M/s Indian Explosives Private Limited, Kolkata V. Pr.CIT-4, Kolkata

ITA 1265/KOL/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5524 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-09-2021
• Assessment Year: 2014-2015
• Appeal Filed On: 24-05-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANISH KANOJIA
• Keywords: Revision of order; Transfer pricing; Principle of natural justice; TDS; Set aside; FORM 26AS
• Section: 143(3); 263

Judgement Text

1 ITA NO. 1265/KOL/2019 INDIAN EXPLOSIVES PVT. LTD., AY 2014-15 , A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA [BEFORE HONBLE SHRI A. T. VARKEY, JM & HONBLE SHR I MANISH BORAD, AM] I.T.A. NO. 1265/KOL/2019 ASSESSMENT YEAR: 2014-15 INDIAN EXPLOSIVES PVT. LTD. (PAN: AAACI 6548 N) VS. PCIT-4, KOLKATA APPELLANT RESPONDENT DATE OF HEARING (VIRTUAL) 07.09.2021 DATE OF PRONOUNCEMENT 17.09.2021 FOR THE APPELLANT SHRI RAVI SHARMA, ADVOCATE FOR THE RESPONDENT SHRI MANISH KANOJIA, CIT ORDER PER SHRI A. T. VARKEY, JM: THIS IS AN APPEAL FILED BY THE ASSESSEE COMPANY AG AINST THE ORDER OF LD. PCIT-4, KOLKATA PASSED U/S 263 OF THE INCOME TAX AC T, 1961 (HEREINAFTER REFERRED TO AS THE ACT) DATED 07.02.2019 FOR ASSESSMENT YEAR 2014-15. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA DS AS UNDER: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, A ND IN LAW; 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. PCIT GROSSLY ERRED IN INITIATING PROCEEDINGS U/S 263 OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE ORDER PASSED BY THE AO WAS NEITHER ER RONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE AND THEREFORE THE PROCEEDINGS A RE BAD IN LAW AND VOID AB- INITIO. 2. IN DOING SO, THE LD. PCIT ERRED IN NOT RECORDING A CONCLUSIVE FINDING THAT THE ASSESSMENT ORDER OF AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, WHICH IS PRE-REQUISITE FOR INITIATION OF P ROCEEDINGS U/S 263 OF THE ACT. THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTH ER. THE APPELLANT CRAVES LEAVE TO ALTER, AMEND OR WITHD RAW ALL OR ANY OF THE GROUNDS HEREIN OR ADD ANY FURTHER GROUNDS AS MAY BE CONSIDE RED NECESSARY EITHER BEFORE OR DURING THE HEARING. 2 ITA NO. 1265/KOL/2019 INDIAN EXPLOSIVES PVT. LTD., AY 2014-15 3. FROM THE AFORESAID GROUND NOS. 1 AND 2 IT IS DIS CERNED THAT THE ASSESSEE IS RAISING LEGAL ISSUE AS TO THE JURISDICTION OF THE LD. PCIT TO INVOKE SECTION 263 OF THE ACT. 4. BRIEF FACTS OF THE CASE AS NOTED BY THE LD. PCIT IS THAT THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME DATED 29.11.2014 DECLARING TOTAL I NCOME OF RS. 9,14,26,540/-. LATER THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS AND THE REAFTER ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT 26.12.2016 DETERMINING THE TOTAL INCOME AT RS. 10,09,57,307/-. ACCORDING TO THE LD. PCIT ON VERIFICATION OF THE ASSESSMENT R ECORDS HE FOUND THAT THE ORDER OF THE ASSESSMENT WAS ERRONEOUS SO FAR AS IT IS PREJUDICIA L TO THE INTEREST OF THE REVENUE FOR THE FOLLOWING GROUNDS: (A) IT IS SEEN THAT AS PER 26AS STATEMENT TOTAL INT EREST INCOME OF THE ASSESSEE WAS RS. 8,10,93,121/-. HOWEVER, AS PER ACCOUNTS AND COM PUTATION OF INCOME TOTAL INTEREST INCOME WAS TO THE TUNE OF RS. 8,00,14,210/ -. HENCE, THE AO FAILED TO RECONCILE OR ADD THE DIFFERENCE DURING THE COURSE O F ASSESSMENT PROCEEDINGS. (B) IT FURTHER APPEARS FROM 26AS STATEMENT THAT THE RE WERE OTHER INCOMES IN THE NATURE OF CONTRACTUAL, COMMISSION, TECHNICAL ETC. T HOUGH NO SEPARATE HEADS OF INCOMES ARE AVAILABLE IN THE P & L ACCOUNTS, IT APP EARS THAT ALL SUCH INCOMES WERE CLUBBED UNDER MISCELLANEOUS INCOME UNDER SCH. 16. HOWEVER, AS PER 26AS TOTAL RECEIPTS WERE OF RS. 1,32,40,556/- AS AGAINST DISCL OSED INCOME OF RS. 78 LAKHS (APPROX). HENCE