TMI Blog2023 (8) TMI 1255X X X X Extracts X X X X X X X X Extracts X X X X ..... his assessment-order as a perfectionist. In our considered view, the writing of assessment-order is a task of AO and the same is neither controlled nor helped by the assessee. In fact, the assessee has no hand or mind in writing the assessment-order. Being so, we are afraid to accept the pleading of Ld. DR that the assessment-order could be said to be erroneous-cum-prejudicial for that reason. Regarding introduction of Explanation 2 to section 263, as claimed by Ld. PCIT in his order, we only need to submit that the said Explanation does not give unfettered power to the PCIT to assume revisional-jurisdiction to revise every order of the AO to re-examine the issues already examined during assessment-proceeding. As judicially interpreted in several decisions that the intention of legislature behind introduction of Explanation 2 could not have been to enable the PCIT to find fault with each and every assessment-order in unlimited terms since such an interpretation would lead to unending litigation and there would not be any point of finality of assessment-proceeding done by Ld. AO. Thus we are persuaded to hold that the facts of the present case do not warrant application o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amended and Explanation 2, as reproduced below, had been introduced therein, the assessment-order is deemed to be erroneous-cum-prejudicial to the interest of revenue if the same had been passed without inquiries or verification which should have been made: Explanation 2 For the purpose of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interest of revenue, if in the opinion of the Principal Commissioner or Commissioner - (a) The order is passed without making inquiries or verification which should have been made; (b) The order is passed allowing any relief without inquiring into the claim; (c) . (d) 5. Finally, Ld. PCIT concluded that the AO has not carried out the inquiry/verification which he should have done and hence the assessment-order is erroneous in so far as it is prejudicial to the interest of revenue. Accordingly, Ld. PCIT passed revision-order u/s 263 whereby the assessment-order was set aside to the file of AO with a direction to re-frame assessment after examining the issue raised by him. 6. Aggrieved by such revision-order, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Required evidence regarding the direct nexus of the loan taken from M/s Neena Motors Investment made in M/s Prince Motors as there are other investment also as per Balance-Sheet, where this loan might have been used. All the details should be submitted in the order in which they appear. The submission shall be verified and signed by the assessee/authorised signatory in the following format. The assessee filed reply dated 11.11.2019 (Page No. 65-89 of Paper- Book) giving details of loan taken, investment made and justification of interest deduction. The assessee also filed copy of income-tax return of preceeding AY 2016-17 in which also the interest expenditure was claimed as deduction though against Income from Business and not against Income from Other Sources and the same was allowed by department. (iii) The AO issued notice dated 18.11.2019 u/s 142(1) (Page No. 44-45 of Paper-Book) raising following query: 1. Please submit a report about establish a nexus of loan taken from M/s Neena Motors and investment made in M/s Prince Motors. Then, the AO issued notice dated 26.11.2019 u/s 142(1) (Page No. 47- 48 of Paper-Book) raising following query: Please re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case. He submitted that the assessment-order is silent / cryptic on the issues raised by Ld. PCIT, which clearly demonstrates that the AO has not made enquiries as required and hence Ld. PCIT was constrained to conduct revision-proceeding. Ld. DR submitted that the action of Ld. PCIT is very much in accordance with the mandate of section 263 and must be upheld. 13. We have heard the rival contentions, perused the material on record and duly considered the facts of the case in the light of applicable legal positions. On a careful consideration of various documents placed in the Paper-Book, as noted in the foregoing discussion, we find that during the course of assessment-proceeding, there were specific queries raised by AO with regard to the issues contemplated by Ld. PCIT and the assessee too made detailed replies / submissions. To this extent, there is no dispute or rebuttal by revenue. Clearly, therefore, it is discernible that the Ld. AO has considered those replies / submissions and thereafter taken a plausible view. Further, the action of AO in accepting the replies / submissions of assessee does not lack bonafides and cannot be said to be faulty. Thus, everything h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 could not have been to enable the PCIT to find fault with each and every assessment-order in unlimited terms since such an interpretation would lead to unending litigation and there would not be any point of finality of assessment-proceeding done by Ld. AO. 15. Hon ble ITAT, Rajkot in M/s Pramukh Realty, Junagadh, ITA No. 93/Rjt/2022 dated 30.06.2022, has extensively dealt a case where the AO raised queries during assessment-proceeding and the assessee filed details / documents. After a thorough analysis, the Hon ble Bench has held that in such circumstances, revision u/s 263 cannot be done. The relevant paragraphs of the decision are reproduced below: 5. The learned AR before us filed a paper book running from pages 1 to 157 and contended that all the necessary details about the advances received from the parties, sales shown in the financial statement and details of the service tax returns were filed during the assessment proceedings. The learned AR further contended that the assessment was framed by the AO after considering the necessary details and verification and application of mind. The learned AR in support of his contention drew our attention on pages 151 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 not visualise a case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs 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. 7.4 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 provision 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 verification carried out by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 . 7.6 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 facts from record it could be con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. 16. In view of above discussion and for the reasons stated therein, we are persuaded to hold that the facts of the present case do not warrant application of section 263. Therefore, the revision-order passed by Ld. PCIT is not a valid order. We, thus, quash the revision-order and restore the original assessment-order passed by AO. The assessee succeeds in this appeal. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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