M/s Nirvana Business Solutions Private Ltd., Bangalore V. CIT, Bangalore

ITA 1093/BANG/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95294 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 08-07-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANURAG SAHAY
• Keywords: Revision of order; Transfer pricing; Double taxation relief; International transaction; Revenue expenditure; Capital expenditure
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH C BEFORE SHRI VIJAYPAL RAO, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER IT(TP)A NO.1093 /BANG/2013 (ASST. YEAR 2006-2007) M/S NIRVANA BUSINESS SOLUTIONS PVT. LTD., NO.98, SHRI KRISHNA NILAYAM, 3 RD CROSS, PILLANA GARDEN, 3 RD STAGE, BANGALORE. . APPELLANT VS. THE DY. COMMISSIONER OF INCOME-TAX, BANGALORE-III BANGALORE. . RESPONDENT APPELLANT BY : NONE RESPONDENT BY : SHRI ANURAG SAHAY, CIT DATE OF HEARING : 31-08-2015 DATE OF PRONOUNCEMENT : 07-10-2015 O R D E R PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEAL) III, BANGALOR E PASSED U/S 263 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED T O AS THE ACT) VIDE ITA NO.1093/B/13 2 ORDER DATED 27/3/2013 FOR ASST. YEAR 2006-07. SINC E THE LEARNED AR OF THE ASSESSEE WAS NOT PRESENT WHEN THE CASE WAS CALL ED FOR HEARING, WE ARE DISPOSING OFF THE APPEAL WITH THE ASSISTANCE OF THE LEARNED DR FOR REVENUE. 2. THE GROUNDS RAISED BY THE ASSESSEE AGAINST THE IMPUGNED ORDER OF THE LEARNED CIT ARE AS UNDER:- 1.1 THE LEARNED CIT, BANGALORE III, BANGALORE HAS ERRED IN ASSUMING JURISDICTION U/S 263 OF THE I T ACT, 1961 AND IN PASSING THE REVISIONAL ORDER. THE COND ITIONS PRECEDENT FOR ASSUMPTION/EXERCISE OF JURISDICTION U /S 263 NOT BEING SATISFIED, THE ORDER PASSED U/S 263 IS BA D IN LAW AND LIABLE TO BE QUASHED. 1.2 THE LEARNED CIT, BLORE III, BLORE HAS ERRED IN ASSUMING JURISDICTION U/S 263 OF THE IT ACT, 1961 A ND IN PASSING THE REVISIONAL ORDER WITHOUT APPRECIATING T HAT FOR THE YEAR UNDER CONSIDERATION, THE APPELLANT HAD FIL ED OBJECTIONS BEFORE THE HONBLE DISPUTE RESOLUTION PA NEL AND THE AO HAS PASSED THE ORDER IN CONFORMITY WITH THE DIRECTIONS OF THE HONBLE PANEL IN ACCORDANCE WITH PROVISIONS OF SEC. 144C. THE ORDER OF THE AO HAVIN G BEEN PASSED IN CONFORMITY WITH THE DIRECTIONS OF TH E DRP CANNOT BE TREATED EITHER AS ERRONEOUS OR PREJUDICIA L IN ITA NO.1093/B/13 3 NATURE. THE ORDER OF THE CIT U/S 263 BEING BAD IN LAW IS LIABLE TO BE QUASHED. 1.3 THE LEARNED CIT, BLORE III, BLORE HAS ERRED I N NOT APPRECIATING THAT THE DRP IS A COMMITTEE OF THREE COMMISSIONERS ON WHOSE DIRECTIONS THE ASSESSMENT ORDER IS FRAMED AND A SINGLE COMMISSIONER CANNOT S IT OVER THE DECISION OF THREE COMMISSIONERS. 