M/s Alankar , Jabalpur V. Pr.CIT-1, Jabalpur, Jabalpur

ITA 22/JAB/2022

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 0717 (ITAT-JABALPUR)
• Duration Of Justice: 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 22-02-2022
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Revision of order; Principle of natural justice; Competent authority; Tax effect; Reason to believe; Borrowed satisfaction; TDS; Set aside
• Section: 263; 40A(3); 143(3); 133A; 194C; 274; 143(2); 69A; 158BC; 2(A); 119

Judgement Text

1 | P a g e IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH, JABALPUR (through web-based video conferencing platform) BEFORE SHRI SANJAY ARORA, HON‘BLE ACCOUNTANT MEMBER & SHRI MANOMOHAN DAS, HON'BLE JUDICIAL MEMBER I.T.A. No. 22/JAB/2022 (Asst. Year: 2017-18) I.T.A. No. 15/JAB/2021 (Asst. Year: 2015-16) Appellant by : Shri Rahul Bardia, FCA Respondent by : Smt. Neeraja Pradhan, CIT-DR Date of hearing : 16/06/2022 Date of pronouncement : 31/08/2022 O R D E R Per Bench: This is a set of two appeals by two separate Assessees, i.e., against the revision in respect of their assessments under section 143(3) of the Income Tax Act, 1961 ( ̳the Act‘ hereinafter) for the relevant years, by the Principal Alankar, 55, Main Road, Sadar, Jabalpur. [PAN : AAGFA 3351 G] vs. Pr.CIT-1, Jabalpur. (Appellant) (Respondent) Vinod Kumar Rajput, Tindi Road, Near Hanuman Mandir, Near Government Nalkoop, Dhanare Colony, Narsinghpur (MP). [PAN : AGCPR 6956 J] vs. Pr.CIT-1, Jabalpur. (Appellant) (Respondent) ITA No. 22/JAB/2022 (A.Y. 2017-18) ITA No.15/JAB/2021 (A.Y. 2015-16) Alankar & Anr. v. Pr. CIT 2 | P a g e Commissioner of Income Tax-1, Jabalpur (―Pr.CIT‖, for short) vide his separate orders u/s. 263 of the Act. The appeals raising a common legal issue, the same were heard together, and are being accordingly disposed of per a common consolidated order for the sake of convenience. 2. The primary issue arising in these two appeals is whether it is in law competent for the revisionary authority, i.e., the Principal Commissioner of Income Tax (Pr. CIT), to direct the assessing authority (AO) to make enquiry on the aspects of the assessee‘s return of income outside the areas specified in the notice u/s. 143(2) on the basis of which the said return stands selected for scrutiny, euphemistically called a ̳limited scrutiny‘ case. In other words, is there any restriction in law on the power of revision u/s. 263, or, on its exercise, to extend the scope of enquiry by the AO beyond that on the basis of which the jurisdiction stand assumed by him to verify the assessee‘s return of income? 2.1 The issue afore-stated arises in view of the fact that in the instant cases the ld. Pr. CIT has required the assessing authority (AO) to, vide the impugned orders, examine matters which fall outside the scope of the areas specified in the respective notices u/s. 143(2), and for that reason not inquired into by the AO while framing the assessment subject to revision. Without doubt, the circumstance of the AO having himself not caused to extend the scope of enquiry obtains. 2.2 We begin by reproducing section 263 of the Act which, in its relevant part, reads as under: ̳Revision of orders prejudicial to revenue. 263 (1) The Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying ITA No. 22/JAB/2022 (A.Y. 2017-18) ITA No.15/JAB/2021 (A.Y. 2015-16) Alankar & Anr. v. Pr. CIT 3 | P a g e the assessment or cancelling the assessment and directing a fresh assessment. Explanation 1...... Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as 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 verification which should have been made; (b) the order is passed allowing any relief without inquiring 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 any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.‘ 3.1 The issue under reference stands considered at length by this Tribunal in Nitin Sharma v. Pr. CIT [2020] 60 CCH 415 (Jabalpur) (APB pgs. 7- 27). The operative part of the said order, also read out during hearing, reads as under:- ―7.1 Next, we proceed to examine the legal implication/s of the foregoing analysis, resulting in the finding of absence of any, much less, proper inquiry in the matter during assessment proceedings. That absence of proper enquiry, i.e., as warranted in the facts and circumstances of the case, being such as would provoke further inquiry, so as to ascertain the truth of the matter or arrive at a reasonable satisfaction with regard thereto, would make an order erroneous inasmuch as there is no proper application of mind, is trite law. The same is among the four tests; the other three being: wrong assumption of facts; incorrect application of law; and omission to observe the principles of natural justice, laid down by the Apex Court, as in Malabar Indl. Co. Ltd. vs. CIT [2000] 243 ITR 83 (SC)(also see: CIT vs. Jawahar Bhattacharjee [2012] 341 ITR 434 (Gau)(FB)), for an order to be regarded as erroneous. For instance, an assessment made by accepting the income returned as such, without inquiring if the income returned had been earned by the person returning the same, was held by the Apex Court to be erroneous and prejudicial to the interest of the Revenue (Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 ITA No. 22/JAB/2022 (A.Y. 2017-18) ITA No.15/JAB/2021 (A.Y. 2015-16) Alankar & Anr. v. Pr. CIT 4 | P a g e (SC)). The case law in the matter is legion, with Hon‘ble Courts all through, including the Apex Court (as in Toyota Motor Corp. v. CIT [2008] 306 ITR 52 (SC), affirming the decision by the High Court reported at [2008] 306 ITR 49 (Del), and the Hon'ble jurisdiction High Court (as in CIT vs. Deepak K. Garg [2008] 299 ITR 435 (MP); CIT v. Mahavar Traders [1996] 220 ITR 167 (MP)), holding like-wise in different fact settings. Reference, however, is being made only to the decision in Gee Vee Enterprises v. CIT (Addl.) [1975] 99 ITR 375 (Del), wherein reliance has been placed on the decisions in Rampyari Devi Saraogi vs. CIT [1968] 67 ITR 84 (SC) and Tara Devi Agarwal (supra), also referred to in Malabar Industrial Co. Ltd. (supra) and Jawahar Bhattacharjee (supra). As explained therein: ̳It is not necessary for the Commissioner to make further inquiries before cancelling the assessment order of the Income-tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income-tax Officer should have made further inquiries before accepting the statements made by the assessee in his return. The reason is obvious. The position and function of the Income-tax Officer is very different 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 simply gives decision on the basis of the pleading and evidence which comes before it. The Income-tax officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. It is because it is incumbent on the Income-tax Officer to further investigation the facts stated in the return when circumstances would make such an inquiry prudent that the word ―erroneous‖ in section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct.‘ (emphasis, supplied) 7.2.......His order, however, does not find fault with the assessment on that score alone. In his view, the AO ought to have sought his approval for comprehensive scrutiny, and examined the issue/s referred to in his notice, for which reference is made by him to para 4 of the Board‘s Instruction No. 7/2014, dated 26/09/2014, reproducing it at para 8 (pg. 13) of his order. The assessee‘s case in this regard is that inasmuch as the same falls within the purview of limited scrutiny, the AO, satisfied with the availability of cash, making addition to the extent the deficit was in his opinion unexplained/not satisfactorily ITA No. 22/JAB/2022 (A.Y. 2017-18) ITA No.15/JAB/2021 (A.Y. 2015-16) Alankar & Anr. v. Pr. CIT 5 | P a g e explained, did not consider it necessary to expand the scope of the inquiry further. That is to say, that the AO‘s discretion in the matter, i.e., for the conversion of a limited scrutiny to a comprehensive scrutiny, cannot be questioned. We have ourselves, in Vishal Sethi vs. CIT (I.T.A. No.57/Jab/2019, dated 07/9/2020), upheld this proposition. If the Assessing Officer himself is unable to, in view of his limited jurisdiction, act in a particular manner, his order cannot be regarded as erroneous and prejudicial to the interest of the Revenue on account of not inquiring into aspects (of the assessee‘s return) outside his purview in such proceedings. However, in Vishal Sethi (supra), the tax effect of the issues not considered by the AO did not exceed Rs. 5 lacs, i.e., the threshold (monetary) limit for seeking such conversion (for non-metro charges). The (said) Board Instruction itself requires the AO to, where deemed proper, undertake proper inquiry in the matter after seeking approval from the competent authority, being Pr. CIT/DIT, i.e., under whose administrative charge he functions. Board Instructions are binding on the AO u/s 119. In fact, this forms the very basis of our holding in Vishal Sethi (supra), as also by the Tribunal in similar cases, that the AO cannot travel beyond the limited scrutiny on his own, and therefore his order cannot be faulted with on that score. However, the Board instruction/s itself enjoins the AO to, where circumstances so warrant, extend the scope of inquiry; his purview, nay duty and, rather, the whole purport of the assessment proceedings, is to bring to tax the correct income chargeable to tax. And which, again, represents trite law (refer, inter alia, Ahmedabad Electricity Co. Ltd. vs. CIT [1993] 199 ITR 351 (Bom)(FB)). It is in fact in view of this that the four-way test, including the absence of proper inquiry, has been laid down by the Hon'ble Courts toward regarding an order erroneous and prejudicial to the interest of the Revenue. And for which reference may again be made to the decision by Hon'ble jurisdictional High Court in Deepak Kumar Garg (supra), holding as under: (pg. 437) ̳The Assessing Officer accepted the version of the assessee without proper enquiry and a result a substantial amount of taxable income was not brought to tax. In such a case the assessment order would be erroneous and prejudicial to the interest of the Revenue because law enjoins upon the Assessing Officer to make the assessment order bringing all taxable income to tax. The enquiry held in a perfunctory manner could not be said to be a proper enquiry before passing the assessment order. This cannot be a ground to shut ITA No. 22/JAB/2022 (A.Y. 2017-18) ITA No.15/JAB/2021 (A.Y. 2015-16) Alankar & Anr. v. Pr. CIT 6 | P a g e out the jurisdiction of the Commissioner of Income-tax that an adequate enquiry was conducted by the Assessing Officer.‘ Similarly, it held as under in Mahavar Traders (supra): Held, that the Income Tax Officer should have examined the matter in the light of the conditions mentioned in both the sections before granting relief. The Commissioner of Income-tax had not given any finding but only remanded the case to the Income Tax Officer for making assessment afresh. The Tribunal, instead of approaching the matter in the proper perspective, had on their own started making inquiries and found that the order passed by the Income Tax Officer was correct. This was erroneous. The order passed by the Commissioner of Income-tax was valid.‘ This infirmity, i.e., making an assessment without proper inquiry, i.e., as warranted by the facts and circumstances of the case, and the law in the matter; the issue in Mahavar Traders (supra), for instance, being the satisfaction of the conditions for allowance of deductions claimed u/ss. 80-HH & 80-J of the Act, in fact gets incorporated in law itself by way of Explanation 2 (clauses (a) & (b)) to section 263 by Finance Act, 2015, w.e.f. 01/06/2015, so that the same deems an order bearing the said infirmity as erroneous and prejudicial to the interests of the Revenue. 