Sh. Braham Dev Gupta, New Delhi V. Pr. CIT, New Delhi

ITA 2102/DEL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3568 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 17-01-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 18-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K SAROHA
• Keywords: Depreciation; Opportunity of being heard; Principle of natural justice; Earning of tax free income; Question of law; Cost of acquisition; Accommodation entries; Assessment record; Reason to believe
• Section: 143(3); 142(1); 133A; 14A; 27; 263

Judgement Text

IN THE INCOME TAX APPELLAT E TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI G.D. AGRAWAL, PRESIDENT AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO. 2102 /DEL/2016 ASSTT. YEAR: 2011-12 BRAHAM DEV GUPTA, VS PRINCIPAL COMMISS IONER OF INCOME TAX, 1043/2, WARD NO. 9, DR. S.P.M. CIVIC CENTR E, FLAT NO. UFG-I, MINTO ROAD, NEW DELHI. MEHRAULI, NEW DELHI. (PAN: AAFPB5907Q) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SALIL AGARWAL, ADV., SANJIV JAI N CA SHRI SHAILESH GUPTA, CA RESPONDENT BY: SHRI A.K. SAROH A, CIT DR DATE OF HEARING: 31.01.2017 DATE OF PRONOUNCEMENT : 13.04.2017 O R D E R PER BENCH : IN THIS APPEAL BY THE ASSESSEE, THE FOLLOWING GROU NDS ARE RAISED:- 1. THAT THE LEARNED PRINCIPAL COMMISSIONER OF I NCOME TAX HAS ERRED IN INVOKING THE JURISDICTION U/S 263 OF T HE ACT IN THE INSTANT CASE AND HAS ALSO ERRED IN HOLDING THAT THE ASSESSM ENT ORDER PASSED BY THE ASSESSING OFFICER IN THIS CASE IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. 2 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 2. THAT THE LEARNED PRINCIPAL CIT HAS ERRED IN HO LDING THAT THE ASSESSING OFFICER FAILED TO MAKE INQUIRIES WHILE FR AMING THE ASSESSMENT ORDER DATED 31.1.14. 3. THAT THE LEARNED PRINCIPAL CIT HAS ERRED IN DR AWING ADVERSE INFERENCE AGAINST THE ASSESSEE ON THE BASIS OF SURMISES, CONJECTURES AND SUSPICION WITHOUT POINTING OUT ANY SPECIFIC DISCREPANCY IN THE DETAILED SUBMISSIONS MADE BEFORE HIM TO SHOW THAT THE ASSESSMENT ORDER DATED 31.1.14 WAS NEITHER ERR ONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. 2. AT THE TIME OF HEARING BEFORE US, THE LEARNED CO UNSEL FOR THE ASSESSEE ARGUED AT LENGTH. HE STATED THAT THE ASSESSEE IS AN INDIV IDUAL WHO DERIVES INCOME FROM EXPORT OF VARIOUS ITEMS LIKE READYMADE GARMENTS, WO OLLEN GARMENTS, LEATHER GOODS, HANDICRAFT GOODS ETC. IN THE NAME AND STYLE OF M/S DSM INTERNATIONAL. DURING THE YEAR UNDER CONSIDERATION, THERE WAS SURVEY AT THE B USINESS PREMISES OF THE ASSESSEE ON 22 ND SEPTEMBER, 2010. IN THIS SURVEY, THE ASSESSEE MAD E A SURRENDER OF RS. 18,25,22,250/- AS ADDITIONAL INCOME ON ACCOUNT OF E XCESS STOCK FOUND IN HIS PREMISES. THE ASSESSEE DECLARED THE INCOME SURREND ERED AT THE TIME OF SURVEY AND INCLUDED THE SAME IN HIS RETURNED INCOME FILED ON 2 8.9.2011 DECLARING TAXABLE INCOME OF RS. 21,58,62,170/- WHICH WAS INCLUSIVE OF THE SUM OF RS. 18.25 CRORES DECLARED AT THE TIME OF SURVEY. THE ASSESSMENT PRO CEEDINGS HAD COMMENCED BY ISSUE OF NOTICE U/S 143(2) AND AFTER SEVERAL HEARIN GS, THE AO COMPLETED THE ASSESSMENT U/S 143(3) AT RS. 21,60,55,880/-. THAT THE CIT ISSUED SHOW CAUSE NOTICE U/S 263 ON 1 ST OCTOBER, 2015 IN RESPONSE TO WHICH THE ASSESSEE FI LED THE 3 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 DETAILED WRITTEN SUBMISSIONS IN WHICH EACH AND EVER Y POINT WAS EXPLAINED. THE LD. CIT(A) ALLEGED THAT THE ASSESSING OFFICER DID NOT MAKE THE INQUIRY ON VARIOUS POINTS AND HE SET ASIDE THE MATTER BACK TO THE FILE OF ASSESSING OFFICER TO MAKE FRESH ASSESSMENT. LD. COUNSEL EXPLAINED IN RESPECT OF EACH AND EVERY POINT RAISED BY THE CIT(A) AND CLAIMED THAT PROPER INQUIRY WAS M ADE BY THE ASSESSING OFFICER IN RESPECT OF EACH AND EVERY POINT AND THE ALLEGATI ON OF CIT IS FACTUALLY AS WELL AS LEGALLY UNTENABLE. HE HAS ALSO FURNISHED THE WRITT EN SUBMISSIONS, THE RELEVANT PORTION OF WHICH IS REPRODUCED BELOW FOR READY REFE RENCE:- 8) SUBMISSIONS BEFORE ITAT IT IS RESPECTFULLY SUBMITTED THAT THE ASSESSMENT IN THIS CASE WAS FRAMED AFTER MAKING ALL INQUIRIES AND VERIFICATION WHICH WERE REQUIRED TO BE MADE AND THAT THE ASSESSMENT ORDER I N THIS CASE IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST O F THE REVENUE.LT IS FURTHER SUBMITTED THAT THE LD. CIT HAS ERRED IN ASS UMING JURISDICTION U/S 263 OF THE ACT AND PASSING THE IMPUGNED ORDER U /S 263 OF THE ACT AS WOULD BE EVIDENT FROM THE FOLLOWING SUBMISSIONS ON EACH OF THE POINTS RAISED BY THE LD. CIT IN HIS NOTICE U/S 263: I. THAT THE LOSS OF RS.38.62 CRORES CALCULATED BY T HE CIT IN HIS SHOW CAUSE NOTICE IS FACTUALLY INCORRECT (EMPHASIS SUPPLIED) AND UNJUSTIFIED AND THAT THE SAME HAS BEEN ARRIVED AT WITHOUT INCLU DING THE EXPORT INCENTIVE OF RS.42,39,41,070/- AND THE FLUCTUATION IN EXCHANGE RATE OF RS.3,42,08,969/- WHICH ARE INEXTRICABLY LINKED TO T HE BUSINESS OF EXPORTS THAT THE ASSESSEE HAS IN FACT EARNED A GROS S PROFIT OF RS.7,19,11,426/- AND A NET PROFIT OF RS.3,33,31,484 /- AND HAD NOT INCURRED ANY LOSS ON GOODS SOLD BY HIM.(PAGE 59 PAP ERBOOK). 4 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 II. THAT THE ASSESSEE DID NOT HAVE ANY TRADING TRA NSACTION WITH SEHDEV GUPTA DURING THE INSTANT YEAR (PAGE 509 OF PAPER BO OK) AND THEREFORE THERE IS NO VALID BASIS FOR THE LD. CIT TO DRAW ANY ADVERSE INFERENCE AGAINST THE ASSESSEE ON THE BASIS OF INVESTIGATION IN THE CASE OF SEHDEV GUPTA BY DRI. EVEN OTHERWISE SH. SEHDEV GUPTA IS AN INDEPENDENT ASSESSEE OF INCOME TAX AND NO ADVERSE INFERENCE CAN BE DRAWN ONLY ON THE BASIS OF SURMISES AND CONJECTURES. DURING THE C OURSE OF HEARING, THE LD. CIT NEVER CONFRONTED THE ASSESSEE REGARDING THE ALLEGATIONS ABOUT SEHDEV GUPTA AND IT IS ONLY IN HIS ORDER THAT HE HAS DRAWN ADVERSE INFERENCE AGAINST THE ASSESSEE AND THAT TOO WITHOUT BRINGING ANY MATERIAL ON RECORD . III. THAT THE A.O. HAD DULY EXAMINED THE CAPITAL A CCOUNT OF THE ASSESSEE AND THAT ALL WITHDRAWALS FROM THE CAPITAL ACCOUNT WERE MADE OUT OF ITS OWN FUNDS AS THE OPENING CAPITAL OF THE ASSESSEE WAS RS.6.41 CRORES AND THE CLOSING CAPITAL OF THE ASSESSEE WAS RS. 14.86 CRORES. IT WAS FURTHER EXPLAINED THAT THE ENTIRE INCOME EARNED BY THE ASSESSEE DURING THE INSTANT YEAR WAS DULY DECLARED IN THE RE TURN OF INCOME AND THAT THERE IS NO OTHER INCOME ACCRUING TO THE ASSES SEE DURING THE INSTANT YEAR.(PAGE 7 PAPERBOOK) IV. THAT THE DETAILS OF LOANS GIVEN TO OTHER PARTI ES BY THE ASSESSEE AT RS.7,52,87,000/- STOOD DULY DISCLOSED IN THE AUDITE D BALANCE SHEET FILED BY THE ASSESSEE AND THAT ALL SUCH LOANS WERE GIVEN BY THE ASSESSEE OUT OF INTEREST FREE FUNDS AVAILABLE TO THE ASSESSE E WHICH INCLUDED HIS CAPITAL WHICH WAS RS.6.41 CRORES AS ON 1.04.10 AND RS. 14.86 CRORES AS ON 31 ST MARCH 2011. IT WAS FURTHER EXPLAINED THAT THE CAPI TAL OF THE ASSESSEE AS ALSO INTEREST FREE LOANS AVAILABLE TO T HE ASSESSEE OF RS.3.16 CRORES AND OTHER INTEREST FREE FUNDS IN THE FORM OF SUNDRY CREDITORS ETC. WERE FAR IN EXCESS OF THE INTEREST FREE LOANS ADVAN CED BY THE ASSESSEE AT RS.7.52 CRORES. IT WAS FURTHER EXPLAINED THAT TH E A.O. HAS TAKEN NOTE OF ALL THIS INFORMATION WHEN HE HAD EXAMINED THE BA LANCE SHEET OF THE ASSESSEE, STATEMENT OF AFFAIRS OF THE ASSESSEE, BAN K STATEMENTS OF THE ASSESSEE AS ALSO THE DETAILS OF DEBTORS, CREDITORS AND UNSECURED LOANS WHICH WERE DULY ASKED FOR VIDE NOTICE DATED 23.07.1 3. (PAGE NO.38 OF PAPERBOOK) V. THE ASSESSEE FURTHER SUBMITTED THAT THE DETAILS OF ALL UNSECURED 5 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 LOANS ALONG WITH CONFIRMATIONS OF EACH OF THE TRANS ACTIONS, BANK ACCOUNT OF EACH OF THE PERSONS AND INCOME TAX ACKNO WLEDGMENT RETURN OF EACH OF THE PERSONS FROM WHOM UNSECURED LOANS WE RE RECEIVED, WERE DULY FURNISHED BEFORE THE ASSESSING OFFICER AN D WERE EXAMINED BY HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IT WAS FURTHER EXPLAINED THAT OUT OF 11 PERSONS WHOSE LOANS WERE O UTSTANDING, FRESH LOANS HAVE BEEN RECEIVED ONLY FROM THREE PERSONS AN D THAT THERE WERE ONLY BROUGHT FORWARD BALANCES IN RESPECT OF REST OF THEM. IT WAS ALSO EXPLAINED THAT THE THREE PERSONS FROM WHOM FRESH LO ANS WERE RECEIVED WERE ALSO CLOSELY RELATED TO THE ASSESSEE BEING THE BROTHERS OF THE ASSESSEE AND WIFE OF THE BROTHER OF THE ASSESSEE. T HE LOANS FROM ALL THESE THREE PERSONS IN THE EARLIER YEARS STOOD DULY ACCEPTED AND NO ADVERSE INFERENCE WAS DRAWN.(PAGE 41 PAPER BOOK) VI. THE ALLEGATION THAT THE A.O. DID NOT CARRY OUT ANY ENQUIRY ABOUT SUNDRY CREDITORS IS ALSO FACTUALLY WRONG. THE A.O. HAD IN FACT DULY MADE ENQUIRY ABOUT THE SUNDRY CREDITORS IN HIS SHOW CAUSE NOTICE (PAGE 38 OF PAPER BOOK). THE DETAILS ASKED FOR WERE DULY FILED BY THE ASSESSEE. OUT OF 80 SUNDRY CREDITORS FOR SUPPLIES, CONFIRMED COPIES OF ACCOUNTS OF 22 PARTIES WERE DULY SUBMITTED TO THE A SSESSING OFFICER WHO HAD RAISED A SPECIFIC QUERY REGARDING THE CREDI TORS AND HAD ASKED THE ASSESSEE TO SUBMIT A DETAIL GIVING NAME, PAN NU MBERS AND AMOUNT OF EACH OF THE SUNDRY CREDITORS (PAGE 38 PAPERBOOK) . THE ASSESSEE HAS DULY SUBMITTED THE DETAILS BEFORE THE A.O. AND HAS ALSO FURNISHED CONFIRMATIONS IN RESPECT OF 22 PARTIES TO THE ASSES SING OFFICER (PAGE NO.43 PAPERBOOK) AND IT IS ONLY AFTER EXAMINATION O F ALL THE DETAILS AND CONFIRMATIONS THAT THE A.O. HAS COMPLETED THE ASSES SMENT. IT WAS FURTHER EXPLAINED TO THE CIT THAT THE ASSESSEE COUL D NOT FURNISH PAN NUMBERS OF THOSE PARTIES IN WHOSE CASE THERE WERE N O FURTHER TRANSACTIONS AT THE TIME OF ASSESSMENT PROCEEDINGS AND THAT THE ACCOUNTS OF 13 PARTIES OUT OF 17 OF SUCH PARTIES ST OOD SQUARED OFF IN SUBSEQUENT YEARS AND DETAILS WERE FILED BEFORE PR. CIT. VII. THAT THE FACTORY PREMISES AND THE GODOWN AT M EHRAULI WERE ANCESTRAL PROPERTIES OWNED BY THE FAMILY OF THE ASS ESSEE FOR MORE THAN 50 YEARS AND THAT NO RENT WAS REQUIRED TO BE PAID. VIII. THAT THE ASSESSMENT WAS FRAMED BY THE ASSESSI NG OFFICER AFTER TAKING NOTE THAT THE ASSESSEE HAS DULY SUBMITTED QU ANTITATIVE DETAILS OF ALL ITEMS EXPORTED BY HIM DURING THE INSTANT YEAR I N THE TAX AUDIT 6 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 REPORT. IT WAS FURTHER EXPLAINED THAT THERE WERE NE ARLY 67 DIFFERENT ITEMS EXPORTED BY THE ASSESSEE DURING THE INSTANT Y EAR AND IT IS NEITHER FEASIBLE NOR REQUIRED BY THE ACT FOR THE PROFITABIL ITY OF EACH OF THE ITEMS SEPARATELY. 