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TMI Blog2023 (4) TMI 336X X X X Extracts X X X X X X X X Extracts X X X X ..... asti Enterprise and M/s M Link Well. During the year, the assessee claimed deduction of bad debts for Rs. 37,338/- and Rs. 39,27,247/- in both the proprietary concern respectively. During the assessment proceeding, the assessee explained that, he had an agency of Reliance Communication Ltd (the company), for the sale of their CUG connection to the Government Department. Thus, it was his responsibility for the collection sale proceeds made on behalf of the company and as per MOU with the company, if a customer will not pay his bill timely, then the entire outstanding amount will be deducted from his sales commission. During the year, some of parties did not paid the bill on time and subsequently there was election in Gujarat. Hence, the code of conduct was announced and the department stopped the payment till the election of new government. After election, he made effort for transfer of outstanding amount but got no response. Therefore in such circumstances he settled loss with the company and stopped future dealing and thereby written off the amount as bad debt. The AO concurred with the explanation of the assessee and allowed the impugned claim of bad debt vide order dated 22-03-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rders passed by the Assessing Officer shall be deemed to be erroneous and prejudicial to the interest of revenue, if, in the opinion of the Pr. Commissioner or Commissioner :-(a) the order is passed without making inquiries or verification which been made; (b) passed allowing any relief without inquiring into the aim (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in case of the assessee or any other person. 3.5 The instant case falls under the clauses (a) & (b). Further, the law on the issue is very clear that bad debts can be allowed to the assessee only when such debt amount was taken as income in the books, which is not the case here, Thus, in term of the section 36(2) of the IT Act the assessee was not allowed to claim such amount as bad debts. As regards claim as a loss u/s 28 or section 37(1) of the Act, the assessee has failed to adduce any credible or worthwhile evidence to demonstrate that the assessee had indeed incurre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under: "12...... There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of "lack of inquiry", that such a course of action would be open. --- 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 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 more elaborately. This section does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. 10.4 The Mumbai ITAT in the case of Sh. Narayan Tatu Rane Vs. ITO, I.T.A. No. 2690/2691/Mum/2016, dt. 06.05.2016 examined the scope of enquiry under Explanation 2(a) to section 263 in the following words:- "20. Further clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provison shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. CIT cannot be taken as final one, without scrutinising the nature of enquiry or veri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal has in the impugned judgment referred to the detailed correspondence between Assessing Officer and the assessee during the course of assessment proceedings to come to a conclusion that the Assessing Officer had carried out detailed inquiries which includes assessee's on-money transactions. It was on account of these findings that the Tribunal was prompted to reverse the order of revision. No question of law arises. Tax Appeal is dismissed" 10.6 The Supreme Court in the another recent case of Principal Commissioner of Income-tax-2, Meerut v. Canara Bank Securities Ltd[2020] 114 taxmann.com 545 (SC), dismissed the Revenue's SLP holding that 263 proceedings are invalid when AO had made enquiries and taken a plausible view in law, with the following observations: "Having heard learned counsel for the parties and having perused the documents on record, we see no reason to interfere with the view of the Tribunal. The question whether the income should be taxed as business income or as arising from the other source was a debatable issue. The Assessing Officer has taken a plausible view. More importantly, if the Commissioner was of the opinion that on the available fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Ld. AO did not apply his mind to the issue on hand or he had omitted to make enquiries altogether. In the instant set of facts, the AO had made enquiries and after consideration of material placed on record accepted the genuineness of the claim of the assessee. 10.10 At this juncture, it is also important to note that the learned PCIT in his order passed under section 263 of the Act has made reference to the explanation 2 of section 263 of the Act. It was attempted by 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. 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 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 learne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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