Zuari Management Services Ltd., Goa V. The Commisioner of Income-tax, Panaji

ITA 103/PAN/2014

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9464 (ITAT-PANAJI)
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 25-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 28-03-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANJUNATH I PUJARI LD
• Keywords: Gift; Depreciation; Opportunity of being heard; Additional depreciation; Period of limitation; Question of law; Tax effect; Revenue expenditure
• Section: 143(3); 142(1); 147; 148; 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 103/ PNJ/201 4 : (ASST. YEAR : 2009 - 10 ) ZUARI MANAGEMENT SERVICES LTD (EARLIER KNOWN AS ZUARI INFRASTRUCTURE AND DEVELOPERS LIMITED), JAIKISAAN BHAWAN, ZUARINAGAR, GOA - 403726. PAN : AAACZ2903Q. (APPELLANT) VS. THE COMMISSIONER OF INCOME - TAX, PANAJI - GOA. (RESPONDENT) A PPELLANT BY : SHRI SALIL KAPOOR, ADV. RE SPONDENT BY : SHRI MANJUNATH I. PUJARI, LD. D.R. DATE OF HEARING : 11/ 1 2 /201 4 DATE OF PRONOUNCEMENT : 16 /0 2 /201 5 O R D E R PER P.K. BANSAL THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) , PANAJI, DT D . 28 .0 1 .201 4 FOR ASSESSMENT YEAR 2009 - 10 BY TAKING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: - 1 . THE COMMISSIONER OF INCOME - T AX , PANAJI GOA ( HEREINAFTER REFERRED TO AS THE CIT ) ERRED IN NOT DEALING WITH THE OBJECTIONS RAISED BY THE APPELLANT ON THE VALIDITY OF NOTICES ISSUED FOR INVOKING JURISDICTION UNDER SECTION 263 OF THE ACT. 2. THE CIT ERRED IN INVOKING JURISDICTION UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 (ACT), W ITHOUT APPRECIATING THAT THE ASSESSMENT ORDER UNDER SECTION 143(3) PASSED BY THE ASSESSING OFFICER (AO) WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST TO THE REVENUE. 3. THE CIT ERRED IN DIRECTING THE AO TO EXAMINE ALLOWABILITY OF INTEREST AND OTHER INCIDENTAL EXPENSES AFTER ASCERTAINING WHETHER THE APPELLANT HAS CARRIED OUT ITS BUSINESS ACTIVITIES AS PER THE MEMORANDUM OF 2 ITA NO. 103 /PNJ/201 4 (ASST. YEAR : 2009 - 10 ) ASSOCIATION (MOA) AND WHETHER LENDING MONEY TO THE HOLDING AND SUBSIDIARY COMPANIES CONSTITUTES ITS BUSINESS ACTIVITIES, IG NORING THE FACT THAT AO MADE DETAILED INQUIRIES DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AND ONLY AFTER DUE SATISFACTION TO THE ENQUIRIES, ALLOWED VARIOUS EXPENSES WHILE COMPUTING THE INCOME FROM BUSINESS OR PROFESSION. 4. WITHOUT PREJUDICE, THE CIT ERRED IN IGNORING THE FACT THAT THE BUSINESS OF THE APPELLANT WAS SET UP AS WELL AS COMMENCED DURING AY 2008 - 09 WHEN IT HAD BORROWED MONEY FROM HOLDING COMPANY AND LENDS IT TO SUBSIDIARY COMPANY, WHICH REPRESENTS ONE OF THE OBJECTS OF THE APPELLANT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY FILED RETURN OF INCOME DECLARING TOTAL INCOME AT RS. NIL AND CLAIMED LOSS OF RS.3 , 61 , 09 , 708/ - UNDER THE HEAD PROFIT AND GAINS FROM BUSINESS AND LONG TERM CAPITAL LOSS OF RS.46,51,437/ - . ASSE SSMENT U/S 143(3) WAS COMPLETED ON THE INCOME AS RETURNED. SUBSEQUENTLY ASSESSING OFFICER MADE A PROPOSAL TO CIT FOR INVOKING JURISDICTION U/S 263 ON THE BASIS OF THE FOLLOWING : - DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR (2009 - 10), THE COMPANY HAS NOT COMMENCED ITS BUSINESS OF DEVELOPMENT OF SE Z /REAL ESTATE. THE COMPANY HAS OBTAINED LOANS FROM HOLDING COMPANY AMOUNTING TO RS.498100000/ - IN THE F.Y.2007 - 08 AND UTILIZED FOR INVESTING IN SHARE S OF SUBSIDIARY COMPANY M/S ZUARI DEVELOPERS PVT. LTD AMOUNTING TO RS.82675564/ - AND GIVING LOANS TO SUBSIDIARY COMPANY OF RS.421640630/ - . THE INTEREST PAYABLE / PAID ON THE ABOVE SAID LOANS AMOUNTING TO RS. 35651678/ - AND OTHER INCIDENTAL EXPENSES AMOUNTI NG TO RS.469544/ - (36121222 35651678) AGGREGATING TO RS. 36121222/ - WAS CHARGED TO THE PROFIT AND LOSS ACCOUNT AS EXPENSES INCURRED DURING THE P.Y. RELEVANT TO A.Y.2009 - 10 AND COMPUTED BUSINESS LOSS OF RS.36109708/ - AND CLAIMED THE SAID LOSS TO CARRY F ORWARD TO SUBSEQUENT YEARS. UNDER THE PROVISIONS OF THE INCOME TAX ACT, 1961, ANY EXPENDITURE EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS IS AN ALLOWABLE DEDUCTION. SINCE, THE COMPANY HAS NOT COMMENCED ITS BUSINESS AND THE LOAN AVAILED WAS NOT USED FO R THE PURPOSE OF ITS BUSINESS OF DEVELOPMENT OF SEZ/REAL ESTATE BUSINESS, THE EXPENDITURE CLAIMED IS REQUIRED TO BE DENIED. FAILURE TO DO SO HAS RESULTED IN LOSS ALLOWED TO CARRY FORWARD OF RS.36109708/ - INVOLVING NOTIONAL TAX EFFECT OF RS.12273689/ - . 