THE AO FAILED TO RECONCILE OR ADD T HE DIFFERENCE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. (C) DEDUCTION OF TDS U/S 194IA OF THE ACT IN THE F ORM 26AS SUGGESTS SALE OF ANY IMMOVABLE PROPERTY OTHER THAN AGRICULTURAL LAND. HO WEVER, NO CAPITAL GAIN/LOSS WAS BOOKED ON ACCOUNT OF SUCH SALE. NEITHER FIXED ASSET STATEMENT OF THE ASSESSEE INDICATES ANY SUCH SALE. (D) IT IS SEEN THAT THE ASSESSEE MADE ADJUSTMENTS ON ACCOUNT OF ARMS LENGTH MARK UP. HOWEVER, THE CASE WAS NOT REFERRED TO TPO. AS P ER PARA 3.2 OF CBDTS INSTRUCTION NO. 3 OF 2016, THE INSTANT CASE HAD TO BE MANDATORILY REFERRED TO THE TPO (THE TRANSFER PRICING OFFICER) BY THE AO AFTER OBTA INING THE APPROVAL OF PRINCIPAL CIT. HOWEVER, THE AO HAS COMPLETED ASSESSMENT U/S 1 43(3) OF THE ACT ON 26.12.2016 WITHOUT REFERRING THE MATTER TO TRANSFER PRICING OF FICER. (E) ONE OF THE REASONS FOR SELECTION OF THE CASE IN SCRUTINY WAS VERIFICATION OF COMMISSION PAYMENT. HOWEVER, THE SAME WAS NOT VERIF IED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 3 ITA NO. 1265/KOL/2019 INDIAN EXPLOSIVES PVT. LTD., AY 2014-15 ACCORDING TO THE LD. PCIT, HE ISSUED SHOW CAUSE NOT ICE (SCN) TO THE ASSESSEE ON 16.05.2017 REQUIRING IT TO SUBMIT CLARIFICATION AND EXPLANATION TO THE AFORESAID ISSUES AND HAS TO SHOW CAUSE AS TO WHY HE SHOULD NOT INVOKE RE VISIONAL JURISDICTION U/S 263 OF THE ACT FOR THE REASON CITED (SUPRA) AGAINST THE ASSESSMENT ORDER DATED 26.12.2016. THE LD. PCIT NOTES THAT THE ASSESSEE HAD FILED WRITTEN SUBMISSIO N WHICH HE REPRODUCED FROM PAGE NO. 2 TO 10 OF THE IMPUGNED ORDER. THEREAFTER, THE LD. PCIT HAS EXPRESSED HIS DISSATISFACTION WITH THE EXPLANATION BY THE SUBMISSION GIVEN BY THE ASSE SSEE AND HELD AS UNDER (RELEVANT PORTION ONLY): 4.1. IN MY CONSIDERED OPINION THIS IS A CASE OF L ACK OF ENQUIRY ON THE PART OF THE AO. THE DECISION ON ALL ABOVE DISCUSSED ISSUES COULD BE TAK EN ONLY AFTER EXAMINING AND VERIFYING THE FACTS/SUBMISSIONS OF THE A.R. NOT COLLECTING THE FU LL FACTS AND NOT TAKING ENQUIRES ON ALL ABOVE ISSUE S TO LOGICAL END WHICH COULD ENABLE AO TO TAKE DECISI ON BASED ON THE TOTALITY OF FACTS MAKES THIS ORDER ERRONEOUS INSOFAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. AFTER HAVING CONSIDERED THE POSITION OF LAW AND FACTS AND CIRCUMSTANCES OF THE INSTANT CASE , I AM OF THE CONSIDERED OPINION THAT THE ASSESSMENT ORDER PASSED BY THE AO IS ERRONEOUS INSO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE IN ACCORDANCE WITH THE EXPLANATION 2(C ) BE LOW SECTION 263(1) OF THE ACT. THE AO IS DIRECTED TO PROVIDE REASONABLE OPPORTUNITY TO THE A SSESSEE COMPANY TO PRODUCE DOCUMENTS AND EVIDENCES WHICH IT MAY CHOOSE TO RELY UPON FOR SUBS TANTIATING ITS OWN CLAIM. THEREAFTER A FRESH ASSESSMENT ORDER MAY BE PASSED IN ACCORDANCE WITH T HE RELEVANT PROVISIONS OF LAW. 5. . 5.1. 5.2. .. 5.3. IN VIEW OF THE FACTS AND THE LEGAL POSITION ST ATED ABOVE, I AM OF THE VIEW THAT THE ORDER PASSED ON AN INCORRECT ASSUMPTION OF FACTS OR INCOR RECT APPLICATION OF LAW AND WITHOUT MAKING REQUISITE INQUIRIES WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE WITHIN THE MEANING AND SCOP E OF SECTION 253 OF THE ACT. THE AFORESAID DECISIONS POSTULATE THAT WHEN THE OF FICER IS EXPECTED TO MAKE AN INQUIRY OF A PARTICULAR ITEM OF INCOME AND IF HE DOES NOT MAKE A N INQUIRY AS EXPECTED, THAT WOULD BE A GROUND FOR THE COMMISSIONER TO INTERFERE WITH THE ORDER PA SSED BY THE OFFICER SINCE SUCH AN ORDER PASSED BY THE OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INT ERESTS OF THE RE (K. A. RAMASWAMY CHETTIAR VS. CIT (1996) 220 ITR 657). 