9. IN ORDER TO SUPPORT THE AFORESAID CONTENTIONS O F THE ASSESSEE THAT THE ORDER PASSED BY THE A.O. IN THIS CASE IS NEITHE R ERRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF REVENUE, FOLLOWING CASES WERE RELIED UPON IN THE COURSE OF HEARING OF THE CASE BEFORE TH E ITAT. GIST OF THE CASES SO CITED IS AS UNDER:- I ) DELHI HIGH COURT - DIRECTOR OF INCOME TAX VS. JYO TI FOUNDATION 357 1TR 388 THE HONBLE DELHI HIGH COURT HAS HELD IN THIS CASE AS UNDER:- IN CASES WHERE THERE IS INADEQUATE ENQUIRY BUT NOT LACK OF ENQUIRY, THE COMMISSIONER MUST RECORD A FINDING THAT THE ORD ER//INQUIRY MADE IS ERRONEOUS. THIS CAN HAPPEN IF AN ENQUIRY AND VER IFICATION IS CONDUCTED BY THE COMMISSIONER AND HE IS ABLE TO EST ABLISH AND SHOW THE ERROR OR MISTAKE MADE BY THE ASSESSING OFFICER, MAKING THE ORDER UNSUSTAINABLE IN LAW. AN ORDER OF REMIT CANNOT BE P ASSED BY THE COMMISSIONER TO ASK THE ASSESSING OFFICER TO DECIDE WHETHER THE ORDER WAS ERRONEOUS. THE HONBLE DELHI HIGH COURT IN THIS CASE FOLLOWED ITS JUDGMENT IN THE CASE OF D.G. HOUSING PROJECTS LIMITED REPORTED IN 3 43 ITR 329. II) DELHI HIGH COURT - 1TO VS. D.G. HOUSING PROJECTS LI MITED 343 ITR 329 IN THIS CASE THE HONBLE DELHI HIGH COURT HAS HELD AS UNDER:- A DISTINCTION MUST BE DRAWN IN THE CASES WHERE THE ASSESSING OFFICER DOES NOT CONDUCT AN ENQUIRY; AS LACK OF ENQUIRY BY ITSELF RENDERS THE ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND CASES WHERE THE ASSESSING OFFICER CONDUCTS AN ENQUI RY BUT THE FINDING RECORDED IS ERRONEOUS AND WHICH IS ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IN THE LATTER CASES, THE COMMISSIONER HAS TO EXAMINE THE ORDER OR THE DECISION TAKEN BY THE ASSESSING OFFICE R ON THE MERITS AND 7 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 THEN FORM AN OPINION ON THE MERITS THAT THE ORDER P ASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO T HE INTERESTS OF THE REVENUE. IN THE SECOND SET OF CASES, THE COMMISSION ER CANNOT DIRECT THE ASSESSING OFFICER TO CONDUCT FURTHER ENQUIRY TO VERIFY AND FIND OUT WHETHER THE ORDER PASSED IS ERRONEOUS OR NOT. III) ALLAHABAD HIGH COURT - CIT VS. KASHI NATH & COMPANY 170 ITR 28 IN THIS CASE THE HONBLE HIGH COURT HAS HELD AS UND ER:- THAT THE ORDER OF THE COMMISSIONER REVEALED THAT T HE COMMISSIONER HIMSELF DID NOT EXAMINE THE VARIOUS CASH CREDITS SA ID TO BE APPEARING IN THE NAMES OF DIFFERENT LADIES WHICH WERE SAID TO HAVE ESCAPED THE ATTENTION OF THE INCOME-TAX OFFICER FOR NOT EXAMINI NG THE DETAILS OF THE CREDITS APPEARING IN VARIOUS NAMES, BUT WHAT THOSE DETAILS WERE HAD NOT BEEN SET OUT. THE COMMISSIONER DID NOT APPLY HI S MIND TO THE RELEVANT MATERIAL ON RECORD AND DID NOT GIVE REASON S FOR HIS CONCLUSIONS THAT THE ASSESSMENT ORDER WAS PREJUDICI AL TO THE INTERESTS OF THE REVENUE. THEREFORE, THE TRIBUNAL WAS JUSTIFI ED IN REVERSING THE ORDER OF THE COMMISSIONER. IV) DELHI HIGH COURT - CIT VS. DLF LIMITED 350 ITR 555 IN THIS CASE THE HONBLE DELHI HIGH COURT HAS HELD THAT IT IS NOT MERE PREJUDICE TO THE REVENUE OR A MERE ERRONEOUS VIEW W HICH CAN BE REVISED U/S 263 OF THE INCOME TAX ACT, 1961 AND THA T THERE SHOULD BE THE ADDED ELEMENT OF UNSUSTAINABILITY IN THE ORDER OF THE ASSESSING OFFICER, WHICH CLOTHES THE COMMISSIONER WITH JURISD ICTION TO ISSUE NOTICE, AND PROCEED TO MAKE APPROPRIATE ORDERS. V) BOMBAY HIGH COURT-CIT VS. NIRAV MODI 138 DTR81 IN THIS CASE THE HONBLE BOMBAY HIGH COURT HAS HEL D AS UNDER:- IT IS A SETTLED POSITION IN LAW THAT POWERS UNDER S. 263 CAN BE EXERCISED BY THE CIT ON SATISFACTION OF TWIN CONDIT IONS VIZ. THE ASSESSMENT ORDER SHOULD BE ERRONEOUS AND PREJUDICIA L TO THE REVENUE. BY ERRONEOUS IS MEANT CONTRARY TO LAW. THUS, THIS P OWER CANNOT BE 8 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 EXERCISED UNLESS THE CIT IS ABLE TO ESTABLISH THAT THE ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE REVENUE. THUS WHER E THERE ARE TWO POSSIBLE VIEWS AND THE AO HAS TAKEN ONE OF THE POSS IBLE VIEWS, NO OCCASION TO EXERCISE POWERS OF REVISION CAN ARISE. NOR CAN REVISIONAL POWER BE EXERCISED FOR DIRECTING A FULLER INQUIRY T O FIND OUT IF THE VIEW TAKEN IS ERRONEOUS, WHEN A VIEW HAS ALREADY BEEN TA KEN AFTER INQUIRY. THE POWER OF REVISION CAN BE EXERCISED ONLY WHERE N O INQUIRY AS REQUIRED UNDER THE LAW IS DONE. IT IS NOT OPEN TO E NQUIRE IN CASES OF INADEQUATE INQUIRY. IN THIS CASE THE HONBLE HIGH COURT HAS FURTHER HEL D AS UNDER: ENQUIRY OF A SOURCE OF SOURCE IS NOT THE REQUIREME NT OF LAW. ONCE THE A.O. IS SATISFIED WITH THE EXPLANATION OFFERED ON I NQUIRY, IT IS NOT OPEN TO THE CIT IN EXERCISE OF HIS REVISIONAL POWERS TO DIRECT THAT FURTHER ENQUIRY HAS TO BE DONE. AT THE VERY HIGHEST, THE CA SE OF THE REVENUE IS THAT THIS IS A CASE OF INADEQUATE INQUIRY AND NOT O F NO ENQUIRY. IT IS WELL-SETTLED THAT THE JURISDICTION U/S 263 CAN BE E XERCISED BY THE CIT ONLY WHEN IT IS A CASE OF LACK OF ENQUIRY AND NOT O NE OF INADEQUATE ENQUIRY. IT IS VERY IMPORTANT TO NOTE THAT THE CIT IN HIS ORDER UNDER S.263 HAS RECORDED THE FACT THAT THERE HAS BEEN NO ADEQUATE INQUIRY. THUS THIS IS NOT A CASE OF NO INQUIRY, WARRANTING A N ORDER UNDER S.263. VI) SUPREME COURT OF INDIA MALABAR INDUSTRIAL COMPANY LIMITED VS. CIT 243 1TR 83 THE HONBLE SUPREME COURT HAS HELD IN THIS CASE THA T AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLI CATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOU S. IT HAS FURTHER BEEN HELD THAT AN ORDER PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND WILL ALSO BE ERRONEOUS. THE HONBLE SUPREME COURT HAS FURTHER HELD THAT THE PHRASE PREJUDICIAL TO THE INTEREST OF REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFF ICER AND WHERE THE INCOME TAX OFFICER ADOPTED ONE OF THE COURSE PE RMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE 9 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED A S ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF REVENUE UNLESS THE VIEW TAKEN BY THE INCOME TAX OFFICER IS UNSUSTAINABLE IN LAW. VII) GUJARAT HIGH COURT - CIT VS. ARVIND JEWELLERS 259 I TR502 IN THIS CASE THE HONBLE GUJARAT HIGH COURT HAS HEL D AS UNDER:- THAT THE FINDING OF FACT BY THE TRIBUNAL WAS THAT THE ASSESSEE HAD PRODUCED RELEVANT MATERIAL AND OFFERED EXPLANATIONS IN PURSUANCE OF THE NOTICES ISSUED UNDER SECTION 142(1) AS WELL AS SECTION 143(2) OF THE ACT AND AFTER CONSIDERING THE MATERIAL AND EXPLANAT IONS, THE INCOME TAX OFFICER HAD COME TO A DEFINITE CONCLUSION. SINC E THE MATERIAL WAS THERE ON RECORD AND THE SAID MATERIAL WAS CONSIDERE D BY THE INCOME- TAX OFFICER AND A PARTICULAR VIEW WAS TAKEN, THE ME RE FACT THAT DIFFERENT VIEW CAN BE TAKEN SHOULD NOT BE THE BASIS FOR AN ACTION UNDER SECTION 263. THE ORDER OF REVISION WAS NOT JUSTIFIE D. VIII) SUPREME COURT OF INDIA - CIT VS. AMITABH BACHCHAN 3 84 1TR200 IT WAS HELD IN THIS CASE THAT EVEN THOUGH A NOTICE TO SHOW CAUSE IS NOT THE CONDITION PRECEDENT FOR THE CIT TO HOLD THAT AN ORDER IS ERRONEOUS AND PREJUDICIAL TO REVENUE, STILL AN OPPORTUNITY TO BE HEARD ON ALL ISSUES IS MANDATORY. IT WAS HELD AS UNDER:- WHAT IS CONTEMPLATED BY SECTION 263, IS AN OPPORTU NITY OF HEARING TO BE AFFORDED TO THE ASSESSEE. FAILURE TO GIVE SUCH A N OPPORTUNITY WOULD RENDER THE REVISIONAL ORDER LEGALLY FRAGILE NOT ON THE GROUND OF LACK OF JURISDICTION BUT ON THE GROUND OF VIOLATION OF PRIN CIPLES OF NATURAL JUSTICE. WHILE THE COMMISSIONER IS FREE TO EXERCISE HIS JURISDICTION ON CONSIDERATION OF ALL RELEVANT FACTS, A FULL OPPORTU NITY TO CONTROVERT THEM AND TO EXPLAIN THE CIRCUMSTANCES SURROUNDING S UCH FACTS, AS MAY BE CONSIDERED RELEVANT BY THE ASSESSEE, MUST BE AFF ORDED TO HIM BY THE COMMISSIONER PRIOR TO THE FINALIZATION OF THE DECIS ION. IN THE INSTANT CASE, A PERUSAL OF THE IMPUGNED ORDE R WOULD SHOW THAT THE CIT HAS DRAWN ADVERSE INFERENCE AGAINST THE ASS ESSEE ON THE BASIS 10 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 OF ALLEGED INFORMATION REGARDING DRI ACTION IN THE CASE OF THE BROTHER OF THE ASSESSEE NAMELY SEHDEV GUPTA, WITH WHOM THE ASSESSEE DID NOT HAVE ANY TRADING TRANSACTION . THERE WAS NO MATERIA L ON RECORD TO SUPPORT SUCH ALLEGATIONS AND THE CIT NEITHER ISSUED ANY SHOW CAUSE TO THE ASSESSEE IN THIS REGARD NOR CONFRONTED THE ASSE SSEE ON THIS ISSUE DURING THE COURSE OF S.263 PROCEEDINGS. 3. LD. DR, ON THE OTHER HAND, WAS OF THE OPINION TH AT THE ALLEGED INQUIRY MADE BY THE ASSESSING OFFICER WAS, IN EFFECT, NO INQUIRY AT ALL BECAUSE THE ASSESSING OFFICER HAS TO DISCHARGE TWIN FUNCTIONS OF ADJUDICA TOR AS WELL AS INVESTIGATOR. MERELY OBTAINING CERTAIN DETAILS OR PAPERS FROM THE ASSESSEE AND KEEPING IT ON RECORD CANNOT AMOUNT TO MAKING A PROPER INQUIRY EXP ECTED FROM AN ASSESSING OFFICER. HE HAS ALSO FURNISHED TWO WRITTEN SUBMISS IONS. BOTH ARE REPRODUCED BELOW FOR READY REFERENCE:- GR. NO. 1 AND 4 : THESE ARE GENERAL IN NATURE AND NEED NOT BE SPECIFI CALLY REPLIED. GR. NO. 2: 1.1 RELIANCE IS PLACED ON THE RATIO OF HON'BLE SUPREME COURT LAID DOWN IN CASE OF MALABAR INDUSTRIAL CO. LTD. VS. COM MISSIONER OF INCOME- TAX [2000] 243 ITR 83 (SC) [2000] 109 TAXMAN 66 (SC ). HON'BLE SC HAS RULED THAT THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE' IS NOT AN EXPRESSION OF ART AND IS NOT DEFINED IN THE ACT. UN DERSTOOD IN ITS ORDINARY MEANING, IT IS OF WIDE IMPORT AND IS NOT CONFINED T O LOSS OF TAX. IT HAS ALSO BEEN HELD THAT AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BE ING ERRONEOUS. IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PR INCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. 