3 . THE CIT ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE FINDING CARRY FORWARD OF THE LOSS OF RS. 36 1 ,09,708/ - TO BE ERRONEOUS. THE ASSESSEE OBJECTED THE JURISDICTION BEING INVOKED U/S 263 . AFTER DISPOSING OF THE OBJECTIONS OF THE 3 ITA NO. 103 /PNJ/201 4 (ASST. YEAR : 2009 - 10 ) ASSESSEE, THE CIT SET ASIDE THE ASSESSMENT ORDER DIRECTING THE ASSESSING OFFICER TO PASS FRESH ORDER AFTER VERIFYING THE CLAIM OF THE ASSESSEE IN RESPECT OF THE CARRY FORWARD OF THE LOSS OF RS.3,61,09,708/ - AS PER LAW BY OBSERVING AS UNDER : - 6. AFTER CONSIDERING OVERALL FACTS OF THE CASE, I AM OF THE OPINION THAT PROPER VERIFICATION IS REQUIRED TO BE DONE IN THIS CASE AS TO WHETHER THE COMPANY HAS CARRIED OUT ITS BUSINESS ACTIVITIES AS PER THE MEMORANDUM AND WHETHER LENDING MONEY TO THE HOLDING AND SUBSIDIARY COMPANIES CONSTI TUTES ITS BUSINESS ACTIVITIES. UNDER THE FACTS AND CIRCUMSTANC ES, WHETHER INTEREST AND OTHER INCIDENTAL EXPENSES ARE ALLOWABLE OR NOT ? PRIMA - FACIE, THE ORDER U/S 143(3) OF THE IT ACT, 1961 ON 28.12.2011 AND, THE AO IS DIRECTED TO PASS FRESH ORDER AFTER VE RIFYING THE CLAIM OF THE ASSESSEE IN RESPECT OF THE CARRY FORWARD OF THE LOSS OF RS.36109708/ - AS PER LAW. 4. THE LD. A.R BEFORE US VEHEMENTLY CONTENDED THAT THE PROCEEDINGS INITIATED U/S 263 IS ILLEGAL AND VOID. THE CIT ISSUED TWO NOTICES ONE DATED 25. 10.2013 AND OTHER DATED 28.10.2013. THE FACTS STATED IN NOTICE DATED 25.10.2013 DOES NOT BELONG TO THE ASSESSEE. THIS IS A SETTLED PRINCIPLE OF LAW THAT SECOND NOTICE ISSUED DURING THE PENDENCY OF THE PROCEEDINGS UNDER FIRST NOTICE IS NOT VALID AND IS LIABLE TO BE QUASHED. RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS: - (1) INDIAN T UBES COMPANY LTD VS ITO 272 ITR 439 (KOL.) (2) SMT NILOFER HAMEED VS ITO 235 ITR 161 (KER.) 5. THE COMPANY WAS INCORPORATED ON 06.12.2006 UNDER THE NAME ZUARI SEZ LTD. SUBSEQUENTLY, SINCE THE COMPANY WANTED TO EXPAND AND DIVERSIFY ITS ACTIVITIES TO REAL ESTATE DEVELOPMENT, THE NAME OF THE COMPANY WAS CHANGED TO Z UARI INFRASTRUCTURE AND DEVELOPERS LTD W.E.F. 27.02.2008. T HE OBJECTS OF THE COMPANY WERE ALSO AMENDED ACCORDINGLY. SUBSEQUENTLY W.E.F. 04.01.2011 THE NAME OF THE COMPANY WAS FURTHER CHANGED TO ZUARI MANAGEMENT SERVICES L TD. THE COMPANY SUBMITTED ITS RETUR N ON 19.09.2009 AT A BUSINESS LOSS OF RS.36109708/ - AND LONG TERM CAPITAL LOSS OF RS.4651437/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS SEVERAL DETAILS DOCUMENTS AND VOUCHERS WERE CALLED 4 ITA NO. 103 /PNJ/201 4 (ASST. YEAR : 2009 - 10 ) FOR WHICH WERE DULY FURNISHED . I N THIS REGARD , OUR ATTENTION WAS DRAWN TO THE QUESTIONNAIRE ISSUED ON 13.06.2011 AND THE SUBMISSIONS MADE ON 08 TH AUGUST AND 19 TH AUGUST, 2011. THE PROCEEDING HAS BEEN INITIATED MERELY ON THE PROPOSAL MADE BY THE ASSESSING OFFICER. FOR INVOKING JURISDICTION U/S 263 BOTH THE CONDITIONS THAT THE ORDER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE MUST BE SATISFIED . THE ASSESSING OFFICER HAS GIVEN A CLEAR CUT FINDING THAT LENDING OF MONEY TO HOLDING AN D SUBSIDIARY COMPANY CONSTI TUTES ITS BUSINESS ACTIVI TIES . IF THE ASSESSING OFFICER HAS TAKEN ONE OF THE VIEWS IT CANNOT BE SAID THAT THE ORDER IS ERRONEOUS. RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE HIGH COURT IN THE CASE OF INCOME TAX OFFICER VS DG HOUSING PROJECTS LTD. 343 ITR 329 (DEL.) F OR TH E PROPOSI TION OF THE LAW CIT CANNOT DEMAND THE MATTER TO THE ASSESSING OFFICER TO DECIDE WHETHER THE FINDING RECORDED OR ERRONEOUS. ATTENTION WAS DRAWN TO PAGE 9 OF THE SAID DECISION IN WHICH IT WAS HELD THAT IN THE ABSENCE OF THE FINDINGS THAT THE ORDER I S ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF THE REVENUE, EXERCISE OF THE JURISDICTION UNDER THE SAID SECTION IS NOT SUSTAINABLE . WHERE THERE IS INADEQUATE INVESTIGATION THE ORDER CANNOT BE REGARDED TO BE ERRONEOUS. RELIANCE WAS ALSO PLACED TO THE DECISIO N OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS VODAFONE ESSAR SOUTH LTD, 212 TAXMAN 184 (DEL.). RELIANCE WAS ALSO PLACED ON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX VS JYOTI FOUNDATION, 357 ITR 388 FOR THE PROPOSITION OF LAW IF THE CIT FELT THAT THE INQUIRIES WERE NOT SUFFICIENT AND FURTHER INQUIRIES OR DETA ILS SHOULD HAVE BEEN CALLED FOR, T HE INQUIRIES SHOULD HAVE BEEN CONDUCTED BY THE CIT HIMSELF TO RECORD THE FINDING THAT THE ASSESSMENT ORDER WAS ER RONEOUS . THE ASSESSMENT ORDER CANNOT BE SET ASIDE FOR CONDUCTING THE INQUIRY. THUS IT WAS CONTENDED THAT THE ORDER PASSED U/S 263 BE ANNULLED . 6. THE LD. D.R ON THE OTHER HAND, VEHEMENTLY CONTENDED IT IS A CASE OF NO INQUIRY OR LACK OF INQUIRY. THE ASSESSING OFFICER IN THIS CASE HAS NOT INQUIRED 5 ITA NO. 103 /PNJ/201 4 (ASST. YEAR : 2009 - 10 ) WHETHER THE ASSESSEE HAS COMMENCED ITS BUSINESS WHETHER THE LOAN AVAILED OF WAS USED FOR THE PURPOSE OF ITS BUSINESS OF DEVELOPMENT OF SEZ / REAL ESTATE. IT IS NOT A CASE OF INADEQUATE INQUIRY. THE ORDER PASSED BY THE ASSESSING OFFICER WAS THEREFORE ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IF THE BUSINESS HAS NOT COMMENCED DURING THE YEAR THE INTEREST AND OTHER INCIDENTAL EXPENSES CANNO T BE ALLOWED . THERE CANNOT BE ANY TWO VIEW S . EARLIER NOTICE DATED 25.10.2013 DOES NOT DEBAR CIT TO ISSUE SHOW CAUSE NOTICE DATED 28.10.2013. REFERRING TO THE DECISION RELIED ON BY THE LD. A.R IT WAS CONTENDED THAT THOSE DECISIONS ARE NOT APPLICABLE ON THE FACTS OF THIS