6. I HAVE CAREFULLY CONSIDERED THE SUBMISSION MADE ON BEHALF OF THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND FOUND THAT THE ISS UES POINTED OUT IN THE SHOW CAUSE NEEDS VERIFICATION, AS AO MERELY ACCEPTED PRIMARY INFORMA TION RELATED TO ISSUES OF SCRUTINY WITHOUT CALLING FOR LOGICALLY RELEVANT MATERIAL/EVIDENCES IN ORDER TO HAVE AN OVERVIEW OF TOTALITY OF FACTS AND CIRCUMSTANCES, DURING THE COURSE OF ASSESSMENT ORDE R ERRONEOUS ON THE GROUND OF LACK OF ENQUIRY. AFTER HAVING CONSIDERED THE POSITION OF LAW AND FAC TS AND CIRCUMSTANCES OF THE INSTANT CASE, I AM OF THE CONSIDERED OPINION THAT THE ASSESSMENT ORDER PA SSED BY THE AO IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE IN ACCORDANC E WITH THE EXPLANATION 2(C ) BELOW SECTION 263(1) OF THE ACT ON THE GROUND OF LACK OF ENQUIRY. ACCORD INGLY, THE ASSESSMENT DATED 22.01.2016 PASSED U/S 4 ITA NO. 1265/KOL/2019 INDIAN EXPLOSIVES PVT. LTD., AY 2014-15 263/143(3) IS SET ASIDE DE-NOVO ON SPECIFIC ISSUES AS OUTLINED IN ABOVE PARA 2 WITH A DIRECTION TO AO TO CAUSE ADEQUATE AND EFFECTIVE ENQUIRY. THE AO IS DIRECTED TO PROVIDE REASONABLE OPPORTUNITY TO THE ASSESSEE COMPANY TO PRODUCE DOCUMENTS & EVIDENCES W HICH IT MAY CHOOSE TO RELY UPON FOR SUBSTANTIATING ITS OWN CLAIM. THEREAFTER A FRESH AS SESSMENT ORDER MAY BE PASSED IN ACCORDANCE WITH THE RELEVANT PROVISIONS OF LAW. 5. AGGRIEVED BY THE AFORESAID ACTION OF THE LD. PCI T TO INTERDICT THE ASSESSMENT ORDER PASSED BY THE AO DATED 26.12.2016 ON THE GROUNDS OF LACK OF ENQUIRY, THE ASSESSEE HAS PREFERRED THIS APPEAL RAISING GROUNDS OF APPEAL SUP RA WHEREIN THE ASSESSEE CHALLENGES THE JURISDICTION OF THE LD. PCIT TO HAVE INVOKED THE RE VISIONAL JURISDICTION U/S 263 OF THE ACT WITHOUT SATISFYING CONDITION PRECEDENT AS REQUIRED U/S 263 OF THE ACT I.E. WITHOUT HOLDING VALIDLY THAT THE AOS ORDER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE REVENUE. 6. BEFORE WE ADVERT TO THE FACTS AND LAW INVOLVE D IN THIS LIS BEFORE US, LET US REVISE THE LAW GOVERNING THE ISSUE BEFORE US. THE ASSESSEE HAS CHALLENGED IN THE FIRST PLACE, THE VERY USURPATION OF JURISDICTION BY LD. PRINCIPAL CIT TO INVOKE HIS REVISIONAL POWERS ENJOYED U/S 263 OF THE ACT. THEREFORE, FIRST WE HAVE TO SEE WHE THER THE REQUISITE JURISDICTION NECESSARY TO ASSUME REVISIONAL JURISDICTION IS EXISTING IN TH IS CASE BEFORE THE PR. CIT RIGHTFULLY EXERCISED HIS REVISIONAL POWER. FOR THAT, WE HAVE T O EXAMINE AS TO WHETHER IN THE FIRST PLACE THE ORDER OF THE ASSESSING OFFICER FOUND FAULT BY T HE PRINCIPAL CIT IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. FOR THA T, LET US TAKE THE GUIDANCE OF JUDICIAL PRECEDENCE LAID DOWN BY THE HONBLE APEX COURT IN M ALABAR INDUSTRIES LTD. VS. CIT [2000] 243 ITR 83(SC) WHEREIN THEIR LORDSHIP HAVE HELD THA T TWIN CONDITIONS NEEDS TO BE SATISFIED BEFORE EXERCISING REVISIONAL JURISDICTION U/S 263 O F THE ACT BY THE CIT. THE TWIN CONDITIONS ARE THAT THE ORDER OF THE ASSESSING OFFICER MUST BE ERRONEOUS AND SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THE FOLLOWING CIRCUMSTA NCES, THE ORDER OF THE AO CAN BE HELD TO BE ERRONEOUS ORDER, THAT IS (I) IF THE ASSESSING OF FICERS ORDER WAS PASSED ON INCORRECT ASSUMPTION OF FACT; OR (II) INCORRECT APPLICATION O F LAW; OR (III)ASSESSING OFFICERS ORDER IS IN VIOLATION OF THE PRINCIPLE OF NATURAL JUSTICE; OR ( IV) IF THE ORDER IS PASSED BY THE ASSESSING OFFICER WAS WITHOUT APPLICATION OF MIND; (V) IF THE AO HAS NOT INVESTIGATED THE ISSUE BEFORE HIM; [ BECAUSE AO HAS TO DISCHARGE DUAL ROLE OF AN INVESTI GATOR AS WELL AS THAT OF AN ADJUDICATOR ] THEN IN AFORESAID ANY EVENT THE ORDER PASSED BY T HE ASSESSING OFFICER CAN BE TERMED AS ERRONEOUS ORDER. COMING NEXT TO THE SECON D LIMB, WHICH IS REQUIRED TO BE 5 ITA NO. 1265/KOL/2019 INDIAN EXPLOSIVES PVT. LTD., AY 2014-15 EXAMINED AS TO WHETHER THE ACTIONS OF THE AO CAN BE TERMED