1.2 RELIANCE IS PLACED ON THE RATIO OF HON'BLE JURISDI CTIONAL HIGH COURT LAID DOWN IN CASE OF CIT VS NAGESH KNITWEARS PVT. LTD. 345 ITR 135 11 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 (DEL) WHERE IT HAS BEEN HELD THAT IT IS INCUMBENT U PON THE AO INVESTIGATE FACTS REQUIRED TO BE EXAMINED AND VERIFIED TO COMPU TE THE TAXABLE INCOME. IF THE AO FAIL TO CONDUCT THE SAID INVESTIGATION, HE C OMMITS AN ERROR AND THE WORD 'ERRONEOUS' INCLUDES FAILURE TO MAKE ENQUIRY. 1.3 RELIANCE IS PLACED ON THE RATIO OF HON'BLE JURISDI CTIONAL HIGH COURT LAID DOWN IN CASE OF GEE VEE ENTERPRISES VS A DDITIONAL CIT 99 ITR 375(DEL) WHERE IT HAS BEEN HELD THAT AO IS HAVING R OLE OF AN INVESTIGATOR AND IT IS DUTY OF THE AO TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETURN WHEN CIRCUMSTANCES WOULD MAKE SUCH AN ENQUIR Y PRUDENT. IT HAS CLEARLY HELD THAT THE ORDER BECOMES 'ERRONEOUS' BEC AUSE SUCH AN ENQUIRY HAS NOT BEEN MADE. 1.4 WHILE DECIDING THE CASE OF NIIT VS COMMISSIONER OF INCOME-TAX (CENTRAL-LL) [2015] 60 TAXMANN.COM 313 (DELHI - TRI B ), HONBLE E BENCH ITAT DELHI HAS ANALYSED PLETHORA OF JUDGMENTS ON TH E ISSUE AND THROUGH ORDER DATED 27.03.2015, GAVE A RATIO THAT THE AO IS REQUIRED TO CONDUCT THE INQUIRY IN A MANNER WHEREBY HE PLACES ON RECORD THE MATERIAL ENOUGH TO REACH THE SATISFACTION, WHICH A RATIONAL PERSON, BE ING INFORMED OF THE NUANCES OF TAX LAWS WOULD REACH AFTER DUE APPRECIAT ION OF SUCH MATERIAL. IF THIS COMPONENT IS MISSING, IT WILL ALWAYS BE A CASE OF LACK OF INQUIRY AND NOT INADEQUATE INQUIRY. THE RELEVANT PORTION OF THE ORD ER OF HON'BLE ITAT IS REPRODUCED BELOW:- ' 28.1 LD. SPECIAL COUNSEL HAS RIGHTLY POINTED OUT THAT T HE EXPRESSION, 'INQUIRY 1 , 'LACK OF INQUIRY' AND 'INADEQUATE INQUIRY', HAVE NOT BEEN DEFINED AND, THEREFORE, WHEN THE ACTION OF THE AO WOULD BE SUGGESTIVE OF LACK OF INQUIRY OR INADEQUATE INQUIRY, WILL DEPEND UPON THE FACTS OBTAINING IN A PARTICULAR CASE. WHAT EMERGES AS A BROAD PRINCIPLE FROM THE VARIOUS DECISIONS IS THAT WHERE THE AO HAS REACHED A RATION AL CONCLUSION, BASED ON HIS INQUIRIES AND MATERIAL ON RECORD, THE COMMISSIO NER SHOULD NOT START THE MATTER AFRESH IN A WAY AS TO QUESTION THE MANNER OF HIS CONDUCTING INQUIRIES. IT IS NOT THE PROVINCE OF THE COMMISSION ER TO ENTER INTO THE MERITS OF EVIDENCE; IT HAS ONLY TO SEE WHETHER THE REQUIRE MENTS OF ESSENTIAL INQUIRES AND OF LAW HAVE BEEN DULY AND PROPERLY COM PLIED WITH BY AO OR NOT. 12 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 28.2 IT IS WELL SETTLED THAT BEFORE THE COMMISSIONER CAN INVOKE HIS POWERS U/S 263, HE HAS TO ARRIVE AT A CONCLUSION THAT THE ASSESSMENT ORDER IS ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE IN TERESTS OF THE REVENUE. THEN ONLY THE POWERS U/S 263 CAN BE INVOKED. THEREF ORE, IF AO ACCEPTS OR REJECTS ANY CLAIM OF THE ASSESSEE WITHOUT DUE APPLI CATION OF MIND AND IF SUCH FAILURE CAUSES PREJUDICE TO REVENUE, THE COMMI SSIONER WOULD BE WELL WITHIN HIS POWERS U/S 263 TO INTERVENE IN THE MATTE R. AN INQUIRY WHICH IS JUST FARCE OR MERE PRETENCE OF INQUIRY, CANNOT BE S AID TO BE AN INQUIRY AT ALL, MUCH LESS AN INQUIRY NEEDED TO REACH THE LEVEL OF S ATISFACTION OF THE AO ON THE GIVEN ISSUE. THE LEVEL OF SATISFACTION WOULD OB VIOUSLY MEAN THAT HE HAS CONDUCTED THE INQUIRY IN A MANNER WHEREBY HE PLACES ON RECORD THE MATERIAL ENOUGH TO REACH THE SATISFACTION, WHICH A RATIONAL PERSON, BEING INFORMED OF THE NUANCES OF TAX LAWS WOULD REACH AFT ER DUE APPRECIATION OF SUCH MATERIAL. IF THIS COMPONENT IS MISSING, IT WIL L ALWAYS BE A CASE OF LACK OF INQUIRY AND NOT INADEQUATE INQUIRY...' (EMPHASIS SUPPLIED). 2.1 IN THE LIGHT OF THE ABOVE RATIO HAVING A LOSS OF R S. 38.62 CR. IS CERTAINLY MATTER OF ENQUIRY. A NORMAL PERSON, LEAVE ALONE ITO WHO IS CONVERSANT WITH NUANCES OF INCOME TAX LAW, WOULD BE INQUISITOR IN SUCH SITUATION. 2.2 ALSO, AS PER THE STATEMENT DURING THE SURVEY, THE ASSESSEE IS DEALING IN DIAMONDS FOR WHICH NO SEPARATE TRADING A CCOUNT OR P& L ACCOUNT IS SUBMITTED. IN THESE CIRCUMSTANCES, ANY P RUDENT PERSON, LEAVE ALONE ITO WHO IS CONVERSANT WITH NUANCES OF INCOME TAX LAW, WOULD LIKE TO SEE SEPARATE TRADING ACCOUNTS OF GARMENT TRADE AS W ELL AS DIAMOND TRADE. 3. IN THE LIGHT OF THE ABOVE RATIO AND THE FACT THAT AMOUNT TO THE TUNES OF CRORES WERE MADE TO THE ASSESSEE, WOULD RAISE IN TEREST OF NORMAL PERSON, LEAVE ALONE ITO WHO IS CONVERSANT WITH NUANCES OF I NCOME TAX LAW, AND HE WOULD LIKE TO MAKE FURTHER ENQUIRY AS TO WHERE SUCH PAYMENTS ARE BEING UTILISED AND WHETHER THESE ARE GENERATING INCOME WH ICH HAS BEEN DISCLOSED BEFORE THE DEPARTMENT OR NOT. 4. IN THE LIGHT OF THE ABOVE RATIO, THE FACT THAT INT EREST-FREE AMOUNT TO THE TUNES OF CRORES WERE MADE BY THE ASSESSEE, WOUL D RAISE INTEREST OF A NORMAL PERSON, LEAVE ALONE ITO WHO IS CONVERSANT WI TH NUANCES OF INCOME 13 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 TAX LAW, AND HE WOULD LIKE TO MAKE FURTHER ENQUIRY AS TO WHETHER SUCH PAYMENTS ARE BEING FOR BUSINESS PURPOSES OR NOT AND HOW MUCH DEDUCTION U/S 36(L)(III) IS ACTUALLY ALLOWABLE. 5. IN LIGHT OF RATIO OF HON'BLE CALCUTTA HIGH COURT IN CASE OF CIT VS. MAITHAN INTERNATIONAL [2015] 56 TAXMANN.COM 283(CAL CUTTA), ENQUIRY MADE BY THE AO IN RESPECT OF UNSECURED LOAN WOULD B E IN THE CATEGORY OF 'NO ENQUIRY'. 6. IT IS UNDISPUTED FACT THAT AO HAD ASKED FOR PANS O F SUNDRY CREDITORS BUT IN VARIOUS CASES THESE WERE NEITHER P ROVIDED DURING THE ASSESSMENT PROCEEDINGS NOR DURING PROCEEDINGS U/S 2 63. ACCEPTING SUCH CREDITORS AS ON THE FACE OF IT (WITHOUT MAKING ANY FURTHER ENQUIRY) IS NO APPLICATION OF MIND AS WELL AS 'LACK OF ENQUIRY' AS PER ABOVE STATED RATIO. 7.1 IT IS NOT DISPUTED THAT THERE IS INVESTMENT OF RS. 5,52,00,000/- WHICH MAKES IT INCUMBENT UPON AO TO INVESTIGATE FROM ANGL E OF EXCLUDING EXPENDITURE WHICH ARE MADE IN RELATION TO EARNING O F EXEMPT INCOME OR MADE NOT WHOLLY AND EXCLUSIVELY FOR EARNING THE TAX ABLE INCOME. 7.2 IT IS A FACT THAT AO DID NOT MAKE ANY ENQUIR Y IN THIS REGARD. 7.3 THE CASE LAW OF HOLCIM IS NOT APPLICABLE TO EX PENDITURE WHICH ARE MADE NOT WHOLLY AND EXCLUSIVELY FOR EARNING THE TAX ABLE INCOME. 7.4 THE CASE OF HOLCIM DOES NOT LAY DOWN ANY RATIO BECAUSE IT DID NOT DECIDE ANY QUESTION OF LAW. 7.5 THE SO CALLED RATIO OF HOLCIM, ASSUMED BY THE ASSESSEE THAT IF NO EXEMPT INCOME IS THERE NO ADDITION COULD BE MADE U/ S 14A IS IN DIRECT CONFRONTATION OF FOLLOWING TWO RATIOS LAID DOWN BY HON'BLE SC. I) RAJENDRA PRASAD MOODY VS CIT [1978] 115 ITR 00519( SC) AND II) DISTRIBUTORS (BARODA) (P.) LTD. VS. UNION OF INDIA [1985] 22 TAXMAN 49 (SC) [1985] 155 ITR 120 (SC). 7.6 IT IS AGAINST BASIC LOGIC THAT BY MAKING EXPE NDITURE INCOME MAY OR MAY NOT BE THERE. 14 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 8. HAVING THE FACT OF SURRENDER OF RS.18 CR DURING SURVEY, LOSS IN TRADING ACCOUNT ON RECORD, STATEMENT DURING SURVEY THAT THE ASSESSEE IS ALSO DEALING IN DIAMONDS BUT HAVING NO SEPARATE TRADING AND P&L ACCOUNT, COUPLED WITH KNOWLEDGE OF INVESTIGATION BY DRI IN SISTER CO NCERNS WOULD PROMPT A NORMAL PERSON, LEAVE ALONE ITO WHO IS CONVERSANT WI TH NUANCES OF INCOME TAX LAW, TO MAKE FURTHER ENQUIRY FORM DRI AND OTHER PLACES TO COLLECT THE RELEVANT MATERIAL AND ALSO TO UNDERSTAND MODUS OPER ANDI OF THE ASSESSEE TO EARN SURRENDERED INCOME OF RS. 18 CRORE. GR. NO. 3: 1. DURING THE COURSE OF PROCEEDINGS U/S 263, THIS ISSUE WAS CONSIDERED AND AFTER CONSIDERING THE RELEVANT MATERIAL ON RECORD A ND GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, THE CIT CAME TO A LOGICAL AND JUDICIOUS CONCLUSION THAT THIS ISSUE WAS NOT CONSID ERED BY THE AO. 2. PRESUMPTION IS IN THE FAVOUR OF THE REVENUE BY VIRT UE OF SUB-SECTION (E) OF 114 OF EVIDENCE ACT, 1872 WHICH READS AS UNDER:- ' SECTION 114 IN THE INDIAN EVIDENCE ACT, 1872 114 COURT MAY PRESUME EXISTENCE OF CERTAIN FACTS. THE COURT MAY PRESUME THE EXISTENCE OF ANY FACT WHICH IT THINKS L IKELY TO HAVE HAPPENED, REGARD BEING HAD TO THE COMMON COURSE OF NATURAL EV ENTS, HUMAN CONDUCT AND PUBLIC AND PRIVATE BUSINESS, IN THEIR RELATION TO THE FACTS OF THE PARTICULAR CASE. ILLUSTRATIONS THE COURT MAY PRESUM E (E) THAT JUDICIAL AND OFFICIAL ACTS HAVE BEEN REGUL ARLY PERFORMED; .. 3. THE FINANCE ACT, 2015 W.E.F. 1ST JUNE, 2015, HAS INSERTED EXPLANATION 2 TO SECTION 263 SO AS TO PROVIDE THAT AN ORDER PASSE D BY THE ASSESSING OFFICER SHALL BE DEEMED TO BE ERRONEOUS IN SO FAR A S IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, IF, IN THE OPINION OF THE PRINCIPAL COMMISSIONER OR COMMISSIONER, (A) THE ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VER IFICATION WHICH, SHOULD HAVE BEEN MADE; 15 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 (B) THE ORDER IS PASSED ALLOWING ANY RELIEF WITHOUT INQ UIRING INTO THE CLAIM; (C) THE ORDER HAS NOT BEEN MADE IN ACCORDANCE WITH ANY ORDER, DIRECTION OR INSTRUCTION ISSUED BY THE BOARD UNDER SECTION 119; OR (D) THE ORDER HAS NOT BEEN PASSED IN ACCORDANCE WITH AN Y DECISION WHICH IS PREJUDICIAL TO THE ASSESSEE, RENDERED BY T HE JURISDICTIONAL HIGH COURT OR SUPREME COURT IN THE CASE OF THE ASSESSEE OR ANY OTHER PERSON. 4.1 THE PR. CIT HAS GIVEN HIS OPINION THAT NO ENQUIRY O R INVESTIGATION WAS MADE BY THE AO ON THE ABOVE DISCUSSED ISSUES. 