M/s Sidhi Vinayak Alloy Industries, Kathua V. The Principal Commissioner of Income Tax, Jammu

ITA 195/ASR/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7720 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 08-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S KANWAL
• Keywords: Revision of order; Proportionate interest; Question of law; Assessment record; Prejudicial to interest; Capital receipt
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. T. S. KAPOOR, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A. NO. 195/(ASR)/2016 ASSESSMENT YEAR: 2011-12 PAN: ABBFS1745A M/S. SIDHI VINAYAK ALLOY INDUSTRIES 46B-50-SICOP, INDUSTRIAL EXTN. AREA, HATLI MORTH, KATHUA. VS. PR. C. I. T., J & K, JAMMU. (APPELLANT) (RESPONDENT) APPELLANT BY : SH. RAJESH JAIN (C.A. ) RESPONDENT BY: SH. S. S. KANWAL (D.R.) DATE OF HEARING: 30.10.2017 DATE OF PRONOUNCEMENT: 04.12.201 7 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE ORD ER OF LD. CIT, JAMMU PASSED U/S 263 OF THE ACT. 2. THE APPEAL WAS EARLIER DISMISSED FOR WANT OF PRO SECUTION VIDE ORDER OF THE TRIBUNAL DATED 01.06.2016 HOWEVER SUCH ORDER WAS RECALLED VIDE TRIBUNAL ORDER DATED 09.09.2016 THE APPEAL WAS LIST ED FOR HEARING ON MERITS. 3. AT THE OUTSET, THE LD. AR SUBMITTED THAT ASSESSE E IS A PARTNERSHIP FIRM AND DURING THE YEAR UNDER CONSIDERATION HAD RE CEIVED EXCISE DUTY REFUND AND INTEREST SUBSIDY WHICH WERE CAPITAL RECE IPTS AS PER THE JUDGMENT OF HON'BLE HIGH COURT OF JAMMU & KASHMIR I N THE CASE OF M/S ITA NO.195 (ASR)/2016 ASSESSMENT YEAR: 2011-12 2 BALAJI ALLOYS AND OTHERS VS. CIT AND THE SAID JUDGM ENT OF HON'BLE JAMMU & KASHMIR HIGH COURT HAS BEEN UPHELD BY HON'B LE SUPREME COURT. THE ASSESSING OFFICER DURING ASSESSMENT PROC EEDINGS IN THE COURSE OF ASSESSMENT PROCEEDINGS THOUGH DISCUSSED A ND DISALLOWED THE CLAIM OF EXCISE DUTY REFUND AND INTEREST SUBSIDY BU T BY MISTAKE HE DID NOT ADD BACK THESE ITEMS IN THE COMPUTATION OF INCO ME. IT WAS SUBMITTED THAT ASSESSING OFFICER HAD COMPLETED THE ASSESSMENT AFTER SCRUTINIZING THE DETAILS REQUIRED AS IS APPARENT FROM THE ASSESS ING OFFICERS ORDER ITSELF. THE LD. AR FURTHER SUBMITTED THAT A SHOW CA USE NOTICE U/S 263 OF THE ACT WAS ISSUED ON 14.12.2015, PROPOSING TO ADD/ DISALLOW EXCISE DUTY REFUND AND INTEREST SUBSIDY AND ALLEGED PROPOR TIONATE INTEREST OF RS.8,67,602/- OUT OF INTEREST CLAIMED BY THE ASSESS EE FOR PAYING EARNEST MONEY OF RS.72,30,017/. THE LD. AR SUBMITTED THAT S HOW CAUSE NOTICE ISSUED BY LD. CIT WAS CRYPTIC, NON-SPEAKING, WITHOU T ANY BASIS, WHEREIN