CASE. 7. WE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONG WITH THE ORDER OF THE AUTHORITIES BELOW. BEFORE DECIDING THE ISSUE WHETHER THE ORDER PASSED U/S 263 IS VALID OR NOT, IT IS ESSENTIAL TO REFER TO THE RELEVAN T PROVISIONS OF SEC. 263. SECTION 263 LAYS DOWN AS UNDER : - 263. (1) THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, HE MA Y, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT , OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. EXPLANATION. - 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 ASSESS ING OFFICER SHALL INCLUDE - (I) AN ORDER OF ASSESSMENT MADE BY THE ASSISTANT COMMISSIONER OR DEPUTY DIRECTOR 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 POWER OR IN THE PERFORMANCE OF THE FUNCTIONS OF AN ASSESSING 6 ITA NO. 103 /PNJ/201 4 (ASST. YEAR : 2009 - 10 ) OFFICER CONFERRED ON, OR ASSIGNED TO, HIM UNDER THE ORDERS OR DIRECTIONS ISSUED BY THE BOARD OR BY THE CHIEF COMMISSIONER OR DIRECT OR GENERAL OR COMMISSIONER AUTHORISED BY THE BOARD IN THIS BEHALF UNDER SECTION 120; (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 CO MMISSIONER; (C) WHERE ANY ORDER REFERRED TO IN THIS SUB - SECTION AND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT MATTER OF ANY APPEAL FILED ON OR BEFORE OR AFTER THE 1ST DAY OF JUNE, 1988, THE POWERS OF THE 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. (2) NO ORDER SHALL BE MADE UNDER SUB - SECTION (1) AFTER THE EXPIRY OF TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER SOUGHT TO BE REVISED WAS PASSED. (3) NOTWITHSTANDING ANYTHING CONTAINED IN SUB - SECTION (2), AN ORDER IN REVISION UNDER THIS SECTION MAY BE PASSED AT ANY TIME IN THE CASE OF AN ORDER WHICH HAS BEEN PASSED IN CONSEQUENCE OF OR TO GIVE EFFECT TO, ANY FINDING OR DIRECTION CONTAINED IN AN ORDER OF THE APPELLATE TRIBUNAL, THE HIGH COURT OR THE SUPREME COURT. EXPLANATION. - IN COMPUTING THE PERIOD OF LIMITATION FOR THE PURPOSES OF SUB - SECTION (2), THE TIME TAKEN IN GIVING AN OPPORTUNITY TO THE ASSESSEE TO BE REHEAR D UNDER THE PROVISO TO SECTION 129 AND ANY PERIOD DURING WHICH ANY PROCEEDING UNDER THIS SECTION IS STAYED BY AN ORDER OR INJUNCTION OF ANY COURT SHALL BE EXCLUDED. 8. FROM THE PERUSAL OF THE AFORESAID SECTION, IT IS APPARENT THAT THERE ARE FOUR MAIN FE ATURES OF THE POWER OF REVISION TO BE EXERCISED U/S 263 BY THE COMMISSIONER OF INCOME - TAX. FIRSTLY, THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORDS OF ANY PROCEEDINGS UNDER THE ACT AND FOR THIS PURPOSE HE NEED NOT TO SHOW ANY REASON OR RECORD ANY R EASON TO BELIEVE. IT IS A PART OF HIS ADMINISTRATIVE POWER TO CALL FOR THE RECORD AND EXAMINE THEM RELATING TO ANY ASSESSEE. SECONDLY, HE MAY CONSIDER ANY ORDER PASSED BY THE ASSESSING OFFICER AS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE RE VENUE. THIS IS 7 ITA NO. 103 /PNJ/201 4 (ASST. YEAR : 2009 - 10 ) EXERCISED BY CALLING FOR AND EXAMINING THE RECORD AVAILABLE AT THIS STAGE. THERE IS NO QUESTION OF THE ASSESSEE TO APPEAR AND MAKE SUBMISSION AT THIS STAGE. THIRDLY, IF AFTER CALLING FOR AND EXAMINING THE RECORDS THE COMMISSIONER CONSIDERS THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, HE IS BOUND TO GIVE AN OPPORTUNITY TO THE ASSESSEE OF BEING HEARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH ENQUIRY AS HE MAY DEEM FIT, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE MAY JUSTIFY INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT OR CANCELLING ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. THIS EMPOWERS THE CIT TO CAUSE OR MAKE SUCH ENQUIRIES AS HE DEEMS NECESSARY . FOURTHLY, THE CIT U/S 263 CAN ENHANCE OR MODIFY THE ASSESSMENT AS A RESULT OF ENQUIRY CONDUCTED AND HEARING OF THE ASSESSEE. 9. FOR INVOKING THE PROVISIONS OF SECTION 263, WE DO AGREE WITH THE LD. A.R BOTH THE CONDITIONS THAT THE ORDER PASSED BY THE A.O. IS ERRONEOUS AND ALSO THAT IT IS PREJUDICIAL TO THE INTEREST OF REVENUE MUST BE SATISFIED. IF ONE OF THEM IS ABSENT, THE PROVISIONS OF SECTION 263 CANNOT BE INVOKED. THE TERM ERRONEOUS HAS NOT BEEN DEFINED UNDER THE INCOME - T AX ACT BUT IT IS WELL SETTLED THAT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE A.O. CANNOT BE SAID TO BE AN ERROR. AN ORDER CAN BE SAID TO BE ERRONEOUS IF THERE IS INCORRECT ASSUMPTION OF FACTS OR INCORRECT APPLICATION OF LAW IN THE ORDER BY T HE A.O. IF THE A.O. AFTER MAKING THE ENQUIRIES AND EXAMINING THE RECORDS TAKEN ONE OF THE POSSIBLE VIEW, IT CANNOT BE SAID THAT THE ORDER PASSED BY THE A.O. WAS ERRONEOUS. 