4.2 THE OPINION IS BOUND TO HAVE A CERTAIN AMOUNT OF SU BJECTIVITY. THE OPINION CERTAINLY REQUIRES MUCH LESSER DEGREE OF MA TERIAL/EVIDENCE AS COMPARED TO 'SATISFACTION' WHICH IN TURN REQUIRES M UCH LESSER DEGREE OF MATERIAL/EVIDENCE AS COMPARED TO 'REASON TO BELIEVE '. IT HAS BEEN LAID DOWN BY HON'BLE SC IN CASE OF RAYMOND WOOLLEN MILLS LTD. THAT SUFFICIENCY OF MATERIAL CANNOT BE CHALLENGED IN CASE OF 'REASON TO BELIEVE'. THEREFORE, THE SAME CANNOT BE DONE IN CASE OF 'OPINION', ALSO. 40.3 THE ASSESSEE HAS NOT SUBMITTED ANY COGENT MAT ERIAL TO SHOW THAT THIS OPINION IS PERVERSE. WS-II ON BEHALF OF THE REVENUE: MAY IT PLEASE YOUR HONOUR: 1.1 THE RATIOS OF VARIOUS JUDICIAL PRONOUNCEMENTS INCL UDING NUT VS COMMISSIONER OF INCOME-TAX (CENTRAL-II) [2015] 60 T AXMANN.COM 313 (DELHI - TRIB.), SUBHLAKSHMI VANIJYA (P.) LTD. VS C IT [2015] 60 TAXMANN.COM 60 (KOLKATA - TRIB.) AND CIT VS MAITHAN INTERNATIONAL [2015] 56 TAXMANN.COM 283 (CALCUTTA) ARE THAT THE AO( FUNC TIONING AS AN INVESTIGATOR) IS REQUIRED TO CONDUCT THE INQUIRY IN A MANNER WHER EBY HE PLACES ON RECORD THE MATERIAL ENOUGH TO REACH THE S ATISFACTION, WHICH A RATIONAL PERSON, BEING INFORMED OF THE NUANCES OF T AX LAWS WOULD REACH AFTER DUE APPRECIATION OF SUCH MATERIAL. IF THIS CO MPONENT IS MISSING, IT WILL ALWAYS BE A CASE OF LACK OF INQUIRY AND NOT INADEQU ATE INQUIRY. 1.2 THE RIGHT QUESTION TO BE ASKED IS AS TO WHETHER A NORMAL PERSON, 16 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 LEAVE ALONE ITO WHO IS CONVERSANT WITH NUANCES OF I NCOME TAX LAW, WOULD BE INQUISITOR IN A GIVEN SITUATION. 2.1 DURING THE COURSE OF PROCEEDINGS U/S 263, THIS ISS UE WAS CONSIDERED AND AFTER CONSIDERING THE RELEVANT MATER IAL ON RECORD AND GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE, THE PR. CIT RETURNED HIS OPINION THAT AO (AS AN INVESTIGATOR) SHOULD HAV E BEEN AN INQUISITOR IN THE GIVEN SITUATIONS. PRESUMPTION IS IN THE FAVOUR OF THE REVENUE BY VIRTUE OF SUB-SECTION (E) OF 114 OF EVIDENCE ACT, 1872. 2.2 THE OPINION IS BOUND TO HAVE A CERTAIN AMOUNT OF S UBJECTIVITY. THE OPINION CERTAINLY REQUIRES MUCH LESSER DEGREE OF MA TERIAL/EVIDENCE AS COMPARED TO SATISFACTION' WHICH IN TURN REQUIRES M UCH LESSER DEGREE OF MATERIAL/EVIDENCE AS COMPARED TO 'REASON TO BELIEVE '. IT HAS BEEN LAID DOWN BY HON'BLE SC IN CASE OF RAYMOND WOOLLEN MILLS LTD. THAT SUFFICIENCY OF MATERIAL CANNOT BE CHALLENGED IN CASE OF 'REASON TO BELIEVE'. THEREFORE, THE SAME CANNOT BE DONE IN CASE OF 'OPINION', ALSO. 2.3 THEREFORE, THE PRESUMPTION IS IN FAVOUR OF THE REVE NUE BECAUSE THE REVENUE IS SAYING THAT APPARENT IS REAL AND IF THE ASSESSEE WANTS TO SHOW OTHERWISE, THE LAW CASTS ONUS UPON THE ASSESSEE TO PROVE WITH COGENT MATERIAL (THAT THE APPARENT IS NOT REAL). RELIANCE IS PLACED UPON THE RATIO LAID DOWN BY THE HONBLE SC IN CASE OF CIT VS DAULA T RAM RAWATMULL [1973] 87 ITR 349 (SC). HOWEVER, THE ASSESSEE HAS NOT SUBMITTED ANY COGENT MATERIAL TO REBUT THIS PRESUMPTION. 2.4 THE COURT CAN ONLY SEE IF THIS OPINION IS LOGICAL AS PER THE MATERIAL BEFORE THE PR. CIT DURING PROCEEDINGS U/S 263. 3.1 DURING PROCEEDINGS U/S 263, THE ASSESSEE WAS REQUI RED TO SHOW CAUSE AS TO WHY THE AO WAS NOT REQUIRED TO BECOME I NQUISITOR IN THE SITUATIONS MENTIONED IN THE SCN DATED 01.10.2015( P AGE #46-48 OF PB) . THE MAIN REPLY IS AS PER LETTER DATED 10.11.2015(PA GE #5073). 3.2 A PERUSAL OF THE REPLY DATED 10.11.2015 SHOWS THAT THE ASSESSEE FAILED TO SHOW CAUSE AS TO WHY THE AO WAS NOT REQUI RED TO BECOME INQUISITOR IN THE GIVEN SITUATIONS. THE SPECIFIC SI TUATIONS ARE DISCUSSED IN SUBSEQUENT PARAGRAPHS. 17 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 4.1 THE FACT THAT THE SALE PROCEEDS WERE LESS BY RS.38 .62 CRORES AS COMPARED TO PURCHASE COST IS UNDISPUTED. THE REPLY OF THE ASSESSEE DOESNT NOT SHOW ANY CAUSE QUA INVESTIGATOR . THE REPLY OF THE ASSESSEE( PARA 10(I) OF THE REPLY DATED 10.11.2015) IS BASICALLY ADDRESS THE QUERY AS TO WHETHER AN ADJUDICATOR IN SUCH A SITUATION WOULD MAKE AN AD DITION OR NOT. 4.2 THE FACT THAT THE ASSESSEE DID WITHDRAW HEAVY AMOU NTS RUNNING INTO CRORES OF RS. IS UNDISPUTED. THE VERY FACT THA T DURING THE PROCEEDINGS U/S 263, THE ASSESSEE SUBMITTED A CHART SHOWING DET AILED UTILIZATION OF SUCH HEAVY WITHDRAWALS SHOWS THAT THE REPLY OF THE ASSES SEE DOESNT NOT SHOW ANY CAUSE QUA INVESTIGATOR. { REF. PARA 10(II) OF THE REPLY DATED 10.11.2015} 4.3 THE FACT THAT ASSESSEE BORROWED INTEREST BEARING L OANS OF ABOVE RS. 19 CRORES AND EXTENDED INTEREST FREE LOANS OF ABOUT RS. 7.52 CRORES IS UNDISPUTED. THE REPLY ADMITS THAT IN SUCH SITUATION ENQUIRY WAS REQUIRED TO BE MADE. THE ASSESSEE ALSO ADMITS THAT NEITHER ANY WRITTEN QUERY WAS RAISED NOR ANY DOCUMENTS WERE SUBMITTED NOR ANY WRI TTEN REPLY WAS SUBMITTED. THE CONTENTION OF THE ASSESSEE IS THAT A O LOOKED AT THE LIST OF THE PARTIES TO WHOM THESE LOANS HAVE BEEN GIVEN AND THE AR ORALLY EXPLAINED THAT THESE LOANS WERE OUT OF INTEREST FREE FUNDS AV AILABLE TO THE ASSESSEE AND THE ROLE OF THE AO AS INVESTIGATOR WAS OVER. FIRST OF ALL THERE IS NO SUPPORTING TO SAY THAT SUCH ORAL QUERY WAS AT ALL M ADE. MORE A CURSORY LOOK AT THE LIST OF PARTIES SHOWS THAT THESE INCLUDE SCH OOLS WHICH, PRIMA FACIE, HAS NOTHING TO DO WITH THE BUSINESS OF THE ASSESSEE . THEREFORE, IN SUCH A SITUATION AO WOULD CERTAINLY BEEN AN INQUISITOR AND CALLED FOR FURTHER DETAILS TO SCRUTINIZE THE TRANSACTIONS AND SURROUND ING CIRCUMSTANCES. { REF PARA 10(III) OF THE REPLY DATED 10.1 1.2015} 4.4 THE FINDING OF THE FACT BY THE PR. CIT (AS A RESUL T OF PERUSAL OF RECORD) THAT BANK STATEMENTS OF ALL THE PERSONS FRO M WHOM UNSECURED LOANS HAVE BEEN PROCURED HAVE NOT BEEN KEPT ON RECORD, WA S REBUTTED ONLY BY A BALD STATEMENT. WHEREAS LETTER SUBMITTED BEFORE THE AO ( IN NOV. 2013-DATE NOT GIVEN-PAGE # 41-43) SHOWS THAT CONFIRMATION, IT R-V AND BANK STATEMENTS OF EIGHT PERSONS WERE SUBMITTED WHEREAS THE UNSECURED LOANS WERE OBTAINED FROM 11 PERSONS. REGARDING SUSPICIOUS PATTERN OF ENTRIES IN THE BANK ACCOUNT OF SH. ABHISHEK GUPTA, THE ASSESSE E DID NOT FURNISH ANY CAUSE AS TO WHY THE AO SHOULD NOT BECOME INQUISITOR . THE EMPHASIS OF THE ASSESSEE IS THAT IT HAS DISCHARGED ITS ONUS. HOWEV ER, AS STATED ABOVE, THE 18 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 QUESTION HERE IS OF THE AO BECOMING INQUISITOR. { R EF. PARA 10(IV) OF THE REPLY DATED 10.11.2015} 4.5 IT IS UNDISPUTED FACT THAT AO HAD ASKED FOR PANS O F SUNDRY CREDITORS BUT IN VARIOUS CASES THESE WERE NEITHER P ROVIDED DURING THE ASSESSMENT PROCEEDINGS NOR DURING PROCEEDINGS U/S 2 63. IT IS OBVIOUS THAT THE ROLE OF AO AS INVESTIGATOR STARTS FROM THIS POI NT WHICH HE FAILED TO CARRY OUT. THE REPLY OF THE ASSESSEE DOES NOT MAKE OUT A CASE THAT THE AO SHOULD HAVE BECOME INQUISITOR IN THE SITUATION. ) REF. PAR A 10(V) OF THE REPLY DATED 10.11 . 2015} 4.6 IT IS ADMITTED THAT NO RENT HAS BEEN PAID FOR THE OFFICE AS WELL AS GO-DOWN PREMISES. IT HAS BEEN ARGUED THAT THESE ARE ANCESTRAL PROPERTIES AND NO RENT IS REQUIRED TO BE PAID. THE ASSESSEE IS NOT ADDRESSING THE QUESTION QUA INVESTIGATOR. THE REPLY OF THE ASSESSE E DOES NOT MAKE OUT A CASE THAT THE AO SHOULD HAVE BECOME INQUISITOR IN THE SITUATION. { REF. PARA 10(VI) OF THE REPLY DATED 10.11.2015) 4.7 IT IS UNDISPUTED THAT THE ASSESSEE DEALT IN READYMA DE GARMENT AS WELL AS DIAMONDS. THE ASSESSEE HAS NOT DISPUTED THE FACT THAT PROFITABILITY OF DIAMOND WOULD NOT BE SAME AS THAT OF READYMADE GARM ENT. THE ASSESSEE HAS ALSO NOT DISPUTED THE FACT THAT ONLY ONE (CONSO LIDATED) TRADING ACCOUNT WAS BEFORE THE AO. THEREFORE, IT IS APPARENT THE AO AS AN INVESTIGATOR WOULD HAVE BECOME INQUISITOR IN SUCH SITUATION. THE ASSESSEE IS SUBMITTING THAT THE ACT DOES NOT REQUIRE SUCH BIFURCATION OR S UCH EXAMINATION. THIS PLEA IS WITHOUT ANY FORCE BECAUSE ACTUAL STEPS OF I NVESTIGATION DEPENDS ON A GIVEN SITUATION AND IT IS NOT THE DOMAIN OF THE ACT . { REF PARA 10(II) OF THE REPLY DATED 10.1 1.2015) 4.8 THE FACT THAT THE INVESTMENT OF RS.5.52 CRORES HAS BEEN MADE IS UNDISPUTED. IT IS NOT THE CASE OF THE ASSESSEE THAT THE MATERIAL ON RECORD SUFFICIENT TO INDICATE THAT THERE IS NO QUESTION OF INCURRING ANY EXPENSE TOWARDS ACTIVITY RELATED TO GENERATION OF EXEMPT IN COME. THE REPLY OF THE ASSESSEE DOESNT NOT SHOW ANY CAUSE QUA INVESTIGATOR. THE REPLY OF THE ASSESSEE (PARA 10(VIII) OF THE REPLY DATED 10 11.20 15) IS BASICALLY ADDRESS THE QUERY AS TO WHETHER AN ADJUDICATOR IN SUCH A SI TUATION WOULD MAKE AN ADDITION OR NOT. 19 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 4. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. BOTH THE PARTIES HA VE RELIED UPON LARGE NUMBER OF JUDICIAL PRONOUNCEMENTS WHICH INCLUDE DECISIONS OF THE ITAT, HONBLE HIGH COURT INCLUDING JURISDICTIONAL HIGH COURTS AS WELL AS APE X COURT. WE HAVE GONE THROUGH ALL THE DECISIONS RELIED UPON BY BOTH THE P ARTIES. THE DECISIONS RELIED UPON INCLUDE DECISIONS RELATING TO INTERPRETATION OF SEC TION 263 WHICH IS UNDER CONSIDERATION IN APPEAL BEFORE US AND ALSO THE DECI SIONS WHEREIN SECTION 263 WAS NOT AN ISSUE IN DISPUTE. THE PARTIES HAVE RELIED U PON THOSE DECISIONS TO DRAW AN ANALOGY OR SUPPORT FOR INTERPRETING SECTION 263. I N OUR OPINION, WHEN THE DIRECT DECISION OF HONBLE JURISDICTIONAL HIGH COURT AS WE LL AS APEX COURT INTERPRETING SECTION 263 IS AVAILABLE, IT WOULD NOT BE NECESSARY TO LOOK INTO THE OTHER DECISIONS. THEREFORE, FOR THE SAKE OF BREVITY, WE WOULD DISCUS S HEREIN BELOW THE DECISIONS RELIED UPON BY BOTH THE SIDES WHEREIN INTERPRETATIO N OF SECTION 263 IS INVOLVED. SIMILARLY, WE ALSO PROPOSE TO NOT DEAL WITH THE DEC ISIONS OF ITAT RELIED UPON BY BOTH THE PARTIES FOR THE SAME REASON I.E. WHEN THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT AS WELL AS APEX COURT IS AVAILABLE, IT W OULD BE PRUDENT TO APPLY THE RATIO OF THOSE DECISIONS TO THE FACTS OF THE ASSESS EES CASE RATHER THAN GOING INTO THE FACTS/INTERPRETATION OF SECTION 263 GONE INTO BY TH E ITAT. WITH THIS BACKGROUND, WE FIRST DEAL WITH THE DECISIONS RELIED UPON BY THE LD. CIT DR:- 20 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 I) G.V. ENTERPRISES VS ADDL. CIT 99 ITR 375 IT IS NOT NECESSARY FOR THE COMMISSIONER TO MAKE FURTHER INQUIRIES BEFORE CANCELLING THE ASSESSMENT ORDER OF THE INCOM E TAX OFFICER. THE COMMISSIONER CAN REGARD THE ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE, THE INCOME T AX OFFICER SHOULD HAVE MADE FURTHER INQUIRIES BEFORE ACCEPTING THE ST ATEMENTS MADE BY THE ASSESSEE IN HIS RETURN. 