TMI Blog2023 (4) TMI 336X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of the AO erroneous insofar prejudicial to the interest of revenue - 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 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 - Decided in favour of assessee. - ITA No. 1075/AHD/2018 - - - Dated:- 31-3-2023 - SHRI WASEEM AHMED , ACCOUNTANT MEMBER And Ms MADHUMITA ROY , JUDICIAL MEMBER For the Assessee : Shri S. N Divatia , A. R For the Revenue : Shri Vijay Kumar Jaiswal , CIT. D. R ORDER PER WASEEM AHMED , ACCOUNTANT MEMBER : The captioned appeal has been file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of bad debts. However the AO, without making enquiry and application of mind in this regard finalized the assessee which is erroneous insofar prejudicial to the interest of the Revenue. Thus issued show cause notice under section 263 of the Act purposing revision of assessment order. 5. The assessee in response to such show cause notice reiterated its submission during the assessment proceeding and requested to allow the claim of the bad debt. 6. However, the ld. PCIT disagreed with the submission of the assessee and set aside the assessment order as erroneous insofar prejudicial to the interest to the Revenue by observing as under: 3.1 On perusal of the copy of agreement between the assessee and Relinace Communication Ltd, it was observed that the assessee is a mere recovery agent and it did not have any obligation to discharge the debts owned by the parties to Reliance Communication. Ltd.Therefore, the said debts could never be claimed as bad debts by the assessee in its books of account as these debtors were primarily debtors of Reliance Communication Ltd and not the assessee. 3.2 The assessee has not produced the copy of his ledger account as appeari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 and pages 1 to 63 and contended that the assessment was framed by the AO after necessary verification and due application of mind. Therefore, the assessment order cannot be said as erroneous insofar prejudicial to the interest of revenue on account of non-verification. 9. On the contrary, the learned DR vehemently supported the order of the authorities below. 10. We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the present case relates whether the assessment order has been passed by Ld. AO without making inquiries or verification with respect to the bad debts claim by the assessee in the P L account 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 whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at conclusion and such a conclusion 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made. In our view, it is the responsibility of the Ld Pr. CIT to show that the enquiries or verification conducted by the AO was not in accordance with the enquries or verification that would have been carried out by a prudent officer. Hence, in our view, the question as to whether the amendment brought in by way of Explanation 2(a) shall have retrospective or prospective application shall not be relevant. 10.5 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial 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 Assessing Officer adopts one of the course permissible in law and it has resulted in loss of revenue; or where two views are possible and the Assessing Officer has taken one view with which the Commissioner of Income-tax does not agree, it cannot be treated as an erroneous order 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 issue of bad debts 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) accepting the genuineness of claim of bad debts. This fact can be verified ..... X X X X Extracts X X X X X X X X Extracts X X X X
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