GANESH BUILDERS,SRI GANGANAGAR V. .PCIT (CENTRAL), JAIPUR, JAIPUR

ITA 278/JODH/2024

AI Insights

The case involves Ganesh Builders, a partnership firm engaged in civil contracting, which faced a revision of its assessment order for the assessment year 2017-18 by the PCIT under section 263 of the Income Tax Act. The original assessment was conducted under section 143(3), where certain disallowances were made based on impounded documents during a survey. The PCIT later found the assessment order to be erroneous and prejudicial to the interests of the revenue, leading to the revision. Ganesh Builders appealed against this revision, arguing that the PCIT's order was based on incorrect assumptions and lacked proper examination of the facts.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 471463 (ITAT-JODHPUR)
• Duration Of Justice: 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 13-04-2024
• Other Referred Cases: Malabar Industrial Co. Ltd. v. CIT, CIT v. Max India Ltd., CIT v. Paville Projects (P) Ltd, CIT v. G.M. Mittal Stainless Steel (P.) Ltd., CIT v. Reliance Communication Ltd, ACIT, Central Circle-20, New Delhi vs. Shiv Kumar Nayyar, CIT vs. Rajasthan Financial Corporation, PCIT vs. Shreeji Prints (P.) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH OJHA
• Assessee Lawyers: MAHENDRA GARGIEYA
• Keywords: Set aside; Opportunity of being heard; Revenue expenditure; Transfer pricing; Unexplained cash credit; Cost of acquisition; Document seized; Documents seized; Principle of natural justice; Search and seizure; Valuation report; Loose papers; Assessment record; Charitable institution; Revision of order
• Section: 147; 143(3); 143(2); 154; 263; 68; 13; 92CA; 40A(3); 133A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR. BEFORE: DR. S. SEETHALAKSHMI, JUDICIAL MEMBER & SHRI RATHOD KAMLESH JAYANTBHAI, ACCOUNTANT MEMBER I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 Ganesh Builders 1-G-44, Jawahar Nagar Sri Ganganagar [PAN: AABFG 1354 Q ] (Appellant) Vs. PCIT (Central), Jaipur (Respondent) Appellant by Sh. Mahendra Gargieya, Adv. Respondent by Sh. Rajesh Ojha, CIT Date of Hearing 22.10.2024 Date of Pronouncement 09.12.2024 ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM Because the assessee aggrieved from the order of Pr. Commissioner of Income Tax (Central), Jaipur [ for short PCIT ] for the assessment year 2017-18 dated 14.03.2024 the present appeal is preferred by the assessee. The ld. PCIT passed that order under challenge as per provisions of section 263 of the Income Tax Act, 1961 (for short “Act”) while examining the assessment record of the above- named assessee. That order of assessment was passed by the I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 2 DCIT/ACIT, Central Circle, Bikaner dated 04.09.2021 as per provisions of section 143(3) of the Income Tax Act. 2. In this appeal, the assessee has raised following grounds: - “1. The ld. Pr. CIT (Central), Jaipur seriously erred in law as well as on the facts of the case in invoking the provisions of section 263 of the Act and therefore, the impugned order dated 14.03.2024 u/s 263 kindly be quashed. 2. The ld. Pr. CIT, Jaipur seriously erred in law as well as on the facts of the case in assuming jurisdiction u/s 263 by wrongly and incorrectly holding that the subjected assessment order passed u/s 143(3) dated 04.09.2021 is prejudicial to the interests of the revenue. The assumption of jurisdiction u/s 263 being contrary to the provisions of law and facts on record, hence, the proceedings initiated u/s 263 hence, the impugned order dated 14.03.2024 deserves to be quashed. 3. The Id. Pr. CIT (Central), Jaipur erred in law as well as on the facts of the case in wrongly setting aside the assessment order dated 04.09.2021 in as much, the Id. Pr. CIT, Jaipur completely ignored/did not judiciously appreciate the detailed written submission filed before him, though was taken note of and neither a copy of the appraisal report was supplied nor an opportunity of inspection of the assessment record was provided to the appellant despite 3. the specific request made therefore, the factual allegation that the impounded Anx-3 and Anx-23 were well before the Id. AO who allegedly did not considered, is factually incorrect, unjustified and merely based on incorrect allegation. Thus, the subjected assessment order dated 04.09.2021 could not have been held to be erroneous and prejudicial to the interest of the revenue and therefore, the impugned order u/s 263 of the Act dated 14.03.2024 deserves to be quashed. 4. That the Id. Pr. CIT (Central), Jaipur erred in setting aside order dated 04.09.2021 in as much as the Id. Pr. CIT did not reproduce the relevant part of the appraisal report wherein there is la reference of the impounded annexures nor she met with this factual averment made by the appellant in its written submission before her that the Id. AO did not have the benefit of the 4. presence of these two annexures and therefore there can't be any question of application of mind thereon. Consequently, therefore, the subjected assessment order dated 04.09.2021 could not have been held to be erroneous and prejudicial to the interest of the revenue and therefore, the impugned order u/s 263 of the Act dated 14.03.2024 deserves to be quashed. 5. The appellant prays your honor indulgences to add, amend or alter of or any of the grounds of the appeal on or before the date of hearing.” I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 3 3. The brief facts related to the case are that there was a search and seizure action in ‘Gawar Group’ of Hisar, a survery proceeding u/s. 133A of the Act was carried out at site office of the assessee firm temporarily located at Camping site Raison, Near Morpheus Valley Resort, NH-21, Kullu-Manali Highway Kullu on 08.11.2017 by the revenue. For the year under consideration the assessee e-filed return of income on 30.10.2017 declaring total income of Rs. 37,97,980/- in the return of income filed u/s. 139(1) of the Act. In compliance to the parameters mentioned in para no. 1(ii) of instruction dated 20.08.2018 issued by the CBDT the case of the assessee was compulsorily selected for complete scrutiny under manual selection. Consequently notice u/s. 143(2) of the Act was issued and the proceeding were conducted electronically though the E-proceeding facility. The assessee is a partnership firm and engaged as civil contractor mainly having business of construction and maintenance of roads and runways. The assessee has mainly done sub-contract work for Gawar Construction Limited. During the course of survey action carried out on 08.11.2017 at work site of the assessee, certain incriminating documents, loose papers etc., were impounded by the survey team. After analysing the said impounded documents/material, certain cash payment have been found I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 4 made in contravention of the provision of section 40A(3) of the Act. Finally the assessment order u/s 143(3) dated 04.09.2021 was passed determining at assessed income at Rs. 2,51,20,840/- by making disallowance on accounts of unexplained cash credit u/s 68 of the Act of Rs. 1,13,44,912/- and disallowance on accounts of violation u/s 40A(3) of the Act at Rs. 99,77,947/-. 4. On culmination of the assessment preceding ld. PCIT called for the assessment records for examination as per the power vested upon her. Upon examination of the records she noted that the transactions details available in annexure 3 & 23 pertain to the F.Y 2016-17. But the same have neither been verified nor any supporting and corroborative evidence are available on the record. So she noted that there is a failure on part of the Assessing Officer in carrying out the requisite inquiries/examination(s) and thereby the action of the AO found erroneous and prejudice to the interest of the revenue. Ld. PCIT thus issued a show cause notice to the assessee on 20.10.2022 and 11.08.2023. The assessee filed the replied online which was considered by the ld. PCIT and she has countered that submission on the following points; I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 5 • First & the foremost point is in regard to the perusal of the seized /Impounded material before the CIT, - In this regard the learned A.R has forgotten that the copy of the Appraisal report is always available with the Commissioner of Income Tax, hence the details of the impounded material were always before the PCIT and on going through the record the error on the part of the Assessing officer which was also prejudicial had been observed. • As regards the other points, the submission of the A.R is not tenable as The Hon'ble Supreme Court in the case of Malabar Industrial Limited V/s CIT 243 ITR it has observed as under- \"An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind.\" Thus, she peruse the reply carefully but the same was not found tenable and accordingly she observed as under : “7. I have examined the facts at hand and have studied the position of law. The error caused by the Assessing Officer resulting in prejudice to Revenue as has been detailed in the Show Cause Notice issued to the taxpayer as reproduced in this order. In this case survey proceedings u/s 133A of the Act was carried out at business premises of the assessee on 08.11.2017in Gawar Group and As appraisal report, the following annexure were considered for the F.Y. 2017- 18 as mentioned at serial no 89 of appraisal report, which is reproduced is as under:- Annexure F.Y Total Dr. Entries in violation of section 40A(3) of the Income Tax Act Cash receipts other than withdrawal from bank Annexure 3 2017-18 42,39,255/- 32,03,380/- Annexure 23 2017-18 81,81,960/- 48,95,340/- Total 1,24,21,215 80,98,270/- On verification of these annexure's at the time of assessment of A.Y. 2018-19 dated 04.09.2021 it is cleared that these transactions pertain to F.Y. 2016-17 and are escaped from assessment. During the assessment proceedings, vide notice u/s 142(1), dated 24.08.2021, the assesse was asked to explain the details regarding annexure A-27, A-11 and A-12 only. No query was made to explain annexure A-3 & A23. As per office note of assessment order it was stated that all the documents and financial statement found during the course of survey proceedings are recorded/reflected in the regular books of accounts of the assessee and the same is verified during the assessment proceedings. An examination of order of the Assessing Officer makes it clear to me that he I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 6 did not take a conscious decision relating transactions pertain to F.Y. 2016-17 of annexure A3 and A23. But, this issue is not seen to have been examined at all by the AO as no query has been raised in this regard & the assessee has not replied on the entries mentioned in these Annexure. 