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 ADOPTED BY A CIVIL COURT IN THE ABSENCE OF ANY REBUTTAL. THE CIVIL COURT IS NEUTRAL. IT SIMP LY GIVES DECISION ON THE BASIS OF THE PLEADING AND EVIDENCE WHICH COMES BEFORE IT. THE INCOME TAX OFFICER IS NOT ONLY AN ADJUDICATOR BUT A LSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER INQUIR Y. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETU RN WHEN THE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE AN INQUIRY. IT IS BECAUSE IT IS INCUMBENT ON THE INCOME TAX OFFICER T O FURTHER INVESTIGATE THE FACTS STATED IN THE RETURN WHEN CIR CUMSTANCES WOULD MAKE SUCH AN INQUIRY PRUDENT THAT THE WORD ERRONEO US IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN ENQUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH AN INQUIRY HAS NOT BEEN MADE AND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF A LL THE FACTS STATED THEREIN ARE ASSUMED TO BE CORRECT. II) CIT VS MAITHAN INTERNATIONAL 56 TAXMANN.COM 283 (CA LCUTTA) IN THE INSTANT CASE, THE COMMISSIONER HAD REASONS TO HOLD THAT CREDITWORTHINESS OF THE ALLEGED LENDERS WAS NOT ENQ UIRED INTO. MERE EXAMINATION OF THE BANK PASS BOOK, PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OF THE CREDITORS IS NOT ENOUGH. WHEN THE REQUISITE ENQUIRY WAS NOT MADE, THE ORDER IS BOUND TO BE ERRO NEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE TR IBUNAL PROCEEDED ON THE THEORY THAT IT WAS NOT A CASE OF NO ENQUIRY; TH AT NO DOUBT IS TRUE, BUT THAT IS NOT ENOUGH. IF THE RELEVANT ENQUIRY WA S NOT MADE, IT MAY IN APPROPRIATE CASES AMOUNT TO NO ENQUIRY AND MAY ALSO BE A CASE OF NON-APPLICATION OF MIND. 21 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 THE POWER UNDER SECTION 263 CAN BE EXERCISED WHERE THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO T HE INTEREST OF THE REVENUE. WHEN AN ORDER IS ERRONEOUS, THEN THE ORDE R IS ALSO DEFICIENT AND IN ORDER TO REMEDY THE SITUATION, POWER UNDER S ECTION 263 HAS BEEN GIVEN. THEREFORE, THE VIEW THAT THE POWDER CO ULD NOT HAVE BEEN EXERCISED TO ALLOW THE ASSESSING OFFICER TO MAKE UP THE DEFICIENCY IS ALTOGETHER AN INCORRECT IMPRESSION OF THE LAW. IT IS NOT THE LAW THAT THE ASSESSING OFFICER OCCUPY ING THE POSITION OF AN INVESTIGATOR AND ADJUDICATOR CAN DISCHARGE HIS F UNCTIONS BY PERFUNCTORY OR INADEQUATE INVESTIGATION. SUCH A CO URSE IS BOUND TO RESULT IN ERRONEOUS AND PREJUDICIAL ORDERS. WHERE THE RELEVANT ENQUIRY WAS NOT UNDERTAKEN, AS IN THIS CASE, THE OR DER IS ERRONEOUS AND PREJUDICIAL TOO AND THEREFORE REVISABLE. INVES TIGATION SHOULD ALWAYS BE FAITHFUL AND FRUITFUL. UNLESS ALL TRUTHF UL AREAS OF ENQUIRY ARE PURSUED THE ENQUIRY CANNOT BE SAID TO HAVE BEEN FAITHFULLY CONDUCTED. III) MALABAR INDUSTRIAL CO. LTD. VS CIT 243 ITR 83 (SC) THE SCHEME OF THE ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO AN ERRONEOUS ORDER OF THE INCOME TAX OFFICER, THE REVE NUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON, TOTAL INCOME WILL CER TAINLY BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE PHRASE PREJUDIC IAL TO THE INTERESTS OF THE REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERR ONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF 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 OFFICER, CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVE NUE, FOR EXAMPLE, WHEN AN INCOME TAX OFFICER ADOPTED ONE OF THE COURSES PERMI SSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMI SSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER P REJUDICIAL TO THE INTERESTS 22 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 OF THE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME TAX OFFICER IS UNSUSTAINABLE IN LAW. THE DECISIONS RELIED UPON BY THE LEARNED COUNSEL AR E AS UNDER:- I) DIRECTOR OF INCOME TAX VS JYOTI FOUNDATION 357 ITR 388 (DEL.) REVISIONARY POWER UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 IS CONFERRED BY THE ACT ON THE COMMISSIONER/DIRECTOR O F INCOME TAX WHEN AN ORDER PASSED BY THE LOWER AUTHORITY IS ERRO NEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. ORDER S WHICH ARE PASSED WITHOUT INQUIRY OR INVESTIGATION ARE TREATED AS ERR ONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE, BUT OR DERS WHICH PASSED AFTER INQUIRY/INVESTIGATION ON THE QUESTION/ISSUE A RE NOT PER SE OR NORMALLY TREATED AS ERRONEOUS AND PREJUDICIAL TO TH E INTERESTS OF THE REVENUE BECAUSE THE REVISIONARY AUTHORITY FEELS AND OPINES THAT FURTHER INQUIRY/INVESTIGATION WAS REQUIRED OR DEEPE R OR FURTHER SCRUTINY SHOULD BE UNDERTAKEN. IN CASES WHERE THER E IS INADEQUATE INQUIRY BUT NOT LACK OF ENQUIRY, THE COMMISSIONER M UST RECORD A FINDING THAT THE ORDER/INQUIRY MADE IS ERRONEOUS. THIS CAN HAPPEN IF AN ENQUIRY AND VERIFICATION IS CONDUCTED BY THE COM MISSIONER AND HE IS ABLE TO ESTABLISH AND SHOW THE ERROR OR MISTAKE MADE BY THE AO, MAKING THE ORDER UNSUSTAINABLE IN LAW. AN ORDER OF REMIT CANNOT BE PASSED BY THE COMMISSIONER TO ASK THE ASSESSING OFF ICER TO DECIDE WHETHER THE ORDER WAS ERRONEOUS. II) INCOME TAX OFFICER VS DG HOUSING PROJECTS LTD. (20 12) 343 ITR 329 (DELHI) A DISTINCTION MUST BE DRAWN IN THE CASES WHERE THE ASSESSING OFFICER DOES NOT CONDUCT AN ENQUIRY; AS LACK OF ENQ UIRY BY ITSELF RENDERS THE ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND CASES WHERE THE ASSESSING OFFICER C ONDUCTS AN ENQUIRY BUT THE FINDING RECORDED IS ERRONEOUS AND W HICH IS ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IN TH E LATTER CASES, THE COMMISSIONER HAS TO EXAMINE THE ORDER OR THE DE CISION 23 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 TAKEN BY THE ASSESSING OFFICER ON THE MERITS AND TH EN FORM AN OPINION ON THE MERITS THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERES TS OF THE REVENUE. IN THE SECOND SET OF CASES, THE COMMISSIO NER CANNOT DIRECT THE ASSESSING OFFICER TO CONDUCT FURTHER ENQ UIRY TO VERIFY AND FIND OUT WHETHER THE ORDER PASSED IS ERRONEOUS OR NOT. III) CIT VS DLF LTD. (2013) 350 ITR 555 (DELHI) IT IS NOT MERE PREJUDICE TO THE REVENUE, OR A MERE ERRONEOUS VIEW WHICH CAN BE REVISED, UNDER SECTION 263 OF THE INCOME TAX ACT, 1961. THERE SHOULD BE THE ADDED ELEMENT OF UNSUSTAINABILITY IN THE ORDER OF THE ASSESSING OF FICER, WHICH CLOTHES THE COMMISSIONER WITH JURISDICTION TO ISSUE NOTICE, AND PROCEED TO MAKE APPROPRIATE ORDERS. IV) CIT VS NIRRAV MODI 138 DTR 81 IT IS A SETTLED POSITION IN LAW THAT POWERS UNDER S. 263 CAN BE EXERCISED BY THE CIT ON SATISFACTION OF TWIN CONDIT IONS VIZ. THE ASSESSMENT ORDER SHOULD BE ERRONEOUS AND PREJUDICIA L TO THE REVENUE. BY ERRONEOUS IS MEANT CONTRARY TO LAW. T HUS, THIS POWER CANNOT BE EXERCISED UNLESS THE CIT IS ABLE TO ESTABLISH THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE REVENUE. THUS WHERE THERE ARE TWO POSSIBLE VIEWS AND THE ASSESSING OFFICER HAS TAKEN ONE OF THE POSSIBLE VIEWS, NO OCCASION TO EXERCISE POWERS OF REVISION, CAN ARISE. NOR CAN REVISIONAL POWER BE EXERCISED FOR DIRECTING A FULLE R INQUIRY TO FIND OUT IF THE VIEW TAKEN IS ERRONEOUS, WHEN A VIE W HAS ALREADY BEEN TAKEN AFTER INQUIRY. THE POWER OF REVISION CA N BE EXERCISED ONLY WHERE NO INQUIRY AS REQUIRED UNDER T HE LAW IS DONE. IT IS NOT OPEN TO ENQUIRY IN CASES OF INADEQ UATE INQUIRY. 24 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 V) CIT VS ARVIND JEWELLERS 259 ITR 502 THE PROVISIONS OF SECTION 263 OF THE INCOME TAX AC T, 1961, CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE O R ERROR COMMITTED BY THE ASSESSING OFFICER. IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUI REMENT OF THE ORDER BEING ERRONEOUS. THE PHRASE PREJUDICIAL TO THE IN TERESTS OF THE REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERR ONEOUS ORDER PASSED BY THE ASSESSING OFFICER AND EVERY LOSS OF R EVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CA NNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. WHEN AN ASSESSING OFFICER ADOPTS ONE OF COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE IN COME TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ITO IS UNS USTAINABLE IN LAW. 5. THE LD. AR FOR THE ASSESSEE CHALLENGED THE IMPUG NED ORDER PASSED BY LD. CIT ON THE GROUNDS INTER ALIA THAT THE ORDER PASSED BY AO IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE; THAT TH E FIGURE OF LOSS OF RS.38.62 CRORES CALCULATED BY CIT IS INCORRECT BEING WITHOUT INCLUD ING THE EXPORT INCENTIVE TO THE TUNE OF RS.42,39,41,070/- AND THE FLUCTUATION IN EX CHANGE RATE OF RS.3,42,08,969/- AND WHILE INCLUDING THE AFORESAID AMOUNT, THE ASSES SEE HAS EARNED GROSS PROFIT OF RS.7,19,11,426/- AND A NET PROFIT OF RS.3,33,31,484 /- MEANING THEREBY THE ASSESSEE HAS NOT INCURRED ANY LOSS ON GOODS SOLD BY HIM; THA T THE ASSESSEE DID NOT HAVE ANY 25 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 TRADING TRANSACTION WITH SAHDEV GUPTA DURING THE YE AR UNDER ASSESSMENT AND AS SUCH, NO ADVERSE INFERENCE CAN BE DRAWN AGAINST THE ASSESSEE ON THE BASIS OF INVESTIGATION IN THE CASE OF SAHDEV GUPTA BY DRI; T HAT THE LD. CIT NEVER CONFRONTED THE ASSESSEE REGARDING THE ALLEGATION AB OUT THE SAHDEV; THAT THE ASSESSEE HAS WITHDRAWN ITS NET FUNDS FROM THE CAPITAL ACCOUN T HAVING OPENING CAPITAL OF RS.6.41 CRORES AND CLOSING CAPITAL OF RS.14.86 CROR ES AND THE ENTIRE INCOME EARNED BY THE ASSESSEE DURING THE YEAR UNDER ASSESSMENT HA S BEEN DULY DECLARED IN THE RETURN OF INCOME; THAT THE ASSESSEE HAS DULY DISCLO SED THE DETAIL OF LOANS LENT TO OTHER PARTIES TO THE TUNE OF RS.7,52,87,000/- IN TH E AUDITED BALANCE SHEET AND ALL THE SAID LOANS HAVE BEEN LENT BY THE ASSESSEE OUT OF IN TEREST FREE FUNDS AVAILABLE WITH HIM INCLUDING HIS CAPITAL WHICH WAS RS.6.41 CRORES AS ON 01.04.2010 AND RS.14.86 CRORES AS ON 31.03.2011; THAT THE AO HAD MADE DISCR EET ENQUIRY ABOUT THE SUNDRY CREDITORS MENTIONED IN THE SHOW CAUSE NOTICE AND DE TAIL THEREOF WAS DULY FILED BY THE ASSESSEE; THAT THE FACTORY PREMISES AND GODDOWN AT MEHRAULI IS THE ANCESTRAL PROPERTY OF THE ASSESSEE FOR WHICH NO RENT IS REQUI RED TO BE PAID; THAT THE AO HAS FRAMED THE ASSESSMENT ON THE BASIS OF QUANTITATIVE DETAILS OF ALL ITEMS EXPORTED DURING THE YEAR UNDER ASSESSMENT IN THE TAX AUDIT R EPORT. 