NO REASONS WERE SPECIFIED, SPECIFICALLY FOR DISALLO WING OF INTEREST ON BORROWED FUNDS. THE LD. AR SUBMITTED THAT THE BASIC TWIN CONDITIONS FOR INVOKING SECTION 263 OF THE ACT IS THE ORDER PASSED BY ASSESSING OFFICER SHOULD BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST S OF THE REVENUE AND CIT SHOULD SPECIFY IN THE SHOW CAUSE NOTICE (AT LEA ST PRIME FACIE) WITH REASONS HOW HE ARRIVED AT SUCH CONCLUSION. RELIANCE IN THIS RESPECT WAS PLACED ON THE CASE OF SHYAM BIRI WORKS 84 ITD 124 ( ALLAHABAD TRIB.) AND BRAHMA BUILDERS 77 DTR 249 (PUNE TRIB.) FOR THE PRO POSITION THAT A SHOW CAUSE NOTICE MUST MENTION HOW THE IMPUGNED ORD ER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IT WAS SUBMITTED THAT MERE ITA NO.195 (ASR)/2016 ASSESSMENT YEAR: 2011-12 3 REMAND TO ASSESSING OFFICER FOR MAKING MORE ENQUIRE S, WITHOUT SPECIFYING THE REASONS, CANNOT BE SAID TO BE ERRONE OUS AND PREJUDICIAL TO INTEREST OF REVENUE. IT WAS SUBMITTED THAT WITHOUT MAKING THIS FINDING, SUCH INSTRUCTIONS OF LD. CIT WOULD TANTAMOUNT TO RE MAND TO ASSESSING OFFICER FOR MAKING FISHING & ROVING ENQUIRES. THE L D. AR IN THIS RESPECT PLACED RELIANCE THE CASE LAW OF D.G. HOUSING 343 IT R 329 (DELHI) FOR THE PROPOSITION THAT CIT CANNOT REMAND MATTER TO ASSESS ING OFFICER BY PASSING ORDER U/S 263 WITHOUT ADDUCING REASONS HOW THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. IT WAS SUBMITTED THAT HON'BLE SUPREME COURT IN THE CASE OF PARSURAM POTTERIES LTD 106 ITR 1 (SC) HELD THAT A VALID ASSESSMENT SHOULD NOT BE REOPENED WITHOUT PROPER REASONS ON MERITS. THE LD. AR SUBMITTED THAT THE HON'BLE SUPREME COURT IN THE CASE OF BALAJI ALLOYS HAD ALRE ADY HELD THAT THE INTEREST SUBSIDY AND EXCISE DUTY REFUND IS A CAPITA L RECEIPT AND HON'BLE JAMMU & KASHMIR HIGH COURT HAD ALREADY HELD IT TO B E A CAPITAL RECEIPT AND THE ASSESSING OFFICER WAS BOUND TO FOLLOW THE J URISDICTIONAL HIGH COURT, THEREFORE BY NOT MAKING ADDITIONS ON ACCOUNT OF INTEREST SUBSIDY AND EXCISE DUTY REFUND, HE HAS PASSED A CORRECT ORD ER. AS REGARDS THE EARNEST MONEY PAID FOR PURCHASE OF PLOT, THE LD. AR SUBMITTED THAT THE EARNEST MONEY WAS PAID FOR BUSIN ESS ASSETS OF THE FIRM AND IN THIS RESPECT OUR ATTENTION WAS INVITED TO A COPY OF BALANCE SHEET PLACED AT P.B. PAGE 11 TO 19. OUR SPECIFIC AT TENTION WAS INVITED TO P.B. PAGE 15 WHERE UNDER THE HEAD LOANS AND ADVANCE S, THE AMOUNT OF EARNEST MONEY PAID FOR PURCHASE WAS APPEARING. THE LD. AR SUBMITTED ITA NO.195 (ASR)/2016 ASSESSMENT YEAR: 2011-12 4 THAT THE ASSESSEE BROUGHT TO THE NOTICE