8. Considering all the facts and circumstances of the case and for the reasons discussed above, the assessment order dated 4/9/2021 for A.Y. 2017-18 passed by the AO is held to be erroneous in so far as it is prejudicial to the interest of the revenue for the purpose of section 263 of the Act. The said order has been passed by the AO in a routine and casual manner without applying proper mind on the Impounded material and issue discussed in the appraisal report. The AO has not verified the details which were required to be verified under the scope of scrutiny. The order of the AO is, therefore, liable to revision under the explanation (2) clause (a) of section 263 of the Act. The assessment order is set aside and restored to the file of Assessing Officer to examine the entries in Annexure A-3 & A-23 of the impounded material afresh in the light of the observation made in this order after allowing reasonable opportunity to the assessee.” 5. Feeling dissatisfied with the order of the ld. PCIT, the assessee has preferred the present appeal on the grounds as raised and reproduced in para 2 above. In support of the various grounds so raised by the ld. AR of the assessee, reliance was placed on the written submission which reads as under: “Brief Facts: The Assessee filed his Return of Income for A.Y. 2017-18 on 30.10.2017 declaring Total Income at Rs.37,97,980/-. A survey u/s 133A of the I.T. Act 1961 was carried out at its site office temporarily located at Camping Site Raison, Near Morpheus Vally Resorts, NH-21, Kullu Manali Highway, Kullu on 08.11.2017 by the department. The assessment was made vide order u/s 143(3) on 04.09.2021 at Total Income of Rs. 2,51,20,840/- by making disallowances on accounts of violation of Sec 40A (3) of I.T. Act 1961 of Rs. 99,77,947/- and addition on account of unexplained cash credit u/s 68 of I.T. Act 1961 of Rs. 1,13,44, 912/-. Thereafter, Show Cause Notice u/s 263 dated 20.10.2022 was issued by the CIT, on the following grounds: “4. Upon examination of assessment records, it has come to notice that transactions detail available in annexure 3 & 23 are pertain to the F.Y. 2016-17. The same have not been verified and have not been satisfactorily examined by the assessing officer as is evident from the fact that no supporting and corroborative evidence has been found/placed on record. I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 7 5. Clearly, there is failure on part of the Assessing Officer in carrying out the requisite inquiries/examination(s). In view of the state of affairs as elaborated above, it is clear to me that the assessment order passed by the assessing officer dated 04.09.2021 is erroneous in so far as the same is prejudicial to the interest of revenue. Thus, prima facie a prejudice has been caused to Revenue.” Further show cause notices u/s 263 due to change of incumbency, were issued and lastly on dated 02.03.2024. In response, the assessee filed detailed submission vide letter dated 12.02.2024 (PB- 63-70). Which is reproduced hereunder: In any case, since the assessment record are available with your good self, the opportunity of official inspection maybe provided to ascertain the availability of these two annexures in the assessment record for the subjected AY 2017-18. However, the ld. CIT didn’t agree with the submissions and finally held as under:(Pg10 Pr.11) “6. The reply of the assessee has been perused. The point wise rebuttal of the reply is as under • First & the foremost point is in regard to the perusal of the seized /Impounded material before the CIT, - In this regard the learned A.R has forgotten that the copy of the Appraisal report is always available with the Commissioner of Income Tax, hence the details of the impounded material were always before the PCIT and ongoing through the record the error on the part of the Assessing officer which was also prejudicial had been observed • As regards the other points, the submission of the A.R is not tenable as The Hon’ble Supreme Court in the case of Malabar Industrial Limited V/s CIT 243 ITR it has observed as under- \" An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind.” Further in the case of Commissioner of Income Tax V/s Paville Projects (P)Ltd , the A.O had allowed the cost of Improvement to the assessee which was not as per law, the Honourable Apex Court while upholding the action of the Commissioner of Income Tax for invoking the powers conferred u/s 263 observed as under and decided in favour of revenue while observing as under “the scheme of the Income Tax 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. 7. I have examined the facts at hand and have studied the position of law. The error caused by the Assessing Officer resulting in prejudice to Revenue as has been detailed in the Show Cause Notice issued to the taxpayer as reproduced in this order. In this case survey proceedings u/s 133A of the Act was carried out at business premises of the assessee on 08.11.2017in Gawar Group and I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 8 as appraisal report, the following annexure were considered for the F.Y. 2017- 18 as mentioned at serial no 89 of appraisal report, which is reproduced is as under: - X X X On verification of these annexures at the time of assessment of A.Y. 2018-19 dated 04.09.2021 it is cleared that these transactions pertain to F.Y. 2016-17 and are escaped from assessment. During the assessment proceedings, vide notice u/s 142(1), dated 24.08.2021, the assesse was asked to explain the details regarding annexure A-27, A-11 and A-12 only. No query was made to explain annexure A-3 & A23. As per office note of assessment order it was stated that all the documents and financial statement found during the course of survey proceedings are recorded/reflected in the regular books of accounts of the assessee and the same is verified during the assessment proceedings. An examination of order of the Assessing Officer makes it clear to me that he did not take a conscious decision relating transactions pertain to F.Y. 2016-17 of annexure A3 and A23. But, this issue is not seen to have been examined at all by the AO as no query has been raised in this regard & the assessee has not replied on the entries mentioned in these Annexure. 8. Considering all the facts and circumstances of the case and for the reasons discussed above, the assessment order dated 4/9/2021 for A.Y. 2017-18 passed by the AO is held to be erroneous in so far as it is prejudicial to the interest of the revenue for the purpose of section 263 of the Act. The said order has been passed by the AO in a routine and casual manner without applying proper mind on the Impounded material and issue discussed in the appraisal report. The AO has not verified the details which were required to be verified under the scope of scrutiny. The order of the AO is, therefore, liable to revision under the explanation (2) clause (a) of section 263 of the Act. The assessment order is set aside and restored to the file of Assessing officer to examine the entries in Annexure A-3 & A-23 of the Impounded material afresh in the light of the observation made in this order after allowing reasonable opportunity to the assessee.” Hence this appeal. Submissions: The impugned order passed u/s 263 is completely beyond the scope of S. 263 of the Act on various grounds, as discussed herein below. 1. Legal Position on Sec.263 – Judicial Guideline: Before proceeding, we may submit as regards the judicial guideline, in the light of which, the facts of this case are to be appreciated. 1.1 The pre-requisites to the exercise of jurisdiction by the Commissioner u/s 263, is that the order of the Assessing Officer is established to be erroneous in so far as it is prejudicial to the interest of the Revenue. The Commissioner has to be satisfied of twin conditions, namely (i) The order of the Assessing Officer sought to be revised is I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 9 erroneous; and (ii) it is prejudicial to the interests of the Revenue. If any one of them is absent i.e. if the assessment order is not erroneous but it is prejudicial to the Revenue, Sec.263 cannot be invoked. This provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous as also prejudicial to revenue’s interest, that the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase 'prejudicial to the interest of the revenue' has to be read in conjunction with an erroneous order passed by the AO. Every loss of Revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. For example, if the AO has adopted one of the two or more courses permissible in law and it has resulted in loss of revenue, or where two views are possible and AO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law. Kindly refer Malabar Industrial Co. Ltd. v/s CIT (2000) 243 ITR 83 (SC). 1.2 Also kindly refer CIT v/s Max India Ltd. (2007) 295 ITR 282 (SC) wherein it is held that: \"The phrase \"prejudicial to the interests of the Revenue\" in S. 263 of the Income Tax Act, 1961, has to be read in conjunction with the expression \"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 the Assessing Officer adopts one of two courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the Revenue, unless the view taken by the Assessing Officer is unsustainable in law.\" Ratio of these cases fully apply on the facts of the present case in principle. 2. Beyond the scope of AO’s inquiry on facts and in law: In the present case jurisdiction u/s 263 of the Act is on the ground that the while completing assessment proceedings the AO did not verify/ examine the transaction details available in Annexure 3 & 23 which pertain to AY 2017-18 and was not satisfactorily examined by the assessing officer. Such a stand by the CIT however, is not only contrary to the facts available on record but also ignoring the scope of inquiry by a quasi-judicial authority and ignoring the possibility of such examination by the AO during and at the time of making of the subjected assessment order. I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 10 2.1. At the outset, it is submitted that the AO in this case, acting as a quasi- jurisdictional authority, after making a detailed enquiry and examination of the relevant facts and material available on record to the extent the AO was supposed to make in law, keeping in mind the principles and guidelines settled by the Hon’ble Courts for application of different provisions of law and thereafter has taken a possible view and completed the subjected assessment. 2.2. A perusal of assessment record reveal that the AO raised specific queries w.r.t. all the documents impounded, which were made available to him, which fact is evident from the discussion made by him in the subjected assessment order dated 04.09.2021 (PB- 1-18) para 5 pg. 3 showing the list of the Annexures being A-27, A-11, A-12. Such document has been discussed show at pages 3, 4, 6, 8, 11 and on 13 of the assessment order. Accordingly, huge disallowance of Rs. 99,77,947/- u/s 40A (3) and addition on account of unexplained cash credit u/s 68 of Rs. 1,13,44,912/- were made. 2.3. It is pertinent to note that the ld. AO made specific remark on the aspect of examination of impounded papers in the office note which was even taken note by the ld. CIT in the impugned order wherein, the CIT has stated that: “As per office note of assessment order it was stated that all the documents and financial statement found during the course of survey proceedings are recorded/reflected in the regular books of accounts of the assessee and the same is verified during the assessment proceedings.” 3. AO can’t be expected to perform something impossible: 3.1. In para 4 of the SCN, dated 20.01.2022 initially ld. CIT alleged failure of the AO to consider these impounded annexures based on his examination of the assessment record however, such an allegation was factually wrong because there was no indication nor any evidence brought on record to support this allegation. Whereas the correct facts are that on 04.09.2021 when the AO passed the Assessment Order for subjected AY 2017-18, he was not having in his possession the impounded two annexures namely Annexure-3 and Annexure-23. On the contrary, aforesaid discussion made in the assessment order for AY 2018-19 (PB 19-54) has proved that such impounded record came to his possession only after the completion of the assessment for subjected AY 2017-18 hence it is wrong to find any fault of the AO and it is legally unjustified to hold the subjected order to be erroneous. In absence of the related impounded documents, it was impossible for the AO to have sought explanation by raising queries from the assessee. The law is well settled that no one can be expected to perform something which is impossible. 3.2. In fact, the AO, during the course of assessments proceeding for AY 2018- 19 had duly taken note all the impounded annexures being A-3, A-13 & A-23 at which were available before him, discussed at page 6 onward of the assessment order and after getting the reply, finally reduced the related amounts from the total addition of Rs. 4.87 Cr. made therein based on these I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 11 two annexures observing that they were related to AY 2017-18 (AY 2018-19) and completed the assessment vide order dated 19.04.2022 u/s 143(3) (PB 19- 54). The relevant findings are reproduced hereunder: “Disallowance u/s 40A(3) of the Act:- 5.3 The assessee submitted its reply dated 09.04.2022 uploaded 11.04.2022 on ITBA portal the relevant portion of reply is stated as under: - A-3 & A-23 pertains to F.Y. 2016-17. The annexure A-30 is totally related expenditure only and no receipts, Annexure A-13 is identical copy of Annexure A-1 and the Annexure A-22 is modified type of pocket ledger to keep handy details payable vis-à-vis payments. Original impounded documents are available with department and explanation with regards to A-3, A-23, A-30, A- 13, A-22 may be verified. The reply of the assessee was considered and found to be acceptable in respect d Annexure A-3, A-23 and A-13. In respect of other annexure assessee did no produce any documentary evidence in support of its claim further assessee did no produce books of account to verify its claim this point is noted vide order sheet entry dated 13.04.2022. The reply of the assessee in respect of Annexure A-3, A-23 and A-13 is discussed as under: - x x x x 5.3.2 Annexure related to F.Y. 2016-17: - On verification of annexure A-3 and A23 it was found that these annexure were related to F.Y. 2016-17 therefore these amount are reduced from the disallowance of Rs 4,86,59,393/- for A.Y. 2018-19 under the head violation of section 40A(3) of the Income Tax Act, 1961. Annexure Total Dr Entries in violation of section 40A(3) A-3 Rs. 42,39,255/- A-23 Rs. 81,81,960/- Total Rs. 1,24,21,215/- As such, Rs. 1,24,21,215/- which pertains to annexure A-3 & A-23 is reduced from proposed disallowance of Rs. 4,86,59,393/- as the same is related to FY 2016-17 initiated for transactions which are found in contravention of provisions of section 40A(3) of the Act.” Thus, it is evident that these papers were considered by the AO in AY 2018-19, only when came to his possession after the completion of the order for this year. 3.3. In the impugned order the CIT is completely silent with regard to the factual submissions made before him that the AO was not in possession of the related impounded documents before him during the course of the assessment proceedings. There is no categorical finding recorded by him that these two impounded documents were well available before the AO. The ld. CIT thus, ignored/ citrated a vital contention raised before him relating to a jurisdictional fact. Thus, it can’t be contended that such record was available before the AO for examination during assessment proceedings. I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 12 3.4. Change of stand by the CIT: Having failed to justify his stand taken in the SCN that upon examination of assessment record it came to his notice that the AO failed to consider these two Annexures surprisingly however, in the impugned order the ld. CIT has now come up with new story /new theory in as much as at page 4 he has referred to the appraisal report and finding fault of the AR that he has forgotten that a “copy of the appraisal report is available with the Commissioner of Income Tax, hence the details of the impounded matter were always before the PCIT and ongoing through the record the error on the part of the Assessing officer which was also prejudicial had been observed”. Thereafter, in para 7.1 page 5 he has again referred to and relied upon the appraisal report and in particular S.NO. 89 observing that the subjected annexures A3 and A23 were considered therein for F.Y. 17-18 (A.Y. 2018-19) solely based on the appraisal report, and repeatedly alleged that the AO made no enquiry, “he did not take a conscious decision and he completed the assessment in a routine and casual manner without applying proper mind on the impounded material and issues discussed in the appraisal report”. Thus, there are serious contradictions in the approach of the ld. CIT. While issuing the SCN and confronting the assessee and in the ultimate finding he recorded in the impugned order which clearly shows an attempt on his part to held the subjected assessment order to be erroneous in any manner whatsoever. In other words, in one way or the other. 3.5. It is also stands established by his own admission that the appraisal report always remains with the CIT and not with the AO. If that is so, how the AO could have been blamed not to have looked into and applied his mind on the appraisal report. 3.6. Even assuming, such appraisal report was with the AO than too, he could not have been blamed in as much as again by his own admission the CIT says that the transactions emanating from these annexures A3 and A23 were entered and shown in the said report as relating to F.Y. 17-18 (A.Y. 2018-19). Needless to say that the AO while making the assessment for a particular year (that is A.Y. 17-18 here), will focus only and only on that part of the appraisal report (if assuming was available with him) or on other impounded document or report etc. which relate to or pertain to the year before him but not to various other years which may be a part of the said appraisal report/various other impounded document which has got nothing to do with the assessment proceedings for that year (i.e. A.Y. 17-18). Even otherwise also he was not bind by such report. 3.7. Reliance placed on the case of CIT vs. G.M. Mittal Stainless Steel (P.) Ltd. [2003] 130 Taxman 67 (SC) (DC 41-44). 4. Appraisal report was never made a ground in the Show Cause Notice: 4.1. It is further submitted that the ignorance/ non-consideration of the appraisal report was never made a part of the various SCN’S issued u/s 263 and I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 13 therefore, the CIT could not have adapted such reasoning/ basis in the impugned order for the first time which was not earlier confronted to the assessee. On the contrary, in the present case on sole basis while holding the assessment order erroneous is the appraisal report. However, such document was never confronted to the assessee nor the assessee was ever show-caused w.r.t the appraisal report. On the contrary, the assessee specifically requested the ld. CIT that such report may be made available to him however, the same was completely ignored without paying any attention there to. 4.2. Reliance is placed on PCIT vs. Shreeji Prints (P.) Ltd. 2021] 130 taxmann.com 294 (SC) Surat-2 (DC 47-51) held as under: “5 The Tribunal has found that in the order passed by the PCIT, Explanation 2 of section 263 of the Act, 1961 is made applicable. The Tribunal observed that the PCIT has not mentioned in the show cause notice to invoke the Explanation 2 of section 263 of the Act 1961. Therefore, by invocation of Explanation in the order without confronting the assessee and giving an opportunity of being heard to the assessee is not appropriate and sustainable in law.” 5. Not a case of complete/total lack of inquiry: 5.1. It was further not a case of complete failure but it was, at the worst, (if assumed so though not admitted), could be a case of partial non-enquiry even ignoring the fact and contention that these two annexures were never within the knowledge of the AO. S. 263 contemplates only a complete failure but not a failure in the part. Thus, the AO made all the possible inquiries, sought clarifications on all the relevant issues to the extent he was supposed looking to the nature of the issue involved and the evidences and material already available therein together with the material provided during the assessment proceedings. Thus, ld. AO framed the assessment in accordance with the available judicial guideline. 5.2. The CIT nowhere denies that each and every other impounded document or other information available before the AO during the course of assessment proceeding, were duly considered by him rather, he himself admits in the impugned Order by referring the above office note put by the AO which is self- explanatory that the AO did make enquiry which was within his reach and was humanly possible for the AO. 5.3. The law is well settled that the Assessment order cannot be held to be erroneous simply on the allegation of inadequate enquiry unless there is an established case of total lack of enquiry. Kindly refer CIT vs. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del) (DC 1-15) wherein Delhi High Court was considering the aspect, when there is no proper or full verification, and it was held that: “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 CIT to pass orders under section 263 of the Act, merely because he has a different I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 14 opinion in the matter. It is only in cases of “lack of inquiry” that such a course of action would be open.” In another case of Narain Singla v. PCIT [2015] 62 taxmann.com 255 (Chandigarh - Trib.) (DC 16-26) it was held that when AO was fully aware of matter, he had appraised evidences filed by assessee and then had formed a view to accept same, Commissioner was unjustified in invoking jurisdiction under section 263. Whether if there was an enquiry, even inadequate, that would not, by itself, give occasion to Commissioner to pass order under section 263, merely because he has a different opinion in matter; it is only in case of 'lack of inquiry' that such a cause of action can be open. However, the ld. CIT is completely silent on this aspect. 6. Remedy to be availed under appropriated provision of law: The law is well settled that there are different provisions enacted in the statute which have got their own significance. There are remedial provisions for the department which could be taken u/s 147 by reopening the concluded assessment or u/s 154 by making a rectification or lastly u/s 263 by revising the erroneous order. However, all the provisions operate in their own/respective fields and cannot be used interchangeably or no provision can overlap the other. Therefore, if the facts and circumstance of the case suggest that the AO can get the jurisdiction from a particular provision of law, it is only that provision which has to be invoked but not the other. Reliance is place on the case of CIT vs. Amitabh Bachchan [2016] 286 CTR (SC) 113. (DC 31-40) wherein held that: “9. Under the Act different shades of power have been conferred on different authorities to deal with orders of assessment passed by the primary authority. While Section 147 confers power on the Assessing Authority itself to proceed against income escaping assessment, Section 154 of the Act empowers such authority to correct a mistake apparent on the face of the record. The power of appeal and revision is contained in Chapter XX of the Act which includes Section 263 that confer suo motu power of revision in the learned C.I.T. The different shades of power conferred on different authorities under the Act has to be exercised within the areas specifically delineated by the Act and the exercise of power under one provision cannot trench upon the powers available under another provision of the Act. In this regard, it must be specifically noticed that against an order of assessment, so far as the Revenue is concerned, the power conferred under the Act is to reopen the concluded assessment under Section 147 and/or to revise the assessment order under Section 263 of the Act. The scope of the power/jurisdiction under the different provisions of the Act would naturally be different. The power and jurisdiction of the Revenue to deal with a concluded assessment, therefore, must be understood in the context of the provisions of the relevant Sections noticed above. While doing so it must also be borne in mind that the legislature had not vested in the Revenue any specific power to question an order of assessment by means of an appeal.” That just to take an example, the ld. CIT himself used the word escaped in the impugned order which shows (without conceding) that proper course might have been to initiate re-assessment proceeding u/s 147/148 however, it was not done and patently wrong provision of law has been invoked which is I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 15 completely without jurisdiction in the light of the above submissions, factual position and the judicial guidelines. Thus, the subjected assessment order may be prejudicial to the interest of the revenue however, cannot be held erroneous because, twin conditions are not fulfilled. 7. S.263 Explanation not invoked: Interestingly, the ld. CIT did not invoke Explanation to S.263 which is normally interpreted / taken support by the invoking of S.263 in absence of which, the ld. CIT could not have at all complained of lack of inquiry or not making proper inquiries. Otherwise also he has not suggested what further inquiries could and should have been made in the admitted facts and circumstances of the present case. 8. Suspicion is not a good basis for revision: The CIT cannot invoke section 263 merely based on suspicion and exploring the possibility of some income, merely making reference to the impounded document, alleging not considered, unless demonstrated showing some income, cannot be a good basis. This so- called appraisal report is not evidence by itself and a merely internal document making a prima facie opinion on the impounded documents by someone other than the AO and therefore, can't be said to be binding upon AO. The CIT even did not mention the amount of income escaping Kindly refer the case of CIT vs. Trustees of Anupam Charitable Trust [1987] 31 Taxman 335 /167 ITR 129 (Raj.) wherein it was held as under: “The error envisaged by section 263 was not one which depended on possibility or the guess work but it should be actually an error either of fact or law. Unless the Commissioner categorically says that there was some income from speculative business which could not qualify for deduction much less exemption under section 11, it cannot be said that there was any error in the order of the ITO relating to the assessment year 1971-72. This error was not relevant to the assessment year 1975-76”. 9. Supporting Case laws: 9.1 In CIT v/s Rajasthan Financial Corporation (1996) 134 CTR 145 (Raj) (DC 27-30) held that: “Once Assessing Officer has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the Assessing Offer allowed the claim being satisfied with the explanation of assessee, the decision of the Assessing Officer cannot be held to be erroneous simply because in his order not make an elaborate discussion in that regard.” 9.2 In [2016] 76 taxmann.com 226 (SC) CIT v. Reliance Communication Ltd (DC 45-46) Held: IT: “SLP dismissed against High Court's ruling that where assessee raised funds by way of FCCBs and Assessing Officer made detailed enquiries about genuineness and creditworthiness of actual subscribers to such FCCBs in terms of section 68, mere fact that AO did not make any reference to said issue in assessment order, would not entitle Commissioner to pass a revisional order” I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 16 9.3 In ACIT, Central Circle-20, New Delhi vs. Shiv Kumar Nayyar [ITA No.1867/Del/2021] “8. …..The copy of the appraisal report submitted by the Investigation Wing to the ld. AO and ld. Addl.CIT are merely guidance to the ld. AO and are purely internal correspondences on which the assessee does not have any access. The scheme of the Act mandates due application of mind by the ld. AO to examine the seized documents independently dehors the appraisal report of the Investigation Wing and seek explanation/clarifications from the assessee on the contents of the seized documents. When the scheme of the Act provides for a leeway to both the ld. AO as well as the ld. Addl. CIT to even ignore the conclusions drawn in the appraisal report by the Investigation Wing and take a different stand in the assessment proceedings, the fact of ld. Addl.CIT getting involved in the search assessment proceedings right from the receipt of copy of appraisal report, as argued by the ld. DR, has no substance. In other words, irrespective of the conclusions drawn in the appraisal report by the ITA Nos.1282 to 1285/Del/2020 & ITA No.1078/Del/2021(By Assessee) ITA No.1867/Del/2021 (By Department) 8 Investigation Wing, both the ld. AO and the ld. Addl.CIT are supposed to independently apply their mind in a judicious way before drawing any conclusions on the contents of the seized documents while framing the search assessments. The law provides only the ld. AO to frame the assessment, but, certain checks and balances are provided in the Act by conferring powers on the ld. Addl.CIT to grant judicious approval u/s 153D of the Act to the draft assessment orders placed by the ld. AO.” 10. Lastly, the ld. CIT cited a decision in the case of CIT vs. Paville Projects Pvt. Ltd. however, firstly, the citation is not complete nor was made available to the assessee during the course of hearing hence deserves to be ignored. Otherwise also, neither he reproduced the relevant part of the impugned order 263 nor he has demonstrated how the same have the ld. CIT hence also the same deserves to be completely ignored. Hence, it cannot be said that the impugned assessment order was erroneous and therefore prejudicial to the interest of the revenue, for want of enquiry by the AO. In view of the above legal and factual position, the impugned order is completely beyond the scope of sec. 263 and therefore, deserves to be quashed.” 6. To support the contention so raised in the written submission reliance was placed on the following evidence / records / decisions: S No. Particulars Page No. I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 17 Case laws relied upon: S.No. Particulars Page No 1. CIT vs. Sunbeam Auto Ltd. [2010] 189 Taxman 436 (Delhi) 1-15 2. Narain Singla vs. PCIT [2015] 62 taxmann.com 255 (Chandigarh - Trib.) 16-26 3. CIT vs. Rajasthan Financial Corporation (1996) 134 CTR 145 (Raj) 27-30 4. Shiv Kumar Nayyar vs. ACIT, (New Delhi) ITA No. 1867/De1/2021 (Relevant Extract Only) 31-40 5. CIT vs. G.M. Mittal Stainless Steel (P.) Ltd. [2003] 130 Taxman 67/263 ITR 255 (SC) 41-44 6. CIT vs. Reliance Communication Ltd. [2016] 76 taxmann.com 226 (SC) 45-46 7. PCIT vs. ShreejiPrints (P.) Ltd. 130 taxmann.com 294 (SC) 47-51 1. Copy of Assessment order for AY 2017-18 dated 04.09.2021 1-18 2. Copy of Assessment order for AY 2018-19 dated 19.04.2022 19-54 3. Copy of Show Cause Notice u/s 263 dated 20.10.2022 55-56 4. Copy of Show Cause Notice u/s 263 dated 11.08.2023 57-58 5. Copy of Show Cause Notice u/s 263 dated 25.01.2024 59-60 6. Copy of Show Cause Notice u/s 263 dated 08.02.2024 61-62 7. Copy of our detailed Reply dt. 12.02.2024 to the above SCN dated 08.02.2024 along with Acknowledgment 63-70 8. Copy of Show Cause Notice u/s 263 dated 02.03.2024 71-72 I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 18 7. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that it was not a case of complete failure but it was, at the worst, could be a case of partial non-enquiry even ignoring the fact and contention that these two annexures were never within the knowledge of the AO. Section 263 contemplates only a complete failure but not a failure in the part. Thus, the AO made all the possible inquiries, sought clarifications on all the relevant issues to the extent he was supposed looking to the nature of the issue involved and the evidences and material already available therein together with the material provided during the assessment proceedings. Thus, ld. AO framed the assessment in accordance with the available judicial guideline. The CIT nowhere denies that each and every other impounded document or other information available before the AO during the course of assessment proceeding, were duly considered by him rather, he himself admits in the impugned order by referring the office note put by the AO which is self- explanatory that the AO did make enquiry which was within his reach and was humanly possible for the AO. The law is well settled that the Assessment order cannot be held to be erroneous simply on the allegation of inadequate enquiry unless there is an established case of total lack of enquiry. It is further submitted that the ignorance/ non- I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 19 consideration of the appraisal report was never made a part of the various SCN’S issued u/s 263 and therefore, the CIT could not have adapted such reasoning/ basis in the impugned order for the first time which was not earlier confronted to the assessee. On the contrary, in the present case on sole basis while holding the assessment order erroneous is the appraisal report. However, such document was never confronted to the assessee nor the assessee was ever show-caused w.r.t the appraisal report. On the contrary, the assessee specifically requested the ld. CIT that such report may be made available to him however, the same was completely ignored without paying any attention there to. Thus, there are serious contradictions in the approach of the ld. CIT. While issuing the SCN and confronting the assessee and in the ultimate finding she recorded in the impugned order which clearly shows an attempt on his part to held the subjected assessment order to be erroneous in any manner whatsoever. The ld. AR of the assessee also submitted that the ld. PCIT failed to place on record the impact or error and she merely based on the assumption and presumption and thus the case does not fall within the provision of section 263 of the Act. 8. The ld DR is heard who relied on the findings recorded in the order of the ld. PCIT and advanced the similar contentions as stated in the I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 20 order of the ld. CIT(A). The ld. DR stated that neither the assessee shows from the submission so made before the ld. AO nor that found discussed in the order of the assessment. The ld. AO has not verified the annexure as per the appraisal report available in this case and therefore, the assessment made in the case of the assessee is prejudicial to the interest of revenue and has rightly been held so by the PCIT. 9. We have heard both the parties and perused the materials available on record. In the present appeal the assessee has taken multiple grounds of appeals and to meet the end of justice we confine to the core controversy as to the invocation of provision of section 263 of the Act based on the facts and circumstances of the case. The brief facts of the case is that there was a search and seizure action in ‘Gawar Group’ of Hisar, a survery proceeding u/s. 133A of the Act was carried out at site office of the assessee firm temporarily located at Camping site Raison, Near Morpheus Valley Resort, NH-21, Kullu-Manali Highway Kullu on 08.11.2017 by the revenue. During the course of survey action carried out on 08.11.2017 at work site of the assessee, certain incriminating documents, loose papers etc., were impounded by the survey team. After analyzing the said impounded documents/material, certain cash payment have been found made in contravention of the I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 21 provision of section 40A(3) of the Act vide annexure A-27, A-11 & A-12 of the annexure of documents found. Finally the assessment order u/s 143(3) dated 04.09.2021 was passed determining at assessed income at Rs. 2,51,20,840/- by making disallowance on accounts of unexplained cash credit u/s 68 of the Act of Rs. 1,13,44,912/- and disallowance on accounts of violation u/s 40A(3) of the Act at Rs. 99,77,947/-. While examining the assessment record ld. PCIT noted that ld. AO has called for the details from the assessee only for Annexure A-27, A-11 and A-12 only. She further noted that no query was made to the assessee to explain annexure A-3 & A-23 pertain to the F.Y 2016-17. But the same have neither been verified nor any supporting and corroborative evidence are available on the record. So she noted that there is a failure on part of the Assessing Officer in carrying out the requisite inquiries/examination(s) and thereby the action of the AO found erroneous and prejudice to the interest of the revenue. Ld. PCIT thus issued a show cause notice to the assessee on 20.10.2022 and 11.08.2023. The assessee filed the replied online which was considered by the ld. PCIT and she has countered that submission on the point that the Appraisal report is always available with the Commissioner of Income Tax, hence the details of the impounded material were always before the PCIT and on going through the record the error on the part of I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 22 the Assessing officer which was also prejudicial had been observed. Thus, relying on the decision of Hon'ble Supreme Court in the case of Malabar Industrial Limited V/s CIT 243 ITR wherein it has been held that - \"An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind” and therefore, she hold the order erroneous and prejudicial to the interest of the revenue. 10. As we note that there is an allegation on the part of the ld. PCIT while examining the assessment record that the while conducting the assessment proceeding the ld. AO has not specifically dealt with the Annexure 3 & 23 and therein the transactions pertaining to the F. Y. 2016-17 have not been satisfactorily examined by the assessing officer and he has not placed on record supporting and corroborative evidence so as to demonstrate that the same were verified and that failure alleged to have been on the part of the ld.AO resulted into passing an order u/s. 263 of the Act. From the order of the PCIT she herself admitted that the ld.AO placed on record the office note wherein he writes that “all the documents and financial statement found during the course of survey proceeding are recorded / reflected in the regular books of accounts of I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 23 the assessee and the same is verified during the assessment proceedings.” But that statement in writing made by the ld. AO is kept a side by ld. PCIT by merely stating as under : An examination of order of the Assessing Officer makes it clear to me that he did not take a conscious decision relating transactions pertain to F.Y. 2016-17 of annexure A3 and A23. But, this issue is not seen to have been examined at all by the AO as no query has been raised in this regard & the assessee has not replied on the entries mentioned in these Annexure. As we note that although the PCIT claimed to have the appraisal report based on these she took a view that the issue has not been verified by the ld. AO. But while issuing the show cause notice to the assessee neither the PCIT demonstrated by placing the relevant part of the seized records which suggest the addition and thereby loss of revenue nor she has while passing the order placed on record the relevant part of the failure on the part of the ld. AO. This conduct itself suggest that the action of the ld. PCIT is based on surmises and conjectures. Not only that when the ld. AO has specifically written in the office note that he has verified all the aspect of the matter then ld. PCIT merely based on the assumption and presumption cannot held the assessment order which is either wise has prejudice caused to the revenue, if so ld. PCIT should have placed on record while passing the order if not while issuing the show cause notice. Without pinpointing specific error on the part of the ld. AO or proving the prejudiced to the revenue the assessment order I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 24 which is passed after hearing the assessee on the as much 10 dates of hearing starting from 20.08.2018 to 27.08.2021. The observation of the ld. PCIT as stated herein above she merely invoked the provision only on the reasons that ld. AO has not raised question and assessee has not filed any reply. On the other hand when the ld. AO has categorically mentioned in the office note that “all documents and financial statement found during the course of survey proceeding are recorded / reflected in the regular books of accounts of the assessee and the same is verified during the assessment proceedings.” Thus, here we note that when the specific observation with that of the general observation the specific will prevail because that general statement of the ld. PCIT has not been proved as correct by placing anything on record so as to demonstrate the impact of her observations. Even the ld. DR while hearing the case has not argued or demonstrated as to what is the impact of this observation. The provision of section 263 cannot be invoked to correct each and every type of mistake or error committed by the AO; it is only when an order is erroneous as also prejudicial to Revenue’s interest, then the provision for revision will be attracted. Ld. PCIT though having the details of the impact of annexure A-3 and A-23 did not demonstrate the impact and merely expressing assumption and presumption she invoked the provision of section 263 of the Act. The I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 25 pre-requisites to the exercise of jurisdiction by the Commissioner u/s 263, is that the order of the Assessing Officer is established to be erroneous in so far as it is prejudicial to the interest of the Revenue. The Commissioner has to be satisfied of twin conditions, namely (i) The order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If any one of them is absent i.e. if the assessment order is not erroneous but it is prejudicial to the Revenue, Sec.263 cannot be invoked. This provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous as also prejudicial to revenue’s interest, that the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase 'prejudicial to the interest of the revenue' has to be read in conjunction with an erroneous order passed by the AO. Every loss of Revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. Practically if the AO has adopted one of the two or more courses permissible in law and it has resulted in loss of revenue, or where two views are I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 26 possible and AO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law. The ld. AO is having the co-judicial authority ld. PCIT cannot direct the ld. AO to do again and again enquiry the way the PCIT wants, it is the privilege that the ld. AO has whether to call for the details or to verify the same from the details available on record. The ld. AO wherever make up mind to add the same has been mentioned and discussed in the assessment order and thereby AO raised specific queries w.r.t. all the documents impounded, which were made available to him, which fact is evident from the discussion made by him in the subjected assessment order dated 04.09.2021 (PB- 1-18) para 5 pg. 3 showing the list of the Annexures being A-27, A- 11, A-12. Such document has been discussed show at pages 3, 4, 6, 8, 11 and on 13 of the assessment order. Accordingly, huge disallowance of Rs. 99,77,947/- u/s 40A (3) and addition on account of unexplained cash credit u/s 68 of Rs. 1,13,44,912/- were made. Thus, merely non mentioning the annexure and not asking the details merely itself does not hold I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 27 the order prejudicial or erroneous. This could have been held so if the ld. PCIT by placing on record the relevant material based on which she is making the statement, without doing so the assessment order otherwise only not refer those annexure does not hold liable to be revision as per provision of section 263 of the Act. 11. We also take note of the facts as submitted by the ld. AR of the assessee in his written submission that “In para 4 of the SCN, dated 20.01.2022 initially ld. CIT alleged failure of the AO to consider these impounded annexures based on his examination of the assessment record however, such an allegation was factually wrong because there was no indication nor any evidence brought on record to support this allegation. On the contrary the correct facts that has been argued and placed on record by the ld.AR of the assessee in his written submission so filed and the same were not challenged by the revenue while arguing the case of the assessee. The submission reads asunder : “on 04.09.2021 when the AO passed the Assessment Order for subjected AY 2017-18, he was not having in his possession the impounded two annexures namely Annexure-3 and Annexure-23. On the contrary, aforesaid discussion made in the assessment order for AY 2018-19 (PB 19-54) has proved that such I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 28 impounded record came to his possession only after the completion of the assessment for subjected AY 2017-18 hence it is wrong to find any fault of the AO and it is legally unjustified to hold the subjected order to be erroneous. In absence of the related impounded documents, it was impossible for the AO to have sought explanation by raising queries from the assessee. The law is well settled that no one can be expected to perform something which is impossible.” As is evident from that order of the assessment that during the course of assessments proceeding for AY 2018-19 had duly taken note all the impounded annexures being A-3, A-13 & A-23 at which were available before him, discussed at page 6 onward of the assessment order and after getting the reply, finally reduced the related amounts from the total addition of Rs. 4.87 Cr. made therein based on these two annexure observing that they were related to AY 2017-18 (AY 2018-19) and completed the assessment vide order dated 19.04.2022 u/s 143(3) (PB 19-54). The relevant findings are reproduced hereunder: “Disallowance u/s 40A(3) of the Act:- 5.3 The assessee submitted its reply dated 09.04.2022 uploaded 11.04.2022 on ITBA portal the relevant portion of reply is stated as under: - A-3 & A-23 pertains to F.Y. 2016-17. The annexure A-30 is totally related expenditure only and no receipts, Annexure A-13 is identical copy of Annexure A-1 and the Annexure A-22 is modified type of pocket ledger to keep handy details payable vis-à-vis payments. Original impounded documents are available with department and explanation with regards to A-3, A-23, A-30, A- 13, A-22 may be verified. The reply of the assessee was considered and found to be acceptable in respect d Annexure A-3, A-23 and A-13. In respect of other annexure assessee did no produce any documentary evidence in support of its claim further assessee did no produce books of account to verify its claim this point is noted vide order sheet entry dated 13.04.2022. The reply of the assessee in respect of Annexure A-3, A-23 and A-13 is discussed as under: - x x x x 5.3.2 Annexure related to F.Y. 2016-17: - On verification of annexure A-3 and A23 it was found that these annexure were related to F.Y. 2016-17 therefore these amount are reduced from the disallowance of Rs 4,86,59,393/- for A.Y. 2018-19 under the head violation of section 40A(3) of the Income Tax Act, 1961. Annexure Total Dr Entries in violation of section 40A(3) A-3 Rs. 42,39,255/- A-23 Rs. 81,81,960/- Total Rs. 1,24,21,215/- As such, Rs. 1,24,21,215/- which pertains to annexure A-3 & A-23 is reduced from proposed disallowance of Rs. 4,86,59,393/- as the same is related to FY 2016-17 initiated for transactions which are found in contravention of provisions of section 40A(3) of the Act.” Thus, it is evident that these papers were considered by the AO in AY 2018-19, only when came to his possession after the completion of the order for this year. I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 29 3.3. In the impugned order the CIT is completely silent with regard to the factual submissions made before him that the AO was not in possession of the related impounded documents before him during the course of the assessment proceedings. There is no categorical finding recorded by him that these two impounded documents were well available before the AO. The ld. CIT thus, ignored/ citrated a vital contention raised before him relating to a jurisdictional fact. Thus, it can’t be contended that such record was available before the AO for examination during assessment proceedings. 3.4. Change of stand by the CIT: Having failed to justify his stand taken in the SCN that upon examination of assessment record it came to his notice that the AO failed to consider these two Annexures surprisingly however, in the impugned order the ld. CIT has now come up with new story /new theory in as much as at page 4 he has referred to the appraisal report and finding fault of the AR that he has forgotten that a “copy of the appraisal report is available with the Commissioner of Income Tax, hence the details of the impounded matter were always before the PCIT and ongoing through the record the error on the part of the Assessing officer which was also prejudicial had been observed”. Thereafter, in para 7.1 page 5 he has again referred to and relied upon the appraisal report and in particular S.NO. 89 observing that the subjected annexures A3 and A23 were considered therein for F.Y. 17-18 (A.Y. 2018-19) solely based on the appraisal report, and repeatedly alleged that the AO made no enquiry, “he did not take a conscious decision and he completed the assessment in a routine and casual manner without applying proper mind on the impounded material and issues discussed in the appraisal report”. Thus, there are serious contradictions in the approach of the ld. CIT. While issuing the SCN and confronting the assessee and in the ultimate finding he recorded in the impugned order which clearly shows an attempt on his part to held the subjected assessment order to be erroneous in any manner whatsoever. In other words, in one way or the other. 3.5. It is also stands established by his own admission that the appraisal report always remains with the CIT and not with the AO. If that is so, how the AO could have been blamed not to have looked into and applied his mind on the appraisal report. 3.6. Even assuming, such appraisal report was with the AO than too, he could not have been blamed in as much as again by his own admission the CIT says that the transactions emanating from these annexures A3 and A23 were entered and shown in the said report as relating to F.Y. 17-18 (A.Y. 2018-19). Needless to say that the AO while making the assessment for a particular year (that is A.Y. 17-18 here), will focus only and only on that part of the appraisal report (if assuming was available with him) or on other impounded document or report etc. which relate to or pertain to the year before him but not to various other years which may be a part of the said appraisal report/various other impounded document which has got nothing to do with the assessment proceedings for that year (i.e. A.Y. 17-18). Even otherwise also he was not bind by such report. I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 30 3.7. Reliance placed on the case of CIT vs. G.M. Mittal Stainless Steel (P.) Ltd. [2003] 130 Taxman 67 (SC) (DC 41-44). 4. Appraisal report was never made a ground in the Show Cause Notice: 4.1. It is further submitted that the ignorance/ non-consideration of the appraisal report was never made a part of the various SCN’S issued u/s 263 and therefore, the CIT could not have adapted such reasoning/ basis in the impugned order for the first time which was not earlier confronted to the assessee. On the contrary, in the present case on sole basis while holding the assessment order erroneous is the appraisal report. However, such document was never confronted to the assessee nor the assessee was ever show-caused w.r.t the appraisal report. On the contrary, the assessee specifically requested the ld. CIT that such report may be made available to him however, the same was completely ignored without paying any attention there to. 4.2. Reliance is placed on PCIT vs. Shreeji Prints (P.) Ltd. 2021] 130 taxmann.com 294 (SC) Surat-2 (DC 47-51) held as under: “5 The Tribunal has found that in the order passed by the PCIT, Explanation 2 of section 263 of the Act, 1961 is made applicable. The Tribunal observed that the PCIT has not mentioned in the show cause notice to invoke the Explanation 2 of section 263 of the Act 1961. Therefore, by invocation of Explanation in the order without confronting the assessee and giving an opportunity of being heard to the assessee is not appropriate and sustainable in law.” 5. Not a case of complete/total lack of inquiry: 5.1. It was further not a case of complete failure but it was, at the worst, (if assumed so though not admitted), could be a case of partial non-enquiry even ignoring the fact and contention that these two annexures were never within the knowledge of the AO. S. 263 contemplates only a complete failure but not a failure in the part. Thus, the AO made all the possible inquiries, sought clarifications on all the relevant issues to the extent he was supposed looking to the nature of the issue involved and the evidences and material already available therein together with the material provided during the assessment proceedings. Thus, ld. AO framed the assessment in accordance with the available judicial guideline. 5.2. The CIT nowhere denies that each and every other impounded document or other information available before the AO during the course of assessment proceeding, were duly considered by him rather, he himself admits in the impugned Order by referring the above office note put by the AO which is self- explanatory that the AO did make enquiry which was within his reach and was humanly possible for the AO. 5.3. The law is well settled that the Assessment order cannot be held to be erroneous simply on the allegation of inadequate enquiry unless there is an established case of total lack of enquiry. Kindly refer CIT vs. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del) (DC 1-15) wherein Delhi High Court was considering the aspect, when there is no proper or full verification, and it was held that: “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 I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 31 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 CIT 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 another case of Narain Singla v. PCIT [2015] 62 taxmann.com 255 (Chandigarh - Trib.) (DC 16-26) it was held that when AO was fully aware of matter, he had appraised evidences filed by assessee and then had formed a view to accept same, Commissioner was unjustified in invoking jurisdiction under section 263. Whether if there was an enquiry, even inadequate, that would not, by itself, give occasion to Commissioner to pass order under section 263, merely because he has a different opinion in matter; it is only in case of 'lack of inquiry' that such a cause of action can be open. However, the ld. CIT is completely silent on this aspect. 6. Remedy to be availed under appropriated provision of law: The law is well settled that there are different provisions enacted in the statute which have got their own significance. There are remedial provisions for the department which could be taken u/s 147 by reopening the concluded assessment or u/s 154 by making a rectification or lastly u/s 263 by revising the erroneous order. However, all the provisions operate in their own/respective fields and cannot be used interchangeably or no provision can overlap the other. Therefore, if the facts and circumstance of the case suggest that the AO can get the jurisdiction from a particular provision of law, it is only that provision which has to be invoked but not the other. Reliance is place on the case of CIT vs. Amitabh Bachchan [2016] 286 CTR (SC) 113. (DC 31-40) wherein held that: “9. Under the Act different shades of power have been conferred on different authorities to deal with orders of assessment passed by the primary authority. While Section 147 confers power on the Assessing Authority itself to proceed against income escaping assessment, Section 154 of the Act empowers such authority to correct a mistake apparent on the face of the record. The power of appeal and revision is contained in Chapter XX of the Act which includes Section 263 that confer suo motu power of revision in the learned C.I.T. The different shades of power conferred on different authorities under the Act has to be exercised within the areas specifically delineated by the Act and the exercise of power under one provision cannot trench upon the powers available under another provision of the Act. In this regard, it must be specifically noticed that against an order of assessment, so far as the Revenue is concerned, the power conferred under the Act is to reopen the concluded assessment under Section 147 and/or to revise the assessment order under Section 263 of the Act. The scope of the power/jurisdiction under the different provisions of the Act would naturally be different. The power and jurisdiction of the Revenue to deal with a concluded assessment, therefore, must be understood in the context of the provisions of the relevant Sections noticed above. While doing so it must also be borne in mind that the legislature had not vested in the Revenue any specific power to question an order of assessment by means of an appeal.” That just to take an example, the ld. CIT himself used the word escaped in the impugned order which shows (without conceding) that proper course might I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 32 have been to initiate re-assessment proceeding u/s 147/148 however, it was not done and patently wrong provision of law has been invoked which is completely without jurisdiction in the light of the above submissions, factual position and the judicial guidelines. Thus, the subjected assessment order may be prejudicial to the interest of the revenue however, cannot be held erroneous because, twin conditions are not fulfilled. 7. S.263 Explanation not invoked: Interestingly, the ld. CIT did not invoke Explanation to S.263 which is normally interpreted / taken support by the invoking of S.263 in absence of which, the ld. CIT could not have at all complained of lack of inquiry or not making proper inquiries. Otherwise also he has not suggested what further inquiries could and should have been made in the admitted facts and circumstances of the present case. 8. Suspicion is not a good basis for revision: The CIT cannot invoke section 263 merely based on suspicion and exploring the possibility of some income, merely making reference to the impounded document, alleging not considered, unless demonstrated showing some income, cannot be a good basis. This so- called appraisal report is not evidence by itself and a merely internal document making a prima facie opinion on the impounded documents by someone other than the AO and therefore, can't be said to be binding upon AO. The CIT even did not mention the amount of income escaping Kindly refer the case of CIT vs. Trustees of Anupam Charitable Trust [1987] 31 Taxman 335 /167 ITR 129 (Raj.) wherein it was held as under: “The error envisaged by section 263 was not one which depended on possibility or the guess work but it should be actually an error either of fact or law. Unless the Commissioner categorically says that there was some income from speculative business which could not qualify for deduction much less exemption under section 11, it cannot be said that there was any error in the order of the ITO relating to the assessment year 1971-72. This error was not relevant to the assessment year 1975-76”. 9. Supporting Case laws: 9.1 In CIT v/s Rajasthan Financial Corporation (1996) 134 CTR 145 (Raj) (DC 27-30) held that: “Once Assessing Officer has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the Assessing Offer allowed the claim being satisfied with the explanation of assessee, the decision of the Assessing Officer cannot be held to be erroneous simply because in his order not make an elaborate discussion in that regard.” 9.2 In [2016] 76 taxmann.com 226 (SC) CIT v. Reliance Communication Ltd (DC 45-46) Held: IT: “SLP dismissed against High Court's ruling that where assessee raised funds by way of FCCBs and Assessing Officer made detailed enquiries about genuineness and creditworthiness of actual subscribers to such FCCBs in terms of section 68, mere fact that AO did not make any reference to said issue in assessment order, would not entitle Commissioner to pass a revisional order” 9.3 In ACIT, Central Circle-20, New Delhi vs. Shiv Kumar Nayyar [ITA No.1867/Del/2021] I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 33 “8. …..The copy of the appraisal report submitted by the Investigation Wing to the ld. AO and ld. Addl.CIT are merely guidance to the ld. AO and are purely internal correspondences on which the assessee does not have any access. The scheme of the Act mandates due application of mind by the ld. AO to examine the seized documents independently dehors the appraisal report of the Investigation Wing and seek explanation/clarifications from the assessee on the contents of the seized documents. When the scheme of the Act provides for a leeway to both the ld. AO as well as the ld. Addl. CIT to even ignore the conclusions drawn in the appraisal report by the Investigation Wing and take a different stand in the assessment proceedings, the fact of ld. Addl.CIT getting involved in the search assessment proceedings right from the receipt of copy of appraisal report, as argued by the ld. DR, has no substance. In other words, irrespective of the conclusions drawn in the appraisal report by the ITA Nos.1282 to 1285/Del/2020 & ITA No.1078/Del/2021(By Assessee) ITA No.1867/Del/2021 (By Department) 8 Investigation Wing, both the ld. AO and the ld. Addl.CIT are supposed to independently apply their mind in a judicious way before drawing any conclusions on the contents of the seized documents while framing the search assessments. The law provides only the ld. AO to frame the assessment, but, certain checks and balances are provided in the Act by conferring powers on the ld. Addl.CIT to grant judicious approval u/s 153D of the Act to the draft assessment orders placed by the ld. AO.” 10. Lastly, the ld. CIT cited a decision in the case of CIT vs. Paville Projects Pvt. Ltd. however, firstly, the citation is not complete nor was made available to the assessee during the course of hearing hence deserves to be ignored. Otherwise also, neither he reproduced the relevant part of the impugned order 263 nor she has demonstrated how the same have the ld. CIT hence also the same deserves to be completely ignored. Hence, it cannot be said that the impugned assessment order was erroneous and therefore prejudicial to the interest of the revenue, for want of enquiry by the AO. In view of the above legal and factual position, the impugned order is completely beyond the scope of sec. 263 and therefore, deserves to be quashed.” 12. Thus, when the assessee in his submission has dealt with the jurisdiction aspect that has been not been dealt by the revenue in her order not at the time of hearing of the appeal we do not find any reason that the order of the ld. AO is erroneous or prejudicial to the interest of the revenue. The provision of section 263 as given in the law and the I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 34 explanation 2 to that has not been invoked by the ld. PCIT to substantiate her view. The provision of section 263 reads as under: Revision of orders prejudicial to revenue. 263. (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 81a[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, 81b[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 1.—For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,— (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer 82[or the Transfer Pricing Officer, as the case may be,] shall include— (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer 82[or the Transfer Pricing Officer, as the case may be,] conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner authorised by the Board in this behalf under section 120; 82[(iii) an order under section 92CA by the Transfer Pricing Officer;] (b) \"record\" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer 82[or the Transfer Pricing Officer, as the case may be,] had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Principal Commissioner or Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 35 Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer 82[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. After going through the provision of the Act we also take note of the fact nowhere in the order she invoked the explanation (2) of provision of section 263 of the Act thereby she was not sure as to whether the order falls any of the criteria given vide explanation 2 of the provision of section 263 of the Act. Thus, we do not agree with the view of the ld. PCIT that without establishing that how the order is erroneous or prejudicial the law does not permit such action. We get support of our view from the decision of our Jurisdictional High Court decision in the case of CIT v/s Rajasthan Financial Corporation (1996) 134 CTR 145 (Raj) (DC 27-30) wherein the High Court have held that: “Once Assessing Officer has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the Assessing Offer allowed the claim being satisfied with the explanation of assessee, the decision of the Assessing Officer cannot be held to be erroneous simply because in his order not make an elaborate discussion in that regard.” I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 36 Similar view is taken by our High Court in the case of PCIT Vs. Om Rudra Priya Holiday Resort Private Limited [ (2019) 109 Taxmann.com (Rajasthan) wherein the consistent view is taken by holding that ; 5. Having heard learned counsel for the revenue and perused the impugned judgment as also the material on record, we find that the Tribunal has analytically examined all the arguments which were advanced on behalf of the revenue. The Tribunal has noted that the assessing officer during the course of assessment proceedings had issued a query letter dated 03.03.2015 wherein various queries were raised including the details of additions of Rs.2,20,03,275/- as per the schedule of fixed assets of the audit report and copies of supporting books and vouchers for acquisition of the fixed assets were also called from the assessee. The assessing officer also asked the assessee to furnish the valuation report of the cost of construction as shown in the books of accounts. In response thereto, the assessee produced the valuation report dated 14.05.2013. The assessing officer also called for relevant documents submitted with the Baroda Rajasthan Gramin Bank including application form and other record in the shape of project report for availing the term loan for construction of the hotel building. All these records were supplied by the bank to the assessing officer along with the sanction letter dated 26.07.2011, whereby a loan of Rs.2.00 crores was sanctioned by the bank for construction of the hotel building. The Tribunal therefore concluded that at the time of applying for term loan, the assessee furnished the estimated and projected cost of construction of the hotel building for a total cost of Rs.3.52 crores, whereas the assessee had shown the fixed assets in the balance sheet as on 31.03.2013 at Rs.2,69,26,206/-. The project report submitted with the bank was an estimated cost of the hotel building to be incurred in future and was not based on the valuation of any existing assets of the assessee. It was therefore that the Tribunal held that the project report cannot constitute actual cost of construction once the assessee has recorded the actual cost of construction in the books of accounts, which was duly verified by the assessing officer along with the report of the registered valuer. After considering the explanation of the assessee as well as the relevant valuation report, the assessing officer was satisfied with the cost of fixed assets as shown in the balance sheet. There was no dispute that the project report produced by the assessee before the bank at the time of taking the loan for the purpose of construction of hotel building was only a projected estimated of the cost and not the actual cost of construction incurred by the assessee. It was stated that the assets must be as per the actual cost of construction and not on the projected cost of acquisition. In these facts, the Tribunal took the view that if the order passed by the assessing officer is without any investigation or enquiry on an issue, then it would be erroneous so far as it is prejudicial to the interest of the revenue on the ground of lack of enquiry. However, it was not a case of complete lack of enquiry on the part of the assessing officer rather the assessing officer has conducted a detailed enquiry on this issue and called for I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 37 all the relevant records from the bank for the purpose of examining the cost of construction of the hotel building. It could be a case of inadequate enquiry so far as not referring the matter to the DVO, however, it was not mandatory for the assessing officer to refer the valuation to the DVO once the assessing officer was satisfied with the cost of construction and cost of fixed assets as recorded in the books of account. The Tribunal further held that even if the Principal Commissioner found that the decision of the assessing officer accepting the cost of construction/cost of fixed assets is contrary to the facts or otherwise not permissible as per the provisions of the IT Act, then the order of the assessing officer could have been reversed by giving a concluding finding on the issue. The Principal Commissioner has set aside the impugned order only for the purpose of referring the same to the DVO. It is thus evident that the Principal Commissioner was not sure about the correctness of the cost of construction or cost of fixed assets either shown in the project report or recorded in the books of account. In the facts of the case, when the assessing officer has taken a broad view by accepting the cost of fixed assets as recorded in the books of account which were also supported by the valuation report, then the order of the assessing officer cannot be held to be erroneous on the ground of lack of enquiry. It is settled position of law that when the assessing officer has taken one of the possible views then the Principal Commissioner cannot be permitted to invoke the provisions of Section 263 simply because he does not agree with the view taken by the assessing officer. 6. On examination of the reasoning given by the Tribunal, we do not find that there was any justification for the Principal Commissioner to invoke the provisions of Section 263 of the IT Act on the specific plea that the order of the assessing officer was prejudicial to the interest of the revenue. The Supreme Court in Malabar Industrial Co. Ltd. v. CIT [2000] 109 Taxman 66/243 ITR 83, in para 9 of the report, did not approve the interpretation placed by the Madras High Court in Venkatakrishna Rice Co. v. CIT [1987] 163 ITR 129/ 96 Taxman 528 on the phrase \"prejudicial to the interests of the Revenue\" and held that 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. The phrase \"prejudicial to the interests of the Revenue\" is not an expression of art and is not defined in the Act. When this phrase is understood in its ordinary meaning, it is of wide import and is not confined to loss of tax. Relevant discussion is found in Paras 8, 9 and 10 of the Report, which are reproduced as follows: \"8. The phrase \"prejudicial to the interests of the Revenue\" is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The High Court of Calcutta in Dawjee Dadabhoy & Co. v. S.P. Jain [1957] 31 ITR 872 (Cal), the High Court of Karnataka in CIT v. T. Narayana Pai [1975] 98 ITR 422 (Kant), the High Court of Bombay in CIT v. Gabriel India Ltd. [1993] 203 ITR 108 (Bom), and the High Court of Gujarat in CIT v. Minalben S. Parikh [1995] 215 ITR 81 (Guj) treated loss of tax as prejudicial to the interests of the Revenue. I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 38 9. Mr Abraham relied on the judgment of the Division Bench of the High Court 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 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 order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue. (See Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) and in Tara Devi Aggarwal v. CIT [1973] 3 SCC 482)\". In view of the above discussion, it must be held that every loss of the revenue as a consequence of the order of the assessing officer cannot be treated prejudicial to the interest of the revenue. Where two views are possible and the assessing officer has taken one view with which the Principal Commissioner did not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the assessing officer was not at all possible in law. In the result, we do not find any merit in this appeal. It is accordingly dismissed. Based on the discussion so recorded herein above we do not concur with the view of the ld. PCIT and thereby we quash the same and in the result the appeal of the assessee is allowed. I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 39 Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board. Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Dated: 09/12/2024 Ganesh Kumar, Sr. PS Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order Date Initial 1. Draft dictated on Sr.PS/PS 2. Draft placed before author Sr.PS/PS 3. Draft proposed & placed before the Second Member JM/AM 4. Draft discussed/approved by Second Member JM/AM 5. Approved Draft comes to the Sr. P.S./P.S. Sr.PS/PS 6. Kept for pronouncement on Sr.PS/PS 7. File sent to the Bench Clerk Sr.PS/PS 8. Date on which file goes to the Head Clerk 9. Date on which file goes to the AR 10. Date of dispatch of Order I.T.A. No. 278/Jodh/2024 Assessment Year: 2017-18 40 "