AS PREJUDICIAL TO THE INTEREST OF REVENUE. WHEN THIS ASPECT IS EXAMINED ONE HAS TO UN DERSTAND WHAT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIES (SUPRA) HELD THAT THIS PHRASE I.E. PREJUDICIAL TO THE INTEREST OF THE REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. THEIR LORDSHIP HEL D THAT IT HAS TO BE REMEMBERED THAT EVERY LOSS OF REV ENUE AS A CONSEQUENCE OF AN ORDER OF ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. WHEN THE ASSESSING OFFICER ADOPTED ONE OF THE COURSES PERMIS SIBLE IN LAW AND IT HAS RESULTED IN LOSS TO THE REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT B E TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. 7. IN THE LIGHT OF THE AFORESAID BINDING AND WELL S ETTLED JUDICIAL PRECEDENT WHEN WE EXAMINE THE CASE OF THE ASSESSEE AS TO WHETHER THE LD. PCITS ACTION OF INVOKING REVISIONAL JURISDICTION IN RESPECT OF FIVE (5) FAULTS BROUGHT OUT IN THE SHOW CAUSE NOTICE (SCN) BY THE LD. PCIT CAN BE HELD AS ERRONEOUS OR PREJUDICIAL TO THE REVENUE. ACCORDING TO LD. PCIT THOUGH THE ASSESSEE PURSUANT TO THE SHOW CAUSE NOTI CE ISSUED BY HIM DATED 16.05.2017 HAD GIVEN CERTAIN EXPLANATION/CLARIFICATION ON THE FIVE (5) FAULTS POINTED OUT BY HIM IN THE SCN, STILL THESE FACTS/CLARIFICATIONS/EXPLANATION HAVE N OT BEEN ENQUIRED/VERIFIED INTO OR BROUGHT TO THE NOTICE OF THE AO DURING THE ASSESSMENT PROCEEDI NGS. ACCORDING TO LD. PCIT ON THESE FIVE (5) FAULTS, THERE WAS LACK OF ENQUIRY BY THE A O DURING THE ASSESSMENT PROCEEDINGS. ACCORDING TO LD. PCIT SINCE THE AO HAS NOT ENQUIRE D INTO THE FIVE (5) FAULTS/ISSUES BROUGHT OUT IN HIS SCN; THE ORDER OF THE AO IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE REVENUE. MOREOVER ACCORDING TO LD. PCIT THOUGH THE ISSUE OF COMMISSION PAYMENT MADE BY THE ASSESSEE TO THE TUNE OF RS. 3,39,92,698/- WAS INITI ALLY SELECTED FOR SCRUTINY UNDER CASS, STILL THE AO HAS NOT CONDUCTED ANY ENQUIRY BY EVEN CALLIN G FOR THE DETAILS RELATED TO THE COMMISSION EXPENSES. AND ACCORDING TO LD. PCIT , W HEN THE ISSUE OF TRANSFER PRICING IS ARISING THERE IN THE RETURN OF INCOME, AND ONCE THE AO IS CONDUCTING SCRUTINY ASSESSMENT AS PER CBDT BINDING INSTRUCTIONS ON THE SAME SHOULD HA VE BEEN EXAMINED BY THE AO. 6 ITA NO. 1265/KOL/2019 INDIAN EXPLOSIVES PVT. LTD., AY 2014-15 THEREFORE HE CONCLUDED THAT ON THE FIVE (5) ISSUES POINTED OUT BY HIM IN THE SCN, THIS WAS A CASE OF LACK OF ENQUIRY ON THE PART OF THE AO THERE FORE HE HELD AT PARA 5.3 THAT HE WAS OF THE VIEW THAT AOS ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE WITHIN THE MEANING OF SECTION 263 OF THE ACT. THEREFORE HE SET ASIDE THE ORDER FOR DE-NOVO ASSESSMENT ON THE FIVE (5) ISSUES AS OUTLINED IN PARA 2 (SCN) WITH THE DIRECTION TO THE AO TO CONDUCT EFFECTIVE ENQUIRY AFTER GIVING OPPORTUNITY TO THE A SSESSEE. 8. ASSAILING THE AFORESAID ACTION OF LD PCIT, THE L D. A.R. OF THE ASSESSEE SHRI RAVI SHARMA SUBMITTED THAT THE AO HAD GONE THROUGH THE T AX AUDIT REPORT, THEREFORE THE FAULTS POINTED OUT BY THE LD. PCIT IN HIS SCN NUMBERED AS (A), (B) AND (C) AND WHICH ARE EMANATING FROM A PERUSAL OF THE FORM 26AS, HAVE BEE N LOOKED INTO BY THE AO AND THEREFORE IT CAN BE PRESUMED THAT THE AO HAS GONE THROUGH TH E ISSUES RAISED BY THE LD. PCIT AND SINCE AO BEING SATISFIED, HAS NOT TAKEN ANY ADVERSE VIEW AGAINST THE ASSESSEE. IN ORDER TO BUTTRESS HIS ARGUMENT THAT THE AO HAS GONE THROUGH THE CONTENTS OF FORM 26AS, THE LD. A.R DREW OUR ATTENTION TO PAGE NO.2 OF ASSESSMENT ORDE R WHEREIN THE DISALLOWANCE OF LEAVE ENCASHMENT HAS BEEN MADE WHEREIN THE AO HAS SPECIF ICALLY STATED THAT HE HAS PERUSED TO TAX AUDIT REPORT (CLAUSE-21/ENCLOSURE-12) TO MAKE D ISALLOWANCE OF LEAVE ENCASHMENT; AND THEREAFTER HE DREW OUR ATTENTION TO PAGE