1.4 THE LEARNED CIT, BLORE III, BLORE HAS ERRED I N NOT APPRECIATING THAT WHETHER PAYMENT TOWARDS DATA LINK CHARGES IS LIABLE TO WITHHOLDING TAX IS A DEBATABLE ISSUE AND ORDER OF THE AO CANNOT BE TERMED AS ERRONEOUS O N THIS COUNT. 1.5 THE LEARNED CIT, BLORE III, BLORES PRESUMPTI ON THAT THE NON-RESIDENT PAYEES MAY HAVE SUBSTANTIAL PRESENCE IN INDIA BASED ON CONTACT INFORMATION AVA ILABLE ON THE WEBSITE/INTERNET IS A ONLY SURMISE OR CONJEC TURE ON THE BASIS OF WHICH IT CANNOT BE CONCLUDED THAT THE ORDER OF THE AO IS ERRONEOUS IN NATURE OR PREJUDICIAL TO THE INTEREST OF THE REVENUE. 1.6 IN VIEW OF THE ABOVE AND OTHER GROUNDS TO BE ADDUCED AT THE TIME OF HEARING, THE APPELLANT PRAYS THAT THE ORDER PASSED BY THE LEARNED CIT, BLORE III, B LORE BE QUASHED. ON GOING THROUGH THE GROUNDS RAISED (SUPRA) WE FIND THAT THE GRIEVANCE RAISED IN THE GROUNDS IS THAT THE LEA RNED CIT HAS ERRED IN TAKING COGNIZANCE U/S 263 OF THE ACT AND IN SETTING ASIDE THE ORDER OF ITA NO.1093/B/13 4 ASSESSMENT FOR ASST. YEAR 2006-07 PASSED U/S 143(3) RWS 144C OF THE ACT VIDE ORDER DATED 18/10/2010. 3. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER:- 3.1 THE ASSESSEE, A COMPANY IN THE BUSINESS OF SOFT WARE DEVELOPMENT SERVICES, FILED ITS RETURN OF INCOME F OR ASST. YEAR 2006- 07 ON 29/11/2006, DECLARING LOSS OF RS.9,79,37,638/ -. THE RETURN WAS PROCESSED AND THE CASE WAS TAKEN UP FOR SCRUTINY. THE ASSESSMENT WAS CONCLUDED BY ORDER PASSED U/S 143(3) RWS 144C O F THE ACT DATED 18/10/2010 WHEREIN THE INCOME OF THE ASSESSEE WAS D ETERMINED AT RS.2,71,30,061/- AS AGAINST DECLARED LOSS OF RS.9,7 9,37,638/-. THE OPERATIVE PORTION OF THE ORDER OF ASSESSMENT READ A S UNDER:- IN RESPONSE TO NOTICES ISSUED, SRI SACHIN ACCOUNT S MANAGER AND AUTHORIZED REPRESENTATIVE APPEAR FROM TIME TO T IME. THE CASE WAS DISCUSSED AND THE RELEVANT DETAILS HAVE BEEN BR OUGHT ON RECORDS. I. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT THE ASSESSEE HAS FILED RETURN CLAIMING LOSS OF (-)RS.9,79,37,638/- DESPITE THE FACT THAT THE LOSS ARRIVED AT ITA NO.1093/B/13 5 AS PER THE COMPUTATION STATEMENT FILED BY IT IS ONL Y RS.6,51,91,941/- ON A CLOSER VERIFICATION IT IS FOUND THAT, WHAT THE ASSESSEE HAS RETURNED IS LOSS AS PER THE PROFIT AND LOSS ACCOUNT AND NOT ADJUSTED TOTAL LOSS WHICH IS ARRIVED AT AFTER THE REQUIRED ADDITION AND ALLOWANCES TO THE BOOK LOSS AS WITHOUT IN THE COMPUTATION OF INCOME STATEMENT SUBMITTED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. ACCORDINGLY, THE LOSS CLAIMED IN THE RETURN OF INCO ME IS IGNORED HEREBY AS INCORRECT AND THE NET LOSS OF RS.6,51,191,941/- WHICH IS THE CORRECT LOSS IS ADOPTED FOR COMPUTATION OF TAXABLE INCOME. THE INTERNATIONAL TRANSACTION OF THE ASSESSEE, AS SPECIFIED IN 92(B) OF THE INCOME-TAX ACT 1961 AN D REPORTED IN FORM 3CEB EXCEEDED RS.5 CRORE. THE CASE WAS THEREFORE REFERRED TO ADDITIONAL DIRECTOR OF