6. HOWEVER, ON THE OTHER HAND, LD. DR FOR THE REVEN UE TO REPEL THE ARGUMENTS ADDRESSED BY THE LD. AR CONTENDED INTER ALIA THAT T HE AO AS AN INVESTIGATOR IS 26 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 REQUIRED TO BE AN INQUISITOR AND PRESUMPTION LIES I N FAVOUR OF THE REVENUE U/S 114 OF THE INDIAN EVIDENCE ACT; THAT THE OPINION OF CIT IS TO BE BASED UPON CERTAIN AMOUNT OF SUBJECTIVITY WHICH REQUIRES MUCH LESSER D EGREE OR MATERIAL / EVIDENCE AS COMPARED TO THE SATISFACTION; THAT SINCE THE PRESUM PTION IS IN FAVOUR OF THE REVENUE, THE ONUS SHIFTS ON THE ASSESSEE TO PROVE O THERWISE WITH COGENT MATERIAL THAT THE ASSESSEE HAS FAILED TO SHOW CAUSE AS TO WH Y THE AO WAS NOT REQUIRED TO BECOME INQUISITOR IN THE GIVEN CIRCUMSTANCES; THAT THE ASSESSEE BORROWED INTEREST BEARING LOANS OF ABOUT RS.19 CRORES BUT EXTENDED IN TEREST FREE LOANS ABOUT RS.7.52 CRORES ABOUT WHICH NEITHER ANY QUERY WAS RAISED NOR ANY DOCUMENT / REPLY WAS SUBMITTED BY THE ASSESSEE AND AS SUCH, THE CONTENT ION OF THE ASSESSEE THAT THE HAS ORALLY EXPLAINED THESE LOANS WERE OUT OF INTEREST F REE FUNDS AVAILABLE WITH HIM IS NOT TENABLE. 7. LD. CIT BY INVOKING THE PROVISIONS CONTAINED U/S 263 OF THE ACT ISSUED SHOW-CAUSE NOTICE TO THE ASSESSEE WHICH IS REPRODUC ED FOR READY REFERENCE AS UNDER:- DATED : 01.10.2015 SUB : SHOW CAUSE NOTICE U/S 263 OF THE INCOME TAX, 1961 F OR THE A.Y. 2011- 12 REG. THE ASSESSMENT RECORDS OF SH. BRAHAM DEV GUPTA PRO PRIETOR OF M/S. D.S.M. INTERNATIONAL (PAN AAFPB5907Q) WERE CALLED FOR AND EXAMINED. ON PERUSAL OF RECORDS I CONSIDER THAT THE ORDER PASSED BY THE ASSESSING OFFICER U/S 27 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 143 (3) OF THE I.T. ACT, 1961 ON 31.01.2014 IS ERRO NEOUS IN SO FAR AS ITS PREJUDICIAL TO THE INTERESTS OF THE REVENUE FOR THE FOLLOWING R EASONS : 2. THE ASSESSING OFFICER MADE ADDITION ON ACCOUNT O F FOLLOWING ISSUES :- I) DISALLOWANCE OF CONVEYANCE, TELEPHONE, ELECTRICI TY, STAFF WELFARE, SALE PROMOTION, VEHICLE RUNNING AND MAINTE NANCE AND DEPRECIATION ON VEHICLE @ 10% I.E. RS.1,93,709/-. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SALE OF READYMADE GARMENTS. THE PERUSAL OF P & L ACCOUNT SHOWS THAT THE ASSESSE E IS SELLING THE GOOD ON LOSS WHICH IS EVIDENT FROM THE TRADING ACCOUNT GIVEN AS BELOW :- PARTICULARS AMOUNT PARTICULARS AMOUNT TO OPENING STOCK 25,89,57,872.58 BY SALES 531,37,67,9430.43 TO PURCHASES 571,14,67,958.00 BY CLOSING STOCK 30,60,78,558.90 TO STITCHING & EMBROIDERY 68,60,215.00 TO VAT EXPENSES 1,75,586.00 TO LABOUR CHARGES 2,86,23,470.00 LOSS 38,62,38,612.25 600,60,85,101.58 600,60,85,101.58 THE ASSESSING OFFICER PES FAILED TO MAKE ANY ENQUI RY AS REGARDS THE INCURRENCE OF TRADING LOSS BY THE ASSESSEE. 4. THE PERUSAL OF CAPITAL ACCOUNT OF SH. BRAHAM DEV GUPTA IN THE BOOKS OF M/S D.S.M. INTERNATIONAL SHOWS THAT THERE ARE A NUM BER OF PAYMENTS MADE TO SH. BRAHAM DEV GUPTA AND THE PAYMENTS ARE IN CRORES. TH E ASSESSING OFFICER HAS FAILED TO MAKE ANY ENQUIRY AS REGARDS THE PURPOSE O F WITHDRAWAL SO AS TO KNOW WHETHER THE ASSESSEE IS INVESTING THESE AMOUNTS TO EARN ANY INCOME. IN THE RETURN OF INCOME NO SUCH INCOME FROM MAKING SUCH INVESTMEN TS HAS BEEN SHOWN BY THE ASSESSEE. 5. THE ASSESSEE HAS CLAIMED INTEREST IN THE P&L AC COUNT OF RS.1,73,34,136 + RS.7,98,853/-. IN THE BALANCE SHEET THE ASSESSEE H AS SHOWN SECURED LOAN OF RS.15.05 CRORES AND UNSECURED LOAN OF RS4.04 CRORES . THE ASSESSEE HAS GIVEN LOANS TO VARIOUS PARTIES AND HAS BEEN SHOWN AS ASSE TS UNDER THE HEAD LOANS TO PARTY. THE ASSESSING OFFICER HAS FAILED TO MAKE ANY ENQUIRY AS REGARDS TO BUSINESS PURPOSES OF MAKING SUCH LOANS AND ADVANCES. THERE COULD HAVE BEEN DISALLOWANCE OF INTEREST U/S 36(1)(III) FOLLOWING T HE DECISION OF HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF ABHISHEK INDU STRIES 286 ITR 1. 28 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 6. THE ASSESSEE HAS SHOWN LOANS FROM VARIOUS PERSON S. THE ASSESSING OFFICER PLACED ON RECORD THE BANKS STATEMENT OF A F EW PERSONS FROM WHOM THE ASSESSEE HAS RECEIVED LOANS. THE ASSESSING OFFICER HAS FAILED TO EXAMINE THE GENUINENESS OF THE TRANSACTIONS. NO ENQUIRY HAS BE EN RAISED AS REGARDS NATURE OF SOURCE OF CREDIT IN THE BANKS ACCOUNTS OF THE PERSO NS WHO HAVE GIVEN LOANS TO THE ASSESSEE. FOR EXAMPLE SH. ABHISHEK GUPTA HAS SHOWN INCOME OF RS.6,66,619/- FOR THE A.Y. 2011-12 WHEREAS IN THE BANKS STATEMENT THE RE ARE A NUMBER OF CREDITS EVEN IN CRORES AND IMMEDIATELY A CHEQUE IS ISSUED E ITHER ON THE SAME DAY OR WITHIN 2-3 DAYS TO SOME PERSONS. IT APPEARS FROM TH E NATURE OF ENTRIES IN THE BANK ACCOUNT THAT SH. ABHISHEK GUPTA IS PERHAPS INDULGIN G INTO GIVING ACCOMMODATION ENTRIES. THE ASSESSING OFFICER HAS NOT MADE ANY SUC H ENQUIRY TO FIND OUT THE GENUINENESS OF THE TRANSACTIONS. SIMILAR IS THE EAS E WITH MS. MAYA GUPTA AND OTHER PERSONS. MERE SUBMISSION OF DOCUMENTS DOES NOT LEAD TO THE G ENUINENESS OF THE TRANSACTIONS, PARTICULARLY WHERE NATURE OF ENTRIES APPEAR TO BE DOUBTFUL. 7. THE ASSESSEE HAS FURNISHED A LIST OF SUNDRY CRED ITORS AGAINST SUPPLY. THE PERUSAL OF LIST SHOWS THAT THE ASSESSEE HAS NOT GIV EN EVEN THE PAN IN SOME OF THE CASES. THE ASSESSING OFFICER HAS FAILED TO MAKE FUR THER ENQUIRIES AS REGARDS THE GENUINENESS OF THE SUNDRY CREDITORS PARTICULARLY WH ERE THE ASSESSEE HAS NOT GIVEN EVEN PAN OF THOSE PERSONS. EVEN OTHERWISE THE ASSES SING OFFICER DID NOT MAKE ANY ENQUIRY, EVEN ON SAMPLE BASIS, TO FIND OUT THE GENUINENESS OF THE SUNDRY CREDITORS. 8. A SURVEY WAS CONDUCTED U/S 133A ON THE BUSINESS PREMISES OF THE ASSESSEE. DURING THE COURSE OF STATEMENT, THE ASSES SEE ADMITTED THAT THE FACTORY IS LOCATED AT 6/848-849, MAIN BAZAR, MEHRAULI, NEW DEL HI - 110030 AND GODOWN IS LOCATED AT T-117, WARD NO.6, MEHRAULI, NEW DELHI - 110030. THE PERUSAL OF BALANCE SHEET SHOW THAT THERE ARE NO SUCH ASSETS RE FLECTED IN THE BALANCE SHEET. THE ASSESSING OFFICER DID NOT MAKE ENQUIRY AS TO WH OM THESE PREMISES BELONG AND HOW THE ASSESSEE IS OPERATING FROM THESE PREMISES. 9. DURING THE COURSE OF STATEMENT RECORDED ON 22.09 .2010. THE ASSESSEE ALSO ADMITTED THAT THEY ARE ALSO DEALING IN DIAMONDS. TH E ASSESSING OFFICER DID NOT ASK FOR THE BIFURCATION OF THE TRADING ACCOUNT OF SALE OF GARMENTS AND SALE OF DIAMONDS SO AS TO KNOW THE PROFITABILITY IN EACH TR ADE. 10. ASSESSEE HAS MADE INVESTMENT OF RS.5,52,00,000/ - FOR THE YEAR ENDING 31.03.2011. NO ENQUIRY HAS BEEN MADE BY THE ASSESSI NG OFFICER AS REGARDS DISALLOWANCE U/S 14A/RULE 8D. 11. IN VIEW OF THE ABOVE, I AM OF THE OPINION THAT THE ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE LT. ACT, 1963 I S ERRONEOUS IN SO FAR AS IT IS 29 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 PREJUDICIAL TO THE INTERESTS OF THE REVENUE. YOU AR E GIVEN AN OPPORTUNITY TO BEING HEARD AND SHOW CAUSE AS TO WHY THE IMPUGNED ORDER B E NOT ENHANCED/MODIFIED OR SET-ASIDE FOR FRESH ASSESSMENT U/S 263 OF THE I.T. ACT, 1961. YOUR CASE IS FIXED FOR HEARING ON 12.10.2015. SD/- (RAMAN KUMAR GOYAL) PR. COMMISSIONER OF INCOME, DELHI 11, NEW DELHI 8. LD. CIT PROCEEDED U/S 263 ON THE PREMISE THAT TH E AO HAS FAILED TO MAKE ENQUIRIES QUA THE ISSUE SHOW CAUSED IN THE NOTICE R EPRODUCED ABOVE WHEREAS THE ASSESSEE RAISED OBJECTION THAT ALL THE ENQUIRIES NO W SOUGHT TO BE CONDUCTED BY CIT HAVE BEEN DULY CONDUCTED BY THE AO. 9. IN THE BACKDROP OF THE AFORESAID FACTS AND CIRCU MSTANCES OF THE CASE, ARGUMENTS ADVANCED BY THE LD. REPRESENTATIVES OF TH E PARTIES AND ORDER PASSED BY THE AUTHORITIES BELOW, THE FIRST QUESTION ARISES FO R DETERMINATION IN THIS CASE IS :- AS TO WHETHER THE ASSESSMENT ORDER PASSED BY THE A O SUFFERS FROM INADEQUATE ENQUIRY OR LACK OF ENQUIRY? 10. FIRST GROUND TAKEN BY THE LD. CIT TO INVOKE THE PROVISIONS U/S 263 OF THE ACT IS AS PER P&L ACCOUNT, THE ASSESSEE IS SELLING THE GOODS ON LOSS AND THE LOSS DETERMINED BY THE ASSESSEE IN THE RECASTED TRADING ACCOUNT OF RS.38,62,38,612/- AND THE CIT CAME TO THE CONCLUSION THAT THE AO HAS NOT MADE ANY ENQUIRY QUA INCURRENCE OF TRADING LOSS. 30 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 11. UNDISPUTEDLY, DURING ASSESSMENT PROCEEDINGS, AO ISSUED NOTICE U/S 142 (1), AVAILABLE AT PAGE 38 OF THE PAPER BOOK, WHICH IS RE PRODUCED AS UNDER FOR READY PERUSAL :- NOTICE UNDER SUB-SECTION OF SECTION 142 OF INCOME TAX ACT 1961 OFFICE OF THE ASSTT. COMMISSIONER OF INCOME-TAX, ROOM NO.1305, 13 TH FLOOR, E-2 BLOCK, DR. S.P.MUKHERJEE CIVIC CENTRE, NEW DELHI PHONE: [phone], FAX - 011-23216829 F.NO.PR.ACIT/CIR-24/2013-14/142/462 DATED: 23.07.2013 PAN : AAFPB5907Q TO, BRAHAM DEV 6/842, MAIN BAZAR, MEHRAULI, DELHI 110 030. IN CONNECTION WITH THE ASSESSMENT FOR THE ASSESSME NT YEAR 2011-2012 YOU ARE REQUIRED TO : (A) ** PREPARE A TRUE AND CORRECT RETURN OF YOUR INCOME /THE FIRMS INCOME/FAMILYS INCOME / THE LOCAL AUTHORITYS INCO ME/ THE COMPANYS INCOME / INCOME O THE A.O.P. / INCOME OF THE BODY INDIVIDU AL / INCOME OF ______________ IN RESPECT OF WHICH YOU ARE ASSESSAB LE UNDER THE INCOME TAX ACT, 1961 DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR MENTIONED ABOVE. (B) ** PRODUCE OR CAUSE TO BE PRODUCED BEFORE ME AT MY OFFICE AT ROOM NO.1305, 13 TH FLOOR, E-2, BLOCK DR. S.P. MUKHERJEE CIVIC CENTRE, NEW DELHI ON 30.07.2013 AT 11.30 AM/PM THE ACCOUNT AND ACCOUNTS AND/OR DOCUMENTS SPECIFIED BELOW / OVERLEAF. (C) ** FURNISH IN WRITING AND VERIFIED IN THE PRESCRIBE D MANNER INFORMATION CALLED FOR AS PER ANNEXURE AND ON THE POINTS OR MATTER SPE CIFIED THEREIN BEFORE ME AT MY OFFICE AT ROOM NO.1305, 13 TH FLOOR, E-2, BLOCK DR. S.P. MUKHERJEE CIVIC CENTRE, NEW DELHI ON 30.07.2013 AT 11.30 AM. PARTICULARS OF ACCOUNTS AND / OR DOCUMENTS REQUIRED : 1. PLEASE FILE BRIEF NOTE ON YOUR NATURE OF BUSINESS 31 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 2. PLEASE FURNISH PREVIOUS THREE YEARS COMPUTATION OF INCOME & RETURN, B/S, P/L TAX AUDIT REPORT WITH ALL ANNEXURE 3. BANK STATEMENT WITH NARRATION 4. STATEMENT OF AFFAIRS 5. LIST OF DEBTORS, CREDITORS AND UNSECURED LOAN PROVI DERS (IF ANY) AS PER PROFORMA BELOW : NAME PAN ADDRESS AMOUNT 6. JUSTIFICATION OF EXPENDITURE CLAIMED IN P&L A/C. YOURS FAITHFULLY, SD/- (DR. MONISHA) ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 24 (1), NEW DELHI. 12. THE LD. AR FOR THE ASSESSEE STATED TO HAVE FILE D THE NECESSARY DOCUMENTARY EVIDENCE VIDE LETTERS AUGUST 2013, NOVEMBER 2013, D ECEMBER 2013 AND 13.01.2014, AVAILABLE AT PAGES 40 TO 45 OF THE PAPE R BOOK. UNDISPUTEDLY, ASSESSEE HAS DECLARED TAXABLE INCOME OF RS.21,58,62,170/- IN CLUSIVE OF AMOUNT OF RS.18,25,22,250/- AS ADDITIONAL INCOME DECLARED DUR ING THE COURSE OF SURVEY ON 22.09.2010 ON ACCOUNT OF ALLEGED EXCESS STOCK FOUND IN THE ASSESSEES PREMISES AND CONSEQUENTLY, THE ASSESSMENT WAS COMPLETED U/S 143 (3) ON 31.01.2014. 13. SO FAR AS QUESTION OF SUFFERING LOSS TO THE TUN E OF RS.38,62,38,612/- POINTED OUT BY THE LD. CIT IN SELLING THE GOODS ON LOSS IS CONCERNED, THE LD. CIT OBSERVED THAT THE AO HAS FAILED TO MAKE ANY ENQUIRY QUA INCU RRENCE OF TRADING LOSS BY THE ASSESSEE. HOWEVER, WE ARE OF THE CONSIDERED VIEW T HAT WHEN THE ASSESSEE HAS BROUGHT ON RECORD AUDITED PROFIT & LOSS ACCOUNT, BA LANCE SHEET, STATEMENT OF AFFAIRS 32 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 AND CAPITAL ACCOUNT OF THE ASSESSEE WHICH HAVE BEEN DULY EXAMINED AND THE AO HAS ALSO VERIFIED THE BOOKS OF ACCOUNT, VOUCHERS, E TC., THERE IS NO QUESTION OF LACK OF ENQUIRY ON THE PART OF THE AO QUA LOSS OF TRADIN G ACCOUNT OF RS.38,62,38,612/-. MORE SO, DURING THE ENQUIRY CONDUCTED BY THE CIT, N O CONCRETE FINDINGS HAVE COME ON RECORD THAT THE ASSESSEE HAS SUFFERED TRADING LO SS DURING THE YEAR UNDER ASSESSMENT. 14. MOREOVER, THE LOSS OF RS.38,62,38,612/- COMPUTE D BY LD. CIT IS FACTUALLY INCORRECT BECAUSE EXPORT INCENTIVE OF RS.42,39,41,0 70/- AND FLUCTUATION IN EXCHANGE RATE OF RS.3,42,08,969/- LINKED TO THE BUS INESS OF EXPORT NEEDS TO BE INCLUDED IN THE SAME AND CONSEQUENTLY, ASSESSEE EAR NED A GROSS PROFIT OF RS.7,19,11,426/- AND NET PROFIT OF RS.3,33,31,484/- . SO, THE CIT HAS FACTUALLY ARRIVED AT THE WRONG DECISION THAT THE ASSESSEE HAS INCURRED LOSS ON GOODS TO THE TUNE OF RS.38,62,38,612/-. THIS FACT HAS BEEN DULY EXPLAINED BY THE ASSESSEE BEFORE THE LD. CIT VIDE LETTER DATED 10.11.2015, AV AILABLE AT PAGES 50 TO 73 OF THE PAPER BOOK (RELEVANT PAGE 59). 15. THIS IS SETTLED PRINCIPLE OF LAW THAT EXPORT IN CENTIVE ARE PART OF EXPORT BUSINESS PROFITS ONLY AND RELIANCE IN THIS REGARD M AY BE PLACED ON THE DECISIONS RENDERED BY HONBLE APEX COURT IN CASE CITED AS TOP MAN EXPORTS VS. CIT 342 ITR 49. SO WHEN THE ASSESSMENT HAS BEEN COMPLETED AFTER SCRUTINIZING ALL THE 33 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 DETAILS AND EXPLANATION SUPPORTED WITH THE DOCUMENT ARY EVIDENCES FILED BY THE ASSESSEE IN RESPONSE TO THE ISSUE NOTICED BY THE AO , THE QUESTION OF LACK OF INQUIRY ON THE PART OF THE AO DOES NOT ARISE. 16. CAPITAL ACCOUNT OF ASSESSEE IS AVAILABLE AT PAG E 7 OF THE PAPER BOOK SHOWING OPENING CAPITAL OF ASSESSEE AT RS.6.41 CRORES AND C LOSING CAPITAL AT RS.14.86 CRORES. SO, AGAIN WHEN THE ENTIRE CAPITAL ACCOUNT OF THE AS SESSEE HAS BEEN EXAMINED BY THE AO AND NOTHING HAS BEEN BROUGHT ON RECORD BY LD. CI T THAT THERE IS ANY ESCAPEMENT OF INCOME BY MAKING WITHDRAWAL FROM THE CAPITAL ACCOUNT AS ITS CLOSING BALANCE WAS RS.14.86 CRORES DURING THE YEAR UNDER ASSESSMENT. AGAIN, THERE IS NO QUESTION OF LACK OF ENQUIRY. 17. THE NEXT GROUND RAISED BY LD. CIT BY INVOKING T HE PROVISIONS CONTAINED U/S 263 IS THAT THE ASSESSEE CLAIMED INTEREST IN THE P& L ACCOUNT OF RS.1,73,34,136/- + RS.7,98,853/- AND IN THE BALANCE SHEET, THE ASSESSE E HAS SHOWN SECURED LOAN OF RS.15.05 CRORES AND UNSECURED LOAN OF RS.4.04 CRORE S AND THE ASSESSEE HAS GIVEN LOAN TO THE VARIOUS PARTIES AND HAS SHOWN AS ASSETS UNDER THE HEADS LOAN TO THE PARTIES AND THE AO HAS FAILED TO MAKE ANY ENQUIRY A S TO THE BUSINESS PURPOSE OF MAKING ANY SUCH LOANS OR ADVANCES. 18. LD. CIT IN PARA 6 OF THE SHOW-CAUSE NOTICE CATE GORICALLY RECORDED THAT, THE AO PLACED ON RECORD THE BANK STATEMENT OF FEW PERSO NS FROM WHOM THE ASSESSEE 34 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 HAS RECEIVED LOANS BUT FAILED TO EXAMINE THE GENUIN ENESS OF THE TRANSACTIONS AND CAME TO THE CONCLUSION THAT NO ENQUIRY HAS BEEN MADE AS TO THE NATURE OF SOURCE OF CREDIT IN THE BANK ACCOUNTS OF THE PERSON S WHO HAVE GIVEN THE LOAN TO THE ASSESSEE. CIT FURTHER RECORDED THAT IN CASE OF ABHISHEK GUPTA HIS INCOME IS SHOWN AT RS.6,06,619/- FOR AY 2011-12 WHEREAS IN TH E BANK STATEMENT THERE ARE A NUMBER OF CREDITS EVEN IN CRORES AND IMMEDIATELY A CHEQUE WAS ISSUED EITHER ON THE SAME DAY OR WITHIN 2 3 DAYS TO SOME PERSONS W HICH SHOWS THAT ABHISHEK GUPTA IS PERHAPS INDULGING INTO PROVIDING ACCOMMODA TION ENTRIES. ASSESSEE PROVED ON RECORD THE FACT THAT THE LOAN AMOUNTING T O RS.7,52,87,000/- IS DULY DISCLOSED IN THE AUDITED BALANCE SHEET, FROM WHICH IT IS APPARENTLY CLEAR THAT ALL THE LOANS GIVEN BY THE ASSESSEE OUT OF INTEREST FREE FU NDS AVAILABLE WITH HIM WHICH INCLUDED HIS CAPITAL TO THE TUNE OF RS.6.41 CRORES AS ON 01.04.2010 AND RS.14.86 CRORES ON 31.03.2011, ASSESSEE FURTHER EXPLAINED TH AT THE CAPITAL OF THE ASSESSEE AS ALSO INTEREST FREE LOANS AVAILABLE TO THE ASSESSEE OF RS.3.16 CRORES AND OTHER INTEREST FREE FUNDS IN THE FORM OF SUNDRY CREDITORS ETC. WER E IN EXCESS OF THE INTEREST FREE LOANS ADVANCED BY THE ASSESSEE AT RS.7.52 CRORES. 19. WHEN THE ASSESSEE SUBMITTED THE COMPLETE DETAIL S OF UNSECURED LOANS ALONG WITH CONFIRMATION OF EACH OF THE TRANSACTION, BANK ACCOUNT OF EACH OF THE PERSON AND INCOME-TAX ACKNOWLEDGEMENT RETURN OF EACH LENDE RS FROM WHOM UNSECURED 35 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 LOANS WERE AVAILED TO THE AO WHO HAS DULY EXAMINED THE SAME DURING THE COURSE OF ASSESSMENT, IT CANNOT BE A CASE OF LACK OF ENQUIRY. 20. MOREOVER, THE ASSESSEE HAS BROUGHT ON RECORD TH AT THREE PERSONS FROM WHOM FRESH LOANS WERE TAKEN, WERE CLOSELY RELATED TO THE ASSESSEE BEING BROTHERS OF THE ASSESSEE AND BROTHERS WIFE OF THE ASSESSEE AND THE LOANS FROM ALL THE AFORESAID THREE PERSONS IN THE EARLIER YEARS HAVE BEEN DULY A CCEPTED BY THE AO, AS IS EVIDENT FROM THE LETTER AVAILABLE AT PAGES 41 TO 43 OF THE PAPER BOOK. IT APPEARS THAT THE CIT WITHOUT BRINGING ON RECORD ANY SUBSTANTIVE PIEC E OF EVIDENCE TO DISPUTE THE GENUINENESS OF THE TRANSACTIONS PROCEEDED ON THE BA SIS OF SURMISES TO HOLD THAT THE AO HAS NOT CONDUCTED ANY ENQUIRY. THE OBSERVATION OF CIT IN THE NOTICE/ORDER U/S 263 CLEARLY SHOWS THAT ENQUIRIES WITH REGARD TO LOA N CREDITOR/SUNDRY CREDITOR WAS MADE BY THE ASSESSING OFFICER. HOWEVER, IN THE OPI NION OF CIT, THE ASSESSING OFFICER SHOULD HAVE MADE FURTHER INQUIRY. THUS, AT BEST, CASE MADE OUT BY CIT IS OF INADEQUATE INQUIRY AND NOT NO INQUIRY. 21. FURTHERMORE, THE ASSESSEE HAS FURNISHED COPIES OF ACCOUNT OF 22 PARTIES OUT OF 80 SUNDRY CREDITORS TO THE AO VIDE LETTER DATED NOVEMBER 2013, AVAILABLE AT PAGES 41 TO 43 OF THE PAPER BOOK, WHO HAS RAISED SP ECIFIC QUERIES QUA THE CREDITORS VIDE LETTER DATED 23.07.2013, AVAILABLE AT PAGE 38 OF THE PAPER BOOK. THE LD. AR FOR THE ASSESSEE ARGUED THAT THE ASSESSEE COULD NOT FURNISH PAN OF ONLY THOSE 36 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 PARTIES IN WHOSE CASE THERE WAS NO FURTHER TRANSACT IONS AT THE TIME OF ASSESSMENT PROCEEDINGS AND THAT THE ACCOUNT OF THE 13 PARTIES OUT OF 17 PARTIES STOOD SQUARED OFF IN SUBSEQUENT YEARS AND DETAILS THEREOF WAS FIL ED BEFORE LD. CIT. THIS FACT GOES TO PROVE THAT A DISCREET ENQUIRY HAS BEEN CONDUCTED BY THE AO QUA ALL THE SUNDRY CREDITORS AND THE FINDINGS OF THE LD. CIT THAT THE AO DID NOT MAKE ANY ENQUIRY EVEN ON SAMPLE BASIS TO FIND OUT THE GENUINENESS OF THE SUNDRY CREDITORS IS BASED UPON SURMISES. AT THE MOST, IT CAN BE A CASE OF INADEQU ATE ENQUIRY, IN WHICH LD. CIT HAS NO POWER TO INTERVENE U/S 263 OF THE ACT. 22. THE NEXT GROUND TO INVOKE SECTION 263 BY CIT IS THAT THE AO HAS NOT MADE ANY ENQUIRY AS TO THE OWNERSHIP OF THE PREMISES / F ACTORY LOCATED AT 6 / 848-849, MAIN BAZAR, MEHRAULI, NEW DELHI AND GODDOWN LOCATED AT T-117, WARD NO.6, MEHRAULI, NEW DELHI AND AS TO HOW THE ASSESSEE IS O PERATING FROM THESE PREMISES. ASSESSEE BROUGHT ON RECORD THE FACT THAT THE FACTOR Y PREMISES AND GODDOWN AT MEHRAULI IS THE ANCESTRAL PROPERTY OF THE ASSESSEE FOR MORE THAN LAST 50 YEARS AND NO RENT WAS REQUIRED TO BE PAID. IN THE FACE OF FA CTS BROUGHT ON RECORD BY THE ASSESSEE, THERE IS NOT AN IOTA OF DOUBT ON THE FILE TO DISPUTE THE FACT THAT THE FACTORY PREMISES AND GODDOWN IS ANCESTRAL PROPERTY OF ASSES SEES FAMILY. MOREOVER, WHEN NO RENT HAS BEEN CLAIMED IN THE BALANCE SHEET QUA T HE PROPERTY IN QUESTION IT WOULD NOT AFFECT THE TAX LIABILITY OF THE ASSESSEE IN ANY MANNER. 