Shri Khalid Aman, Bhopal V. The PCIT-2, Bhopal, Bhopal

ITA 225/Ind/2021

AI Insights

The case involves Shri Khalid Aman, the appellant, who contested a revision-order by the PCIT under section 263 of the Income Tax Act, 1961, concerning the assessment year 2014-15. The original assessment by the ITO was reopened due to discrepancies in property valuations reported by the assessee and the stamp authority. The PCIT later found the assessment to be erroneous and prejudicial to the revenue's interests, leading to a revision-order. The Tribunal examined whether the PCIT's revision was valid, focusing on the adequacy of the ITO's inquiries and the applicability of section 56(2)(vii)(b)(ii) of the Act, which was contested by the assessee.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135714 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-10-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 21-11-2021
• Other Referred Cases: Royal Western India Turf Club Vs. PCIT, The Tata Power Company Limited Vs. PCIT Mumbai, Ashoka Buildcon Ltd. Vs. ACIT, Gulab Badgujar (HUF) Vs. CIT(Central), Nagpur, Reliance Payment Solutions Ltd. Vs. Pr. CIT, M/s Pramukh Realty, Junagadh, Principal Commissioner of Income-tax 2 v. Shree Gayatri Associates, Principal Commissioner of Income-tax-2, Meerut v. Canara Bank Securities Ltd
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Business income; Revision of order; Income from undisclosed sources; Search and seizure; Question of law; Revenue expenditure; TDS; Set aside
• Section: 147; 148; 56(2)(vii)(b); 143(3); 142(1); 69A; 2(A); 13; 22

Judgement Text

आयकरअपील यअ धकरण,इंदौर यायपीठ,इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE MS.SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRIB.M. BIYANI, ACCOUNTANT MEMBER (Conducted through Virtual Court) ITA No.225/Ind/2021 Assessment Year: 2014-15 Shri Khalid Aman, Bhopal बनाम/ Vs. Pr. CIT-2 Bhopal (Appellant / Assessee) (Respondent / Revenue) PAN: AARPA 4443 L Assessee by Ms. Nisha Lahoti, AR Revenue by Shri P.K. Mitra, CIT- DR Date of Hearing 17.10.2022 Date of Pronouncement 10.01.2023 आदेश/O R D E R Per B.M. Biyani, A.M.: Feeling aggrieved by revision-order dated 24.02.2020 passed by Ld. Pr. Commissioner of Income-Tax (Appeal)-2Bhopal [“Ld. PCIT”]u/s 263 of Income-tax Act, 1961 [“the Act”], which in turn arises out of assessment- order dated 16.11.2017 passed by learned ITO-3(2)[“Ld. AO”]u/s 147/143(3) for Assessment-Year [“AY”] 2014-15, the assessee has filed this appeal on following grounds. “1.The impugned order of the Commissioner of Income Tax under section 263 of the Income Tax Act is wrong, illegal and opposed to facts. Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 2 of 29 2. The Pr. Commissioner of Income Tax ought to have seen that the order of assessment is neither erroneous nor prejudicial to the interest of revenue. 3. The Pr. Commissioner of Income Tax ought to have seen that the assessment was reopened under section 148 on the point of stamp valuation of property which was considered by assessing officer and such that the order of assessment does not suffer any illegality. 4. The Ld. Pr. CIT went wrong in invoking the provision of section 56(2)(vii)(b)(ii) of the income tax act. The Pr. CIT failed to note that the said provisions is applicable only with effect from 1.4.14 for the purchases and cannot be made applicable for this transaction. 5. The Pr. CIT erred in not referring the valuation of the property to the registered valuer when the assessee has already annexed the report of the registered valuer who comments that the valuation cannot be possible as the property is disputed and litigated. 6. That on the facts and circumstances of the case the investment shown on the property should be accepted as the same is distress purchased and there is number of joint owners who are falsely claimed on the property, even some persons have unauthorized possession on the property. 7. That on the facts and circumstances of the case the properties are encumbered, not freehold property, occupied by various claimants and court cases are also going on the market value of the property for the purpose of stamp duty could not be adopted. 8. That the appellant craves to add, alter or delete any ground or grounds of appeal before or during the hearing of appeal.” Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 3 of 29 2. Heard the learned Representatives of both sides at length and case- records perused. 