INCOME-TAX(TRANSFER PRICING) VIDE REFERENCE NO.TP/ITO-W-12(1)/2008-09 DATED 14.5.2008, AFTER RECEIVING APPROVAL FOR THE REFERENCE FROM THE COMMISSIONER OF INCOME-TAX, BANGALORE-III, VIDE NO.TPO/CIT-B.III/2008-09 DATED 12.12.2008, WITH A VIEW TO EXAMINE THE INTERNATIONAL TRANSACTION OF TH E ASSESSEE AND SUGGEST ANY ADJUSTMENT IN RESPECT OF ARMS LENGTH PRICE U/S 92CA. ITA NO.1093/B/13 6 THE JT. DIRECTOR (TRANSFER PRICING)-II, BLORE VIDE ORDER U/S 92CA DATED 20.10.2009 DETERMINED THE ARMS LENGTH PRICE IN RESPECT OF THE SOFTWARE SERVICE AT RS.21,49,71,327/- AS AGAINST RS.12,08,02,549/- SHOWN BY THE TAXPAYER. THE DIFFERENCE OF RS.9,41,68,778/- WAS DETERMINED AS AN ADJUSTMENT U/S 92CA. IN THIS REGARD A COMMUNICATION WAS ISSUED TO THE ASSESSEE COMPANY TO FILE ITS OBJECTIONS, IF ANY, FOR THE PROPOSED AB OVE ADJUSTMENTS IN ARMS LENGTH PRICE. THE SUBMISSIONS AGAINST THE PROPOSED ADJUSTMENTS FILED BY THE ASSESSEE COMPANY ON 20.11.2009 WERE EXAMINED. ALL THE SUBMISSION MADE BY THE ASSESSEE COMPANY WAS ALREADY CONSIDERED BY THE TRANSFER PRICING AUTHORITY WHILE PASSING THE ORDER U/S 92CA. HENCE, A ORDER U/S 144C WAS PASSED ON 21.12.2009 ADOPTING THE ARMS LENGTH PRICE IN RESPECT OF INTERNATIONAL TRANSACTIONS DEALT IN BY THE ASSESSEE COMPANY WITH ITS ASSOCIATED ENTERPRISES TO THE TUNE OF RS.9,41,68,778/- AS SUGGESTED BY THE TPO IN HIS REPORT U/S 92CA AS DISCUSSED ABOVE. IN ACCORDANCE WITH THE PROVISIONS OF SEC. 144C OF THE INCOME-TAX ACT 1961 THE ASSESSEE WAS ASKED TO FILE ITS ACCEPTANCE TO VARIATION OF INCOME DETERMINED CONSEQUENT TO THE ADJUSTMENT IN ARMS LENGTH PRICE AND TO FILE ITS OBJECTION BEFORE THE DISPUTE RESOLUTION PANEL ON THE ABOVE ISSUES AND ANY OTHER ITA NO.1093/B/13 7 ELIGIBLE ISSUES IN THE SAID ORDER WITHIN 30 DAYS OF THE RECEIPT OF THE SAME. CONSEQUENT TO WHICH THE ASSESSEE FILED ITS OBJECTIONS BEFORE THE DISPUTE RESOLUTION PANEL. TH E SAID DISPUTE RESOLUTION PANEL AFTER HEARING THE CAS E HAS GIVEN DIRECTION U/S 144C(5) R.W.S 144C(8) DATED 27.9.2010. THE ASSESSMENT IN THE CASE IS CONCLUDED ADOPTING THE DIRECTION GIVEN BY THE DISPUTE RESOLUTION PANEL AS UNDER: TOTAL LOSS AS PER RETURN OF INCOME (-) RS.9,79,37 ,638 ASSESSED LOSS AS DISCUSSED IN PARA I OF THIS ORDER (-)RS.6,51,91,941 ADD: DIFFERENCE ON ACCOUNT OF ARMS LENGTH PRICE SUGGESTED BY THE TPO AND SUBSEQUENTLY REWORKED OUT IN ACCORDANCE WITH THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL IN ITS DIRECTION DATED 27.09.2010. RS,9,41,68,778 TOTAL TAXABLE INCOME RS.2,89,76,8 37 ASSESSED INCOME RS. 18,46,776 RS.2,71,30,061 ITA NO.1093/B/13 8 3.2 THE LEARNED CIT ON AN ANALYSIS OF THE RECORDS O F ASSESSMENT FOR ASST. YEAR 2006-07 OBSERVED FROM POINT NO.17F OF T HE REPORT FILED IN FORM NO.3CD THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.3,41,52,529/- ON