37 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 23. NEXT GROUND TAKEN BY THE CIT TO INVOKE THE PROV ISIONS CONTAINED U/S 263 IS THE ASSESSEE HAS MADE INVESTMENT OF RS.5,52,00,000/ - FOR THE YEAR ENDING 31.03.2011 BUT AO HAS NOT MADE ANY ENQUIRY REGARDIN G DISALLOWANCE U/S 14A / RULE 8D. STRANGELY ENOUGH, WHEN THE ASSESSEE HAS C ATEGORICALLY SUBMITTED BEFORE THE LD. CIT THAT THE ASSESSEE HAS EARNED NO EXEMPT INCOME ON INVESTMENT DURING THE YEAR UNDER ASSESSMENT AND RELIED UPON THE DECIS ION RENDERED BY HONBLE HIGH COURT OF DELHI IN CASE OF CHEMINVEST LTD. VS. CIT 387 ITR 33 (DEL.), LD. CIT INSTEAD OF EXAMINING THE ISSUE IN THE LIGHT OF THE SETTLED PRINCIPLE OF LAW, DIRECTED THE AO TO EXAMINE THE CASE LAW AND DECIDE ACCORDING LY AND THIS FACT SHOWS THE CASUAL APPROACH ADOPTED BY THE CIT. SO AGAIN, IN T HESE CIRCUMSTANCES, WE ARE UNABLE TO HOLD THAT NO ENQUIRY HAS BEEN CONDUCTED B Y THE AO TO COMPLETE THE ASSESSMENT U/S 143(3). 24. LD. AR FOR THE ASSESSEE FURTHER CONTENDED THAT LD. CIT HAS DRAWN ADVERSE INFERENCE ON THE BASIS OF NON-EXISTENT FACTS BY HOL DING THAT THERE WAS LACK OF ENQUIRY ON THE PART OF THE AO AS TO THE MODUS OPERA NDI OF THE ASSESSEE BY MAKING OBSERVATION REGARDING THE ENQUIRIES OF THE DRI AGAI NST BROTHER OF THE ASSESSEE, SAHDEV GUPTA. SINCE THE ASSESSEE HAS NO TRADING TR ANSACTION WITH SAHDEV GUPTA, THE QUESTION OF DRAWING ADVERSE INFERENCE DOES NOT ARISE AND FURTHER INVESTIGATION INTO THE SAME AS DIRECTED BY THE CIT IS NOT WARRANT ED. THE CONTENTION OF LD. AR IS 38 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 APPARENTLY TENABLE BECAUSE FROM THE COPY OF ACCOUNT OF SAHDEV GUPTA IN THE BOOKS OF M/S. RSM INTERNATIONAL, AVAILABLE AT PAGE 509 OF THE PAPER BOOK, IT IS MADE OUT THAT THE ASSESSEE HAS NO TRANSACTION WHATSOEVER WIT H SAHDEV GUPTA AND BY MERELY PROCEEDING ON THE BASIS OF ENQUIRY CONDUCTED BY DRI AGAINST SAHDEV GUPTA DO NOT CONFER ANY POWER ON CIT TO PROCEED AGAINST THE ASSE SSEE U/S 263. 25. MOREOVER, THE LANGUAGE USED BY CIT IN PARA 10 O F THE IMPUGNED ORDER THAT, IT APPEARS THAT THE ASSESSEE IS ALSO INTO SAME KIN D OF BUSINESS AND DUTY DRAWBACK IS TAKEN FROM THE GOVERNMENT. IT NEEDS TO BE INVESTIGATED AS TO WHETHER THE ASSESSEE HAS TAKEN DUTY DRAWBACK ON BOG US EXPORTS AND THE ASSESSEE HAS HIMSELF VOLUNTARILY ACCEPTED ADDITIONAL INCOME OF RS.18 CRORES DURING SURVEY AND ENQUIRE IN THIS REGARD HAS NOT BEEN CONDUCTED B Y THE AO SHOWS THAT THE CIT HAS PROCEEDED ON THE BASIS OF SURMISES EVEN BY IGNO RING THE FACT THAT THE ASSESSEE HAS NO TRADING TRANSACTION WITH SAHDEV GUPTA. SO A GAIN, IT IS NOT A CASE OF LACK OF ENQUIRY. 26. FURTHERMORE, IN PARA 10 OF THE IMPUGNED ORDER, CIT PROCEEDED TO HOLD THAT, THERE WAS LACK OF ENQUIRY AS REGARDS THE MODUS OPE RANDI OF THE ASSESSEE PARTICULARLY WHEN THE ASSESSEE HAS DECLARED LOW INC OME EVEN AFTER GETTING HUGE DUTY DRAWBACK, WHICH SHOWS THAT AGAIN THE CIT WITHOUT DISPUTING T HE AUDITED BALANCE SHEET AND QUANTITATIVE DETAILS OF ITEMS EXP ORTED BY ASSESSEE DURING THE YEAR 39 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 UNDER ASSESSMENT PROCEEDED ON THE BASIS OF SURMISES THAT IT IS A CASE OF LACK OF ENQUIRY AS THE ASSESSEE HAS DECLARED LOW INCOME, WH ICH IS NOT SUSTAINABLE IN THE EYES OF LAW. 27. BARE PERUSAL OF THE WRITTEN SUBMISSIONS FILED B Y THE REVENUE, REPRODUCED IN THE PRECEDING PARA 3 OF THE ORDER, GOES TO PROVE TH AT THE REVENUE HAS MERELY RELIED UPON THE CASE LAW TO CLARIFY THE LEGAL POSITION SO AS TO INVOKE THE PROVISIONS CONTAINED U/S 263 OF THE ACT BUT HAS FAILED TO BRIN G ON RECORD THAT THE ORDER PASSED BY THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTE REST OF THE REVENUE BY BRINGING ON RECORD THE EVIDENCE AS WE HAVE DISCUSSED IN DETA IL IN THE PRECEDING PARAS. 28. HONBLE SUPREME COURT IN MALABAR INDUSTRIAL COMPANY LIMITED VS. CIT (SUPRA) HELD THAT THE PHRASE PREJUDICIAL TO THE INTEREST OF THE REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE AO AND WHERE THE INCOME-TAX OFFICER ADOPTED ONE COURSE PERMISSIBLE I N LAW AND RESULTED IN LOSS OF REVENUE OR WHERE TWO VIEWS ARE POSSIBLE AND THE INC OME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH COMMISSIONER DOES NOT AGREE, IT CAN NOT BE TREATED AS ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUE UNLESS THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE IN LAW. NOT A SINGLE FACT HAS BEE N BROUGHT ON RECORD BY THE LD. CIT THAT THE ASSESSMENT ORDER IS PREJUDICIAL TO THE INT EREST OF THE REVENUE. BECAUSE THE CIT HAS CALCULATED LOSS OF RS.38.62 CRORES WHICH IS FACTUALLY INCORRECT HAVE BEEN 40 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 CALCULATED WITHOUT INCLUDING THE EXPORT INCENTIVE O F RS.42,39,41,070/- AND THE FLUCTUATION IN THE EXCHANGE RATE OF RS.3,42,08,969/ - WHICH ARE PART AND PARCEL OF BUSINESS OF EXPORT AND THEREBY ASSESSEE EARNED GROS S PROFIT OF RS.7,19,11,426/- AND NET PROFIT OF RS.3,33,31,484/-. 29. FURTHERMORE, HONBLE APEX COURT IN CIT VS. AMITABH BACHCHAN (SUPRA) HELD THAT THOUGH A NOTICE TO SHOW CAUSE IS NOT A CO NDITION PRECEDENT FOR THE CIT TO HOLD THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE REVENUE STILL AN OPPORTUNITY TO BE HEARD IN ALL THE ISSUE IS MANDATORY TO CONTRO VERT ALL THE RELEVANT FACTS. IN THE INSTANT CASE, CIT HAS DRAWN ADVERSE INFERENCE AGAIN ST THE ASSESSEE MERELY ON THE BASIS OF ALLEGED INFORMATION REGARDING ACTION TAKEN BY THE DRI AGAINST SAHDEV GUPTA, BROTHER OF THE ASSESSEE WITH WHOM THE ASSESS EE DID NOT HAVE ANY TRADING TRANSACTION. FIRST OF ALL, NO SHOW-CAUSE NOTICE HA S BEEN ISSUED BY THE CIT REGARDING THIS ALLEGATION NOR CONFRONTED THE ASSESS EE ON THIS ISSUE DURING PROCEEDINGS U/S 263. THIS ISSUE WE HAVE DISCUSSED IN DETAIL IN THE PRECEDING PARAS. 30. HONBLE JURISDICTIONAL HIGH COURT IN DLF LIMITED (SUPRA) CASE HELD THAT IT IS NOT MERE PREJUDICE TO THE REVENUE OR A MERE ERRONEO US VIEW WHICH CAN BE REVISED U/S 263 OF THE ACT BUT THERE SHOULD BE AN ADDED ELE MENT OF UNSUSTAINABILITY OF THE ASSESSMENT ORDER WHICH EMPOWERS THE COMMISSIONER TO ISSUE NOTICE U/S 263. AS 41 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 DISCUSSED IN THE PRECEDING PARAS, THERE IS NOT AN I OTA OF EVIDENCE ON THE FILE TO SUPPORT THE ELEMENT OF UNSUSTAINABILITY OF THE ASSE SSMENT ORDER. 31. IN JYOTI FOUNDATION CASE (SUPRA), IN CASES WHERE THERE IS INADEQUATE ENQUIR Y BUT NOT LACK OF ENQUIRY, THE COMMISSIONER MUST RECO RD A FINDING THAT THE ORDER MADE IS ERRONEOUS. THIS IS ONLY POSSIBLE IF AN ENQ UIRY AND VERIFICATION IS CONDUCTED BY COMMISSIONER AND HE IS ABLE TO ESTABLI SH AND SHOW THE ERROR OR MISTAKE BY THE AO, MAKING THE ORDER UNSUSTAINABLE I N LAW. CIT CANNOT PASS AN ORDER OF REMIT TO ASK THE AO TO DECIDE WHETHER THE ORDER IS ERRONEOUS. IN THE INSTANT CASE, CIT HAS SPECIFICALLY DIRECTED THE AO TO EXAMINE THE SUSTAINABILITY OF THE CLAIM OF THE ASSESSEE U/S 14A IN THE LIGHT OF T HE CASE LAWS I.E. HOLCIM AND CHEMINVEST LTD. (SUPRA) RELIED UPON BY THE ASSESSEE DURING PROCEED INGS U/S 263 OF THE ACT TO WHICH THE CIT IS NOT EMPOWERED. IT WAS FOR THE CIT TO DECIDE THAT THE ORDER WAS ERRONEOUS. 32. HONBLE DELHI HIGH COURT IN CASE OF DG HOUSING PROJECTS LTD. (SUPRA) EXPLAINED THE DISTINCTION IN THE CASES WHERE THE AO DOES NOT CONDUCT AN ENQUIRY AND IN THAT CASE, THE LACK OF ENQUIRY ITSELF RENDER S THE ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND CASE S WHERE THE AO CONDUCTS AN ENQUIRY BUT THE FINDING RECORDED IS AN ERRONEOUS AN D WHICH IS ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THE SECOND SET OF CASES, THE COMMISSIONER CANNOT 42 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 DIRECT THE AO TO CONDUCT FURTHER ENQUIRY TO VERIFY AND FIND OUT WHETHER THE ORDER PASSED IS ERRONEOUS OR NOT. THIS JUDGMENT IS APPLI CABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE BECAUSE CIT FINDS THE ENQ UIRY CONDUCTED BY AO INADEQUATE AND DIRECTED THE AO TO CONDUCT FURTHER ENQUIRY TO VERIFY AND FIND OUT WHETHER ORDER PASSED IS ERRONEOUS OR NOT. 33. LD. DR FOR THE REVENUE BY RELYING UPON THE CASE CITED AS NIIT VS. CIT (2015) 60 TAXMANN.COM 313 (DELHI-TRIB.) CONTENDED T HAT EXPRESSION LACK OF ENQUIRY AND INADEQUATE ENQUIRY HAVE NOT BEEN DEFINED AND, THEREFORE, WHEN THE ACTION OF AO WOULD BE SUGGESTIVE OF LACK OF ENQ UIRY OR INADEQUATE ENQUIRY WILL DEPEND UPON THE FACTS OBTAINING IN A PARTICULAR OF CASE. BUT, IN THE INSTANT CASE, NO SUCH FACTS HAVE BEEN POINTED OUT THAT THE REQUIREME NT OF ESSENTIAL ENQUIRIES AND OF LAW HAS NOT BEEN PROPERLY COMPLIED WITH BY THE AO. BECAUSE, AS DISCUSSED IN THE PRECEDING PARAS, WHEN THE AO HAS ACCEPTED THE CLAIM OF THE ASSESSEE BY APPLYING HIS MIND, THOUGH THE CIT HAS DIFFERENT OPINION ON T HE SAME IT WOULD CERTAINLY FALL IN THE CATEGORY OF INADEQUATE ENQUIRY. SO, IN CASE OF INADEQUATE ENQUIRY, THE COMMISSIONER IS NOT EMPOWERED TO INVOKE THE PROVISI ONS CONTAINED U/S 263. 34. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE AR E OF THE CONSIDERED VIEW THAT AT THE MOST, THIS IS A CASE OF INADEQUATE ENQU IRY ON THE PART OF THE AO AND NOT A CASE OF LACK OF ENQUIRY BY ANY STRETCH OF IMAGINATI ON, SO THE DECISIONS OF HON'BLE 43 ITA NO. 2102/DEL/2016 ASSESSMENT YEAR: 2011-12 JURISDICTIONAL HIGH COURT IN THE CASE OF JYOTI FOUN DATION (SUPRA), D.G. HOUSING PROJECTS LTD. (SUPRA), DLF LTD. (SUPRA) AND NIRAV M ODI (SUPRA) WOULD BE SQUARELY APPLICABLE. RESPECTFULLY FOLLOWING THE SAME, THE O RDER PASSED BY CIT U/S 263 IS HEREBY QUASHED. RESULTANTLY, THE APPEAL FILED BY T HE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 13 TH DAY OF APRIL, 2017. SD/- SD/- (G.D. AGRAWAL) (KULDIP SINGH) PRESIDENT JUDIC IAL MEMBER DATED THE 13 TH DAY OF APRIL, 2017 GS/TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.