3. Briefly stated the facts are such that the assessee filed original return of income of relevant AY 2014-15 on 31.03.2016 declaring a total income of Rs. 7,97,860/- which was assessed. Subsequently, the revenue-authorities received an information that during the previous year 2013-14 relevant to AY 2014-15 the assessee purchased immovable properties for Rs. 80,00,000/- although the valuation done by stamps authority was Rs. 3,91,78,500/-. Based thereon, the Ld. AO framed a view that there arose a taxable-income of Rs. 3,11,78,500/-, being the difference of Rs. 3,91,78,500/- and Rs. 80,00,000/-, u/s 56(2)(vii)(b) which had escaped assessment. Accordingly, the Ld. AO re-opened assessment by issuing notice u/s 148. Finally, the re-opened assessment was completed vide assessment-order dated 16.11.2017 at the originally assessed income of Rs. 7,97,860/-. Subsequently,the Ld. PCIT examined the record of re- assessment-proceeding and viewed that the assessment-order dated 16.11.2017 passed by Ld. AO is erroneous in so far it is prejudicial to the interest of revenue, which attracts revisionary-jurisdiction u/s 263. The show-cause notice dated 13.01.2020, issued by Ld. PCIT, containing the reasons of revision-proceeding, is reproduced below: Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 4 of 29 Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 5 of 29 Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 6 of 29 4. By the aforesaid show-cause notice, the assessee was asked to explain as to why the assessment-order may not be revised. In response thereto, the Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 7 of 29 assessee made a detailed submission to Ld. PCIT which is re-produced in Para No. 3 of the revision-order. 5. However, none of those submissions impressed the Ld. PCIT.Finally, the Ld. PCIT concluded that the Ld. AO has not carried out the inquiry/verification which he should have done and hence the assessment- order is erroneous in so far as it is prejudicial to the interest of revenue. Accordingly, the Ld. PCIT passed revision-order u/s 263 whereby the assessment-order was set aside to the file of Ld. AO with a direction to pass a speaking order on the issues noted by Ld. PCIT. 6. Aggrieved by such revision-order, the assessee has filed this appeal. 7. By means of various grounds, the appellant-assessee requires us to adjudicate whether or not the revision-order passed by Ld. PCIT u/s 263 is valid in the eyes of law? Submission of Ld. AR: 8. Ld. AR straightaway carried us to a Paper-Book-I, II and III filed by him and submitted that (i) during the course of assessment-proceeding, the Ld. AO has made specific queries to assessee quasome of the issues raised by Ld. PCIT in the show-cause notice u/s 263 and the assessee has also filed enough details/documents in response thereto which is very much evident from the following details/documents forming part of assessment-record available with the department; or (ii) some issues were not at all a part of the domain of Ld. AO: (i) Issue No. 1 – The assessee had purchased following properties for inadequate consideration, which though attracted section 56(2)(vii)(b) yet the Ld. AO has not made enquiries: It is observed that the assessee purchased following three properties at the values lesser than the valuation of stamps-authority: Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 8 of 29 Property Date of purchase Cost shown by assessee Value as per stamps authority Plot 0.055 hectare at Koh-e-fiza, Bhopal 13/09/2013 20,00,000 1,00,01,000 Plot 0.110 hectare at Koh-e-fiza, Bhopal 13/12/2013 35,00,000 1,94,32,500 Plot 0.05 hectare at Koh- e-fiza, Bhopal 17/05/2013 25,00,000 97,45,000 Total 80,00,000 3,91,78,500 For this issue, Ld. AR carried us to Paper Book-III / Page No. 5 where Point No. 4 of the questionnaire dated 24.08.2017 u/s 142(1) issued by the Ld. AO queried the assessee about “the details of movable and immovable properties alongwith details of investment supported by evidences”. In response to the above queries, the assessee filed two replies, copies of which are placed in the Paper-Book. Reply-I is undated and placed in Paper Book-I / Page No. 22 to 24. On Page No. 23, the assessee had submitted complete details of all movable and immovable properties in a tabular format comprising details such as name of the person holding the property, details of