10. WE NOTED IN THE CASE OF THE ASSESSEE THE CIT INVOKED THE JURISDICTION U/S 2 63 ON THE BASIS OF THE FOLLOWING REASONS: - DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR (2009 - 10), THE COMPANY HAS NOT COMMENCED ITS BUSINESS OF DEVELOPMENT OF SEZ/REAL ESTATE. THE COMPANY HAS OBTAINED LOANS FROM HOLDING COMPANY AMOUNTING TO RS.498100000/ - IN THE F.Y.2007 - 08 AND UTILIZED FOR IN VESTING IN SHARES OF 8 ITA NO. 103 /PNJ/201 4 (ASST. YEAR : 2009 - 10 ) SUBSIDIARY COMPANY M/S ZUARI DEVELOPERS PVT. LTD AMOUNTING TO RS.82675564/ - AND GIVING LOANS TO SUBSIDIARY COMPANY OF RS.421640630/ - . THE INTEREST PAYABLE / PAID ON THE ABOVE SAID LOANS AMOUNTING TO RS. 35651678/ - AND OTHER INCIDENTAL EXPENSES AMOUNTING TO RS.469544/ - (36121222 35651678) AGGREGATING TO RS. 36121222/ - WAS CHARGED TO THE PROFIT AND LOSS ACCOUNT AS EXPENSES INCURRED DURING THE P.Y. RELEVANT TO A.Y.2009 - 10 AND COMPUTED BUSINESS LOSS OF RS.36109708/ - AND CLAIMED THE SAID LOSS TO CARRY FORWARD TO SUBSEQUENT YEARS. UNDER THE PROVISIONS OF THE INCOME TAX ACT, 1961, ANY EXPENDITURE EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS IS AN ALLOWABLE DEDUCTION. SINCE, THE COMPANY HAS NOT COMMENCED ITS BUSINESS AND THE LOAN AVAILED WAS NOT USED FOR THE PURPOSE OF ITS BUSINESS OF DEVELOPMENT OF SEZ/REAL ESTATE BUSINESS, THE EXPENDITURE CLAIMED IS REQUIRED TO BE DENIED. FAILURE TO DO SO HAS RESULTED IN LOSS ALLOWED TO CARRY FORWARD OF RS.36109708/ - INVOLVING NOTIONAL TAX EFFECT OF RS .12273689/ - . 11. FROM THESE REASONS IT IS APPARENT THAT IT WAS NOTED THAT COMPANY HAS NOT COMMENCED ITS BUSINESS OR DEVELOPMENT OF SEZ / REAL ESTATE STILL THE INTEREST PAYABLE / PAID ON THE LOANS AND OTHER INCIDENTAL EXPENSES WERE CHARGED TO THE PROFIT AND LOSS ACCOUNT AS EXPENSES INCURRED DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR AND COMPUTED THE BUSINESS LOSS AT RS.36109708/ - . THE ASSESSING OFFICER HAS ALLOWED THE CARRY FORWARD OF THESE EXPENSES EVEN THOUGH THE ASSESSEE HAS NOT CO MMENCED ITS BUSINESS. 12. THE LD . A.R. BEFORE US VEHEMENTLY CONTENDED THAT THE ASSESSING OFFICER HAS MADE THE DETAILED INQUIRY INTO THE VARIOUS ASPECTS OF THE ASSESSMENT AND AFTER CONSIDERING THE ASSESSING OFFICER ALLOWED THE DEDUCTION. NO DOUBT THE ASSESSING OFFICER ISSUED THE QUESTIONNAIRE VIDE NOTICE DATED 24.8.2010, 13.6.2011. THE ASSESSEE SUBMITTED THE REPLY VIDE LETTER DATED 08 TH AUGUST, 19 TH AUGUST, 2011 THE COPY OF WHICH PLACED BEFORE US AT PAGE 116 TO 124 WHICH WE PURSUED. FROM THIS , WE NO TED NEITHER THE ASSESSING OFFICER HAS INQUIRED OF ABOUT THE COMMENCEMENT OF BUSINESS NOR ANY SUBMISSION WAS MADE IN THIS REGARD. THIS IS THE SETTLED LAW AND EXPENSE S CAN BE REGARDED TO BE REVENUE EXPENDITURE IF IT IS INCURRED AFTER THE SET UP OF THE BUSIN ESS. THEREFORE, SO FAR SET UP / COMMENCEMENT OF BUSINESS IS CONCERNED, IT IS A CASE WHERE THERE IS NO 9 ITA NO. 103 /PNJ/201 4 (ASST. YEAR : 2009 - 10 ) INQUIRY MADE BY THE ASSESSING OFFICER. THUS, IN OUR OPINION THIS IS A CASE OF LACK OF INQUIRY NOT A CASE OF INADEQUATE INQUIRY. 1 3 . NOW THE QUESTION A RISE WHETHER LACK OF ENQUIRY BY THE ASSESSING OFFICER WILL TANTAMOUNT TO BE THE ONE WHICH IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. WE NOTED THAT A SIMILAR ISSUE HAS ARISEN IN THE ASSESSMENT YEAR 2006 - 07 IN I.T.A. NO.139/PNJ /11 IN THE CASE OF V.M. SALGAO K A R IN WHICH ALSO THE A.O HAS NOT CARRIED OUT ANY ENQUIRY AND THIS TRIBUNAL, VIDE ORDER DATED 25/08/2011 HAS HELD AS UNDER : - 12. WE HAVE HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECORD AND CASE LAWS BROUGHT TO OUR NOTICE. THE APPELLANT DOES NOT DISPUTE THAT HE ALSO IS ENGAGED IN THE BUSINESS OF TRADING OF IRON ORE. THE APPELLANT IN HIS RETURN OF INCOME MADE CLAIM OF ADDITIONAL DEPRECIATION AMOUNTING TO RS.4,42,46,711/ - AND DECLARED INCOME OF RS FROM THE BUSINESS OF IRON ORE MINING, PROCESSING AND EXPORTING AS REPRODUCED AT PAGE 1 OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SIMPLY ACCEPTED THE AFORESAID CLAIM OF ADDI TIONAL DEPRECIATION AS WAS STATED IN THE RETURN OF INCOME AND HAS FAILED TO MAKE ANY ENQUIRY AS TO WHETHER THE CONDITIONS CONTAINED U/S 32(1)(IIA) FOR ALLOWING THE ADDITIONAL DEPRECIATION HAVE ACTUALLY BEEN SATISFIED. EVEN THE APPELLANTS RETURN DID NOT CONTAIN SUCH DETAILS FROM WHICH A CONCLUSION IN ACCORDANCE WITH LAW COULD BE DRAWN. THE IMPLICATION OF THE JUDGMENT BY APEX COURT IN THE CASE OF CIT VS. SESA GOA LTD. 271 ITR 332 (SC) HAS NOT BEEN ANALYZED TO FIND OUT AS TO WHETHER THE NEW MACHINERY ON W HICH ADDITIONAL DEPRECIATION HAS BEEN CLAIMED IS ACQUIRED OR INSTALLED IN THE ASSESSEES BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING OR THAT IT WAS A MACHINERY INSTALLED IN THE TRADING BUSINESS OR OTHERWISE IN A BUSINESS WHICH DOES NOT AM OUNT TO MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING AS CLARIFIED IN THE SUPREME COURT JUDGMENT IN SESA GOA LTD., SUPRA. NO FINDINGS OF FACT ARE SHOWN TO HAVE BEEN RECORDED BY THE ASSESSING OFFICER ON THESE ASPECTS. THE NATURE OF BUSINESS MENTIONED AT PAGE NO. 1 OF THE ASSESSMENT ORDER SIMPLY STATES THE EX - FACIE POSITION AS IS NARRATED BY THE ASSESSEE IN THE RETURN OF INCOME FILED BY HIM. THE SAME DOES NOT CONSTITUTE ANY FINDING OF FACT REACHED AFTER MAKING ANY ENQUIRY BY THE ASSESSING OFFICER. IT THUS IS APPARENT THAT THE ASSESSING OFFICER ACCEPTED THE CLAIM ON ITS