NO. 4 WHER EIN THE AO HAS DISCUSSED ABOUT EMPLOYEES CONTRIBUTION TO PF OF THE ESI WHEREIN THE AO HAS ALSO STATED TO HAVE EXAMINED THE TAX AUDIT REPORT (SL. NO. 16(B) TO FORM NO. 3CD ). THUS ACCORDING TO LD. A.R., THE AO HAS GONE THROUGH THE CONTENTS OF THE TAX AUDIT R EPORT AND SO IT CANNOT BE SAID THAT THE AO HAS NOT ENQUIRED ABOUT THESE THREE (3) ISSUES (A , B & C) STATED IN SCN OF LD. PCIT SUPRA. NEXT ACCORDING TO LD. A.R, ON A PERUSAL OF T HE PAGE 3 OF THE ASSESSMENT ORDER IT SHOWS THAT THE DISALLOWANCE OF CLUB EXPENSES WAS MA DE AFTER PERUSAL OF THE PROFIT AND LOSS ACCOUNT. THEREFORE, ACCORDING TO LD. A.R. THE ISSUE OF COMMISSION EXPENSES MUST HAVE BEEN TAKEN NOTE OF BY THE AO WHEN HE WENT THROUGH T HE P&L ACCOUNT AND BEING SATISFIED HAS NOT DRAWN ANY ADVERSE INFERENCE AGAINST THE ASS ESSEE. SO ACCORDING TO LD. A.R. THE AOS ACTION CANNOT BE TERMED AS ERRONEOUS. NEXT ACC ORDING TO LD. A.R. THE LD. PCIT ERRED IN REFERRING TO PARA 3.2 OF CBDTS INSTRUCTION NO. 2/2016 WHICH THE AO IS MANDATORILY REQUIRED TO REFER TO THE TPO THE ARMS LENGTH ADJUST MENT IN RESPECT OF ISSUES RELATING TO 7 ITA NO. 1265/KOL/2019 INDIAN EXPLOSIVES PVT. LTD., AY 2014-15 TRANSFER PRICING OF INTERNATIONAL TAXATION OR SPECI FIED DOMESTIC TRANSACTION ONLY IF SPECIFIC CRITERIAS ARE SATISFIED AND SINCE THE ASSESSEES C ASE DOES NOT FALL IN THE KEN OF THAT INSTRUCTIONS THE AO NEED NOT REFER IT TO TPO. ACCOR DING TO AO, THIS ASSESSMENT YEAR IN QUESTION I.E. AY 2014-15 THEREFORE THE INSTRUCTION NO. 3/2016 WAS ERRONEOUSLY TAKEN AID BY THE LD. PCIT TO INTERDICT THE AOS ORDER WHICH IS B AD IN LAW. THUS ACCORDING TO LD. AR, SINCE THE AO HAS GONE THROUGH THE TAX AUDIT REPORT AND PROFIT AND LOSS ACCOUNT THE FAULTS/ISSUES POINTED OUT BY THE LD. PCIT IN HIS SH OW CAUSE NOTICE ISSUED FOR INVOKING JURISDICTION U/S 263 OF THE ACT IS BAD IN LAW FOR W ANT OF JURISDICTION. 9. FURTHER ACCORDING TO LD. A.R. DURING THE REVISIO NAL PROCEEDINGS BEFORE THE LD. PCIT THE ASSESSEE HAD BROUGHT ALL MATERIALS/DOCUMENTS TO SHOW THAT THE AOS VIEW (NOT TO TAKE ANY ADVERSE VIEW) IN RESPECT OF FIVE (5) ISSUES WER E NOT DEALT BY THE LD. PCIT BY GIVING SPECIFIC FINDINGS AS TO WHETHER THE AOS ACTION IS ERRONEOUS AND PREJUDICIAL TO THE REVENUE AND FOR THAT HE CITED THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ITO VS. D.G. HOUSING PROJECTS LTD. REPORTED IN (2012) 343 ITR 32 9 (DEL) AND DREW OUR ATTENTION TO PARA 17 TO 19 OF THE ORDER WHICH READS AS UNDER: 17. THIS DISTINCTION MUST BE KEPT IN MIND BY THE CI T WHILE EXERCISING JURISDICTION UNDER SECTION 263 OF THE ACT AND IN THE ABSENCE OF THE FI NDING THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, EXERCISE OF JURISDICTION UNDER THE SAID SECTION IS NOT SUSTAINABLE. IN MOST CASES OF ALLEGED 'INADEQUATE I NVESTIGATI ON', IT WILL BE DIFFICULT TO HOLD THAT THE ORDER OF THE ASSESSING OFFICER, WHO HAD CO NDUCTED ENQUIRIES AND HAD ACTED AS AN INVESTIGATOR, IS ERRONEOUS, WITHOUT CIT CONDUCTING VERIFICATION/INQUIRY. THE ORDER OF THE ASSESSING OFFICER MAY BE OR MAY NOT BE WRONG. CIT CANNOT DIRECT RECONSIDERATION ON THIS GROUND BUT ONLY WHEN' THE ORDER IS ERRONEOUS. AN ORDER OF REMIT CANNOT BE PASSED BY THE CIT TO ASK THE ASSESSING OFFICER TO DECIDE WHETHER THE ORDER WAS ERRONEOUS. THIS IS NOT PERMISSIBLE. AN ORDER IS NOT ERRONEOUS, UNLESS THE CIT HOLD AND RECORDS REASONS WHY IT IS ERRONEOUS. AN ORDER WILL NOT BECOME ERRONEOUS BECAUSE ON REMIT, THE ASS ESSING OFFICER MAY DECIDE THAT THE ORDER IS ERRONEOUS. THEREFORE CIT M UST AFTER RECORDING REASONS HOLD THAT THE ORDER IS ERRONEOUS. THE JURISDICTIONAL PRECONDITION STIPULATED IS THAT THE CIT MUST COME TO THE CONCLUSION THAT THE ORDER IS ERRONEOUS AND IS UNSUS TAINABLE IN LAW. WE MAY NOTICE THAT THE