deposit is not correct. 5. It was also submitted before the Ld. Pr. CIT that all details required by Ld. AO were filed. Ld. AO was aware of the issues involved in reasons for complete scrutiny and raised specific queries. In response of which replies were filed and Ld. AO examined each and every aspect with the books of account and relevant records with due application of mind. 6. However, Ld. Pr. CIT was not satisfied with this reply and after placing reliance on various judgments concluded that as there was a complete lack of enquiry on the part of Ld. AO, all the stated issues which have rendered the order as erroneous because it has resulted in a potential loss of revenue. The order is also prejudicial to the interest of Revenue. Accordingly, the assessment order dated 26.04.2017 was set aside on the three issues for which the complete scrutiny was initiated, thereby, directing the Ld. AO to conduct full and proper enquiry. 7. Now the assessee is in appeal before the Tribunal challenging the action of Ld. Pr. CIT of assuming jurisdiction u/s. 263 of the Act. Learned senior counsel for the assessee apart from referring to various documents filed in pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove contention Ld. Senior Counsel for the assessee has relied on following judgment: 1. Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax, (2000) 243 ITR 83 (SC) 2. CIT v. Gabriel India Ltd. [1993] 203 ITR 108 (Bom). 3. Micro Inks Limited v. CIT (2018) 407 ITR 681 (Guj) (HC). 4. D.G. Housing Projects Ltd.-[2012] 20 taxmann.com 587 (Delhi). 8. Per contra Ld. Departmental Representative (DR) referred to the finding of Ld. Pr. CIT and also decisions referred in the impugned order by the Ld. Pr. CIT and the same is mentioned below: 4. I have carefully considered the facts of the case, the show cause notices, the reply filed by the assessee and the case record. I find that a perusal of the assessment order shows that the three issues were part of the assessment order in so far as mentioning them therein is concerned. A perusal of para 4 page 2 of the assessment order shows that AO has mentioned the three points for complete scrutiny and has scanned the reply of the assessee. Thereafter, he has observed as follows: (On perusal of the submission, it is found that the assessee duly substantiate the genuineness of his claim in his submission which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 242 (Calcutta). 4. State Bank of Indore v. CIT (1998) 64 ITD 209 (Indore). 5. S.N. Mukherjee vs. Union of India (1990) AIR 1984 : 1990 Supl. (1) 44 DID, 28th August, 1990. 6. Boston Analytics P. Ltd. Mumbai vs. ITO I.T.A.T. Mumbai B Bench ITA No. 2745/Mum/2012. 6. Based on the above, it is clear that, there is complete lack of enquiry on the part of the assessing officer on all the stated issues which has rendered the order erroneous and because it has resulted in a potential loss of revenue, the order is also prejudicial to the interest of revenue. The assessment order is accordingly set aside on the above three issues with the direction to conduct full and proper enquiry and also giving assessee proper opportunity of being heard. Therefore, a reasoned and speaking order should be passed by the assessing officer in accordance with law. 9. We have heard rival contentions and perused the records placed before us and carefully gone through the facts of the case, submission filed and the decisions referred and relied by both sides. Through this appeal the assessee has challenged the jurisdiction assumed by Ld. Pr. CIT using revisionary powers u/s. 263 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssistant Commissioner or Deputy Commissioner or the Income Tax Officer on the basis of the directions issued by the Joint Commissioner under Section 144-A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorised by the Board in this behalf under Section 120; (b) record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject-matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub- section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. (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 orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exist to enable the Commissioner to exercise power of revision under this sub10 section, viz., (i) the order is erroneous; (ii) by virtue of the order being erroneous prejudice has been caused to the interests of the Revenue. It has, therefore, to be considered firstly as to when an order can be said to be erroneous. We find that the expressions erroneous , erroneous assessment and erroneous judgment have been defined in Black's Law Dictionary. According to the definition, erroneous means involving error; deviating from the law . Erroneous assessment refers to an assessment that deviates from the law and is, therefore, invalid, and is a defect that is jurisdictional in its nature, and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. Similarly, erroneous judgment means one rendered according to course and practice of court, but contrary to law, upon mistaken view of law; or upon erroneous application of legal principles . 