FACE WITHOUT PERFORMING HIS FUNCTIONS AS ARE REQUIRED OF HIM AS A QUASI JUDICIAL AUTHORITY. THE ASSESSMENT ORDER THUS MADE WAS ERRONEOUS AND UNDER THE CIRCUMSTANCES OF THE CASE, IT WAS NOT NECESSARY FOR THE LEARNED CIT TO MAKE FURTHER ENQUIRIES BEFORE SETTING ASIDE THE ORDER AND FIND OUT HIMSELF ALL SUCH RELEVANT FACTS IN A MANNER AS ARE 10 ITA NO. 103 /PNJ/201 4 (ASST. YEAR : 2009 - 10 ) REQUIRED TO BE DONE BY THE ASSESSING AUTHORITY. THE ASPECT OF DEDUCTION OF INTEREST PAID ON INCOME T AX WAS NEITHER ENQUIRED NOR SHOWN TO HAVE BEEN VERIFIED BY THE ASSESSING OFFICER AND THUS THE ORDER OF ASSESSMENT IS ERRONEOUS ON THAT COUNT AS WELL. 13. ADMITTEDLY THE ASSESSING OFFICER BEING A QUASI - JUDICIAL AUTHORITY HAD THREE FUNCTIONS (I) TO COLLECT THE MATERIALS AND INFORMATION (II) TO PROCESS THE MATERIALS AND INFORMATION; AND (III) TO ADJUDICATE ON THE CONSIDERATION OF SUCH MATERIALS AND INFORMATION. IN A CASE LIKE THIS, WHERE THE ASSESSING OFFICER HAS FAILED TO PERFORM HIS DUTIES IN NUMBER (I) A ND (II) ABOVE AND PROCEEDS TO ADJUDICATE, SUCH ORDERS ARE TAKEN TO HAVE BEEN PASSED IN A SLIP - SHOD MANNER AND CANNOT BE TAKEN TO BE ORDERS PASSED IN ACCORDANCE WITH LAW. DEFINITELY SUCH ACTIONS OF THE GOVT. FUNCTIONARIES GOES TO EFFECT THE REPUTATION OF R EVENUE DEPARTMENT ADVERSELY AND CAUSE PREJUDICE TO THEIR INTERESTS, BESIDES CAUSING LOSS OF REVENUE BY HIS SUCH DECISION. 14. THE APPELLANTS PLEA THAT SIMILAR ISSUE WAS ALSO A SUBJECT MATTER OF ASSESSMENT IN ASSESSMENT YEAR 2008 - 09, NOT AN YEAR IN APPEAL BEFORE US IS OF NO CONSEQUENCE IN CASE OF EXERCISE OF JURISDICTION U/S 263 FOR THE DIFFERENT YEAR. UNDER THE PECULIAR FACTS, THE CASE LAWS REFERRED INCLUDING THOSE ON POSSIBILITY OF TWO VIEWS ON THE ISSUES BEFORE US CANNOT IMPRESS US TO SAY THAT THE EXER CISE OF JURISDICTION U/S 263 OF THE ACT IS INITIATED AS THE OPINION ON THE BASIS OF SUCH CASE LAWS NEEDS TO BE TESTED IN THE CIRCUMSTANCE WHEN ASSESSING OFFICER HIMSELF HAS MADE ENQUIRIES AND TAKEN A POSSIBLE DECISION IN ACCORDANCE WITH LAW. 15. IN THE PR ESENT CASE, THE LEARNED CIT IS FOUND SATISFIED THAT THE ASSESSMENT ORDER PASSED IS BOTH ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF REVENUE AND THUS THE TWIN CONDITIONS OF SECTION 263 OF THE ACT AS ARE ALSO ENUNCIATED BY APEX COURT IN MALABAR INDU STRIAL CO. LTD. VS. CIT [2000] 243 ITR 83 (SC) STAND DULY SATISFIED. THE LEARNED CIT ALSO DIRECTED THE ASSESSING OFFICER TO CALL FOR INFORMATION ON BOTH THE ISSUES AND EXAMINE IT AND TAKE DECISION AFRESH ON MERITS AFTER PROVIDING OPPORTUNITY OF BEING HEAR D TO THE ASSESSEE. THIS WOULD CAUSE NO PREJUDICE TO THE ASSESSEE. HAVING REGARD TO THE JUDGMENT RENDERED BY HON'BLE DELHI HIGH COURT IN THE CASE OF GEE VEE ENTERPRISES VS. ADDL. CIT [1975] 99 ITR 375 (DEL), HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF SMT . RENU GUPTA VS. CIT [2008] 301 ITR 45 (RAJ.) AND HON'BLE MADHYA PRADESH HIGH COURT IN CIT VS. DEEPAK KUMAR GARG [2008] 299 ITR 435 (MP) AND THE FINDINGS REACHED AS AFORESAID, WE FIND NO INFIRMITY IN THE DECISION TAKEN BY LEARNED CIT. THE GROUNDS RAISED I N APPEAL, THEREFORE, STAND REJECTED AND APPEAL IS DISMISSED. 11 ITA NO. 103 /PNJ/201 4 (ASST. YEAR : 2009 - 10 ) 1 4 . IT IS NOT A CASE WHERE THE AO HAS ALLOWED THE DEDUCTION OF THE EXPENSES TO THE ASSESSEE BY TAKING ONE OF THE POSSIBLE VIEWS. IT IS ALSO NOT A CASE OF INADEQUATE INQUIRY BUT A CASE WHERE NO INQUIRY HAS BEEN CONDUCTED BY THE AO ABOUT THE COMMENCEMENT OF THE BUSINESS OF THE ASSESSEE . 1 5 . WE HAVE GONE THROUGH THE DECISION OF CIT VS. VODAFONE E SSAR SOUTH LTD. 212 TAXMANN 184 (DEL.) ON WHICH THE LD . AR VEHEMENTLY RELIED. WE NOTED THAT THIS DECISION WILL NOT ASSIST THE ASSESSEE. IN THIS DECISION THE HONBLE HIGH COURT RELIED ON THE EARLIER DECISION OF THE HIGH COURT IN THE CASE OF CIT VS. SUNBE AM AUTO LTD., 332 ITR 167 IN WHICH IT WAS HELD THAT IF THERE IS SOME INQUIRY BY THE AO IN THE ORIGINAL PROCEEDINGS, EVEN IF INADEQUATE, THAT CANNOT CLOTHE THE COMMISSIONER WITH JURISDICTION U/S 263 MERELY BECAUSE HE CAN FORM ANOTHER OPINION. IN THIS CASE ON THE BASIS OF THIS DECISION, HONBLE HIGH COURT TOOK THE VIEW THAT IF THERE WAS ANY INQUIRY, EVEN INADEQUATE, THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE COMMISSIONER TO PASS ORDERS U/S 263 OF THE ACT MERELY BECAUSE HE HAS A DIFFERENT OPINION IN THE MA TTER. IT IS ONLY IN CASES OF LACK OF INQUIRY. IN THIS DECISION UNDER PARA 11 HONBLE HIGH COURT CLEARLY LAID DOWN THAT THAT WAS NOT A CASE OF NO INQUIRY. IN THE CASE OF THE ASSESSEE WE NOTED THE AO HAS NOT MADE ANY INQUIRY WHETHER THE ASSESSEE HAS COM MENCED THE BUSINESS OR NOT SO THAT THE EXPENSES INCURRED COULD BE REGARDED TO BE REVENUE EXPENDITURE. 