ACCOUNT OF DATA LINK CHARGES PA ID/PAYABLE OUTSIDE INDIA AND CLAIMED THAT THE SAID AMOUNT IS NOT CHARG EABLE TO TAX IN INDIA BASED ON THE DECISION OF WIPRO LTD., VS. ITO (2005) 378 ITR (57) AND THEREFORE, THE PROVISION OF SEC. 40(A)(I) OF TH E ACT ARE NOT ATTRACTED. ACCORDING TO THE LEARNED CIT, IT IS EVI DENT FROM THE RECORDS OF ASSESSMENT THAT THE ASSESSING OFFICER OUGHT TO H AVE, BUT FAILED TO EXAMINE THE SAME AND VERIFY THE ASPECT AS TO WHICH PARTIES THERE PAYMENTS WERE MADE AND WHETHER THE PROVISIONS OF SE C. 40(A)(I) OF THE ACT WERE ATTRACTED OR NOT FOR DEDUCTION OF TA X AT SOURCE. 3.2 IN THIS VIEW OF THE MATTER, THE LEARNED CIT ISS UED A SHOW CAUSE NOTICE REQUIRING THE ASSESSEE TO SHOW CAUSE WHY PROCEEDINGS U/S 263 OF THE ACT SHOULD NOT BE INITIA TED IN ITS CASE AND CALLING UPON THE ASSESSEE TO FILE OBJECTIONS IF ANY TO THESE PROPOSED PROCEEDINGS US/ 263 OF THE ACT. IN RESPONSE THERET O, THE ASSESSEE FILED WRITTEN SUBMISSIONS IN THE COURSE OF HEARINGS ON 26 /3/2012, 4/6/2012 AND 22/10/2012. AS THERE WAS A CHANGE IN INCUMBENT IN OFFICE, THE ASSESSEE WAS AFFORDED FRESH OPPORTUNITY OF BEING HE ARD ON 6/2/2013, ITA NO.1093/B/13 9 WHEREIN THE ASSESSEE RESTRICTED THE ARGUMENTS PUT F ORTH IN THE EARLIER PROCEEDINGS. 3.3 THE LEARNED CIT, THEN MADE AN ANALYSIS OF TH E RECORDS IN PARAS 10 TO 11 OF THE IMPUGNED ORDER AND THEREAFTER CAME TO THE CONCLUSION THAT THE ASSESSING OFFICER OUGHT TO HAVE , BUT DID NOT CARRY OUT ANY EXAMINATION/INVESTIGATION/VERIFICATION ON T HE ISSUE OF WHETHER THE PAYMENTS AMOUNTING TO RS.3,41,92,524/- BEING DA TA LINK CHARGES AND ISSUANCE CHARGES PAID/PAYABLE OUTSIDE INDIA TO 4 PARTIES, NAMELY MCI WORLD COM COMMUNICATION INC (USA), NOVATEL (USA), VERIZON COMMUNICATION INC (USA) AND SINGAPOR E, TELECOMMUNICATIONS (SINGAPORE) WERE LIABLE FOR TDS THEREON AS THE INCOMES WERE CHARGEABLE TO TAX IN INDIA; WHETHER OR NOT, THESE NON RESIDENTS TO WHOM PAYMENTS HAVE BEEN MADE HAD PERMA NENT ESTABLISHMENT IN INDIA (PE); THE APPLICABILITY OF PROVISIONS OF ARTICLES 5,7 ETC. OF THE DTAA BETWEEN INDIA AND THE CONCERNED COUNTIES, EXAMINATION OF THE APPLICABILIT Y OF THE PROVISION OF SEC. 9(1)(VII) RWS 195(I) AND 40(A)(I) OF THE AC T. IN VIEW OF THE ABOVE, THE LEARNED CIT AT PARA 12 OF THE ORDER HELD THAT THE ORDER OF ASSESSMENT FOR ASST. YEAR 2006-07 PASSED U/S 143(3) RWS 144C OF THE ACT DATED 18/10/2010 WAS ERRONEOUS AND PREJUDICIA L TO THE INTEREST OF ITA NO.1093/B/13 10 REVENUE AS PER THE PROVISIONS OF SEC. 263 OF THE AC T AND CONSEQUENTLY CANCELLED THE SAID ORDER OF ASSESSMENT. THE LEARN ED CIT THEN AT PARA 13 OF THE IMPUGNED ORDER DIRECTED THE ASSESSING OFF ICER TO MAKE A DENOVO ORDER OF ASSESSMENT AFTER EXAMINING AND VERI FYING THE ISSUE AND CONSIDERING THE DISALLOWANCE OF THE PAYMENTS MA DE BY THE ASSESSEE COMPANY FOR DATA LINK CHARGES AND ISSUANCE CHARGES PAID/PAYABLE TO THE PARTIES OUTSIDE INDIA WITHOUT M AKING TDS THEREON, AFTER AFFORDING THE ASSESSEE ADEQUATE OPPORTUNITY O F BEING HEARD IN THE MATTER. 