TMI Blog2022 (12) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... has also categorically admitted that to such extent where TDS is liable to be done, the TDS has been deducted and where payment was less than Rs.30,000/-, no TDS has been deducted. Admittedly, the Pr.CIT in his wisdom failed to consider the issue even after receipt of the reply of the assessee. This clearly shows that the Pr.CIT has not conducted any enquiry after receipt of the reply of the assessee. This is not permitted under the provisions of Section 263 of the Act. Ld. Pr.CIT cannot brush aside the reply of the assessee and set aside the issue to the file of AO for readjudication u/s.263 of the Act without doing any primary investigation. As the first issue of WIP is not an issue arising from the show cause notice issued u/s.263 of the Act and the second issue is an issue which has already been considered by the AO and no investigation has been done by the ld. Pr.CIT, we are of the view that the order passed u/s.263 of the Act is unsustainable and consequently we quash the same. Appeal of the assessee is allowed. - ITA No.107/CTK/2021 - - - Dated:- 30-11-2022 - Shri George Mathan, JM And Shri Arun Khodpia, AM For the Assessee : Shri S.N.Sahoo, Advocate with Shri So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication of mind and hence it was erroneous and prejudicial to the interests of revenue. The Hon'ble Supreme Court in the case of Malabar Industries Ltd. vs. CIT (243 ITR 83) has held in para-7 that 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 findings of the Hon'ble Supreme Court in para-10 are reproduced as under: 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 appellant-company 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 ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w that the profit element in the WIP was not accounted for by the Assessee is absent in the order of the CIT . Thus the Hon'ble Orissa High Court has itself held in para-14 that even if such enquiry may not be mandatory but there should be some basis to form such a view. The cases where there is incorrect application of law, the Pr. CIT is not required to carry out any sort of enquiry as section 263(1) uses the words as he deems necessary . iii.) A plain reading of section 263 of the Act reveals that the CIT can make inquiry on his own if he deems so necessary and can also direct the A.O. to conduct inquiries. This very question was answered by the Hon'ble DelhiHigh Court in the case of Gee Vee enterprises (99 ITR 375) as under: The question would naturally arise whether the firm was formed merely for the purpose of getting a tax advantage. Shri Sharma argued that there is nothing wrong if a legitimate advantage is sought by these means. But it was precisely for that reason that the Income-tax Officer had to be satisfied that the firm had existed in the previous year genuinely. It cannot be said that the Commissioner could not be reasonably of the opinion t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpretation. The intention of the legislature was to give a wide power to the Commissioner. He may consider the order of the Income-tax Officer as erroneous not only because it contains some apparent error of reasoning or of law or of fact on the face of it but also because it is a stereo-typed order which simply accepts what the assessee has stated in his return and fails to make inquiries which are called for in the circumstances of the case. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word erroneous in section 263 emerges out of this context. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word erroneous in section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the material enough to reach the satisfaction, which a rational person, being informed of the nuances of tax laws would reach after due appreciation of such material. If this component is missing, it will always be a case of lack of inquiry and not inadequate inquiry. In the case of no inquiry, the assessment order is not only erroneous but also prejudicial to the interest of revenue. The order of assessment has to be a speaking Order and when the fact of others' view has not been mentioned and the claim pressed by the assessee has been allowed without making any inquiry, then the order must be held as erroneous and prejudicial to the interest of revenue. 5. It was further submitted by the ld. CIT-DR that this is a case of erroneous application of law, insofar as the AO has not considered the issue of TDS in proper perspective. It was the submission that as it is the issue of erroneous application of law, there is no requirement of any further investigation by the ld. Pr.CIT. It was further submitted that the assessee in his reply before the ld. Pr.CIT has submitted that verbal discussion have been done with the AO. It was the submission that no evidence of this verb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceipt of the reply of the assessee. This is not permitted under the provisions of Section 263 of the Act. Ld. Pr.CIT cannot brush aside the reply of the assessee and set aside the issue to the file of AO for readjudication u/s.263 of the Act without doing any primary investigation. This view of ours is supported by the decision of the coordinate bench of the Tribunal in the case of M/s Earth Minerals Co. Ltd., passed in ITA No.223/CTK/2019, order dated 29.08.2022, wherein this Bench of the Tribunal has placed reliance on the decision of the Hon ble Jurisdictional High Court in the case of Orissa State Police Housing Welfare Corporation Ltd., reported in [2022] 139 taxmann.com 207 (Orissa). This being so, as the first issue of WIP is not an issue arising from the show cause notice issued u/s.263 of the Act and the second issue is an issue which has already been considered by the AO and no investigation has been done by the ld. Pr.CIT, we are of the view that the order passed u/s.263 of the Act is unsustainable and consequently we quash the same. 9. In the result, appeal of the assessee is allowed. Order pronounced and dictated in the open court on 30/11/2022. - - TaxTMI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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