OF CIT, IN REPLY TO SHOW CAUSE NOTICE, THAT THERE WAS CREDIT BALANCE OF RS.2.03 CR ORES IN PARTNERS CAPITAL AS ON 31.03.2011, AND ONUS WAS ON THE REVEN UE TO PROVE THAT THERE WAS DIVERSION OF FUNDS FOR NON BUSINESS PURPO SES. THE LD. AR SUBMITTED THAT PAYING EARNEST MONEY FOR BOOKING PLO T WAS PURELY A BUSINESS DECISION AND REVENUE CANNOT SIT IN THE CHA IR OF BUSINESSMAN TO DECIDE HOW TO TAKE DECISIONS. IT WAS SUBMITTED THAT THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. MAX INDIA LTD. 388 ITR 0081, HAS HELD THAT WHERE INTEREST FREE FUNDS ARE AVAILAB LE, PRESUMPTION WILL BE THAT INTEREST FREE FUNDS WERE SUFFICIENT TO MEET IN VESTMENTS AND SIMILAR RATIO HAS BEEN HELD IN A NUMBER OF CASES. IN VIEW O F THESE FACTS AND CIRCUMSTANCES, IT WAS SUBMITTED THAT ON MERITS ALSO THE ORDER PASSED BY ASSESSING OFFICER WAS ERRONEOUS AND THE PREJUDICIAL BUT INTEREST AND IN VIEW OF THE ABOVE, IT WAS SUBMITTED THAT THE ORDER PASSED BY LD. CIT SHOULD QUASHED. 4. THE LD. DR, ON THE OTHER HAND SUBMITTED THAT THO UGH IT IS AN ADMITTED FACT THAT EXCISE DUTY REFUND AND INTEREST SUBSIDY ARE CAPITAL RECEIPTS AS PER THE JUDGMENT OF HON'BLE SUPREME COU RT IN THE CASE OF BALAJI ALLOYS BUT AT THE TIME OF MAKING ASSESSMENT, THE JUDGMENT OF SUPREME COURT HAD NOT COME INTO EXISTENCE AND DEPAR TMENT HAD FILED APPEAL AGAINST THE ORDER OF JAMMU & KASHMIR HIGH CO URT BEFORE SUPREME COURT AND THEREFORE THE ASSESSING OFFICER W AS BOUND TO MAKE ADDITIONS. HE SUBMITTED THAT THE ASSESSING OFFICER IN THE BODY OF ASSESSMENT ORDER DISCUSSED THIS ISSUE AND DISALLOWE D THESE ITEMS BUT ITA NO.195 (ASR)/2016 ASSESSMENT YEAR: 2011-12 5 WHILE MAKING COMPUTATION OF INCOME, HE DID NOT ADD THE SAME TO THE TOTAL INCOME AND THEREFORE THE LD. CIT RIGHTLY ASSU MED JURISDICTION U/S 263 OF THE ACT. AS REGARDS THE DISALLOWANCE OF INTEREST, THE LD. D R SUBMITTED THAT ASSESSING OFFICER DID NOT LOOK INTO THIS ASPECT AND THEREFORE THE ASSUMPTION OF JURISDICTION U/S 263 WAS VALID. 5. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH OUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT ASSESSING OFFICER DU RING ASSESSMENT PROCEEDINGS HAS DISCUSSED THE ISSUE OF EXCISE DUTY REFUND AND INTEREST SUBSIDY IN THE BODY OF ASSESSMENT ORDER AND HAS ALS O NOTED THE RELIANCE PLACED BY ASSESSEE ON THE JUDGMENT OF JAMMU & KASHM IR HIGH COURT IN THE CASE OF BALAJI ALLOYS. HE ALSO HELD THAT THESE RECEIPTS ARE REVENUE RECEIPTS AND ACCORDINGLY MADE ORDER FOR ADDITIONS T O THE INCOME OF ASSESSEE BUT IN THE COMPUTATION OF TOTAL INCOME, HE DID NOT MADE