16 . IN THE CASE OF ITO VS DG HOUSING PROJECTS LTD (SUPRA) , WE NOTED THE HONBLE DELHI HIGH COURT TOOK THE VIEW THAT THE CIT WHILE EXERCISING THE JURISDICTION U/S 263 OF THE ACT AND IN THE ABSENCE OF THE FINDING THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, EXERCISE OF JURISDICTION UNDER THE SAID SECTION IS NOT SUSTAINABLE. IT WAS FURTHER HELD THAT IN MOST CASES OF AL LEG ED INADEQUATE INVESTIGATION, IT WILL BE DIFFICULT TO HOLD THAT THE ORDER OF THE ASSESSING OFFICER, WHO HAD CONDUCTED INQUIRIES AND HAD ACTED AS AN 12 ITA NO. 103 /PNJ/201 4 (ASST. YEAR : 2009 - 10 ) INVESTIGATOR, IS ERRONEOUS, WITHOUT CI T CONDUCTING VERIFICATION / INQUIRY. IN THAT CASE THE CIT HAD DOUBTS ABOUT THE VALUATION AND SALE CONSIDERATION RECEIVED EVEN THOUGH THE CIT HAS RECORDED THAT THE CONSIDERATION RECEIVABLE WAS EXAMINED BY THE ASSESSING OFFICER BUT WAS NOT PROPERLY EXAMINE D AND THEREFORE HE TOOK THE VIEW THAT THE ASSESSMENT ORDER IS ERRONEOUS AND DIRECTED THE ASSESSING OFFICER TO MAKE FURTHER INQUIRY. ON THESE FACTS THE HONBLE HIGH COURT DECIDED THE QUESTION OF LAW IN FAVOUR OF THE ASSESSEE. THIS DECISION IS NOT APPLICABLE IN OUR OPINION TO A CASE WHERE NO INQUIRY HAS BEEN CONDUCTED BY THE ASSESSING OFFICER. 1 7 . IN THE CASE OF DIT VS JYOTI FOUNDATIONS, 357 ITR 388 ON WHICH THE LD. A.R HAS RELIED WE NOTED IN THIS CASE , THE HONBLE HIGH COURT HAS OBSERVED AS UNDER : - HELD, DISMISSING THE APPEAL, THAT INQUIRIES WERE CERTAINLY CONDUCTED BY THE ASSESSING OFFICER. IT WAS NOT A CASE OF NO INQUIRY. THE ORDER UNDER SECTION 263 ITSELF RECORDED THAT THE DIRECTOR FELT THAT THE INQUIRIES WERE NOT SUFFICIENT AND FURTHER INQUIRIES OR DETAILS SHOULD HAVE BEEN CALLED FOR. THE INQUIRY SHOULD HAVE BEEN CONDUCTED BY THE DIRECTOR HIMSELF TO RECORD THE FINDING THAT THE ASSESSING ORDER WAS ERRONEOUS. HE SHOULD NOT HAVE SET ASIDE THE ORDER AND DIRECTED THE ASSESSING OFFICER TO CONDUCT THE INQUIRY. 18 . IN OUR OPINION THIS DECISION WILL NOT ALSO HELP THE ASSESSEE AS THIS CASE DOES NOT RELATE TO A CASE OF NO INQUIRY. 19 . IN THE CASE OF CIT VS. GABRIEL INDIA, 203 ITR 108 (MUM) THE AO HAD MADE THE INQUIRIES IN REGARD TO THE NATURE OF THE EXPENDITURE INCURRED BY THE ASSESSEE AND ASSESSEE HAD GIVEN DETAILED EXPENDITURE. THE ORDER PASSED BY THE AO WAS HELD NOT TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD. THUS, IN OUR VIEW TH IS CASE LAW RELIED ON BY THE LD. AR FOR INADEQUATE INQUIRY WILL NOT ASSIST THE ASSESSEE. 13 ITA NO. 103 /PNJ/201 4 (ASST. YEAR : 2009 - 10 ) 2 0 . THE DECISION OF THE COORDINATE BENCH IN THE CASE OF THE V.N. SALGAO C AR IS BINDING ON US AND WE CANNOT TAKE A DIFFERENT VIEW. THIS IS A FACT THAT IN THIS CASE THE ASSESSING OFFICER HAS NOT ISSUED ANY NOTICE OR RAISED ANY QUERY TO THE ASSESSEE IN RESPECT OF ASCERTAINING WHETHER THE BUSINESS HAS COMMENCED DURING THE IMPUGNED ASSESSMENT YEAR FOR ASCERTAINING THE NATURE OF THE EXPENDITURE INCURRED BY THE ASSESSEE, DUR ING THE CO URSE OF ASSESSMENT PROCEEDING. EVEN NO SUBMISSIONS WERE ALSO MADE BY THE ASSESSEE ON THIS ASPECT . 21. HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. V S. CIT [2000] 243 ITR 83, AT PAGE 88 HAS CATEGORICALLY HELD AS UNDER: - IN THE INSTANT CASE, THE COMMISSIONER NOTED THAT THE INCOME TAX OFFICER PASSED THE ORDER OF NIL ASSESSMENT WITHOUT APPLICATION OF MIND. INDEED, THE HIGH COURT RECORDED THE FINDING THAT THE INCOME TAX OFFICER FAILED TO APPLY HIS MIND TO THE CASE IN ALL PE RSPECTIVE AND THE ORDER PASSED BY HIM WAS ERRONEOUS. IT APPEARS THAT THE RESOLUTION PASSED BY THE BOARD OF THE APPELLANT COMPANY WAS NOT PLACED BEFORE THE ASSESSING OFFICER. THUS, THERE WAS NO MATERIAL TO SUPPORT THE CLAIM OF THE APPELLANT THAT THE SAID AMOUNT REPRESENTED COMPENSATION FOR LOSS OF AGRICULTURAL INCOME. HE ACCEPTED THE ENTRY IN THE STATEMENT OF THE ACCOUNT FILED BY THE APPELLANT IN THE ABSENCE OF ANY SUPPORTING MATERIAL AND WITHOUT MAKING ANY INQUIRY . ON THESE FACTS THE CONCLUSION THAT THE ORDER OF THE INCOME TAX OFFICER WAS ERRONEOUS IS IRRESISTIBLE. WE, ARE, THEREFORE OF THE OPINION THAT THE HIGH COURT HAS RIGHTLY HELD THAT THE EXERCISE OF THE JURISDICTION BY THE COMMISSIONER U/S 263(1) WAS JUSTIFIED. 22. THIS ITSELF PROVES NON APPLIC ATION OF MIND ON THE PART OF THE ASSESSING OFFICER AND ALLOWING THE EXPENDITURE AS REVENUE EXPENDITURE TO THE ASSESSEE WITHOUT MAKING AN ENQUIRY WILL TANTAMOUNT THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HON'BLE SUPREME CO URT IN THE CASE OF MALABAR INDUSTRIAL CO. (SUPRA) WHILE HOLDING SO HAS RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RAMPYARI DEVI SARAOGI VS. COMMISSIONER OF INCOME - TAX 67 ITR 84(SC). IN THIS CASE THE INCOME TAX OFFICER ACCEPTED THE RETU RN OF THE ASSESSEE IN RESPECT OF THE INITIAL CAPITAL, GIFT RECEIVED AND SALE OF JEWELLERY, THE INCOME FROM BUSINESS ETC. WITHOUT ANY 14 ITA NO. 103 /PNJ/201 4 (ASST. YEAR : 2009 - 10 ) ENQUIRY OR EVIDENCE WHATSOEVER. FOR THAT REASON THE CIT HELD THE ORDER TO BE ERRONEOUS. IN REVISION, HE CANCELLED THE ORD ER AND ORDERED THE INCOME TAX OFFICER TO MAKE FRESH ASSESSMENT 23. THUS, THE LAW AS MAY BE STATED AFTER GOING THROUGH BOTH THE DECISIONS OF SUPREME COURT IS VERY CLEAR THAT IF THE ASSESSMENT