TMI Blog2022 (12) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned PCIT to hold that there were certain necessary enquiries which should have been made by the AO during the assessment proceedings but not conducted by him. Therefore, on this reasoning the order of the AO is also erroneous insofar prejudicial to the interest of revenue PCIT has not invoked the explanation 2 of section 263 of the Act in the show cause notice about the same. Therefore, the opportunity with respect to the explanation 2 of section 263 of the Act was not afforded to the assessee. Thus, on this count the learned PCIT erred in taking the course of such provisions while deciding the issue against the assessee. Secondly, the learned PCIT has also not specified the nature and the manner in which the enquiries which should have been conducted by the AO in the assessment proceedings. Thus, in the absence of any specific finding of the learned PCIT with respect to the enquiries which should have been made, we are not convinced by his order passed under section 263 Thus we hold that there is no error in the assessment framed by the AO under section 143(3) of the Act, causing prejudice to the interest of revenue. Thus, the revisional order passed by the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use notice submitted that the AO before the finalizing the assessment proceeding had properly enquired the issue in respect of tax liability on unaccounted income declared by the assessee during the survey proceedings by issuance of notice u/s 142(1) of the Act dated 23-12-2019. 5.1 The assessee in response to such notice explained the source of such unaccounted income of Rs. 40,00,000/- before the AO. Likewise the assessee explained the unaccounted income of Rs. 20,00,000/- as off market transaction. The assessee has invested Rs. 15,60,000/- as investment and earned an income of Rs. 4,40,000/- as profit out of commodity transaction. The assessee further explained that the remaining unaccounted income Rs. 20,00,000/- is related to survey no. 364 village madhapar tal, bhuj. Thus it is cleared that the transaction is unaccounted but not unexplained. 5.2 The assessee further submitted that at the time of disclosure the rate of tax specified under section 115BBE was 30% and the assessee has paid the amount instantly. However, the section 115BBE amended by the Taxation Laws (Second Amendment) Act, 2016, w.e.f. 1-4-2017 retrospectively and tax rate increased to the extent of 60%. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uiries or verification with respect to the applicability of section 115BBE of the Act as discussed above and hence the assessment is erroneous insofar prejudicial to the interest of the Revenue and thus requiring revision by Pr. CIT u/s 263 of the Act. 10.1 An inquiry made by the Assessing Officer, considered inadequate by the Commissioner of Income Tax, cannot make the order of the Assessing Officer erroneous. In our view, the order can be erroneous if the Assessing Officer fails to apply the law rightly on the facts of the case. As far as adequacy of inquiry is considered, there is no law which provides the extent of inquiries to be made by the Assessing Officer. It is Assessing Officer s prerogative to make inquiry to the extent he feels proper. The Commissioner of Income Tax by invoking revisionary powers under section 263 of the Act cannot impose his own understanding of the extent of inquiry. There were a number of judgments by various Hon ble High Courts in this regard. 10.2 Delhi High Court in the case of CIT Vs. Sunbeam Auto 332 ITR 167 (Del.), made a distinction between lack of inquiry and inadequate inquiry. The Hon ble court held that where the AO has made inqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion cannot be termed 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. 15. Thus, even the Commissioner conceded the position that the Assessing Officer made the inquiries, elicited replies and thereafter passed the assessment order. The grievance of the Commissioner was that the Assessing Officer should have made further inquires rather than accepting the explanation. Therefore, it cannot be said that it is a case of lack of inquiry . 10.3 The Hon ble Bombay High Court in case of Gabriel India Ltd. [1993] 203 ITR 108 (Bom), discussed the law on this aspect in length in the following manner: The 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 whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 The Hon ble Supreme Court in recent case of Principal Commissioner of Income-tax 2 v. Shree Gayatri Associates*[2019] 106 taxmann.com 31 (SC), held that where Pr. CIT passed a revised order after making addition to assessee's income under section 69A in respect of on-money receipts, however, said order was set aside by Tribunal holding that AO had made detailed enquiries in respect of such on-money receipts and said view was also confirmed by High Court, SLP filed against decision of High Court was liable to be dismissed. The facts of this case were that pursuant to search proceedings, assessee filed its return declaring certain unaccounted income. The Assessing Officer completed assessment by making addition of said amount to assessee's income. The Principal Commissioner passed a revised order under section 263 on ground that Assessing Officer had failed to carry out proper inquiries with respect to assessee's on money receipt. In appeal, the Tribunal took a view that Assessing Officer had carried out detailed inquiries which included assessee's on-money transactions and Tribunal, thus, set aside the revised order passed by Commissioner. The Hon ble High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r causing prejudice to the interests of the Revenue unless the view taken by the Assessing Officer is unsustainable in law, or the AO has completely omitted to make any enquiry altogether or the order demonstrates non-application of mind. 10.8 Now in the facts before us, in the case of the assessee the AO during the course of assessment proceedings, made enquiries on this issue and after consideration of written submissions filed by the assessee and documents / evidence placed on record, and then framed the assessment under section 143(3) of the Act. This fact can be verified from the notice issued by the AO and submission in reply of the assessee against such notices. i. Notice dated 23-12-2019: 2. From (he perusal of the case records it is noticed that in your case a survey was conducted on 26.09.2016 during proceedings of which you have declared Rs. 20,00,000/- on account of gains on commodity transactions and Rs. 20,00,000/- on account of unaccounted expenses without any underlying supporting documents for the source and manner in which such profit was earned. Therefore, it is show caused as to why same should not be treated as unexplained credits u/s68 of the I.T.Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO during the assessment proceedings but not conducted by him. Therefore, on this reasoning the order of the AO is also erroneous insofar prejudicial to the interest of revenue. In this regard, we make our observation that the learned PCIT has not invoked the explanation 2 of section 263 of the Act in the show cause notice dated 17 January 2022 about the same. Therefore, the opportunity with respect to the explanation 2 of section 263 of the Act was not afforded to the assessee. Thus, on this count the learned PCIT erred in taking the course of such provisions while deciding the issue against the assessee. Secondly, the learned PCIT has also not specified the nature and the manner in which the enquiries which should have been conducted by the AO in the assessment proceedings. Thus, in the absence of any specific finding of the learned PCIT with respect to the enquiries which should have been made, we are not convinced by his order passed under section 263 of the Act. 10.11 In view of the above and after considering the facts in totality, we hold that there is no error in the assessment framed by the AO under section 143(3) of the Act, causing prejudice to the interest of reve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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