THE ADDITIONS. THEREFORE THE LD. CIT ISSUED NOTICE FOR ASSUMPTION OF JURISDICTION U/S 263 OF THE ACT. IN REPLY TO THE NO TICE U/S 263, THE ASSESSEE FILED THE DETAILED SUBMISSION AS PLACED IN P.B. PAGE 24 TO 35 WHEREIN THE ASSESSEE TRIED TO EXPLAIN THAT THE RECE IPTS OF EXCISE DUTY REFUND AND INTEREST SUBSIDY WERE CAPITAL RECEIPTS A ND RELIED ON THE ORDER OF JAMMU & KASHMIR HIGH COURT IN THE CASE OF BALAJI ALLOYS. SIMILARLY WITH RESPECT TO DISALLOWANCE OF PROPORTIONATE INTER EST, THE ASSESSEE SUBMITTED A REPLY AND STATED THAT THE ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS AND THEREFORE DISALLOWANCES WAS NOT WARR ANTED AS WAS HELD IN ITA NO.195 (ASR)/2016 ASSESSMENT YEAR: 2011-12 6 A NUMBER OF CASES. IT WAS ALSO SUBMITTED THAT THE I NVESTMENT WAS MADE FOR BUSINESS PURPOSES AND THESE WERE NOT LOANS OR A DVANCES AND THEREFORE THERE WAS NO DIVERSION OF BORROWED FUNDS. HOWEVER, THE LD. CIT HELD THAT THE DEPARTMENT HAD NOT ACCEPTED THE JUDGM ENT OF HON'BLE JAMMU & KASHMIR IN THE CASE OF BALAJI ALLOYS AND HA D FILED BEFORE HON'BLE SUPREME COURT AND THEREFORE THE SAME CANNOT BE SAID TO BE APPLICABLE. AS REGARDS THE PROPORTIONATE DISALLOWANCE OF INTER EST, THE LD. CIT HELD THAT ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM THAT THE ASSESSEE HAD SUFFICIENT FUNDS. THE LD. CITS FINDINGS THAT THE D ECISION OF JAMMU & KASHMIR HIGH COURT IN THE CASE OF BALAJI ALLOYS CAN NOT BE RELIED IS NOT CORRECT AS THE ASSESSING OFFICER WAS BOUND TO FOLLO W THE ORDER OF HON'BLE JAMMU & KASHMIR HIGH COURT AND AS PER THE ORDER OF HON'BLE JAMMU & KASHMIR HIGH COURT THESE TWO AMOUNTS REPRESENTING E XCISE DUTY REFUND AND INTEREST SUBSIDY WERE CAPITAL RECEIPTS AND WHIC H WERE NOT LIABLE TO BE TAXED AND THEREFORE THE ORDER OF THE ASSESSING O FFICER TO THIS EXTENT WAS NOT ERRONEOUS AND WAS NOT PREJUDICIAL TO THE IN TEREST OF REVENUE. REGARDING THE DISALLOWANCE OF INTEREST THE ASSESSEE SUBMITTED BEFORE LD. CIT IN REPLY TO SHOW CAUSE NOTICE THAT ASSESSEE HAD SUFFICIENT INTEREST BEARING FUNDS, THEREFORE NO DISALLOWANCE WAS NOT WA RRANTED AND ALSO SUBMITTED THAT IT WAS A BUSINESS ASSET. WITHOUT REC ORDING AS TO HOW THE ORDER PASSED BY ASSESSING OFFICER IN NOT MAKING ADD ITION ON ACCOUNT OF PROPORTIONATE INTEREST WAS ERRONEOUS HE PASSED U/S 263 OF THE ACT. IN A CASE WHERE LD. CIT HOLDS THAT THE ORDER PASSED BY A SSESSING OFFICER IS ITA NO.195 (ASR)/2016 ASSESSMENT YEAR: 2011-12 7 ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E, HE IS BOUND TO STATE THE REASONS AFTER EXAMINING THE REPLY OF ASSESSEE