HAS BEEN MADE WITHOUT MAKING THE I NQUIRY AND APPLICATION OF MIND, THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. UNLIKE THE CIVIL COURT WHICH IS NEUTRAL TO GIVE A DECISION ON THE BASIS OF EVIDENCE PRODUCED BEFORE IT, AN ASSESSING OFFICER IS NOT ONLY AN ADJUDICATOR BUT IS ALSO AN INVESTIGATOR. THE ASSESSING OFFICER CANNOT REMAIN PASSIVE ON THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR I NQUIRY. IT IS THE DUTY OF THE ASSESSING OFFICER TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETURN WHEN THE CIR CUMSTANCES OF T HE CASE ARE SUCH AS TO PROVOKE I NQUIRY. IF THERE IS FAILURE TO MAKE SUCH I NQUIRY, IN OUR OPINION, THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE REVENUE HAS NOT TO PROVE THAT ITS ORDER IS ERRONEOUS AND CIT CAN REVIS E IT U/S 263. EVEN THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF SWARUP VEGETABLE PRODUCTS INDUSTRIES LTD. (NO. 1) VS. CIT [1991] 187 ITR 412 HAS ALSO TAKEN THE SIMILAR VIEW BY OBSERVING AS UNDER : - IT IS BEYOND DISPUTE THAT, UNDER SECTION 263 OF TH E I.T. ACT, THE COMMISSIONER HAS POWER TO SET ASIDE THE ASSESSMENT ORDER AND SEND THE MATTER FOR FRESH ASSESSMENT IF HE IS SATISFIED THAT FURTHER ENQUIRY IS NECESSARY AND THAT THE ORDER OF INCOME TAX OFFICER IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 24. HON'BLE DELHI HIGH COURT ALSO IN THE CASE OF GEE VEE ENTERPRISES VS. ADDL. CIT [1975] 99 ITR 375 (DEL) HAS ALSO TAKEN THE SI MILAR VIEW THAT LACK OF PROPER I NQUIRY TANTAMOUNT S THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 15 ITA NO. 103 /PNJ/201 4 (ASST. YEAR : 2009 - 10 ) 25. SIMILAR ISSUE HAS ARISEN BEFORE THE SPECIAL BENCH OF I.T.A.T. CHENNAI B BENCH IN THE CASE OF RAJALAKSMI MILLS LTD. VS. INCOME TAX OFFICER [2009] 121 ITD 343 (CHENNAI) (SB). THE FACTS OF THIS CASE WERE THAT THE ASSESSEE ENCLOSED THE BALANCE SHEET A LONG WITH THE RETURN AND IN THE BALANCE SHEET THE ASSESSEE MADE A PROVISION FOR GRATUITY AMOUNTING TO RS.7,85,600/ - . THE ASSESSEE CLAIMED IT AS DEDUCTION IN THE RETURN OF INCOME. THE ASSESSING OFFICER ALLOWED THE SAME WITHOUT MAKING ANY DISCUSSION IN THE ORDER OF ASSESSMENT. THE CIT BY INVOKING THE PROVISION OF SECTION 263 TOOK THE VIEW THAT THE ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE SPECIAL BENCH OF I.T.A.T. UNDER THESE FACTS HAS HELD AS UNDER: - IT IS NOT NECESSARY FOR TH E COMMISSIONER TO MAKE FURTHER ENQUIRIES BEFORE CANCELLING THE ASSESSMENT ORDER OF THE ASSESSING OFFICER. THE COMMISSIONER CAN REGARD THE ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE THE ASSESSING OFFICER SHOULD HAVE MADE FURTHER INQUIRIES BEFORE ACCEPTING THE STATEMENTS MADE BY THE ASSESSEE IN THE RETURN. THE REASON IS OBVIOUS. UNLIKE THE CIVIL COURT WHICH IS NEUTRAL TO GIVE A DECISION ON THE BASIS OF EVIDENCE PRODUCED BEFORE IT, AN ASSESSING OFFICER IS NOT ONLY AN ADJUDICATOR BUT IS ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER ENQUIRY. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETURN WHEN THE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE AN INQUIRY. THE MEANING TO BE GIVEN TO THE WORD 'ERRONEOUS IN SECTION 263 EMERGES OUT OF THIS CONTEXT. THE WORD 'ERRONEOUS' IN THAT SECTION INCLUDES CASES WHERE THERE HAS BEEN FAILURE TO MAKE THE NECESSARY INQUIRIES. IT IS INCUMBENT ON THE ASSESSING OFFICER TO INVESTIGATE THE FACTS STATED IN THE RETURN WHEN CIRCUMSTANCES MAKE SUCH AN INQUIRY PRUDENT AND THE WORD 'ERRONEOUS' IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN ENQUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH AN ENQUIRY HAS NO T BEEN MADE AND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF ALL THE FACTS STATED THEREIN ARE ASSUMED TO BE CORRECT. IN THE INSTANT CASE, THE ASSESSING OFFICER FAILED TO MAKE ANY ENQUIRY IN REGARD TO THE ALLOWABILITY OF THE PROVISION FOR GRATUIT Y. AS SUCH, THE ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THEREFORE, THE CONDITIONS PRECEDENT FOR ASSUMING JURISDICTION UNDER SECTION 263 DID EXIST IN THE FACTS OF THE INSTANT CASE. 16 ITA NO. 103 /PNJ/201 4 (ASST. YEAR : 2009 - 10 ) 26. WE NOTED THAT I.T.A.T. E BENCH NEW DELHI IN I.T.A. NO.1438/DEL/09 IN THE CASE OF N.T.P.C. LIMITED VS. DY . CIT IN RESPECT OF LACK OF I NQUIRY IN THIS JUDGMENT WHIL E DEALING THE ISSUE OF LACK OF I NQUIRY, THE TRIBUNAL, UNDER PARA 14 HAS HELD AS UNDER : - 14. IN THE LIG HT OF ABOVE PROPOSITIONS LET US EXAMINE THE FACTS OF THE PRESENT CASE. ON PAGE NO. 5 OF THE PAPER BOOK, VOLUME - I, THE ASSESSEE HAS PLACED ON RECORD COPY OF THE QUESTIONNAIRE DATED 29/06/2006 ISSUED BY THE ASSESSING OFFICER. IN THIS QUESTIONNAIRE, ASSESSIN G OFFICER HAS CALLED FOR INFORMATION FROM THE ASSESSEE UNDER SEC. 142(1) ON FIFTEEN COUNTS. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES, WE HAVE GONE THROUGH THIS QUESTIONNAIRE CAREFULLY. PERUSAL OF THIS QUESTIONNAIRE REVEALS THAT ASSESSING OFFICER HA S NOT A SINGLE QUESTION ON BOTH THE ISSUES. THEREFORE, IT SUGGESTS THAT HE HAS NOT CONDUCTED ANY INQUIRY ON THESE TWO ISSUES. THE CONTENTIONS OF THE ASSESSEE IS THAT IT HAS DISCLOSED ALL MATERIAL FACTS FULLY AND TRULY DURING THE ASSESSMENT PROCEEDINGS AND ASSESSMENT HAS BEEN FRAMED UNDER SEC.143(3) OF THE ACT, THEREFORE, IT BE PRESUMED THAT ASSESSING OFFICER MUST HAVE GONE THROUGH ALL THESE DETAILS. HOWEVER, HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIES, HON'BLE DELHI HIGH COURT IN THE CASE OF GE E VEE ENTERPRISES AS WELL AS IN THE CASE OF ASHOK LOGANI AND DLF POWER EQUIPMENTS, IT HAS BEEN HELD THAT IF THE ASSESSING OFFICER FAILED TO GO INTO THE ISSUES IN PROPER PERSPECTIVE AND HIS APPROACH IS PERFENTORY THEN THE ORDER WOULD BE TERMED AS ERRONEOUS WHICH WOULD ULTIMATELY CAUSED A PREJUDICE TO THE ASSESSEE ON ESCAPEMENT OF INCOME FROM TAX. THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF ASHOK LOGANI AS WELL AS IN THE CASE OF DLF POWER ARE THE LATEST DECISIONS ON THIS ISSUE. SIMILARLY, LEAR NED DR HAS BROUGHT TO OUR NOTICE THE DECISION OF HON'BLE DELHI HIGH COURT DATED 15.2.2002 IN THE CASE OF CIT VS. REGENCY PARK PROPERTY MANAGEMENT SERVICES PVT. LTD. REPORTED IN [2012] TIOL PAGE 75 WHERE IT HAS BEEN HELD THAT IF ASSESSING OFFICER HAD NOT D EALT WITH THE DETAILS AND EXAMINED THE ISSUES THEN THERE WAS AN ERROR ON THE PART OF THE ASSESSING OFFICER UPON WHICH ACTION U/S 263 CAN BE JUSTIFIED. THUS, CONSIDERING ALL THESE ASPECTS, WE ARE OF THE VIEW THAT LEARNED COMMISSIONER HAS RIGHTLY TAKEN COGN IZANCE U/S 263 OF THE ACT BECAUSE ASSESSING OFFICER HAS NOT CONDUCTED ANY INQUIRY ON THESE TWO ISSUED. 27. THIS CLEARLY PROVES THAT THE TRIBUNAL HAS AL SO TAKEN THE VIEW THAT LACK OF I NQUIRY WILL TANTAMOUNT TO BE THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE CIT HAS ALREADY RESTORED THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER AND THE ASSESSING OFFICER, AFTER GIVING PROPER OPPORTUNITY 17 ITA NO. 103 /PNJ/201 4 (ASST. YEAR : 2009 - 10 ) TO THE ASSESSEE HA S TO RE - DECIDE THE ISSUE WHETHER THE ASSESSEE IS ENTITLED FOR THE DEDUCTION . 28. THE LD. A.R HAS TAKEN ONE MORE PLEA THAT THE CIT HAS ISSUED TWO NOTICES DATED 25.10. 2013 AS WELL AS 28.10. 2013 AND IN THIS REGARD RELIED ON THE DECISION OF INDIAN TUBES CO. LTD (SUPRA) AS WELL AS SMT NILOFER HAMEED. THOSE DECISIONS ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE AS THEY RELATE TO THE ISSUES OF TWO NOTICES U/S 148. THERE IS DIFFERENCE IN THE NOTICE ISSUED U/S 263 AS WELL AS NOTICE ISSUED U / S 148. ONCE THE NOTICE U/S 148 ARE ISSUED THE ASSESSEE HAS TO FILE THE RETURN AND THE ASSESSMENT GET RE - OPENED ON THE BASIS OF REASONS RECORDED U/S 147. THE ASSESSMENT PROCEEDINGS THEREFORE GET PENDING. THERE CANNOT BE TWO ASSESSMENT PROCEEDINGS AGAINST TH E SAME ASSESSEE FOR THE SAME ASSESSMENT YEAR, THEREFORE THE HONBLE HIGH COURT TOOK THE VIEW THAT THERE CANNOT BE TWO NOTICES ISSUED FOR THE SAME ASSESSMENT YEAR U/S 148 IF THE PROCEEDINGS IN PURSUANCE WITH FIRST NOTICE IS PENDING. SUBSEQUENTLY, TO OVER RU LE THESE DECISIONS EXPLANATION 2(B) WAS INSERTED IN THE NEW SECTION 147 AMENDED W.E.F. 01.04.1989. SO FAR THE NOTICE ISSUED U/S 263 IS CONCERNED, IT IS MERELY A SHOW CAUSE NOTICE. IT DOES NOT DECIDE THAT THE ORDER IS ERRONEOUS AS WELL AS PREJUDICIAL. SECT ION 263 REQUIRES AN ASSESSEE BE GIVEN AN OPPORTUNITY OF BEING HEARD. THE NOTICE REPRESENT THE OPPORTUNITY OF HEARING GIVEN TO THE ASSESSEE. ISSUING OF THE NOTICE U/S 263 DOES NOT GET THE ASSESSMENT PROCEEDINGS PENDING. THE CIT CAN GIVE IN OUR OPINION AS MANY OPPORTUNITY AS HE MAY DESIRE. THEREFORE, ISSUING TWO NOTICES TO THE ASSESSEE ON DIFFERENT DATES U/S 263 WILL NOT INVALIDATE THE ORDER PASSED U/S 263. 29. IN VIEW OF AFORESAID DISCUSSION, T HE ORDER PASSED U/S 263 HAS TO BE UPHELD AS, IN OUR OPINION, IT HAS PASSED THROUGH TEST OF FULFILMENT OF BOTH THE CONDITIONS BY THE CIT THAT THE ORDER PASSED BY THE AO IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE ON THE ISSUE OF CLAIM OF EXPENSES 18 ITA NO. 103 /PNJ/201 4 (ASST. YEAR : 2009 - 10 ) ALLOWED TO THE ASSESSEE WITHOUT VERIFYING WHETHER THE ASSESSEE HAS SET UP / COMMENCED THE BUSINESS DURING THE YEAR . WE, THEREFORE, DISMISS THE APPEAL FILED BY THE ASSESSEE BY UPHOLDING THE ORDER PASSED U/S 263. 30 . SO FAR THE GROUND NO.4 IS CONCERNED , IN OUR OPINION, THIS GROUND IS INFRUCTUOUS AS CIT HAS SET ASIDE THE ASSESSMENT. THE CIT HAS NOT DECIDED THE ISSUE ON MERIT WHETHER THE BUSINESS HAS BEEN SET UP AS WELL AS COMMENCED DURING THE IMPUGNED ASSESSMENT YEAR. 31 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE STANDS DISMISSED . 32 . ORDER PRONOUNCED IN THE OPEN COURT ON 16 . 0 2 .2015 . SD/ - (D.T.GARASIA) JUDICIAL MEMBER SD/ - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI - GOA DATED : 16 /0 2 /201 5 * A * COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CONCERNED (4) CIT(A) CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER ASSISTANT REGISTRAR ITAT, PANAJI BENCH, PANAJI