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TMI Blog2025 (2) TMI 825X X X X Extracts X X X X X X X X Extracts X X X X ..... That on the facts and circumstances of the case and in law, the order passed by the Ld. PCIT under section 263 of the Act, is bad in law and void ab initio as the Ld. PCIT merely set aside the assessment order passed with directions that the fresh assessment order be passed after makingthe detailed enquiry, which clearly shows that there was non-application of mind by the Ld. PCIT. That on the facts and circumstances of the case and in law, the order passed by the Ld. PCIT. 4. Under section 263 of the Act is bad in law as its based upon merely change of opinion, especially, when the assessing officer in the assessment order passed under section 143(3) of the Act had duly verified the genuineness of the transaction relating to sale of shares. Each of the above grounds is independent and without prejudice to the other grounds of appeal preferred by the Appellant." 3. The brief facts of the case are that, Assessee filed its return of income declaring income of Rs. 2,06,64,574/-. The case was selected for limited scrutiny through CASS. Assessment was completed u/s 143(3) of the Income Tax Act, 1961 ('Act' for short) vide order dated 07/12/2016 by making disallowance of Rs. 5,37,86 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elying on the order of the PCIT, sought for dismissal of the Appeal. 6. We have heard both the parties and perused the material available on record. During the original assessment proceedings, a notice dated 13/06/2016 issued u/s 142(1) of the Act by the A.O. The A.O. vide Point No. 12, asked the details and evidence of 'Short and Long Term Capital Gains earned during the year' which reads as under:- "Please state, if the Company has showed any Short Term or Long Term Capital Gain during the year under consideration, with proper details and evidences." 7. The said query has been replied by the Assessee vide letter dated 23/06/2016, wherein the Assessee has produced the details which reads as under:- "Dear Sir, This is in reference to the above mentioned notice, you may please find enclosed herewith following documents for your references: 1. The Detail of Share Trading Statement of the Broker. 2. The Copy of Demat Statement with reconciliation. 3. The Copy of Sale/Purchase Bills of Share Trading. 4. The Copy of Financial Ledger of the Brokers." The Assessee produced the details of share trading statement of broker, Demat statement with re-conciliation, sale/purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 263 of the Act held as under:- 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, 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. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 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 suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 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 Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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