A S TO HOW THE ORDER IS ERRONEOUS. THE HON'BLE DELHI HIGH COURT IN THE CASE OF THE INCOME TAX OFFICE VS. D.G. HOUSING 343 ITR 329 HAS HELD THAT W HILE EXERCISING JURISDICTION/S 263 OF THE ACT, AND IN THE ABSENCE O F FINDING THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REV ENUE, THE ORDER PASSED BY LD. CIT IS NOT SUSTAINABLE. THE FINDINGS OF HON' BLE COURT AS CONTAINED FROM PARA 17 TO 20 ARE REPRODUCED BELOW: THUS, IN CASE OF WRONG OPINION OR FINDING ON THE M ERITS, THE COMMISSIONER OF INCOME-TAX HAS TO COME TO THE CONCL USION AND HIMSELF DECIDE THAT THE ORDER IS ERRONEOUS, BY CONDUCTING N ECESSARY ENQUIRY, IF REQUIRED AND NECESSARY, BEFORE THE ORDER UNDER SECT ION 263 IS PASSED. IN SUCH CASES, THE ORDER OF THE ASSESSING OFFICER WILL BE ERRONEOUS BECAUSE THE ORDER PASSED IS NOT MAINTAINABLE IN LAW AND THE SAID FINDING MUST BE RECORDED. THE COMMISSIONER OF INCOME-TAX CANNOT REM AND THE MATTER TO THE ASSESSING OFFICER TO DECIDE WHETHER THE FINDINGS RE CORDED ARE ERRONEOUS. IN CASES WHERE THERE IS INADEQUATE ENQUIRY BUT NOT LACK OF ENQUIRY, AGAIN THE COMMISSIONER OF INCOME-TAX MUST GIVE AND RECORD A FINDING THAT THE ORDER/INQUIRY MADE IS ERRONEOUS. THIS CAN HAPPEN IF AN ENQUIRY AND VERIFICATION IS CONDUCTED BY THE COMMISSIONER OF IN COME-TAX AND HE IS ABLE TO ESTABLISH AND SHOW THE ERROR OR MISTAKE MADE BY THE ASSESSING OFFICER, MAKING THE ORDER UNSUSTAINABLE IN LAW. IN SOME CASE S POSSIBLY THOUGH RARELY, THE COMMISSIONER OF INCOME-TAX CAN ALSO SHO W AND ESTABLISH THAT THE FACTS ON RECORD OR INFERENCES DRAWN FROM FACTS ON RECORD PER SE JUSTIFIED AND MANDATED FURTHER ENQUIRY OR INVESTIGATION BUT T HE ASSESSING OFFICER HAD ERRONEOUSLY NOT UNDERTAKEN THE SAME. HOWEVER, T HE SAID FINDING MUST BE CLEAR UNAMBIGUOUS AND NOT DEBATABLE. THE MATTER CANNOT BE REMITTED FOR A FRESH DECISION TO THE ASSESSING OFFICER TO CO NDUCT FURTHER ENQUIRIES WITHOUT A FINDING THAT THE ORDER IS ERRONEOUS. FIND ING THAT THE ORDER IS ERRONEOUS IS A CONDITION OR REQUIREMENT WHICH MUST BE SATISFIED FOR EXERCISE OF JURISDICTION UNDER SECTION 263 OF THE A CT. IN SUCH MATTERS, TO REMAND THE MATTER/ISSUE TO THE ASSESSING OFFICER WO ULD IMPLY AND MEAN THE COMMISSIONER OF INCOME-TAX HAS NOT EXAMINED AND DECIDED WHETHER OR NOT THE ORDER IS ERRONEOUS BUT HAS DIRECTED THE ASS ESSING OFFICER TO DECIDE THE ASPECT /QUESTION. THIS DISTINCTION MUST BE KEPT IN MIND BY THE COMMIS SIONER OF INCOME WHILE EXERCISING JURISDICTION UNDER SECTION 263 OF THE ACT AND IN THE ABSENCE OF THE FINDING THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE, EXERCISE