12. From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income tax Officer acting in accordance with law ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is prejudicial to the interests of the Revenue. We have already held what is erroneous. It must be an order which is not in accordance with the law or which has been passed by the Income-tax Officer without making any enquiry in undue haste. We have also held as to what is prejudicial to the interests of the Revenue. An order can be said to be prejudicial to the interests of the Revenue if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realised or cannot be realised. There must be material available on the record called for by the Commissioner to satisfy him prima facie that the aforesaid two requisites are present. If not, he has no authority to initiate proceedings for revision. Exercise of power of suo motu revision under such circumstances will amount to arbitrary exercise of power. It is well-settled that when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on record to satisfy it in that regard. If the action of the authority is challenged before the court it would be open to the courts to examine whether the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o account the position of law as it stood on the date when the Commissioner passed the order dated March 5, 1997, in purported exercise of his powers under Section 263 of the Income Tax Act. 3. For the above reasons, civil appeals filed by the department stand dismissed. 16. It is a settled position of law that powers u/s. 263 of the Act can be exercised by the Pr. Commissioner/Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and prejudicial to the interest of the Revenue. By 'erroneous' is meant contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry. Our view is f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts referring to each of the reasons: i. As regards low income shown by large contractors we observe that prima facie going through records it appears that the assessee is a trader and authorized dealer of M/s. Bajaj Auto Ltd. and also sales accessories and spare parts. No documents are placed before us which could prove that the assessee is a large contractor. Even otherwise the turnover of the assessee has increased from 76.42 cr. (Approx.) in A.Y. 2014-15 to ₹ 79.54 Cr. (Approx.) in A.Y. 2015-16. Gross profit and net profit ratio has also been more or less consistent at 14.72% and 0.83% for A.Y. 2014-15 and 14.34% and 0.74% for A.Y. 2015-16. Though there is a decline in overall net profit of ₹ 4,25,773/- but the same has already been considered to a large extent by the assessing officer by disallowing expenses to the tune of ₹ 3,64,391/-. Therefore, so far as this issue is concerned, we find that complete details were placed before Ld. AO and he after due application of mind and examining the necessary documents has made additions. Therefore, we find no justification in the finding of Ld. Pr. CIT directing the assessing officer to reexamine this issue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t service charges of ₹ 66,95,750/- is shown on credit side being service charges received. In the services tax returns we find that the return for first six months shows a taxable receipt of ₹ 26,47,323/- and for second half of the year service receipt of ₹ 15,19,842/- which total to ₹ 42,38,165/-. But apart from the taxable services assessee also received nontaxable service amounting to ₹ 24,72,851/-. If both taxable and nontaxable services are added up they would almost match to the service charges shown in the profit and loss account. These details of service tax returns were filed before the Ld. AO. On the strength of these documents Ld. AO was satisfied with the submissions and was of the view that there is no mismatch in turnover as per the service tax return and ITR. We therefore are of the view there is a complete enquiry and application of mind by the Ld. AO on this which thus do not call for invoking the provisions of section 263 of the Act. iv. The other limb of 3rd reason is a large cash deposit in Saving Bank Account. Though assessee is a partnership firm and is not entitled to open a Saving Bank Account, but complete details of all b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing 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. 17. This distinction must be kept in mind by the CIT while exercising jurisdiction under Section 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of alleged inadequate investigation , it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the said aspect and accepted the respondent's computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment order is erroneous . The said finding will be correct, if the CIT had examined and verified the said transaction himself and given a finding on merits. As held above, a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order being erroneous and prejudicial to the interest of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In the second set of cases, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find ou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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