ANGLE INFRASTRUCTURE (P) LTD,NEW DELHI V. PCIT (CENTRAL)-3, NEW DELHI

ITA 2921/DEL/2024

AI Insights

The case involves Angle Infrastructure [P] Ltd, which appealed against the order of the PCIT-Central, Delhi, which revised the assessment order for AY 2015-16 under Section 263 of the Income Tax Act, 1961. The PCIT found the original assessment order erroneous and prejudicial to the interest of the Revenue because the Assessing Officer (AO) failed to conduct a proper inquiry regarding rental payments amounting to Rs 72,00,000 made to Kamal Kapoor, despite having incriminating evidence from a WhatsApp chat indicating that cash was returned to Amit Katyal, the director of the assessee company. The ITAT dismissed the appeal, agreeing with the PCIT that the AO did not apply his mind to the evidence and failed to conduct necessary inquiries.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 26204 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Other Referred Cases: DCIT V U.K.Paints (Overseas) Ltd, Divyesh Bhupendra Desai V PCIT, Ahmedabad, Malabar Industrial Co. Ltd. v. CIT, Gabriel India Ltd v. CIT, Toyota Motor Corporation v. CIT, Rampyari Devi Saraogi v. CIT, West Bengal & Ors, Tara Devi Aggarwal v. CIT, West Bengal, Calcutta, Commissioner of Income Tax v. Sunbeam Auto Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JAVED AKHTAR
• Assessee Lawyers: VINOD KUMAR BINDAL
• Keywords: Set aside; Opportunity of being heard; Additional evidence; Revenue expenditure; Transfer pricing; Capital expenditure; Capital Gains; Principle of natural justice; TDS; Search and seizure; Revision of order; Prejudicial to interest; Bogus
• Section: 143(3); 142(1); 143(2); 263; 92CA; 153C; 2(A); 72

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘A’ BENCH, NEW DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 2921/DEL/2024 [A.Y 2015-16] Angle Infrastructure [P] Ltd Vs. The P.C.I.T 406, Elegance Tower – 8 Central - 3 Jasola District Centre New Delhi New Delhi PAN – AAKCA 6318 C (Applicant) (Respondent) Assessee By : Shri Vinod Kumar Bindal, Adv Ms. Rinki Sharma, ITP Department By : Shri Javed Akhtar, CIT- DR Date of Hearing : 06.11.2024 Date of Pronouncement : 31.01.2025 ORDER PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:- This appeal by the assessee is preferred against the order of the PCIT-Central, Delhi dated 22.12.2023 pertaining to A.Y 2015-16. 2 2. The grievances of the assessee read as under: “1. The PCIT erred in law and on facts in passing an order u/s 263 of the Act in respect of rent of Rs 72,00,000/- paid by the assessee during the relevant period merely on surmises and conjectures as: (i) the order to be revised was passed in an assessment proceeding initiated u/s 153C of the Act where no incriminating material suggesting receipt of any cash by the assessee or anybody else on its behalf against the said rent paid during the relevant period; (ii) no copies of the statements of Mr Amit Katyal / Mr Kamal Kapoor were given to the assessee for appreciation of the facts nor any cross-examination of the said persons was allowed though specifically demanded; (iii) the AO had made enquiry earlier about the rent paid during the relevant period during the assessment proceedings and came to the conclusion that the rent paid during the relevant period was bonafide expense and no cash against the same was ever returned by Kamal Kapoor. 2. The impugned revisionary order passed by the PCIT(Central), Delhi-3 on 22/12/2023 for which the proceedings were initiated vide notice dated 02/02/2023 and the same was responded to the 3 PCIT by the assessee on 18/02/2023 and thereafter, no proceedings were undertaken by the PCIT (Central), Delhi-3 for almost 10 months and the impugned order was passed. Thus, the impugned order must be quashed. 3. The PCIT failed to meet the prayers made during the impugned revisionary proceedings vide letter dated 18/02/2023, ignoring that the impugned incriminating information does not at all refer to the assessee in any manner. Thus, the impugned order passed u/s 263 of the Act must be cancelled. 4. The appellant craves the leave to add, substitute, modify, delete or amend all or any ground of appeal either before or at the time of hearing.” 3. Representatives of both the sides were heard at length. Case records carefully perused. Relevant documentary evidence brought on record duly considered in light of Rule 18(6) of the ITAT Rules. 4. Briefly stated, the facts of the case are that the assessee filed its original return of Income for AY 2015-16 on 29.09.2015 declaring loss of Rs. 6,43,95,386/-. Search and seizure action was conducted on 16.05.2017 in the case of Shri Amit Katyal at his residence. Amit Katyal 4 is the Director and major shareholder (90%) of the assessee company. During the course of search operation, certain incriminating evidence pertaining to the assessee company was found and seized from the premise of Sh Amit Katyal. An incriminating evidence in the form of WhatsApp chat between Amit Katyal and Sh. Kamal Kapoor was found where Sh Kamal Kapoor is found messaging to Sh Amit Katyal as follows: And bhaiya with due respect - I want to express 1 thing that I paid u around 47 lacs in cash for rental cheques around 2 years back for which I haven't got cheque till this date. I always feel that I can ask for money from you in difficult times and u will support. Kindly Bhaiya reciprocate as elder brother. 5. Subsequently, proceedings were initiated against the assessee u/s 153C of the Act and assessment was completed at a loss of Rs. 6,14,76,700/- vide order u/s 153C dated 05.09.2021. 6. This assessment order dated 05.09.2021 was considered by the PCIT as erroneous and prejudicial to the interest of the Revenue u/s 263 on the ground that the AO did not conduct proper enquiry with respect to rent paid of Rs 72,00,000/- to Kamal Kapoor in the light of the information available with the AO that Sh Amit Katyal was receiving cash against cheques of rental payment given to Sh Kamal Kapoor. This order u/s 263 is in challenge before us. 5 7. Before us, the ld. counsel for the assessee vehemently stated that the Assessing Officer had very much examined the issue of payment of rent by the assessee company of Rs 72,00,000/- to Sh Kamal Kapoor. The ld AR vehemently stated that the AO had enquired the issue of payment of rent and the assessee had submitted to the AO a detailed submission vide letter dated 25.06.2021, on the issue of rent payment. The ld AR further argued that as the AO had examined the same and did not consider proper to make the addition on this account, in absence of any material. The ld AR further argued that the allegation is that the landlord used to return the money in cash to Sh Amit Katyal and not the assessee company. It is the say of the Ld AR that no incriminating material implicating the assessee company was found in the course of search. 8. It is vehemently argued by the ld AR that no statement or material has been supplied along with the show cause notice of the PCIT or any opportunity to cross examine Sh Kamal Kapoor was provided. Therefore, it is argued that the PCIT is barred from assuming jurisdiction u/s 263. The ld AR relied on the decision of DCIT V U.K.Paints (Overseas) Ltd (2023) 0150 taxmann.com 108(SC) and 6 Divyesh Bhupendra Desai V PCIT, Ahmedabad in ITA no 802/Ahd/2024 dated 29.08.2024. 9. Per contra the ld DR argued that the AO did not make any proper enquiry and applied his mind during the assessment proceedings u/s 153C of the Act which is essential to ascertain true and correct particulars of income declared by the assessee in the ITR. The ld DR stated that the Assessing Officer was in possession of the information provided by the Inv. Wing regarding the bogus rental payment, however, he failed to act on the information received and did not issue any show cause notice to verify the rental expenses. The ld DR stated that the though the AO had information available with him regarding return of rent in cash, yet he merely called for the details of various expenses debited to Profit & Loss A/c which included rental expenses also. 10. The ld DR stated that in response, the assessee vehemently pointed out that no detailed submission was made by the assessee on the issue of rent. The ld DR stated that only a ledger account of Kamal Kapoor in the books of the assessee showing rent paid during the period was furnished, that too without any supporting documents for the 7 transactions. The ld DR pointed out that the ledger account showed erratic behaviour of rent payments like rent billed for April 2014 till August 2014 were paid on 29.08.2014 and there was no bills raised month-wise or payment received month-wise which should been enquired further. It is the say of the ld DR that the AO never asked the relevant questions nor asked the nature of the business activity carried out on that premise, rent agreement and bills/invoices in support of the rental expenses claimed. 11. The ld DR further referred to the assessment order passed for AY 2016-17 passed on the same day i.e., 05.09.2021 where the AO has taken cognizance of the information and added the rent paid in the hands of the assessee. The ld DR stated that the above facts clearly establishes that the AO failed to act on the information for AY 2015-16. The AO neither issued show cause nor added back the bogus rental expenses of Rs.72,00,000/- debited by the company in its P&L a/c for the year under consideration demonstrates that the AO never applied his mind to the issue at hand. The ld DR finally concluded that such failure has rendered his order for A.Y. 2015-16 passed u/s 153C of the Income Tax Act, 1961 dated 05.09.2021 not only erroneous but also prejudicial to the interest of the Revenue. 8 12. We have heard the rival submissions and have perused the relevant material on record. We find that the PCIT called for the record for AY 2015-16 and from the examination of records found that the assessing officer had in his possession an information in the shape of Whatsapp chat which shows one Sh. Kamal Kapoor used to return back the amount of Rental expenses to Sh. Amit Katyal, the Director and major Share Holder of the assessee company. As per the information from investigation and enquiries by the Investigation Wing of the Department, Sh. Amit Katyal was receiving cash in lieu of the rental expenses paid through cheques by the company M/s Angel Infrastructure Pvt. Ltd to Sh. Kamal Kapoor. 13. We find that the ld AR emphasis that the AO had examined the rent debited in the assessee’s books of account is not entirely correct. We find that in the course of assessment proceedings, the AO called for the following detail vide notice u/s 142(1) dated 11.04.2021 for the impugned AY 2015-16:- “5. Please provide details of expense debited to P&L A/c on account of Rent paid, Legal & Professional Expenses, brokerage and commission alongwith details of TDS deducted on payments (if any)”. 9 The query shows that the AO merely sought several details one of which was rent paid. We can therefore say, without hesitation, that the AO called for detail of rent in a routine manner. The AO never raised any specific query on rental expense especially in context of the information he had in his possession. The assessee’s reply merely states that the assessee made payment of rent to Sh. Kamal Kapoor against the property 41A-Ring Road, Lajpat Nagar IV, New Delhi-110024 and it submitted the ledger account of Kamal Kapoor in its books. In the light of above facts, we can not but reach a conclusion that the AO did not make any enquiry at all with regard to the rent payment especially in the light of information available with him. The AO never asked for any supporting documents like rent agreement, bills/invoices or any query on the whatsapp chat showing Sh. Kamal Kapoor receiving rental payments in cheque from the assessee and Sh. Amit Katyal receiving cash from Sh Kamal Kapoor against those cheques of rental payment made. We therefore hold that the AO neither examined the issue of rental expenses for the AY 2015-16 nor applied his mind on the issue in light of information available with him. 10 14. We also note that the PCIT has specifically compared the assessment made for AY 2015-16 with the assessment made for AY 2016-17. The PCIT has noted that the AO issued notice u/s 142(1) of the Income-tax Act, 1961 for both AY 2015-16 and AY 2016-17 on 11.04.2021 and asked to furnish details of rent expenses claimed in the P&L Account. The AO however, for the AY 2016-17, issued a further show cause notice to the assessee on 13.06.2021 on the issue of rental expenses in light of information found & seized during the search proceedings on Sh. Amit Katyal and finally made disallowance of Rs 70,89,040/- on account of rent in the assessment order for AY 2016-17 passed on 05.09.2021. In contrast, for AY 2015-16, the AO neither issued further show cause notice to verify the rental expenses nor made addition of Rs. 72 lacs on account of rental expenses debited in the books of the company, despite passing the assessment order on the same day i.e., 05.09.2021. In view of the above, there is no escapement from the view that the AO did not make any enquiry nor verified the rental expenses claimed by the company during the AY 2015-16 rendering the assessment order passed by the AO for the AY 2015-16 not only erroneous but also prejudicial to the interest of the Revenue. 11 15. It is a settled position of law that powers u/s 263 of the Act can be exercised by the Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and prejudicial to the interest of the Revenue. The Hon'ble Supreme Court in Malabar Industrial Co. Ltd., 243 ITR 83 that “An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous \". The Hon'ble Bombay High Court in the case of Gabriel India Ltd 203 ITR 108 has held that an erroneous order is one “which is not in accordance with the law or which has been passed by the Income-tax Officer without making any enquiry in undue haste”. It further held that an order which is prejudicial to the interests of the Revenue is one “if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realised or cannot be realized”. The PCIT in the instant case, in our mind, satisfied the both the twin conditions in both letter and spirit. 16. We find that the decision of U.K.Paints (supra) relied upon by the assessee is not applicable as the issue is on different proposition i.e., no incriminating material is found, assessment u/s 153C can not be made. The instant case is one where incriminating material existed 12 but was not utilized by the AO. Similarly in the case of Divyesh Desai (supra), the ITAT found for a fact that there was no lack of enquiry hence jurisdiction u/s 263 is not valid which is not the situation in the instant case. 17. It is worthwhile to note that the proceedings u/s 263 was initiated on 02.02.2023, much after the Explanation 2(a) to section 263 was brought into the statute on 01.06.2015, hence an order that is in the opinion of the PCIT, been passed without making inquiries or verification which should have been made, can be considered as erroneous in so far as prejudicial to the interest of the revenue. In the instant case the PCIT has clearly demonstrated that the AO did not conduct inquiries or verification which should have been done. 18. The issue of proper enquiry and inadequate enquiry, was deliberated at length by the hon’ble Delhi High Court recently in the case of Pr. Commissioner of Income Tax Delhi -11 vs Ms. Sangeeta Jain [2024] 168 taxmann.com 276 (Delhi) on 8 November, 2024, referring to several decisions on the subject, it elaborated the issue as follows: 13 “37. The above-mentioned facts make it clear that no inquiry, in fact, was conducted by the AO before passing the assessment order under Section 143(3) of the Act. 38. During the course of arguments, the learned counsel for the assessee contended that even if this Court arrives at an opinion that the AO did not conduct a proper inquiry, it can at best be a case of insufficient inquiry, but it cannot be termed as a case of absence or lack of inquiry, so as to empower the PCIT to exercise jurisdiction under Section 263 of the Act. It was also contended that the PCIT could not have exercised jurisdiction in the manner as exercised since the AY in the present case is 2013-14 and the amendment to Section 263 of the Act, by which Explanation 2 was inserted in the provision, was brought in the year 2015. Therefore, since the said Explanation came to be incorporated after the AY in question, the earlier provisions of Section 263 of the Act will govern the adjudication of the present case. 39. Prior to dealing with the above contentions, the relevant portion of Section 263 of the Act is set out hereunder for reference: \"263. Revision of orders prejudicial to revenue. (1) The Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment...\" 40. Section 263 of the Act, as it reads on date, including Explanation 2 inserted by virtue of Finance Act, 2015, is extracted hereunder: \"263. Revision of orders prejudicial to revenue. 14 (1) The Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer or the Transfer Pricing Officer, as the case may be, is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including,-- (i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) an order modifying the order under section 92CA; or (iii) an order cancelling the order under section 92CA and directing a fresh order under the said section. *** Explanation 2.-- For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer [or the Transfer Pricing Officer, as the case may be, shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Chief Commissioner or Chief Commissioner or 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) 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.\" (Emphasis added) 15 41. As far as the above-noted contention of the assessee is concerned, the same appears merited. The AY qua which the notice was issued by the AO is 2013-14. The said notice was issued under Section 143(2) on 10.09.2014. However, the Explanation 2 to Section 263 of the Act was inserted by virtue of Finance Act, 2015 with effect from 01.06.2015. The proceedings in this case were initiated in the year 2014, i.e. prior to insertion of Explanation 2 in Section 263 of the Act. 42. Therefore, while deciding the question as to whether or not the jurisdiction was rightly exercised by the PCIT under Section 263 of the Act, we would have to take into consideration the provisions of Section 263 of the Act as they stood prior to the amendment in the year 2015 i.e. sans Explanation 2 which has elucidated the cases where the order can be held as erroneous and prejudicial to the interests of the Revenue. 43. However, undisputedly, Section 263 of the Act, even prior to the said amendment, stipulated the mandatory requirement of the order being “erroneous‟ as well as “prejudicial to the interests of the Revenue‟. Therefore, what manifests from the above is the fact that the twin conditions have to be met for assuming jurisdiction under Section 263 of the Act, and the PCIT has to form an opinion that the order passed by the AO is “erroneous‟ and “prejudicial to the interests of the Revenue‟. 44. Further, even prior to the amendment, though it was not explicitly explained in the Act as to how the PCIT will reach a conclusion that the AO had passed an “erroneous‟ order which was also “prejudicial to interests of the Revenue‟, the scope of these words was explained by the Hon‟ble Supreme Court and the Coordinate Benches of this Court in various decisions. It will be useful to refer to a few decisions, without burdening the present judgment with all the authorities on the said issue. 45. The Hon‟ble Supreme Court, in case of Malabar Industrial Co. Ltd. (supra) has ruled that an order passed by an assessing officer can be deemed erroneous if it is based on incorrect assumption of facts or an incorrect application of law, and also if it is passed 16 without applying the principles of natural justice or without application of mind. In the case of Malabar Industrial Co. Ltd. (supra), a resolution passed by the board of the appellant- company was not placed before the assessing officer and it was held that there was no material to support the claim of the appellant therein, and the assessing officer had accepted the entry in the statement of the account filed by the appellant in the absence of any supporting material and without making any inquiry. 