OF JURISDICTION UNDER THE SAID SECTION IS NOT S USTAINABLE. IN MOST CASES OF ALLEGED 'INADEQUATE IN VESTIGATION', IT WILL BE ITA NO.195 (ASR)/2016 ASSESSMENT YEAR: 2011-12 8 DIFFICULT TO HOLD THAT THE ORDER OF THE ASSESSING O FFICER, WHO HAD CONDUCTED ENQUIRIES AND HAD ACTED AS AN INVESTIGATOR, IS ERRO NEOUS, WITHOUT THE COMMISSIONER OF INCOME-TAX CONDUCTING VERIFICATION/ INQUIRY. THE ORDER OF THE ASSESSING OFFICER MAY BE OR MAY NOT BE WRONG. T HE COMMISSIONER INCOME-TAX CANNOT DIRECT RECONSIDERATION ON THIS GR OUND BUT ONLY WHEN I ORDER IS ERRONEOUS. AN ORDER OF REMIT CANNOT BE PAS SED BY THE COMMISSIONER OF INCOME-TAX TO ASK THE ASSESSING OFF ICER TO DECIDE WHETHER THE ORDER WAS ERRONEOUS. THIS IS NOT PERMISSIBLE. A N ORDER IS NOT ERRONEOUS, UNLESS THE COMMISSIONER OF INCOME-TAX HO LD AND RECORDS REASONS WHY IT IS ERRONEOUS. AN ORDER WILL NOT BECO ME ERRONEOUS BECAUSE ON REMIT, THE ASSESSING OFFICER MAY DECIDE THAT THE ORDER IS ERRONEOUS. THEREFORE, THE COMMISSIONER OF INCOME-TAX MUST AFTE R RECORDING REASONS HOLD THAT THE ORDER IS ERRONEOUS. THE JURISDICTIONA L PRECONDITION IS THAT THE COMMISSIONER OF INCOME-TAX MUST COME TO THE CONCLUS ION THAT THE ORDER IS ERRONEOUS AND IS UNSUSTAINABLE IN LAW. WE MAY NOTIC E THAT THE MATERIAL WHICH THE COMMISSIONER OF INCOME-TAX CAN RELY INCLU DES NOT ONLY THE RECORD AS IT STANDS AT THE TIME WHEN THE ORDER IN Q UESTION WAS PASSED BY THE ASSESSING OFFICER BUT ALSO THE RECORD AS IT STA NDS AT THE TIME OF EXAMINATION BY THE COMMISSIONER OF INCOME-TAX (SEE CIT VS. SHREE MANJUNATHESZVARE PACKING PRODUCTS AND CAMPHOR WORK [1998] 231 ITR 53 (SC)). NOTHING BARS/PROHIBITS THE COMMISSIONER O F INCOME-TAX FROM COLLECTING AND RELYING UPON NEW/ADDITIONAL MATERIAL /EVIDENCE TO SHOW AND STATE THAT THE ORDER OF THE ASSESSING OFFICER IS ER RONEOUS. IT IS IN THIS CONTEXT THAT THE SUPREME COURT IN MAL ABAR INDUSTRIAL CO. LTD. VS. CIT [2000] 243 ITR 83 (SC), HAD OBSERVED T HAT THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE' HAS T O BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFF ICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSI NG CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THU S WHEN THE ASSESSING OFFICER HAD ADOPTED ONE OF THE COURSES PERMISSIBLE AND AVAILABLE TO HIM, AND THIS HAS RESULTED IN LOSS TO THE REVENUE ; OR T WO VIEWS WERE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW WITH W HICH THE COMMISSIONER OF INCOME-TAX MAY NOT AGREE ; THE SAID ORDERS CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE IN TERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS U NSUSTAINABLE III SUCH MATTERS, THE COMMISSIONER OF INCOME-TAX MUST GIVE A FINDING (BIT VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW AND, THEREFORE, THE ORDER IS ERRONEOUS. HE MUST ALSO SHOW THAT PREJUDIC E IS CAUSED TO THE INTERESTS OF THE REVENUE. IN THE PRESENT CASE, THE FINDINGS RECORDED BY THE T RIBUNAL ARE CORRECT AS COMMISSIONER OF INCOME-TAX HAS NOT GONE INTO AND HA S NOT GIVEN ANY REASON FOR OBSERVING THAT THE ORDER PASSED BY THE A SSESSING OFFICER WAS ERRONEOUS. THE FINDING RECORDED BY THE COMMISSIONER OF INCOME-TAX IS THAT 'ORDER PASSED BY THE ASSESSING OFFICER MAY BE ERRON EOUS. THE COMMISSIONER OF INCOME-TAX HAD DOUBTS ABOUT THE VAL UATION AND SALE CONSIDERATION RECEIVED BUT THE COMMISSIONER OF INCO ME-TAX SHOULD HAVE EXAMINED THE SAID ASPECT HIMSELF AND GIVEN A FINDIN G THAT THE ORDER ITA NO.195 (ASR)/2016 ASSESSMENT YEAR: 2011-12 9 PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS. HE C AME TO THE CONCLUSION AND FINDING THAT THE ASSESSING OFFICER HAD EXAMINED THE SAID ASPECT AND ACCEPTED THE RESPONDENT'S COMPUTATION FIGURES BUT H E HAD RESERVATIONS. THE COMMISSIONER OF INCOME-TAX IN THE ORDER HAS REC ORDED THAT THE CONSIDERATION RECEIVABLE WAS EXAMINED BY THE ASSESS ING OFFICER BUT WAS NOT PROPERLY EXAMINED AND, THEREFORE, THE ASSESSMEN T ORDER IS 'ERRONEOUS'. THE SAID FINDING WILL BE CORRECT, IF THE COMMISSION ER OF INCOME-TAX HAD EXAMINED AND VERIFIED THE SAID TRANSACTION HIMSELF AND GIVEN A FINDING ON THE MERITS. AS HELD ABOVE, A DISTINCTION MUST BE DR AWN IN THE CASES WHERE THE ASSESSING OFFICER DOES NOT CONDUCT AN ENQUIRY; AS LACK OF ENQUIRY BY ITSELF RENDERS THE ORDER BEING ERRONEOUS AND PREJUD ICIAL TO THE INTERESTS OF THE REVENUE AND CASES WHERE THE ASSESSING OFFICER C ONDUCTS ENQUIRY BUT FINDING RECORDED IS ERRONEOUS AND WHICH IS ALSO PRE JUDICIAL TO THE INTERESTS OF THE REVENUE. IN LATTER CASES, THE COMMISSIONER O F INCOME TAX HAS TO EXAMINE THE ORDER OF THE ASSESSING OFFICER ON THE M ERITS OR THE DECISION TAKEN BY THE ASSESSING OFFICER ON THE MERITS AND TH EN HOLD AND FORM AN OPINION ON THE MERITS THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. IN THE SECOND SET OF CASES, THE COMMISSIONER OF INCOME-TAX CANNOT DIR ECT THE ASSESSING OFFICER CONDUCT FURTHER ENQUIRY TO VERIFY AND FIND OUT WHETHER THE ORDER PASSED IS ERRONEOUS OR NOT. THE COMMISSIONER OF INCOME-TAX IS PATENTLY WRONG IN MENTIONING AND STATING THAT SCHEDULE III TO THE WEALTH-TAX ACT , 