7.3 Now, it is axiomatic that while an assessment under comprehensive scrutiny is to be regarded as erroneous in-so-far as it is prejudicial to the interest of Revenue for want of proper inquiry, a limited scrutiny assessment cannot, particularly considering that there is nothing in law, i.e., except the Board Instruction u/s. 119, binding on him, that stops him from travelling to and examining those areas that merit his consideration. That is, no difference could be drawn between the two categories of assessments – limited and comprehensive, except the Board Instruction limiting the scope of inquiry in one category of assessments. However, what when the Board Instruction itself enjoins him to get the said scope extended in the appropriate cases? And which aspect is not in dispute; rather, patent from the Board Instruction. Now, it cannot be that one Board Instruction is binding and the other not, or one part of it is binding and the other not. That would clearly be ludicrous and without any legal basis; in fact, would make an order stating so as self-contradictory. As afore-noted, vide the amendment afore-referred, an order not made in accordance with an order, direction or instruction issued u/s. 119, is deemed to be ITA No. 22/JAB/2022 (A.Y. 2017-18) ITA No.15/JAB/2021 (A.Y. 2015-16) Alankar & Anr. v. Pr. CIT 7 | P a g e erroneous and prejudicial to the interests of Revenue. There is, it may be appreciated, no absolute bar in law for extension of scope of inquiry, but only one formulated by the Board, as a matter of policy, toward better management of tax assessments. The same therefore itself provides for extension of the said scope in appropriate cases. Not only is the said Instruction binding, not observing its mandate makes an assessment made in disregard thereof as infirm and, accordingly, liable for revision u/s. 263. In fact, providing an absolute bar would dilute the plenary power of the assessing authority in the matter of assessment, so that all that the Board instruction seeks to provide is for a mechanism for the exercise of that power with a view to optimize scarce resources – nothing more and nothing less, i.e., where a return has been initially selected for scrutiny on limited aspects. That apart, it would be inconsistent with the scheme of the Act, which seeks to bring the total income of an assessee to tax. Further still, inasmuch as one AO may extend the scope of an assessment, and the other not, providing for the assessment made without observing the said mandate as infirm, liable for revision u/s. 263, places the two situations on an even keel, i.e., on a same footing, under law. An absence of such a provision would make the law inequitable as between the two assessees, similarly placed. Also, it shall render it ultra vires the Constitution inasmuch as it would offend Article 14, guaranteeing equality before law. Providing for permission for the enhancement in scope, which is what the ld. Pr. CIT in effect does in the instant case, is to provide an in-built check to ensure the exercise of power only in deserving cases. 3.2 The Tribunal‘s view in Nitin Sharma (supra), is, as apparent, based on the following fundamental aspects impinging on the matter: a) no limitation on the plenary power of assessment of the assessing authority, who exercises the said power in his own right, and not on behalf of the Board or any other; b) the AO is obliged to assess the total income of the assessee. He cannot remain passive in face of a return which calls for further inquiry. c) an order becomes erroneous because such an enquiry has not been made and not because what is stated in the return is not correct. d) the Board Instruction (BI), unless the same is not in force, as where it stands struck down by a competent Court as bad in law or as incompetent, for (say) exceeding the purview thereof u/s. 119, is binding on the assessing authority; and ITA No. 22/JAB/2022 (A.Y. 2017-18) ITA No.15/JAB/2021 (A.Y. 2015-16) Alankar & Anr. v. Pr. CIT 8 | P a g e e) there is no limitation on the revisionary power where circumstance/s for its exercise is shown to exist. There is no dispute in principle on all these aspects, which form part of the settled jurisprudence, even as admitted by Shri Bardia, the ld. counsel for the assessee, during hearing, who would though ̳rely‘ on the decision by the Tribunal in Mahendra Singh Dhankar (HUF) v. Asst. CIT [2021] 204 DTR (Trib) 377 (Jp), reading out the same. Though, he would add, there are several other orders by the Tribunal in the assessee‘s paper-book (APB), this order, being the most comprehensive, is only being referred to. In the said order, which is subsequent to the order in Nitin Sharma (supra), the Tribunal states that the AO ought to, in case he considers that an aspect of the assessee‘s return other than that specified in the notice u/s. 143(2) is to be enquired into, he is to make out a case and seek approval of the competent authority. There is no, or could not be any, quarrel on this, that in fact being the mandate of the Board Instruction 7/2014, dated 26/9/2014 – also referred to in Nitin Sharma (supra), binding on the AO. The question before us is what where the AO does not do so, i.e., follow the said mandate? As afore-noted, a failure to observe a BI would itself attract sec. 263. The Tribunal in Mahender Singh Dhankar (supra) however, regards it as akin to the exercise of power u/s. 147. Would it (i.e., where the AO, even though he ought to have made out a case and sought the approval of the competent authority, as required by the BI, does not do so), constrain or bind the revisionary authority not to initiate revisionary proceedings, extending the scope of inquiry by the assessing authority? The answer to this would clearly lie in the scope of the power of revision. No answer, on being so enquired during hearing, was forthcoming from Sh. Bardia, even with reference to the order by the Tribunal being relied upon by him, nor indeed do we find any in the said order. At this stage, Sh. Bardia was questioned by the Bench about clause (c) of Explanation 2 to sec. 263. This is as the BI itself obliges the AO to, as also explained in Nitin Sharma (supra), move the competent authority where aspects outside the specified areas, i.e., as mentioned in the notice u/s. ITA No. 22/JAB/2022 (A.Y. 2017-18) ITA No.15/JAB/2021 (A.Y. 2015-16) Alankar & Anr. v. Pr. CIT 9 | P a g e 143(2), warrant enquiry or circumstances provoking enquiry are found to obtain. To no answer again by Shri Bardia, who would though fairly admit that none of the orders by the Tribunal placed in APB consider clause (c) to Explanation 2 (to s. 263), thus accepting the same to be distinguishable. Though, he would make a feeble argument that the BI referred to in Explanation 2(c) pertains to the instructions which specifically require assessment in a particular case to be made in a particular manner, he was unable to explain the basis in law for saying so, the same being rather specifically proscribed by law (s. 119). As explained in Nitin Sharma (supra), there is nothing in law to distinguish one BI from another, i.e., in- so-far as sec. 263 is concerned, or one part of the Instruction from another, which would make an order stating so as legally infirm or as self-contradictory. 3.3 We may at this stage consider the basic legal principles involved, which, as indeed the law as explained by the higher courts of law, must guide us in the matter and govern our adjudication. That the power of inquiry in assessment or indeed the power of the assessing authority in the matter of assessment, is plenary, brooking no interference, is well-settled, for which we may, for the sake of completeness of this order, refer to some, viz. CIT v. Greenworld Corporation [2009] 314 ITR 81 (SC); J.K. Synthetics Ltd. v. CIT [1972] 83 ITR 335 (SC), rendered in different fact settings. The reason for, and premise of, the same is simple. He is duty bound to bring all the income chargeable to tax in the hands of the assessee for the relevant year, i.e., ―total income‖ to tax, even as explained in CIT vs. Deepak K. Garg [2008] 299 ITR 435 (MP); Ahmedabad Electric Co. vs. CIT [1993] 199 ITR 351 (Bom)(FB), again, to cite some. A BI circumscribing the power of an assessing authority to venture into areas outside those specified in the notice u/s. 143(2) must therefore only be regarded as putting fetters on this power of assessment, which in law cannot be, and is therefore necessarily to be understood, as explained in Nitin Sharma (supra), regulating the exercise of the said power by the AO, with a view to better utilize the manpower resources, even ITA No. 22/JAB/2022 (A.Y. 2017-18) ITA No.15/JAB/2021 (A.Y. 2015-16) Alankar & Anr. v. Pr. CIT 10 | P a g e as explained in the BIs themselves – nothing more and, nothing less. Any restriction on or meddling with this power by the Board would be inconsistent with the scheme of the Act as well as ultra vires the power of the Board u/s. 119 of the Act, as explained in J.K. Synthetics Ltd. (supra). Reference in this context may also be made to the decision in Pahwa Chemicals (P.) Ltd. v. CCE [2005] 274 ITR 87 (SC), wherein the Hon'ble Apex Court clarified that the Instructions by the Board u/s. 37B (of the Central Excise Act, 1944), which is akin to sec. 119 of the Act, are circumscribed by the consideration stated in section 37B itself, i.e., in furtherance of the provisions of the Act. Earlier in Kerala Financial Corporation v. CIT [1994] 210 ITR 129 (SC), it explained that the powers of the Board u/s. 119 are for the purposes of the Act and, thus, cannot override the provisions of the Act or detract from the same. The matter is well-settled, and case law abundant. Reference here may also be made to L. Hazari Mal Kuthiala vs. ITO [1961] 41 ITR 12 (SC), wherein the Apex Court explains that the provisions of the Act must be read in a manner which make its machinery workable, rather than not. In its words: ̳the exercise of power would be referable to a jurisdiction that confers validity thereto, and not to a jurisdiction under which it would be nugatory.‘ Why, the proviso to s. 119(1) itself clarifies the position of law in the matter, recognising the independence of both the assessing as well as the first appellate authority, whose powers are coterminous with that of the former, and they do not function for and on behalf of the Board or any other authority specified in s. 116, but in their own right. This also explains the striking down by Courts of law where the action or the assessment by the AO is found not based on his own volition, but on the dictate of another or on (say) borrowed satisfaction, for which principle, again well-settled, we may refer to decisions by the Apex Court in Larsen & Toubro Ltd. vs. State of Jharkhand (in CA No.5390/2007, dated 21/03/2017); Greenworld Corporation (supra). The following excerpt from the latter is instructive in this regard: ITA No. 22/JAB/2022 (A.Y. 2017-18) ITA No.15/JAB/2021 (A.Y. 2015-16) Alankar & Anr. v. Pr. CIT 11 | P a g e ̳The Commissioner, or for that matter, any other higher authority, may have supervisory jurisdiction over the Assessing Officer but it is difficult to conceive that even the merits of the decision should be discussed and should be rendered by the higher authority, who is a supervisory authority. It is one thing to say that while making the orders of assessment the Assessing Officer should be bound by the statutory circulars issued by the CBDT, but it is another thing to say that the assessing authority exercising quasi-judicial functions, keeping in view the scheme contained in the Act, would lose his independence to pass an independent order of assessment. When a statute provides for different hierarchies providing for forums in relation to passing of an order as also appellate or revisional order, by no stretch of imagination can a higher authority interfere with the independence which is the basic feature of any statutory scheme involving adjudicatory process.‘ (emphasis, supplied) 3.4 Continuing further, it needs to be appreciated that the notice u/s. 143(2), though on the basis of extant criteria as may be specified by the Board, the said notice is in law issued by and under the authority of the AO, i.e., it is the AO who decides which areas of the assessee‘s return, based on a prima facie examination thereof – which though may be undertaken through the computing power of a central data base, are to be initially scrutinised. He cannot be, for that reason, regarded as constrained in any manner by law not to expand or extend it to the other areas of the assessee‘s return which come to his notice and call for scrutiny, being, in law, duty bound to, given his purview in law, i.e., to assessee the ̳total income‘ of the assessee. We have already clarified that the proposition that the power of assessment of the assessing authority is plenary represents well-settled law. 3.5 Next, we may examine the power of revision under law. A mere browse of sec. 263(1), reproduced hereinbefore, defines the power of revision, exercise of which is governed by the satisfaction of twin conditions of the subject order being erroneous and prejudicial to the interests of the Revenue, absence of any one of which would fail the revision in given a case. That is to say, the order of the AO is erroneous, and the error has resulted in a prejudice to the Revenue. Further, this error could be of fact or of law. The Apex Court in Malabar Industries Co. v. CIT [2000] 243 ITR 83 (SC) laid down a four-way test for an order to be regarded as ITA No. 22/JAB/2022 (A.Y. 2017-18) ITA No.15/JAB/2021 (A.Y. 2015-16) Alankar & Anr. v. Pr. CIT 12 | P a g e erroneous and prejudicial to the interests of the Revenue, liable for revision u/s. 263, viz. wrong assumption of facts; incorrect application of law; non-application of mind; and omission to observe the principles of natural justice. 3.6 We shall here confine ourselves only to non-application of mind. Absence or lack of proper enquiry vitiates an order for non-application of mind. As explained by the Hon'ble Courts, the same renders an order as erroneous for the reason that an enquiry, where circumstance/s would make such an enquiry pertinent and relevant for an assessment, had not been made. As explained (refer: Gee Vee Enterprise vs. Addl. CIT [1975] 99 ITR 375 (Del), relying on judicial precedents, including by the Apex Court), it is the lack or absence of inquiry that would render an order per se erroneous and prejudicial to the interests of the Revenue, liable for revision, and not for the reason that what is stated in the return is incorrect, which would in fact only be known upon enquiry and verification. Case law in the matter is legion, with several by the Apex Court itself, followed throughout by Hon‘ble High Courts across the country in different fact settings, with some by the Hon‘ble jurisdictional High Court being Deepak Kumar Garg (supra); CIT v. Kohinoor Tobacco Products [1998] 234 ITR 557 (MP); CIT v. Mahavar Traders [1996] 220 ITR 167 (MP); H.H. Maharaja Raja Pawar Dewas v. CIT [1982] 138 ITR 518 (MP). 3.7 Now, as also explained in Nitin Sharma (supra), it stands to reason that while a ̳complete scrutiny‘ case is regarded as erroneous and prejudicial to the interests of the Revenue for want of proper enquiry, a ̳limited scrutiny‘ cannot be. That apart, the proposition is without any basis in law, for which reference is drawn to ss. 143(2), 143(3), 147, 119 & 263. We have already noted that there is no, nor cannot be, any legal bar for conversion of a limited scrutiny to a complete scrutiny, both of which enjoy the same status in law, i.e., a regular assessment, the purpose of which is to assess the total income of an assessee for the relevant year. ITA No. 22/JAB/2022 (A.Y. 2017-18) ITA No.15/JAB/2021 (A.Y. 2015-16) Alankar & Anr. v. Pr. CIT 13 | P a g e A procedure for the same, i.e., for the said conversion or extension, can definitely be put in place – which again ought to be preferably through law. Why, sec. 143(2) itself is a part of procedure. However, the restraint on the scope of s. 143(2) being mandated by a Board Instruction, the same also provides for the said expansion. It would thus be, as apparent, fallacious to regard one as more binding than the other, or to regard one (assessment u/s. 143(3)) as sacrosanct and the other not; in short, to treat the two as any different in law. The procedure prescribed by the BI for such conversion cannot thus be read as limiting the power, either of the AO, as explained earlier, nor of the revisionary authority. The same cannot be read as a limitation, which would only be defeative of s.143(2), as indeed of s. 119, given the underlying object of a fair assessment of the total income chargeable u/s. 4 to tax. Concurrence of a higher authority, which the AO is to obtain to extend the scope of enquiry, is only enabling and facilitative, and necessarily so, the purpose of an assessment itself being to bring to tax the taxable income. The reason for the same, i.e., a two-step process, limiting the areas of inquiry initially – on the basis of predefined parameters, is only, as explained in Nitin Sharma (supra), toward better management of resources and, as explained in the BI itself, only proper cases with tax potential are selected. This is as much a duty of the AO as if the return selected was for complete scrutiny in the first place itself, and this is what the Board clarifies, albeit requiring him to follow a process. As such, where he fails to do so, as found by the said higher authority on an examination of the record, he is well within his power to require him to do so in the interest of the Revenue; the assessment, as explained, being for that reason itself, erroneous and prejudicial to the interests of the Revenue. This, i.e., the circumstance for exercise of power u/s. 263, which must be shown to exist, is the only legal bar for the revisionary authority to observe, and for which one may again refer to the four- way test by the Apex Court in Malabar Industrial Co. (supra). Each of the four circumstances specified in Explanation 2 to s.263 (inserted on the statute-book by ITA No. 22/JAB/2022 (A.Y. 2017-18) ITA No.15/JAB/2021 (A.Y. 2015-16) Alankar & Anr. v. Pr. CIT 14 | P a g e Finance Act, 2015, w.e.f. 01/6/2015), which statutorily deem an order as erroneous insofar as it is prejudicial to the interests of the Revenue, it would be noted, falls under one (or more) of these four tests laid down by the Apex Court, so that it could be said that Explanation 2 is to be regarded as clarificatory of law, statutorily prescribing what the law was always understood as. And, perhaps, with a view to remove any doubt that may obtain. This is as if an enquiry is warranted in the facts and circumstances of the case, not so doing, given the law in the matter, s. 263 would apply. No case law circumscribing the said power, being rather now statutorily provided for and, as explained, consistent with the law on revision as explained by the Apex Court, has been brought to our notice. The only limitation that we observe is where the AO has upon enquiry taken a view, which is a plausible view, thus representing the legal bar aforesaid. The reason is not far to seek. A revisionary authority does not sit in judgment of the assessing authority, so as to substitute his view, i.e., which is the domain of the appellate authority. Sure, he reviews his orders, but only from the stand point of it being erroneous and prejudicial to the interests of the Revenue, and which in turn is for the reason that the Revenue has under law no right to appeal. This gets also manifest in Explanation 1(c) to s. 263(1). 3.8 We have thus far sought to dilate only upon, with a view to explain them, the fundamental aspects on which the Tribunal‘s order in Nitin Sharma (supra) rests, noted at the beginning of this order (para 3.2). We here make a separate reference to the aspect of the binding nature of the BI, as the same is argued at Bar to bar the assessing authority to travel to aspects of the assessee‘s return outside those specified in sec. 143(2) notice. As clarified, the said notice is both in law and in fact issued by the assessing authority and by no other, and the BI only provides for a procedure for the exercise of this inherent power of assessment by the AO, with a view that it is directed toward deserving cases, i.e., it is not inhibitive, and neither can be, but regulative and facilitative and, at the same time, eliminating any ITA No. 22/JAB/2022 (A.Y. 2017-18) ITA No.15/JAB/2021 (A.Y. 2015-16) Alankar & Anr. v. Pr. CIT 15 | P a g e possible misuse of power by making the process transparent. Being binding, the same (i.e., the said procedure), ought to have been observed by the AO where applicable, and which is what the revisionary authority in effect does. As explained in J.K. Synthetics Ltd. (supra), the Board is not competent to give directions regarding the exercise of any judicial power by its subordinate authorities. In Kerala Financial Corporation (supra) and Pahwa Chemicals Ltd. (supra), it further explained that the power of the Board u/s. 119 is only for the furtherance of the objects and for the purposes of the Act. This, then, provides the prescriptive and the legal framework under which Explanation 2(c) below s. 263(1) is to be read. True, a BI is binding, however, its contours and parameters are laid down in sec.119 itself, so that any instruction or circular which travels beyond the same is itself ultra vires s.119. We may toward this advert to the observations by the Apex Court in Greenworld Corporation (supra) (at para 3.3 of this order), as well as to that in Catholic Syrian Bank Ltd. v. CIT [2012] 343 ITR 270 (SC), impinging on the matter, explaining the said contours and parameters: ̳A circular may not override or detract from the provisions of the Act but it can seek to mitigate the rigour of a particular provision for the benefit of the assessee in certain specified circumstances. So long as the circular is in force, it aids the uniform and proper administration and application of the provisions of the Act.‘ (emphasis, ours) Further, as explained in L. Hazari Mal Kuthiala (supra), as indeed in several decisions by the Apex Court, viz. Prakash Nath Khanna v. CIT [2004] 266 ITR 1 (SC); Padmasundara Rao (Decd.) v. State of Tamil Nadu [2002] 255 ITR 147 (SC), the provisions of the Act are to be read as a composite whole and in a manner which makes them and the scheme of the Act workable. Section 119 is to be, rather than an imposition, itself regarded as a part of the scheme of the Act, so that, except where the purpose is to mitigate the rigor of the specified provisions of law (in certain circumstances) or otherwise a genuine hardship (s.119(2)), it is toward proper administration of the Act and uniform application of its provisions. ITA No. 22/JAB/2022 (A.Y. 2017-18) ITA No.15/JAB/2021 (A.Y. 2015-16) Alankar & Anr. v. Pr. CIT 16 | P a g e We do not, we may clarify, either see the Board Instruction/s issued qua limited scrutiny as restrictive of either the power of assessment of the assessing authority or of the power of revision by the revisionary authority. Rather, that would render it as legally infirm, as if seeking to usurp the power of assessment or of revision, which it legally cannot. On the contrary, the BI itself enjoins the assessing authority to, in appropriate cases, make out a case for extension of the scope of enquiry. That being the case, the argument as to the binding nature of a BI, valid in itself, rather, becomes supportive of the case of the Revenue in the instant case. 4. We may next discuss the issue as to whether an enquiry was indeed warranted, i.e., whether, in the circumstances of the case, an enquiry or, as the case may be, further enquiry – the mandate in law being proper enquiry, i.e., as should have been made, has been made, as the assessee/s contends, or not, as does the revisionary authority. We shall consider the facts of the two cases in this respect separately. 4.1 In Alankar (ITA No. 22/Jab/2022), the assessee-firm was subjected to a survey u/s. 133A of the Act during the relevant previous year at its business premises, whereat an excess stock of Rs. 117.98 lacs was found and admitted by the assessee. The said amount was subsequently credited by the assessee to it‘s profit & loss account for the year, which thus gets included in and returned as business income. The assessee‘s return was selected for verification of ̳Large increase in capital during the year‘, and qua which, accordingly, enquiry was made by the AO during the course of the assessment proceedings. No enquiry was made in respect of the excess stock surrendered, nor, accordingly finds any mention or reference in the assessment order. In view of the ld. Pr. CIT, the said amount ought to have been subjected to tax, not as business income u/s. 28, but u/s. 69A, i.e., as undisclosed assets, and subject to tax at a higher rate u/s. 115BBE. ITA No. 22/JAB/2022 (A.Y. 2017-18) ITA No.15/JAB/2021 (A.Y. 2015-16) Alankar & Anr. v. Pr. CIT 17 | P a g e 4.2 There has been without doubt no enquiry in the matter by the AO in the assessment proceedings. The stock found and surrendered at the time of survey would, in absence of anything to show, much less found as a fact, that the entire of it represents the profit on the sales arising during the year, or otherwise earned from the business during the year, is deemed to be the income for the relevant year u/s. 69A of the Act. No case in this regard has been made by the assessee before the AO. What, one may ask, is the difference between the gold declared (at Rs. 255.22 lacs) under IDS, 2016, and that found during survey, i.e., from the standpoint of tax thereon, except of the former being voluntary, while the latter is occasioned by the survey by the Revenue at the assessee‘s business premises. A profit of Rs. 118 lacs, even reckoned at the obtaining (gross) profit rate of Rs. 11.52% (the rate for the immediately preceding year, as that for the current year stands admittedly inflated on account of credit/inclusion of the excess stock found and declared at the time of survey), implies undisclosed sales of Rs. 1024 lacs for the relevant year up to 15/11/2016, the date of survey, as against the assessee‘s sale for the entire year is only at Rs. 446.69 lacs (PB pgs. 32-59). Further, sale implies availability of stock. How much of it was available as at the beginning of the year, inasmuch as it is only the profit on its sale during the year (upto 15/11/2016), even if by way of the capital being circulated again, that could be undisclosed profit earned during the relevant year. Then, again, is the aspect of incurring the cost of acquisition/conversion thereof inasmuch as the hypothesis implies incurring the entire of it outside books, which may not hold for every expenditure, implying a part thereof, as claimed in regular accounts, being in relation to undisclosed sales, requiring adjustment in its respect. We are not, we may clarify, thereby suggesting an addition for a higher sum, but only highlighting the issues that arise for determination and consideration. It is in view of these difficulties that the law deems the sum/asset unexplained as its source as income for the current year, which legal fiction, unless rebutted on facts, ITA No. 22/JAB/2022 (A.Y. 2017-18) ITA No.15/JAB/2021 (A.Y. 2015-16) Alankar & Anr. v. Pr. CIT 18 | P a g e is to be adopted, taking it to its logical end (CIT vs. Vadilal Lallubhai [1972] 86 ITR 2 (SC)). Ignoring the special provisions which expressly apply in the facts of the case, or at least prima facie so, i.e., for the excess stock of Rs. 118 lacs, without anything more, would surely make the assessment order erroneous and prejudicial to the interests of the Revenue. Reference in this regard be made to the decision in M.B. Abdulla vs. CIT [1990] 183 ITR 96, 101 (SC). Further, the objection by the ld. CIT-DR before us, i.e., the survey cases, in terms of Board Instruction, necessarily require being subject to a comprehensive scrutiny, cannot be countenanced as, even so, notice u/s. 143(2) issued in the instant case is, as a matter of fact, for limited scrutiny. 4.3 We, accordingly, for the reasons afore-noted (paras 3 to 4.2), uphold the revision under reference. The AO shall, in the set aside proceedings, adjudicate on this aspect of the matter after allowing the assessee a reasonable opportunity of being heard, in accordance with law and by issuing definite findings of fact. As explained in Anantharam Veerasinghaiah & Co. v. CIT [1980] 123 ITR 457 (SC), the Tribunal has to consider, from an overall consideration of all the relevant facts and circumstances, whether the unexplained cash deposits and cash credits could be reasonably attributed to the pre-existing fund of concealed income or they were reasonably explained by reference to the concealed income earned in the relevant year. We direct accordingly. 4.4 The invocation in Vinod Rajput (ITA No. 15/JAB/2021) is on three grounds. Firstly, that the AO did not properly enquire with regard to disclosed profit, which witnessed a decline in gross profit (GP) rate from 4.40% (for the immediately preceding year) to 3.75% for the current year. This ought to have surely been enquired into by the AO considering that the assessee, a Government contractor, had, against a contract receipt of Rs. 184.71 lacs for the relevant year, claimed raw material expenditure at Rs. 151.96 lacs, i.e., at over 82% of the turnover. Qua the ITA No. 22/JAB/2022 (A.Y. 2017-18) ITA No.15/JAB/2021 (A.Y. 2015-16) Alankar & Anr. v. Pr. CIT 19 | P a g e other two aspects, i.e., verification of applicability of s. 40A(3) and the applicability of TDS provisions (ss. 194C & 194I), we do not find any infirmity in the AO not enquiring in the matter/s in view of the same, as explained by the assessee before the ld. Pr. CIT, being covered under Cl. 21(d) and Cl. 33 of the tax audit report, qua both of which the tax auditor had returned no violation. For Explanation 2(a) to s.263(1) to be attracted, as explained in Zila Sahakari Kendriya Bank Maryadit vs. Pr. CIT (ITA No. 45/JAB/2022, dated 15/06/2022), there should be circumstance/s warranting enquiry. We modify the impugned order accordingly. We may though add a caveat, i.e., if the AO in the course of his examining the assessee‘s profitability and, thus, verifying expenditure, which may not be limited to expenditure on raw material alone, comes across instances of apparent violation of s.40A(3) or the TDS provisions, he shall be at liberty to examine the same and adjudicate thereon, i.e., without any fetters. The income liable to be taxed, as explained in Poona Electric Supply Co. Ltd vs. CIT (1965) 57 ITR 521 (SC); Southern Technologies Ltd. v. Jt. CIT [2010] 320 ITR 577 (SC), is the real income, subject to the provisions of the Act. Also, the Revenue shall, in case of violation/s being found, so that the Auditor has misreported, be at liberty to take such action against him, including as to professional misconduct, as permissible under law. The AO shall, though, where he chooses to do so, hear the Auditor in the matter. We decide accordingly; this para is to be read in conjunction with paras 3.1 to 3.8. 5. Before parting with this order, we may also advert to aspects of the matter that we consider relevant. The first is the decision by the Tribunal in Mahendra Singh Dhankar (HUF) (supra). The same, admittedly, as well as other included in his compilation by the assessee, though not referred to during hearing, do not consider clause (c) of Explanation 2 to s.263(1), which we have found as applicable, making them, thus, as afore-stated, distinguishable. On it being argued by the Revenue before it that the Board Instruction provides for a mechanism to ITA No. 22/JAB/2022 (A.Y. 2017-18) ITA No.15/JAB/2021 (A.Y. 2015-16) Alankar & Anr. v. Pr. CIT 20 | P a g e convert a limited scrutiny case into a complete scrutiny case, the Tribunal in that case would, with reference to the Board Instruction No. 05/2016, dated 14/7/2016 requiring the AO to refer only deserving cases to the competent authority, acting on credible information, opined the same to be akin to s.147 of the Act, and rejected the arguments advanced before it on that basis as the AO had not made out a case following the procedure u/s. 147. In the opinion of the Tribunal, areas other than those specified in s.143(2) notice, could be enquired into by the AO only where the same qualify for being subject to reassessment proceedings, the condition precedent for which is ̳reason to believe‘ escapement of income, i.e., the requirement of s.147 is read into s.143(2). There is no gain saying that s.147 proceedings are not for undertaking verification proceedings, for which notice u/s. 143(2) is contemplated. The matter is well-settled, for which we may refer to decisions in Kamal Textiles v. ITO [1999] 189 ITR 339 (MP); Vipin Khanna vs. CIT [2002] 255 ITR 220 (P&H), to cite two. A reason to suspect or the need for verification is the purpose of s. 143(2), as would be clear from a mere reading of the provision, and furnishes no ground for invocation of s.147, which represents a more stringent condition of ̳reason to believe‘, and there is little overlap between the two. Reference for the purpose be made to Asst. CIT v. Rajesh Jhaveri Stock Brokers P. Ltd. [2007] 291 ITR 500 (SC), wherein it stands clarified that a failure to issue notice u/s. 143(2) would not preclude sec. 147 proceedings; the two operating in different fields, so that the only consideration relevant for the latter is a ̳reason/s to believe‘. As again explained by it in the context of sec. 158BC proceedings (in Asst. CIT & Anr. v. Hotel Blue Moon [2010] 321 ITR 362 (SC)), a notice u/s. 143(2) would entitle the AO to repudiate the assessee‘s return of income. That sections 143(2) and 147/148 operate in different fields is well- settled; the former being in effect an opportunity to substantiate the return furnished, while the latter is toward reassessment on the basis of information with the Revenue, and irrespective of the assessee having furnished a return or not. ITA No. 22/JAB/2022 (A.Y. 2017-18) ITA No.15/JAB/2021 (A.Y. 2015-16) Alankar & Anr. v. Pr. CIT 21 | P a g e The only stipulation, and which the Board could make, inasmuch as it is a reasonable restriction on the right of the assessment of the AO, is to not regard the assessment as open, so as to make any enquiry, but only where circumstances provoking enquiry make it incumbent to do so. This is precisely the import of sec.263 proceedings. The same thus supports the Revenue‘s case that s.263 would lie where despite conditions for the exercise of power of enquiry u/s. 143(2), were not exercised by the AO. The question as to whether the Board, incompetent to issue directions to the assessing authority on the exercise of judicial power or as to the manner of making a particular assessment, is competent to issue instructions importing the condition of s.147 in s. 143(2) (verification) or s. 263 (lack of enquiry) proceedings, assuming, as the Tribunal considers in Mahendra Singh Dhankar (HUF) (supra), that it so does, would also need to be addressed. And which, the said decision by the Tribunal does not. Continuing further, true, the assessee found favour with the Tribunal (Jabalpur Bench) in Vishal Sethi (supra) on the basis that the AO was justified in not seeking approval from a higher authority even as the Board Instruction, binding on him u/s. 119, required him to report and seek the said approval for enquiry into areas outside those specified in the s. 143(2) notice. The same, however, is subject to the tax-effect thereof exceeding a particular threshold limit, defined separately for metro (Rs. 10 lacs) and non-metro (Rs. 5 lacs) charges, which was not breached in that case. The said decision is thus distinguishable, as also observed in Nitin Sharma (supra). We are conscious that there is a dichotomy here inasmuch as we have in the instant case observed that a Board Instruction, insofar as it places an absolute bar on the exercise of his power of assessment by the AO, who in law issues the notice s. 143(2), may be ultra vires s.119, and such bar could only be by way of a statutory provision, as u/s. 143(2) itself. This question, not argued in Vishal Sethi (supra) and, therefore, not considered, and which does not arise in the instant case, as, admittedly, the threshold limit is ITA No. 22/JAB/2022 (A.Y. 2017-18) ITA No.15/JAB/2021 (A.Y. 2015-16) Alankar & Anr. v. Pr. CIT 22 | P a g e breached, may therefore be regarded as open, to be decided in an appropriate case upon hearing the parties. We may though mention that such a stipulation, apart from it inhibiting the power u/s. 143(2) and s. 263, also places the two assessees with varying tax-effect differently, while the purpose of an assessment under the Act is to bring his ̳total income‘ to tax, even as clarified by the higher Courts of law, being the premise of an assessment under the Act (see ss. 139, 143/144). Again, it places two assessees, located at two different places in India, differently, on the basis of whether the same is a metro or a non-metro charge. Whether the same is an intelligible classification or offends Article 14 of the Constitution, i.e., equality before law, can only be answered by a Constitutional Court in appropriate proceedings. The issue, nevertheless, that could be addressed, albeit in appropriate proceedings, by a non-constitutional court as this Tribunal, would be whether such an Instruction is intra vires the powers of a Board vested with the power to issue administrative instructions with the mandate to do so in furtherance of the objects and for the purposes of the Act. 6. In the result, the assessee‘s appeal (ITA 22/2022) is dismissed, and appeal (ITA 15/2021) is partly allowed. Order pronounced in open Court on August 31, 2022 Sd/- Sd/- (Manomohan Das) (Sanjay Arora) Judicial Member Accountant Member Dated: 31/08/2022 vr/- ITA No. 22/JAB/2022 (A.Y. 2017-18) ITA No.15/JAB/2021 (A.Y. 2015-16) Alankar & Anr. v. Pr. CIT 23 | P a g e Copy to: 1. The Appellant: a) Alankar, 55, Main Road, Sadar, Jabalpur (MP) b) Vinod Kumar Rajput, Tindi Road, Near Hanuman Mandir, Near Government Nalkoop, Dhanare Colony, Narsinghpur (MP). 2. The Respondent: Principal CIT-1, Jabalpur. 3. The CI T-DR, I TAT, Jabalpur. 4. Guard File. By order (VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Jabalpur.