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TMI Blog2025 (2) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... ds, more particularly, when the Hon'ble ITAT, Raipur Bench has vide order in ITA No. 112/RPR/2018 dated 17.10.2022 has quashed 4e order passed by the Learned PCIT, Bilsapur u/s 263 which renders the assessment order passed u/s. 143(3) r.w.s. 263 to be non-est as the assessment order passed u/s. 143(3) r.w.s. 263 was based on the order u/s. 263 which stands uprooted. Consequently, the First Appellate Proceedings directed against the assessment order passed u/s. 143(3) r.w.s. 263 also became redundant and liable to be dropped. Hence, it is prayed that the order passed by the Learned CIT (Appeal), NFAC, Delhi may kindly be set aside. 2. On the facts and in the circumstances of the case, the Learned CIT (Appeal) is not justified in passing the order and confirming the additions/disallowances in an ex-parte order for want of prosecution without providing sufficient opportunity of being heard to the assessee and thereby violating the principles of natural justice. Hence, the impugned order passed by the Learned CIT (Appeal) without dealing with the grounds of appeal on merit is liable to be declared as illegal and bad-in-law. It is prayed that the order passed by the Learned CIT (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arity, the observations of the Tribunal are culled out as under: "10. We have given a thoughtful consideration to the facts elucidated hereinabove, and are unable to concur with the Pr. CIT, who vide his order passed u/s 263 of the Act, dated 30.03.2018 after holding the investor company, viz. M/s. Sakshi Real Estate Pvt. Ltd. as an ingenuine investor company, had observed, that as the A.O had failed to properly analyze the financial statements of the investor company and such other details which otherwise would have resulted to a contrary view, therefore, the order passed by him u/s. 143(3), dated 31.03.2016 was rendered as erroneous in so far as it was prejudicial to the interest of the revenue. We, say so, for the reason that as observed by us hereinabove the A.O in the course of original assessment proceeding had exhaustively examined and verified at length the solitary issue which had formed the very basis for selection of the assessee's case for limited scrutiny, viz. "large share application money received against unallotted share". Not only the A.O had called for the requisite details from the assessee company to substantiate the authenticity of the transaction of receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d only after exhaustive deliberations arrived at a possible and a plausible view, therefore, it is beyond any doubt not a case of lack of enquiry which would have otherwise justified triggering of the powers vested with the Pr. CIT u/s 263 of the Act. In sum and substance the Pr. CIT could not have with a purpose and an intent to substitute his view as against that of the A.O brought into play the provisions of Sec. 263 of the Act. Our aforesaid view is supported by the landmark judgment of the Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. Vs. CIT (2000) 243 ITR 83 (SC). In the aforesaid judgment it was held by the Hon'ble Apex Court that where an Income-Tax Officer had adopted one of the courses permissible in law 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. The aforesaid view was thereafter reiterated by the Hon'ble Supreme Court in the case of CIT Vs. Max India Ltd. (2007) 213 CTR 266 (SC). Once again it was observed that where two views are possible and the Income-Tax Officer has taken one of the view with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e investor company, viz. M/s. Sakshi Real Estate Pvt. Ltd. had arrived at a possible and a plausible view, then, the same could not have been revised by the Pr. CIT under Sec. 263 of the Act, for the reason that the A.O had failed in not adopting a different line of verification and, therein, arriving at a view to the contrary on the issue under consideration. We, say so, for the reason that the A.O in the course of the assessment proceedings had not only raised queries on the issue in hand from the assessee, but had in fact in exercise of his powers u/s 133(6) of the Act called for and examined the substantial documentary evidence that was placed on his record by the investor company, viz. copy of its income-tax return along with audited balance sheet, copy of Form-20B (annual return filed with registrar of companies), company master data, names and complete address of its directors a/w. proof of identity, mode of payment of the share application money (though banking channel) a/w copy of the bank account from where payments were made, and confirmation of having paid share application money to the assessee company alongwith a supporting affidavit. Apart from that, the investor com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Sec. 263 of the Act, and resultantly even render a reasoned assessment made after necessary examination and verification prone to revision. 13. Clause (a) of the "Explanation 2" of Sec. 263 reads as under (relevant extract as was available on the statute at the relevant point of time): "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 the revenue, if, in the opinion of the Principal Commissioner or Commissioner, - (a). the order is passed without making inquiries or verifications which should have been made. (b) to (d) ...................................." Ostensibly the "Explanation 2(a)" is only in the nature of a tool to aid in construing the scope and gamut of Sec. 263, and thus, cannot override the statutory provision. Inadequacy in conducting enquiry cannot be the reason based on which powers under Sec. 263 can be invoked to interdict an assessment order. Our said view is fortified by the judgment of the Hon'ble High Court of Delhi in the case of Pr. CIT-1, New Delhi Vs. M/s Brahma Centre Development Pvt. Ltd., ITA N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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. In Gabriel India Ltd.'s case (supra), law on this aspect was discussed in the following manner : ". . . From a reading of sub-section (1) of section, it is clear that the power of suo motu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is 'erroneous insofar as it is prejudicial to the interests of the revenue'. It is not an arbitrary or unchartered power. It can be exercised only on fulfilment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. ****** We may now examine the facts of the present case in the light of the powers of the Commissioner set out above. The Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation on that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. Such decision of the Income-tax Officer cannot be held to be "erroneous" simply because in his order he did not make an elaborate discussion in that regard . . ." (pp. 113-117) xxx xxx xxx 15. Thus, even the Commissioner conceded the position that the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 3 (at page 67), the assessee explained that the difference in the amount as per Form 26AS and ITR was due to the difference in the interest received from the banks duly accounted and considered in the financial statements of the company and the ITR and given that the Real Estate projects being undertaken by the company is under consideration, the interest received during construction period has been adjusted/reduced against the cost of the project. Vide page No. 118 of the paper book, the assessee submitted the bifurcation of the inventory showing that the assessee paid interest and finance charges to the tune of Rs. 68,35,65,792/-, whereas the assessee received interest income on fixed deposits to the tune of Rs. 9,47,04,585/-. It is submitted that both these items are taken to the inventory. 11. Further, it could be seen from the record that vide letter dated 14.09.2017, the ld. Ld. Assessing Officer issued notice to the assessee proposing rectification in respect of certain items including the one relating to interest of Rs. 9,47,04,585/- to which the assessee has issued reply dated 12.10.2017 where under it was explained that the company was engaged in the business of prom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue involved by seeking relevant explanation and had carried out necessary verification, therefore, on the said count itself the application of Clause (a) to "Explanation 2" of Sec. 263 was ousted. 14. As in the present case before us the A.O while framing the assessment had made exhaustive examination and carried out necessary verifications on the issue which had formed the very basis for selection of the assessee's case for limited scrutiny assessment, i.e. large share application money received against unallotted shares, and had only after exhaustive deliberations arrived at a possible and a plausible view and accepted the claim of the assessee of having received genuine share application money from the investor company i.e. M/s. Sakshi Real Estate Pvt. Ltd., therefore, there was no justification for the Pr. CIT to have invoked his jurisdiction u/s 263 of the Act for the purpose of supplanting his view on the issue in hand, on the ground that appraisal of the material that was available before the A.O ought to have been done in a different manner, which, thus, would have resulted to a contrary view as was advocated by him. We, thus, in terms of our aforesaid observations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt 'DR') did not controvert the contentions advanced by the Ld. AR that the order passed by the Pr. CIT, Bilaspur u/s. 263 of the Act, dated 30.03.2018 had been vacated by the Tribunal vide its order passed in ITA No.112/RPR/2018, dated 17.10.2022. 12. We have thoughtfully considered the facts involved in the present case in the backdrop of the contentions advanced by the Ld. Authorized Representatives of both the parties. We find substance in the claim of the Ld. AR that now when the very genesis of the impugned addition made by the A.O u/s. 143(3) r.w.s. 263 of the Act, dated 28.12.2018 i.e. the order passed by the Pr. CIT u/s. 263 of the Act, dated 30.03.2018 had been quashed and does no more survive, therefore, the impugned order passed by the A.O u/s. 143(3) r.w.s. 263 of the Act, dated 28.12.2018 has to meet the same fate and is liable to be quashed. We, thus, in terms of the aforesaid observations, set-aside the order of the CIT(Appeals) and vacate the addition of Rs. 65,00,000/- made by the A.O vide his order passed u/s. 143(3) r.w.s. 263 of the Act, dated 28.12.2018. 13. In the result, appeal filed by the assessee company is allowed in terms of our aforesaid observations ..... X X X X Extracts X X X X X X X X Extracts X X X X
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