1957, WAS NOT APPLICABLE BUT, THE ASSESSING OFFICER SHOULD HAVE A DOPTED THE SAID FORMULA/METHOD. THE AFORESAID REASONING CANNOT BE A CCEPTED AND DOES NOT SHOW OR ESTABLISH THAT THE ASSESSMENT ORDER WAS ERRONEOUS. IN VIEW OF THE AFORESAID REASONING, THE QUESTION OF LAW IS ANSWERED IS ANSWERED IN FAVOUR OF RESPONDENT-ASSESSEE AND AGAIN ST THE REVENUE AND THE APPEAL IS ACCORDINGLY DISMISSED. NO COSTS. WE FURTHER FIND THAT BALANCE SHEET OF THE ASSESSEE AS PLACED IN P.B. PAGE 11 IS HAVING PARTNERS CAPITAL TO THE EXTENT OF RS.2.32 CRORES AGAINST WHICH THE AMOUNT GIVEN AS EARNEST MONEY IS ONLY TO THE EXTENT OF RS.72.30 LACS WHICH IS LESS THAN THE INTEREST FREE CAPITAL OF THE ASSESSEE FIRM. THE PUNJAB & HARYANA HIGH COURT IN THE CASE O F CIT VS. MAX INDIA LTD. 388 ITR 0081 HAS HELD THAT WHERE THE INTEREST FREE FUNDS ARE AVAILABLE, PRESUMPTION WILL BE MADE THAT INTEREST F REE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS. SIMILAR FINDING S HAS BEEN MADE BY OTHER COURTS IN THE FOLLOWING CASES: ITA NO.195 (ASR)/2016 ASSESSMENT YEAR: 2011-12 10 (A) RELIANCE UTILITIES & POWER LTD. 313 ITR 340 (MUMBAI HIGH COURT) (B) WOOLCOMBERS CASE 134 ITR 219 (CALCUTTA) (C) INDIAN EXPLOSIVES LTD. 147 ITR 392 (CALCUTTA) (D) EAST INDIA PHARMACEUTICALS (1997) SUPREME COURT CAS ES PAGE 224 (SC). THE AMRITSAR BENCH IN THE CASE OF MALHOTRA BOOK DE POT VS. ACIT VIDE ITS ORDER DATED 29 TH JUNE, 2016 REPORTED AT 51 ITR 0484 HAS ALSO HELD SIMILAR FINDINGS AND THEREFORE ON MERITS ALSO THE DISALLOWANCE COULD NOT HAVE BEEN MADE BY THE ASSESSING OFFICER. IN REPLY TO SHOW CAUSE NOTICE THE ASSESSEE HAD EXP LAINED THE FACTS THAT THERE WERE SUFFICIENT INTEREST FREE FUNDS BUT LD. CIT HELD THAT NO EVIDENCE WAS FILED WHEREAS THE FACT REMAINS THAT AS SESSMENT RECORD WAS WITH HIM AND COPIES OF BALANCES SHEET WERE PART OF THE ASSESSMENT RECORD. THE LD. CIT SHOULD HAVE EXAMINED THOSE RECO RDS WITH RESPECT TO REPLY FILED BY ASSESSEE AND THEN HE SHOULD HAVE NOT ED HIS SATISFACTION WHICH HE HAS FAILED TO DO. THEREFORE FOLLOWING THE JUDICIAL PRECEDENTS RELIED ON BY LD. AR THE ORDER PASSED BY LD. CIT U/S 263 IS NOT SUSTAINABLE AND THEREFORE IT IS CANCELLED. IN VIEW OF THE ABOVE, THE ORDER PASSED BY LD. CIT U/S 263 IS QUASHED. ITA NO.195 (ASR)/2016 ASSESSMENT YEAR: 2011-12 11 6. IN NUTSHELL, THE APPEAL FILED BY ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04.12.2017 SD/- SD/- (N. K. CHOUDHRY) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 04.12.2017. /GP/SR. PS . COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER