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TMI Blog2024 (9) TMI 1558X X X X Extracts X X X X X X X X Extracts X X X X ..... eted for the assessee vide order dated 29.12.2019 and the income assessable to tax was arrived at Rs. 39,41,18,508/-. Thereafter taking prior approval u/s 148 of the Act from the Principal Commissioner of income Tax, as per the proviso of section 151 of the Act, the case was reopened u/s 147 of the Income Tax Act, 1961. 3. The AO in his order has stated the 'reason' for reopening of the case as under: "As per the information available the assessee has arrived at business income of Rs. 27,91,57,970/- after setting of losses amounting to Rs. 95,36,80,348/-. It is seen that the assessee's entitlement to carry forward losses was revised due to application of provision u/s 79 of the Income Tax Act, 1961". Consequently, a notice u/s 148 of the Act was issued on 31.03.2021, calling the assessee to prepare a true and correct return of income relevant to assessment year 2016- 17. In response to the notice, the assessee filed its ITR for AY 2016-17 on 30.04.2021. Accordingly, notice u/s 143(2) was issued on 28.07.2022 with compliance date as on 12.08.2021. In response of this notice the assessee filed its reply on 07.09.2021 and 11.11.2021 with its objections however, the same was re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forward loss of Rs. 59,82,73,179/- was allowed (brought forward loss of Rs. 95,36,80,348/- unexplained income of Rs. 35,54,07,169/-) as deduction from the total income, details of loss of Rs. 59.82 crs allowed to set off were not available.' 5. Before the ld. PCIT, the assessee has submitted that the issues are covered in the appeal filed before CIT(Appeals). The appellant also submitted before ld.CIT the very same issue which is sought to be revised is already investigated and enquired by the ld.AO in earlier re-assessment proceedings. However, the ld. PCIT after examining form 35, the statement of facts, figures of addition made by the assessing officer are not matching with the show cause notice given by under section 263. Ld. PCIT found that grounds of appeal are general in nature and do not reflect the correct amount of addition made against which appeal has been filed and it was not determinable clearly from the form 35 as to what is the addition which has been contested against. The ld. PCIT directed the ld. Assessing Officer to reconcile the same along with other records and documents. Ld. PCIT further stated that this decision of partly set aside will apply only to the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken a different view than AO. In fact, the ld.AO on same material available before him already duly inquired the issue and judicially had taken a cogent view in reassessment proceedings. The ld. AR further referred pages 1-3 of the Assessment order dated 28.03.2022 passed u/s 147 read with section 144B of the Act. The ld.Counsel argued that since the AO had applied his mind to the facts of the case and had raised a specific query, the ld. CIT was not justified in invoking the provisions of section 263 of the Act. 7. Per contra, the ld. DR supported the findings of the ld. CIT and further contended that issue had not been examined by the AO during the course of assessment proceedings. 8. We have heard the rival submissions and perused the records of the lower authorities and Schedule UD: "Unabsorbed Depreciation and allowance under section 35(4)" in Income Tax Return for AY 2016-17 and find that the impugned order is not sustainable for the following reasons: i. The observation of the ld.CIT that Assessment order dated 28.03.2022 u/s 147 read with section 144B of the Act was passed without due/complete verification is factually incorrect. In fact, same income tax return for A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terests of the Revenue. The conditions are twin conditions as held by the apex court and both of them have to be fulfilled before the Commissioner of Income-tax can exercise jurisdiction under section 263 of the Act. In the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) the apex court has held: "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." viii. We may refer recent judgment of the Hon'ble Delhi High Court dated 01.03.2024 passed in ITA No.1428/2018 in the case of Pr. Commissioner of Income Tax -2, Delhi Vs M/s Cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (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 the case of the assessee or any other person.] ***' 19. A bare reading of sub-Section (1) of Section 263 of the Act makes it abundantly 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. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue. 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 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Madras in Venkatakrishna Rice Co. v. CIT[(1987) 163 ITR 129(Mad)] interpreting 'prejudicial to the interests of the Revenue'. The High Court held: ' ''In this context, (it must) be regarded as involving a conception of acts or orders which are subversive of the administration of revenue. There must be some grievous error in the order passed by the Income Tax Officer, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the Commissioner might think to be prejudicial to the interests of Revenue Administration''. In our 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 prejudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of the Act are fulfilled in its letter and spirit. 28. Notably, the ITAT, while making a categorical finding that the CIT had failed to point out any definite or specific error in the assessment order, has satisfactorily explained both the claims in question in Paragraph 8.2 of its order, which reads as under:- ''8.2 In the Impugned Order, the Ld. Commissioner of Income Tax-IV, Delhi held that the AO had not examined the aforesaid two issues properly and, therefore, set aside the issues for further inquiries to be conducted by the AO. As regards the first issue is 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 intere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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