46. This Court, in Gee Vee Enterprise (supra), held that the Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the officer should have made further inquiries before accepting the statements made by the assessee in the return. The relevant portion of the decision is reproduced hereunder: \"....These two decisions show that it is not necessary for the Commissioner to make further inquiries before cancelling the assessment order of the Income-tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income- tax Officer should have made further inquiries before accepting the statements made by the assessee in his return. The reason is obvious. The position and function of the Income-tax Officer is very different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word \"erroneous\" in section 263 emerges out of this context. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word \"erroneous\" in 17 section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct.\" (Emphasis added) 47. In case of Commissioner of Income-tax v. Toyota Motor Corporation: (2008) 306 ITR 49, the assessing officer had passed an order dropping the penalty proceedings initiated in the assessee's case. The Commissioner had exercised powers under Section 263 of the Act and concluded that the assessing officer had not verified several issues and facts as mentioned in the order passed by him, nor had he carried out necessary investigations to come to a conclusion that penalty was not leviable. Consequently, he had found that the order was erroneous and prejudicial to the interest of the revenue. However, on appeal, the Tribunal had held that the penalty proceedings were not dropped casually by the assessing officer but after verification of full facts disclosed by the assessee in the reply. This Court, in judgment dated 02.04.2008 held that the order passed by the assessing officer was cryptic and non-reasoned. The relevant observations are extracted below: \"10. We are unable to appreciate this reasoning given by the Tribunal simply because that the Assessing Officer himself did not say any such thing in his order. There is no doubt that the proceedings before the Assessing Officer are quasi-judicial proceedings and a decision taken by the Assessing Officer in this regard must be supported by reasons. Otherwise every order such as the one passed by the Assessing Officer, could result in a theoretical possibility that it may be revised by the CIT under section 263 of the Act. Such a situation is clearly impermissible. 11. It is also necessary for the parties to know the reasons that have weighed with the Adjudicating Authority in coming to a conclusion. The order passed by the Assessing Officer should be a 18 self-contained order giving the relevant facts and reasons for coming to the conclusion based on those facts and law. 12. We find that the order passed by the Assessing Officer is cryptic to say the least, and it cannot be sustained. The Tribunal cannot substitute its own reasoning to justify the order passed by the Assessing Officer when the Assessing Officer himself did not give any reason in the order passed by him.\" 48. The aforesaid decision was affirmed by the Hon‟ble Supreme Court in Toyota Motor Corporation v. Commissioner of Income- tax:(2008) 306 ITR 52. 49. Therefore, it is clear that the Hon’ble Supreme Court and the Coordinate Benches of this Court had also dealt with the scope of “erroneous orders‟ for the purpose of Section 263 of the Act, even when Explanation 2 had not been inserted in the said provision, and had held that an erroneous order would include an order which is passed without conducting sufficient inquiries or without application of mind. 50. In the present case, while invoking the provisions of Section 263 of the Act against the order passed by the AO under Section 143(3) of the Act, the PCIT emphasized that the AO did not scrutinize the critical documents, particularly those concerned with the claim of the assessee with respect to the land being agricultural in nature and its sale being exempt from capital gains tax. Specifically, the PCIT noted that the AO relied on a certificate issued by the Tehsildar, but failed to obtain corroborative evidence from other important and necessary authorities like the DTP, Gurugram. The AO, according to the PCIT, accepted the assessee‟s claim without proper verification, which amounted to no-inquiry. Ultimately, the PCIT took a view that the land sold by the assessee was not agricultural land, and thus, the assessee was not entitled for long-term capital gains tax exemption. However, the learned ITAT in the impugned order opined in the present case that the AO had considered the issue of capital gains taxability and had accepted the submissions of the assessee. 