4.1 WE HAVE HEARD THE LEARNED DR IN THE MATTER AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. BEF ORE EMBARKING UPON AN INQUIRY ABOUT THE FACTS AVAILABLE ON RECORD AND HOW TO CONSTRUE THEM, WE DEEM IT PERTINENT TO TAKE NOTE OF THE FUND AMENTAL PRINCIPLES FOR JUDGING THE ACTION OF THE CIT TAKEN U/S 263. T HE ITAT IN THE CSE OF M/S KHATIZA |S OOMERBHOY VS. IT, MUMBAI REPORTED IN 101 TTJ 1095, ANALYZED IN DETAILS VARIOUS AUTHORITATIVE PRO NOUNCEMENTS INCLUDING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIES CO. VS. CIT 243 ITR 83 AND PROPO UNDED THE FOLLOWING BROADER TESTS: ITA NO.1093/B/13 11 (I) THE CIT MUST RECORD SATISFACTION THAT THE ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. BOTH THE CONDITIONS MUST FULFILLED. (II) SEC. 263 CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE AO AND IT WAS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SEC. WILL BE ATTRACTED. (III) AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SUFFICE THE REQUIREMENT OF ORDER BEING ERRONEOUS. (IV) IF THE ORDER IS PASSED WITHOUT APPLICATION OF MIND, SUCH ORDER WILL FALL UNDER THE CATEGORY OF ERRONEOUS ORDER. (V) EVERY LOSS OF REVENUE CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND IF THE AO HAS ADOPTED ONE OF THE COURSES PERMISSIBLE UNDER LAW OR WHERE TWO VIEWS ARE POSSIBLE AND THE AO HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE. IT CANNOT BE TREATED AS AN ERRONEOUS ITA NO.1093/B/13 12 ORDER, UNLESS THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE UNDER LAW. (VI) IF WHILE MAKING THE ASSESSMENT, THE AO EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINE THE INCOME, THE CIT, WHILE EXERCISING HIS POWER U/S 263 IS NOT PERMITTED TO SUBSTITUTE HI S ESTIMATE OF INCOME IN PLACE OF THE INCOME ESTIMATED BY THE AO. (VII) THE AO EXERCISES QUASI-JUDICIAL POWER VESTED IN HIS AND IF HE EXERCISES SUCH POWER IN ACCORDANCE WITH LAW AND ARRIVE AT A CONCLUSION, SUCH CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE CIT DOES NOT FEE STRATIFIED WITH THE CONCLUSION. (VIII) THE CIT, BEFORE EXERCISING HIS JURISDICTION U/S 263 MUST HAVE MATERIAL ON RECORD TO ARRIVE AT A SATISFACTION. (IX) IF THE AO 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 AO ALLOWS THE CLAIM ON ITA NO.1093/B/13 13 BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, THE DECISION OF THE AO CANNOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DOES NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD. 4.2 APART FROM THE ABOVE PRINCIPLES, WE DEEM IT AP PROPRIATE TO MAKE REFERENCE TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SUN BEAM AUTO REPORTED IN 227 CTR 1 13 WHEREIN THE HONBLE HIGH COURT HAS PROPOUNDED A DISTINCTION BET WEEN LACK OF INQUIRY AND INADEQUATE INQUIRY. IF THERE IS A LACK OF ENQUIRY, THEN THE ASSESSMENT ORDER CAN BE BRANDED AS ERRONEOUS. THE FOLLOWING OBSERVATIONS OF THE HONBLE DELHI HIGH COURT ARE WO RTH TO NOTE: 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE COUNSEL ON THE OTHER SIDE AND HA VE GONE THROUGH THE RECORDS. THE FIRST ISSUE THAT ARISES F OR OUR CONSIDERATION IS ABOUT THE EXERCISE OF POWER BY THE CIT U/S 263 OF THE INCOME-TAX ACT. AS NOTE ABOVE, THE SUBM ISSION OF LEARNED COUNSEL FOR REVENLUE WAS THAT WHILE PASS ING THE ASSESSMENT ORDER, THE AO DID NOT CONSIDER THIS ASPE CT SPECIFICALLY WHETHER THE EXPENDITURE IN QUESTION WA S REVENUE OR CAPITAL EXPENDITURE. THIS ARGUMENT PRED ICATES ON THE ASSESSMENT ORDER WHICH APPARENTLY DOES NOT G IVE ITA NO.1093/B/13 14 ANY REASONS WHILE ALLOWING THE ENTIRE EXPENDITURE A S REVENUE EXPENDITURE. HOWEVER, THAT BY ITSELF WOULD NOT BE INDICATIVE OF THE FACT THAT THE AO HAD NOT APPLIED HIS MIND ON THE ISSUE. THERE ARE JUDGMENTS GALORE LAYING DO WN THE PRINCIPLE THAT THE AO IN THE ASSESSMENT ORDER IS NO T REQUIRED TO GIVE DETAILED REASON IN RESPECT OF EACH AND EVERY ITEM OF DEDUCTION, ETC. THEREFORE, ONE HAS TO SEE FROM THE RECORD AS TO WHETHER THERE WAS APPLICATION OF MIND BEFORE ALLOWING THE EXPENDITURE IN QUESTION AS REVENUE EXPENDITURE. LEARNED COUNSEL FOR THE ASSES SEE IS RIGHT IN HIS SUBMISSION THAT ONE HAS TO KEEP IN MIN D THE DISTINCTION BETWEEN LACK OF INQUIRY AND INADEQUA TE INQUIRY. IF THERE WAS ONLY INQUIRY, EVEN INADEQUA TE, THAT WOULD NOT BY ITSELF, GIVE OCCASION TO THE COMMISSIO NER TO PASS ORDERS U/S 163 OF THE ACT, MERELY BECAUSE HE H AS DIFFERENT OPINION IN THE MATTER. IT IS ONLY IN CAS ES OF LACK OF INQUIRY, THAT SUCH A COURSE OF ACTION WOULD BE OPEN. 4.3 THE HONBLE DELHI HIGH COURT IN THE CASE OF GEE VEE ENTERPRISE VS. ADDL. CIT & ORS. (1975) 99 ITR 375 ( DEL.) HAS PROPOUNDED THE ROLE REQUIRED TO BE PLAYED BY THE AO . THE REASON IS OBVIOUS. THE POSITION AND FUNCTION OF THE INCOME-TAX OFFICER IS VERY DIFFEREN T FROM THAT OF A CIVIL COURT. THE STATEMENTS MADE IN A PLEADING PROVED BY THE MINIMUM AMOUNT OF EVIDENCE MAY BE ACCEPTED BY A CIVIL COURT IN THE ABSENCE OF ANY ITA NO.1093/B/13 15 REBUTTAL. THE CIVIL COURT IN NEUTRAL. IT SIMPLY G IVES DECISION ON THE BASIS OF PLEADING AND EVIDENCE WHIC H COMES BEFORE IT. THE ITO IS NOT ONLY AN ADJUDICATO R BUT ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER B UT CALLS FOR FURTHER INQUIRY. IT IS HIS DUTY TO ASCER TAIN 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 SEC. 263 EMERGES OUT OF THIS CONTRAC T. IT IS BECAUSE IT IS INCUMBENT ON THE ITO TO FURTHER INVESTIGATE THE FACTS STATED IN THE RETURN WHEN CIRCUMSTANCES WOULD MAKE SUCH AN INQUIRY PRUDENT THAT THE WORD ERRONEOUS IN SEC. 263 INCLUDES THE FAILURE TO MAKE SUCH AN INQUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH AN INQUIRY HAS NOT BEEN MADE AND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE OR DER IF ALL THE FACTS STATED THEREIN ARE ASSUMED TO BE CORRECT. 