MATERIAL WHICH THE CIT CAN RELY INCLUDES NOT ONLY T HE RECORD AS IT STANDS AT THE TIME WHEN THE TENDER IN QUESTION WAS PASSED BY THE ASSESSING OFFI CER BUT ALSO THE RECORD AS IT STANDS AT THE TIME OF EXAMINATION BY THE CIT [SEE CIT V. SHREE MA NJUNATHESWARE PACKING & PRODUCTS CAMPHOR WORKS [1998] 231 ITR 53 / 98 TAXMAN I SC)]. NOTHING BARS/PROBIBITS THE CIT FROM COLLECTING AND RELYING UPON NEW/ADDITIONAL MATERIAL /EVIDENCE TO SHOW AND STATE THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS. 18. IT IS IN THIS CONTEXT THAT THE SUPREME COURT IN MALABAR INDUSTRIAL CO. LTD. V. COMMISSIONER OF INCOME TAX, [2000] 243 ITR 83 / 109 TAXMAN 66 (SC), HAD OBSERVED THAT THE PHRASE PREJUDICIAL TO THE INTEREST OF REVENUE' HAS TO BE READ IN CONJUNCTION WITH AN 8 ITA NO. 1265/KOL/2019 INDIAN EXPLOSIVES PVT. LTD., AY 2014-15 ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EV ERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF REVENUE. THUS, WHEN THE ASSESSING OFFICER HAD ADOPTED ONE O F THE COURSES PERMISSIBLE AND AVAILABLE TO HIM, AND THIS HAS RESULTED IN LOSS TO REVENUE; OR TWO VIEWS WERE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE CIT MAY N OT AGREE; THE SAID ORDERS CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE IN TEREST OF REVENUE UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. IN S UCH MATTERS, THE CIT MUST GIVE A FINDING THAT THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNS USTAINABLE IN LAW AND, THEREFORE, THE ORDER IS ERRONEOUS. HE MUST ALSO SHOW THAT PREJUDICE IS C AUSED TO THE INTEREST OF THE REVENUE. 19. IN THE PRESENT CASE, THE FINDINGS RECORDED BY THE T RIBUNAL ARE CORRECT AS THE CIT HAS NOT GONE INTO AND HAS NOT GIVEN ANY REASON FOR OBSERVING THA T THE ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS. THE FINDING RECORDED THE CIT IS THAT 'ORDER PASSED BY THE ASSESSING OFFICER MAY BE ERRONEOUS'. THE CIT HAD DOUBTS ABOUT THE VALUATION AND SALE CONSIDERATION RECEIVED BUT THE CIT SHOULD HAVE EXAMINED THE SAID ASPECT HIMSELF AND GIVEN A FINDING THAT THE ORDER-PASSED BY THE ASSESSING OFFICER-WAS ERRON EOUS. HE CAME-TO-THE-CONCLUSION AND FINDING THAT THE ASSESSING OFFICER HAD EXAMINED THE SAID ASPECT AND ACCEPTED THE RESPONDENT'S COMPUTATION FIGURES BUT HE HAD RESERVATIONS. THE CI T IN THE ORDER HAS RECORDED THAT THE CONSIDERATION RECEIVABLE WAS EXAMINED BY THE ASSESS ING OFFICER BUT WAS NOT PROPERLY EXAMINED AND THEREFORE THE ASSESSMENT ORDER IS 'ERR ONEOUS'. THE SAID FINDING WILL BE CORRECT. IF THE CIT HAD EXAMINED AND VERIFIED THE SAID TRANS ACTION HIMSELF AND GIVEN A FINDING ON MERITS. AS HELD ABOVE, A DISTINCTION MUST BE DRAWN IN THE CASES WHERE THE AO DOES NOT CONDUCT AN ENQUIRY; AS LACK OF ENQUIRY BY ITSELF RE NDERS THE ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND CASE S WHERE THE AO CONDUCTS ENQUIRY BUT FINDING RECORDED IS ERRONEOUS AND WHICH IS ALSO PRE JUDICIAL TO THE INTEREST OF THE REVENUE. IN LATTER CASES, THE CIT HAS TO EXAMINE THE ORDER OF T HE AO ON MERITS OR THE DECISION TAKEN BY THE AO ON MERITS AND THEN HOLD AND FORM AN OPINION ON M ERITS THAT THE ORDER PASSED BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. IN THE SECOND SET OF CASES, CIT CANNOT DIRECT THE AO TO CONDUCT FURTHER ENQUIRY TO VERIFY AND FIND OUT WHETHER THE ORDER PASSED IS ERRONEOUS OR NOT. ACCORDING TO LD. A.R. SINCE THE AO HAS GONE THROUGH THE TAX AUDIT REPORT AND PROFIT AND LOSS ACCOUNT THE AO SHOULD BE PRESUMED TO HAVE GON E THROUGH THE DETAILS AND BEING SATISFIED HAS TAKEN A PLAUSIBLE VIEW AND IN CASE IF THE LD. PCIT STILL FEELS THAT THERE IS A CASE OF INADEQUATE ENQUIRY THEN HE SHOULD HAVE GONE THRO UGH THE MATERIALS/DOCUMENTS SUBMITTED BY THE ASSESSEE BEFORE HIM (DURING REVISIONAL PROCE EDINGS) AND SHOULD HAVE DEALT WITH EACH ISSUES ON MERITS AND DEMONSTRATED AS TO HOW THE AO S ORDER WAS ERRONEOUS AS WELL AS PREJUDICIAL TO THE REVENUE. AND WITHOUT SATISFYING THAT THIS TWIN CONDITION IS EXISTS ON EACH OF THE ISSUES FOUND FAULT, THE LD. PCIT OUGHT NOT T O HAVE INTERFERED WITH THE ORDER OF THE AO AND INTERDICTED THE SAME. THEREFORE ACCORDING TO LD . A.R. THE LD. PCIT LACKS JURISDICTION TO INVOKE REVISIONAL JURISDICTION U/S 263 OF THE ACT A ND THEREFORE THE IMPUGNED ORDER OF THE LD. PCIT NEED TO BE QUASHED. 9 ITA NO. 1265/KOL/2019 INDIAN EXPLOSIVES PVT. LTD., AY 2014-15 10. PER CONTRA, THE LD. CITDR SHRI MANISH KANOJIA, SUBMITTED THAT EVEN THOUGH THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY WHICH ALS O INCLUDED COMMISSION PAYMENT OF RS. 3,39,92,698/- THE AO DID NOT EVEN MAKE ANY ENQUIRY AND HAS ACCEPTED THE CLAIM AS GOSPEL TRUTH AND ALLOWED THE CLAIM. ACCORDING TO THE LD. C ITDR ON OTHER FOUR (4) ISSUES ALSO THE AO DID NOT EVEN BOTHER TO MAKE ANY ENQUIRY ON THES E ISSUES ALSO WHICH MAKES THE ORDER OF THE AO PER-SE ERRONEOUS AS WELL AS PREJUDICIAL TO THE REVENUE. ACCORDING TO LD. CITDR THE AO HAS TO DISCHARGE THE DUAL ROLE OF AN INVESTIGATO R AS WELL AS THAT OF AN ADJUDICATOR AND IF HE FAILS IN ANY ONE OF THIS ISSUE IT WOULD VITIATE /MAKE THE ORDER OF THE AO ON THESE ISSUES ERRONEOUS AS WELL AS PREJUDICIAL TO THE REVENUE. TH EREFORE, ACCORDING TO LD. CITDR ON THE FIVE (5) ISSUES POINTED OUT BY THE LD. PCIT IN HIS SCN WHILE INVOKING HIS POWER UNDER SECTION 263 OF THE ACT, THE LD. PCIT WAS SATISFIED THAT AO HAS NOT MADE ANY ENQUIRY AT ALL THEREFORE HE HAS RIGHTLY INVOKED REVISIONAL JURISDI CTION U/S 263 OF THE ACT WHICH NEED NOT BE INTERFERED BY US. HE ALSO POINTED OUT THAT THE CASE LAW RELIED UPON BY THE ASSESSEE IN D.G. HOUSING SUPRA IS NOT APPLICABLE IN THE FACTS OF THE CASE AND IS DISTINGUISHABLE. ACCORDING TO LD. CITDRS THE OBSERVATIONS OF THE HONBLE HIGH CO URT WAS MADE IN THAT CASE IN THE LIGHT OF THE FACT THAT IT WAS A CASE WHEREIN AO HAD ENQU IRED INTO THE ISSUES AND THEREFORE IT WAS NOT A CASE OF LACK OF ENQUIRY BUT IT WAS A CASE OF INADEQUATE ENQUIRY, WHICH IS NOT WHAT HAPPENED IN ASSESSEES CASE. IN ASSESSEES CASE THE RE WAS NO ENQUIRY BY THE AO, SO IT IS NOT A CASE OF INADEQUATE ENQUIRY. SO THE OBSERVATIONS M ADE BY THE HONBLE DELHI HIGH COURT IS NOT APPLICABLE TO THE CASE OF THE PRESENT ASSESSEE . SO THE LD. CITDR DOES NOT WANT US TO INTERFERE WITH THE ORDER OF LD. PCIT. 11. HAVING HEARD BOTH SIDES AND AFTER PERUSAL OF TH E RECORDS WE FIND THAT ON THE FIVE (5) ISSUES POINTED OUT BY THE LD. PCIT IN HIS SCN SUPRA (A, B, C, D & E) AT PARA 3 OF THIS ORDER, THE AO IN HIS SCRUTINY ASSESSMENT ORDER HAS NOT MAD E ANY ENQUIRY AS RIGHTLY POINTED OUT BY THE LD. CITDR. IT IS SETTLED POSITION OF LAW THAT T HE AO WHILE ASSESSING AN ASSESSEE HAS TO DISCHARGE THE DUAL ROLE OF AN INVESTIGATOR AS WELL AS THAT OF AN ADJUDICATOR, AND IF HE FAILS IN ANY ONE OF THIS ISSUE IT WILL MAKE THE ORDER ON THE SE ISSUES ERRONEOUS AS WELL AS PREJUDICIAL TO THE REVENUE. EVEN THOUGH WE ASKED THE LD. A.R. A S TO WHETHER THERE WAS ANY MATERIAL TO SUGGEST/SHOW THAT AO HAS ENQUIRED INTO THE ANY OF T HE FIVE (5) ISSUES POINTED OUT BY THE LD. 10 ITA NO. 1265/KOL/2019 INDIAN EXPLOSIVES PVT. LTD., AY 2014-15 PCIT, THE LD. A.R. EXPRESSED HIS HELPLESSNESS IN TH IS REGARD. THE LD. A.R.S SUBMISSION IS THE AO HAS GONE THROUGH THE TAX AUDIT REPORT AND TH E THREE FAULTS/THREE ISSUES (A, B & C) EMANATES FROM TAX AUDIT REPORT, IT SHOULD BE PRESUM ED THAT THE AO HAS ENQUIRED INTO THE SAME AND BEING SATISFIED HAS NOT DRAWN ANY ADVERSE INFERENCE AGAINST THE ASSESSEE ON THESE THREE(3) ISSUES.. WE DO NOT ACCEPT SUCH A BROAD CON TENTION OF THE LD. A.R. OF THE ASSESSEE. WE FIND THAT THE AO HAS NOT MADE ANY ENQUIRY INTO T HE ISSUE RAISED BY THE LD. PCIT. ON SPECIFIC QUERY AS TO WHETHER THE COMMISSION PAYMENT MADE BY THE ASSESSEE TO THE TUNE OF RS. 3,39,92,698/- WAS SPECIFICALLY SELECTED FOR SCR UTINY AND WHETHER THIS ISSUE WAS ENQUIRED INTO BY THE AO, THE LD. A.R FAILED TO SHOW US FROM PB AS TO WHETHER THE AO HAS ENQUIRED INTO IT OR NOT. THUS WE FIND THIS IS A CASE WHEREIN ON THE FIVE (5) ISSUES POINTED OUT BY THE LD. PCIT, THE AO HAS NOT MADE ANY ENQUIRY AT ALL. T HUS IT IS A CASE OF LACK OF ENQUIRY. THE CASE LAW RELIED UPON BY THE LD. A.R. IS NOT OF ANY ASSISTANCE TO THE ASSESSEES CASE BECAUSE IN D.G. HOUSING (SUPRA) THAT WAS A CASE WHEREIN THE RE WAS ENQUIRY BY THE AO THEREFORE IT WAS A CASE OF NO ADEQUATE ENQUIRY. AND FURTHER WE R ESPECTFULLY AGREE WITH THE PROPOSITION LAID BY THE HONBLE DELHI HIGH COURT IN THE CASE OF ITO VS. D.G. HOUSING (SUPRA) THAT WHEN THERE HAS BEEN AN ENQUIRY CONDUCTED BY THE AO ON AN ISSUE WHICH LATER ON THE LD. PCIT FELT TO HAVE NOT BEEN ENQUIRED PROPERLY/INADEQUATE ENQUI RY BY THE AO, THEN THE LD. PCIT, IN SUCH A SCENARIO SHOULD ENQUIRE BY HIMSELF AND SHOUL D POINT OUT AS TO HOW & WHERE THE AO HAS GONE WRONG IN HIS ENQUIRY AND SHOULD RETURN A F INDING AS TO HOW THE VIEW OF THE AO WAS UNSUSTAINABLE IN LAW. THEREFORE, THE CASE LAW RELIE D UPON BY THE LD. A.R IS NOT APPLICABLE TO THE FACTS OF THE CASE. 12. THE LD. A.R. THEREAFTER MADE A FEEBLE ATTEMPT T O SHOW THAT PARA 2.3 ON CBDTS INSTRUCTION NO. 2/2016 DATED 10.03.2016 WAS NOT APP LICABLE IN THIS CASE FOR AY 2014-15. WE NOTE THAT INSTRUCTION OF SUCH NATURE IS PROCEDUR AL IN NATURE I.E. WHEN THERE IS A TRANSFER PRICING ISSUE BEFORE THE AO, HE IS DUTY BOUND TO EX AMINE AS TO WHETHER THE CRITERIA SPELLED OUT IN THE CBDT CIRCULAR/INSTRUCTION IS FULFILLED O R NOT AND THEN TO TAKE A DECISION WHETHER TO REFER THE SAME TO TPO OR NOT AND THEREFORE IT WOULD TAKE IMMEDIATE EFFECT FROM 10.03.2016 ONWARDS. WE NOTE THAT AO HAS PASSED THE ASSESSMENT ORDER ON 26.12.2016 AND IT IS NOT THE 11 ITA NO. 1265/KOL/2019 INDIAN EXPLOSIVES PVT. LTD., AY 2014-15 CASE OF THE ASSESSEE THAT THE CBDT INSTRUCTION NO. 3/2016 HAS BEEN PASSED AFTER 26.12.2016. THEREFORE WE DO NOT FIND ANY MERIT IN THE CONTENTIO N OF THE ASSESSEE. 13. THE ONLY OTHER ISSUE WHICH HAS BEEN POINTED BY THE LD. A.R. IS THAT THE LD. PCIT ERRED IN TAKING THE AID OF EXPLANATION 2(C) BELOW SECTION 263(1) OF THE ACT WHICH IS APPLICABLE ONLY FROM AY 2015-16. EVEN IF WE AGREES TO THE CONTENTION OF THE LD. A.R. OF THE ASSESSEE THAT EXPLANATION 2(C ) BELOW SECTION 2 63(1) OF THE ACT IS NOT APPLICABLE FOR AY 2014-15, STILL IT DOES NOT IN ANY WAY MAKE ANY IMPA CT ON THE FINDING MADE BY THE LD. PCIT THAT THE AO HAS NOT ENQUIRED INTO THE FIVE (5) ISSU ES RAISED BY HIM IN THE SCN AND SINCE WE HAVE CONCURRED WITH THE SAME, EVEN IF WE DISCARD EX PLANATION 2 (C) BELOW SECTION 263 OF THE ACT IT DOES NOT HELP THE ASSESSEES CONTENTION. TH EREFORE, IN THE LIGHT OF THE AFORESAID DISCUSSION WE UPHOLD THE ACTION OF THE LD. PCIT TO HAVE INVOKED SECTION 263 OF THE ACT TO INTERDICT THE ASSESSMENT ORDER DATED 26.12.2016. TH E ASSESSEES APPEAL FAILS. 14. IN THE RESULT, THE APPEAL OF ASSESSEE IS DISMIS SED ORDER IS PRONOUNCED IN THE OPEN COURT ON 17 TH SEPTEMBER, 2021. SD/- SD/- (MANISH BORAD) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 17.09.2021 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. APPELLANT- INDIAN EXPLOSIVES PVT. LTD., APEEJAY HOU SE, BLOCK-C, 6 TH FLOOR, 15, PARK STREET, KOLKATA-700016. 2. RESPONDENT PCIT-4, KOLKATA 3. CIT(A)- KOLKATA 4. CIT- KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) TRUE COPY BY ORDER ASSISTANT REGISTRAR/DDO ITAT, KOLKATA BENCHES, KOLKATA