19 51. However, the critical issue remains whether the inquiry made by the AO in this case can be actually considered as an inquiry required to be conducted by the AO. The fact that the AO neither read the contents of the certificate issued by the Tehsildar, which is discernible from the fact that the certificate did not even mention the distance of the land from the municipal limits which is a criteria for determining the agricultural status of land under the Act, nor sought any additional evidence or document from the relevant authorities like the DTP, Gurugram, undoubtedly, suggests that the AO failed to undertake any inquiry or even apply his mind to the documents submitted by the assessee to arrive at the conclusion regarding the long-term capital gains exemption. 52. There is no cavil that the PCIT would not have jurisdiction to pass an order under Section 263 of the Act solely for the reason that he held a different opinion with the AO. If the AO has applied his mind and had arrived at a plausible view, the same would not be amenable to a revision under Section 263 of the Act. 53. However, if the AO has not applied his mind and had come to an erroneous conclusion without making any enquiries, the CIT may be well within his jurisdiction to pass an order under Section 263 if he finds that the assessment order is erroneous and prejudicial to the interest of the revenue. In Rampyari Devi Saraogi v. Commissioner of Income-Tax, West Bengal & Ors: (1968) 67 ITR 84, the Commissioner found that the assessee had given an incorrect residential address and had also given her name in reverse order so as to fall within the jurisdiction of a particular Income Tax Officer (ITO). Accordingly, the CIT concluded that the ITO did not have the jurisdiction to pass the assessment order. The CIT held that it was apparent that the assessee had given a fictitious address and revered the order of her name, as a camouflage to fall within the jurisdiction of a particular ITO. Accordingly, the CIT passed an order under Section 263 of the Act. The High Court upheld the said decision. In the appeal preferred by the assessee, the Hon‟ble Supreme Court observed that \"there was ample material to show that the Income Tax Officer has made the assessments in undue hurry\". The assessment was made without any enquiry or evidence 20 whatsoever and the order of assessment was erroneous and prejudicial to the interest of the revenue. 54. Similarly in the case of Tara Devi Aggarwal v. Commissioner of Income-Tax, West Bengal, Calcutta: (1973) 88 ITR 323, the Hon’ble Supreme Court upheld the finding of the CIT that the assessments made by the ITO \"were made in post haste without making any enquiry or investigation into the antecedents of the assessee\". 55. A Coordinate Bench of this Court in Commissioner of Income Tax v. Sunbeam Auto Ltd.: (2011) 332 ITR 167 had highlighted the necessity to bear in mind the distinction between \"lack of inquiry\" and \"inadequate enquiry\". We consider it apposite to refer to the following passage from the said decision: \"17. We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Income-tax Act. As noted above, the submission of learned counsel for the Revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order, which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the 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 21 is only in cases of \"lack of inquiry\" that such a course of action would be open......\" (Emphasis added) 56. In the present case, the AO had issued a questionnaire to the assessee on 19.08.2015. The assessee responded to the said questionnaire by claiming that she had earned long term capital gains of ₹10,72,76,180/-, which was not chargeable to tax as the agricultural land was beyond the prescribed distance from the municipal limits of Sohna district. She also enclosed therewith a document described as a certificate issued by Tehsildar, Sohna to the aforesaid effect. However, a plain reading of the said document indicates that it did not certify that the land in question was beyond the prescribed distance from the municipal limits as claimed by the assessee. Notwithstanding the same, the AO passed the assessment order on the same date. It is thus apparent that the AO had not applied his mind to the relevant point whether the asset sold by the assessee was the agricultural land situated 5 kms / 8 kms beyond the boundary limits of the municipal corporation. The noting made by the Tehsildar on 24.04.2012, which the assessee claims to be a certificate, merely stated that the land in question was \"outside the border of Sohna Municipal Corporation\". The question is not whether the land in question was outside the municipal limits but whether it was an agricultural land that was located 5 kms. / 8 kms. beyond the municipal limits. The Tehsildar‟s noting is clearly not to the aforesaid effect. It is thus clear that this is not a case where the enquiries conducted by the AO were inadequate; this