TMI Blog2024 (3) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... USTICE PURUSHAINDRA KUMAR KAURAV For the Appellant Through: Mr. Prashant Meharchandani, Sr. Standing Counsel. For the Respondent Through: Mr. Sachit Jolly, Advocate. JUDGMENT PURUSHAINDRA KUMAR KAURAV, J. 1. The instant appeal at the instance of the Revenue is filed against the order dated 23.04.2018, passed by the Income Tax Appellate Tribunal [ ITAT ], setting aside the order of the Commissioner of Income Tax [ CIT ] passed under Section 263 of the Income Tax Act, 1961 [ Act ] for the Assessment Year [ AY ] 2002-03. 2. The facts of the case exhibit that the respondent-assessee is a Non-Banking Financial Company [ NBFC ] engaged in the business of providing finance to industry, trade etc. through hire purchase, lease and loans. The respondent-assessee filed its income tax return [ ITR ] for the concerned AY on 31.10.2002, declaring its total income to the tune of Rs. 65,41,08,720/-. The ITR filed by the respondent-assessee was processed under Section 143(1) of the Act. Subsequently, a notice under Section 143(2) was issued on 28.03.2003, intimating that the case of the respondent-assessee has been selected for the scrutiny. 3. In pursuance of the proceedings under Section 143(3) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned counsel appearing on behalf of the Revenue submits that the ITAT erred in setting aside the revisional order under Section 263 of the Act, inasmuch as, the AO had failed to record any finding with respect to the above-mentioned two issues in the assessment order. He submits that there is nothing on record which could signify due application of mind on the part of the AO while allowing the claims of the respondent-assessee. He, therefore, submits that the revisional authority has rightly held that the AO has failed to make any enquiry and merely accepted the version of the respondent-assessee. 8. He further contends that any order passed by the AO without carrying out necessary verification, would be deemed to be erroneous as per Explanation 2 to Section 263 of the Act. While taking this Court through the original assessment order at Annexure A-1, he submits that the AO has merely sought details with respect to the claims in question, however, the same cannot be construed as an enquiry for the purpose of satisfying the conditions laid down in Section 263 of the Act. Learned counsel further submits that if the assessment order is read in juxtaposition with questionnaire dated 02. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision recording of each and every finding in the assessment order, however, the same cannot lead to a far-fetched conclusion that no enquiry has been conducted qua the issues not properly elucidated in the assessment order. 13. He further contends that once it appears that the AO has conducted the enquiry on the issues on which the concerned authority seeks to exercise jurisdiction under Section 263 of the Act, the said authority must record conclusive findings of error and prejudice and cannot remit back the issues for a fresh consideration. 14. Learned counsel has placed reliance on the decisions in the cases of Hari Iron Trading Co. v. CIT [(2003) 263 ITR 43 7 (P H)], CIT v. Eicher Ltd. [(2007) 294 ITR 310 (Del.)], CIT v. Gabriel India Ltd. [(1993) 203 ITR 108], CIT v. Nirma Chemicals Ltd. [(2009) 309 ITR 67], CIT v. Ashish Rajpal [(2010) 320 ITR 674 (Delhi)]. 15. We have heard the learned counsel appearing on behalf of the parties and perused the record. 16. Vide order dated 06.11.2019, this Court framed the following question of law:- A. Whether, in the facts and circumstances of the case, the Hon'ble ITAT was justified in quashing the order under Section 263 of the Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bundantly clear that the said provision lays down a two pronged test to exercise the revisional authority i.e., firstly, the assessment order must be erroneous and secondly, it must be prejudicial to the interests of the Revenue. Further, Explanation 2 to Section 263 of the Act delineates certain conditions and circumstances when the order passed by the AO can be said to be erroneous and prejudicial to the Revenue. 20. Clause (a) of Explanation 2 to Section 263 of the Act further stipulates that if an order is passed without making an enquiry or verification which should have been made, the same would bestow a revisional power upon the Commissioner. However, the said Clause or any other condition laid down in Explanation 2 does not warrant recording of the said enquiry or verification in its entirety in the assessment order. 21. Admittedly, in the instant case, the questionnaire dated 02.11.2004, which has been annexed and brought on record in the present appeal, would manifest that the AO had asked for the allowability of the claims with respect to the issues in question. Consequently, the respondent-assessee duly furnished explanations thereof vide replies dated 09.12.2004, 20.12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. It is only in cases of lack of inquiry that such a course of action would be open. In Gabriel India Ltd. (1993) 203 ITR 108 (Bom), law on this aspect was discussed in the following manner (page 113) *** 23. A similar view was taken by this Court in the case of CIT v. Anil Kumar Sharma [2010 SCC OnLine Del 838], wherein, it was held that once it is inferred from the record of assessment that AO has applied its mind, the proceedings under Section 263 of the Act would fall in the category of Commissioner having a different opinion. Paragraph 8 of the said decision reads as under:- 8. In view of the above discussion, it is apparent that the Tribunal arrived at a conclusive finding that, though the assessment order does not patently indicate that the issue in question had been considered by the Assessing Officer, the record showed that the Assessing Officer had applied his mind. Once such application of mind is discernible from the record, the proceedings under section 263 would fall into the area of the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view this interpretation is too narrow to merit acceptance. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income Tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. 10. The phrase prejudicial 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 Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income Tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income Tax Officer is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned, we note that out of total provision of Rs. 1114.68 lacs, a sum of Rs. 7,60,76,105/- was suo moto added back in the computation of income and a further sum of Rs. 73,46,160/- was disallowed by the AO in the original assessment order dated 30.3.2005. Therefore, out of Rs. 1114.68 lacs, Rs. 834.22 lacs already stood disallowed in the original assessment order. The balance amount represented actual write off which was palpably clear from page 2 of the impugned order itself. No deduction on account of any such provision was, therefore, allowed to the assessee. Hence, there is no error or prejudice to the interest of revenue. As regards second issue it was noted that interest rate swap was an actual loss and only the net loss of Rs. 114.05 lacs after setting of gain of interest rate swap was claimed as deduction. However, we find that both these issues were duly examined by the AO vide Questionnaire dated 2.11.2004 (Page 1-2 of the Paper Book) to which replies dated 9.12.2004, 20.12.2004 and 6.1.2005 (Page No. 3-39 of Paper Book-1) were furnished and, therefore, the finding of the Ld. CIT that the issues were not examined properly was not correct. Even the Ld. CIT has not poin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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