4.4 IN THE LIGHT OF THE ABOVE PROPOSITION, IF WE PE RUSE AND CONSIDER THE MATERIAL ON RECORD, IT WOULD REVEAL THAT IN THE PERIOD UNDER CONSIDERATION AS PER THE DETAILS IN 17F OF THE FORM 3CD REPORT, THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.3,41,92,529/- ON ACCOUNT OF DATA LINK CHARGES AND INSURANCE CHARGES PAID/PAYABLE TO PARTIES OUTSIDE INDIA, WHICH IT HAS CLAIMED AS NOT CHARGEABLE TO TA X IN INDIA BASED ON ITA NO.1093/B/13 16 THE DECISION OF WIPRO LTD., VS. ITO (SUPRA) AND, T HAT THEREFORE THE PROVISIONS OF SEC. 40(A)(I) ARE NOT ATTRACTED IN IT S CASE. FROM A PERUSAL OF THE ORDER OF ASSESSMENT, IT IS EVIDENT THAT THE ASSESSING OFFICER HAS NEITHER EXAMINED AND NOR VERIFIED THIS ISSUE NOR TH AT HE HAS APPLIED HIS MIND TO THE MATTER. PASSING THE ORDER OF ASSE SSMENT IS THE PREROGATIVE OF THE ASSESSING OFFICER AND ASSESSEE H AS NO CONTROL OVER THE OFFICER FOR PASSING THE ORDER OF ASSESSMENT IN A SPECIFIC MANNER. HOWEVER, IF THE EXAMINATION OF THE SPECIFIC ISSUE I S NOT DISCERNABLE FROM THE ORDER OF ASSESSMENT, THEN THE HIGHER FORUM CAN GO THROUGH THE SHOW CAUSE NOTICE, IF ANY, ISSUED TO THE ASSESS EE AND THE REPLY THERETO WHICH WOULD INDICATE THAT THOUGH THE ORDER OF ASSESSMENT IS SILENT ON THE ISSUE, IT MUST HAVE BEEN DISCUSSED DU RING THE ASSESSMENT PROCEEDINGS. NO SUCH MATERIAL IS AVAILABLE BEFORE US, EVEN IN THE ASSESSEES REPLY TO THE SHOW CAUSE NOTICE ISSUED BY THE LEARNED CIT IN REVISIONARY PROCEEDINGS U/S 263. TH E HONBLE APEX COURT IN THE CASE OF MALABAR INDUSTRIES CO . VS CIT REPORTED IN 243 ITR 83 HAS OBSERVED THAT THE ACCEPTANCE OF ACCOUNTI NG ENTRIES AS IT IS WITHOUT CAUSING ENQUIRIES BY THE ASSESSING OFFICER WOULD RENDER THE ORDER OF ASSESSMENT ERRONEOUS AND PREJUDICIAL TO TH E INTEREST OF REVENUE. IN THE LIGHT OF THE FACTS AND CIRCUMSTANC ES OF THE CASE AS DISCUSSED ABOVE, WE ARE OF THE VIEW THAT THE LEARNE D CIT HAS RIGHTLY ITA NO.1093/B/13 17 CONSIDERED ALL THESE ASPECTS BEFORE TAKING ACTION U /S 263 OF THE ACT. WE, THEREFORE, FIND NO MERIT IN THE APPEAL OF THE A SSESSEE, DISMISS THE SAME. 6. IN THE RESULT, THE ASSESSEES APPEAL FOR THE ASS T. YEAR 2006-07 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH OCT, 2015. SD/- SD/- (VIJAYPAL RAO) (JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER VMS. BANGALORE DATED : 7/10/2015 COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REGISTRAR, I TAT, BANGALORE.