is a case of lack of enquiry as the AO had not conducted any enquiry to verify whether the land sold by the assessee was beyond the prescribed distance from the boundary of Sohna Municipal Corporation. It is apparent that no enquiry to the said effect was conducted by the AO and there is no material before the AO, other than the self serving statement of the assessee, to corroborate the same. 57. The assessment order passed by the AO under Section 143(3) of the Act even records no reasons for accepting the version 22 of the assessee that the land was agricultural land, and not capital asset, and thus exempt from capital gain. In fact, there is no mention of this aspect at all in the order passed by the AO under Section 143(3) of the Act. Thus, it is not clear as to what had weighed in the mind of the AO since the order passed by the AO is totally silent on this aspect. 58. Therefore, the present case would be one where the absence of any effective inquiry and a total non-application of mind by the AO is evident, and thus, the order passed by the AO would clearly fall within the meaning of an “erroneous order‟. The order is also, undisputedly, prejudicial to the interests of the Revenue inasmuch as it results in loss of the Revenue in the form of tax. 59. We are thus of the view that the PCIT had exercised the jurisdiction under Section 263 of the Act correctly and legally, in view of the fact that the order passed by the AO was erroneous and prejudicial to the interest of the Revenue since the same was passed without conducting any enquiries and applying mind to the claims of the assessee. We are also of the view that the learned ITAT erred in setting aside the order passed by the PCIT under Section 263 of the Act on the ground that the PCIT had wrongly exercised jurisdiction under Section 263 of the Act. 60. In view of the above, we set aside the impugned order dated 15.02.2018 passed by the learned ITAT in ITA No. 3888/Del/2017 in as much as for the reasons mentioned in the preceding paragraphs, it is writ large that the order passed by the AO was prejudicial to the interest of the Revenue which is the foundational requirement of exercising jurisdiction under Section 263 of the Act. Consequently, the jurisdiction exercised by the PCIT cannot be found fault with. 61. Accordingly, the appeal is disposed of in the above terms. 23 19. In the light of the above judicial pronouncements, we are of the view that this is not a case where the AO has applied his mind and had arrived at a plausible view whereas the PCIT had different view from that of the AO. We are of the considered view that the instant case is one where the AO has not conducted any effective enquiry and has not applied his mind at all which is discernible from the fact that the AO never confronted the assessee with the whatsapp chat and was simply satisfied with the ledger account of Kamal Kapoor in the assessee’s book as explaining the genuineness of the rental payment made. The routine questionnaire issued by the AO cannot be considered as an inquiry required to be conducted by the AO. We therefore, hold that it is writ large on the facts and circumstances of the case that there is absence of any effective inquiry and there is a total non-application of mind by the AO on the incriminating documents available with him. The order passed by the AO would therefore, clearly fall within the meaning of an “erroneous order”. The order is also, undisputedly, prejudicial to the interests of the Revenue inasmuch as it results in loss of the Revenue in the form of tax. We therefore, hold that the assumption of jurisdiction by the PCIT under Section 263 of the Act is valid and legally permissible in the facts and circumstances of the case. The grounds no 1 to 3 are accordingly dismissed. 24 20. In the result, the appeal of the assessee in ITA No. 2921/DEL/2024 is dismissed. The order is pronounced in the open court on 31.01.2025. Sd/- Sd/- [VIKAS AWASTHY] [NAVEEN CHANDRA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 31st JANUARY, 2025. VL/ Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi 25 Sl No. PARTICULARS DATES 1. Date of dictation of Tribunal Order… 2. Date on which the typed draft Tribunal Order is placed before the Dictation Member 3. Date on which the fair Tribunal Order is placed before the Dictating Member for pronouncement 4. Date on which the approved draft Tribunal Order comes to the Sr. P.S./P.S. 5. Date on which the fair Tribunal Order is placed before the Dictating Member for pronouncement 6. Date on which the signed order comes back to the Sr. P.S./P.S 7. Date on which the final Tribunal Order is uploaded by the Sr. P.S./P.S. on official website 8. Date on which the file goes to the Bench Clerk alongwith Tribunal Order 9. Date of killing off the disposed of files on the judiSIS portal of ITAT by the Bench Clerks 10. Date on which the file goes to the Supervisor (Judicial 11. The date on which the file goes to the Assistant Registrar for endorsement of the order 12. Date of Despatch of the Order "