property, address/location, cost of acquisition, source of purchase. Thereafter, on Page No. 24,the assessee specifically filed details of all of above three properties in a tabular format with columns such as S.No, name of seller, name of purchaser, area, volume no., book-no., date of registry, actual amount of consideration and enclose documents. In Reply-II which is dated 17.10.2017 and placed in Paper-Book-I / Page No. 25 to 30, the assessee filed a comprehensive factual reply on thoseproperties vis-à-vis non-applicability of section 56(2)(vii)(b). Part of the reply is extracted below for an immediate reference: Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 9 of 29 Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 10 of 29 Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 11 of 29 Thus, Ld. AR contended, the Ld. AO has made specific queries and the assessee had also given detailed replies with regard to the impugned property. Ld. AR also carried us to Paper Book-I / Page No. 51 to 54 where a certificate of Shri Sunil Garg, Govt. Registered Valuer, is placed. It is submitted that this certificate was filed to Ld. PCIT during revision- proceeding which clearly concludes “In view of the above fact, there is no availability of buyers due to various disputes, litigation, slow down in the property market value of the above-mentioned property cannot be ascertainable. There can be only disress sale value is possible.” The certificate is scanned below: Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 12 of 29 Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 13 of 29 Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 14 of 29 Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 15 of 29 Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 16 of 29 The Ld. AR argued that even during revision-proceeding, the assessee has made all efforts to satisfy the Ld. PCIT that the provisions of section 56(2)(vii)(b) cannot be applied due to peculiar features in the transactions. (ii) Issue No. 2 –The assessee had sold plot at Parwakheda for Rs. 44,39,250/- and plot at Arwalia for Rs. 5,99,500/- for less than circle rates, which attracted section 43CAyet the Ld. AO has not made enquiries: Ld. AR carried us to Paper-Book-I / Page No. 20 to 21 where a copy of the reasons recorded by Ld. AO for re-opening of assessment is placed. The said document is scanned below: Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 17 of 29 Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 18 of 29 Analysing the contents, Ld. AR submitted that the re-opening of assessment was made only for the reason that the income taxable u/s Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 19 of 29 56(2)(vii)(b) arising from the transactions of purchase of three properties by the assessee had escaped assessment. Ld. AR submitted that the Issue No. 2 raised by Ld. PCIT was neither a reason of re- opening nor a matter which was considered by Ld. AO during the course of re-assessment proceeding in terms of the main body of section 147 / Explanation 3 to section 147. Hence the Issue No. 2 was completely out of the domain of the re-assessment proceeding conducted by Ld. AO. Therefore, based on judicial rulings in Royal Western India Turf Club Vs. PCIT ITA No. 640/Mum/2021 dated 12.10.2021; The Tata Power Company Limited Vs. PCIT Mumbai, ITA No. 1307/Mum/2020 dated 29.07.2021; Ashoka Buildcon Ltd. Vs. ACIT Write Petition No. 10160 of 2009 dated 23.04.2010; and Gulab Badgujar (HUF) Vs. CIT(Central), Nagpur ITA No. 798/PUN/2015 dated 03.05.2019, the Ld. PCIT could not exercise revisionary jurisdiction in respect of Issue No. 2 which was never a part of the re-assessment-proceeding conducted by Ld. AO. (iii) Issue No. 3 – The assessee had shown cost of Rs. 18,20,155/- as part of closing-stock/work-in-progress and also claimed that an expenditure of Rs. 35,93,257/- was incurred for Parwakheda Land, but the Ld. AO has not made enquiries: Ld. AR made same pleadings as for Issue No. 2. (iv) Issue No. 4 – The assessee has flats at Ibrahimpura, Bhopal and house at Mansab Manzil, Karbala Bhopal which attract section 22, but the Ld. AO has not made enquiries: Ld. AR made same pleadings as for Issue No. 2. (v) Issue No. 5 – There are many cash-deposit entries appearing in the bank which have not been enquired into at all by assessing officer: Ld. AR carried us to Paper Book-III / Page No. 5 where Point No. 5 of Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 20 of 29 the questionnaire dated 24.08.2017 u/s 142(1) issued by the Ld. AO queried the assessee about “bank accounts”. In response, the assessee filed complete details of all bank accounts in a tabular format comprising details such as name of bank a/c, bank a/c number, nature of bank a/c and also enclosed bank-statements. Ld. AR further submitted that the assessee has maintained regular books of account wherein all entries of bank accounts are duly accounted for. Ld. AR also contended that the Ld. PCIT has made a general remark without specifying which entries were not verified by Ld. AO. (vi) Issue No. 6 – The assessee has declared agricultural income on estimate basis while there is no agricultural land appearing in the Balance-Sheet: Ld. AR carried us to Paper Book-III / Page No. 5 where Point No. 4 of the questionnaire dated 24.08.2017 u/s 142(1) issued by the Ld. AO queried the assessee about “the details of movable and immovable properties alongwith details of investment supported by evidences”. In response, the assessee filed complete details of all movable and immovable properties in a tabular format comprising details such as name of the person holding the property, details of property, address/location, cost of acquisition, source of purchase vide reply- letter undated which is placed at Paper Book-I / Page No. 23. Drawing our attention to these details, Ld. AR pointed out that the agricultural- lands were “Ancestral” which was clearly submitted in the reply to Ld. AO. Ld. AR contended that non-appearance of agricultural land in the Balance-Sheet of assessee is due to this reason that landswere ancestral and the assessee did not make any investment out of his pocket. (vii) Issue No. 7 – The assessee has received rent from Bharti Airtel but the AO has not generated the ITS and no veracity of actual rental income Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 21 of 29 is examined as over the years no TDS is visible from such a big company. This required verification not done by the assessing officer at all: Ld. AR submitted that TDS is required only if the rental-payments exceed the threshold limit prescribed in the relevant provisions of TDS and not in all cases. Since in the present case, the threshold limits had not exceeded, there was no TDS by Bharti Airtel. Ld. AR further contended that even otherwise the TDS was a concern of M/s Bharti Airtel who paid rent to the assessee, and not a concern of assessee. Hence there is no justification on the part of Ld. PCIT to involve this issue in revisionary-action. 9. Clearly therefore, the Ld. AR contended, the assessee had filed all details / documents during the course of assessmentqua Issue No. 1, 5, 6, 7; and Issue No. 2,3,4 were out of the domain of Ld. AO. Therefore, this is not a case of “no enquiry” by Ld. AO as understood by Ld. PCIT. Still the Ld. PCIT has conducted revision only because the Ld. AO has not discussed these issues in assessment-order. Ld. AR submitted that such an approach of Ld. PCIT is not permissible u/s 263, therefore the order passed by Ld. PCIT is not in accordance with the law of section 263 and liable to be quashed. Submission of Ld. DR: 10. Per contra, Ld. DR supported the revision-order. He submitted that the assessment-order is running just in 3-4 paras and totally silent/ /cryptic on the issues raised by Ld. PCIT, which clearly demonstrates that the Ld. AO has not made enquiries as required and hence the Ld. PCIT was constrained to conduct revision-proceeding. Ld. DR also submitted that since the section 263 has been amended and Explanation 2, as reproduced below, had been introduced therein, the assessment-order is deemed to be Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 22 of 29 erroneous-cum-prejudicial to the interest of revenue if the same had been passed without inquiries or verification which should have been made: “Explanation 2 – “For the purpose 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 interest of 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) .... (d) ...” With these submissions, Ld. DR argued that the action of Ld. PCIT is very much in accordance with the mandate of section 263 and must be upheld. Our analysis: 11. We have heard the rival contentions, perused the material on record and duly considered the facts of the case in the light of applicable legal provisions. On a careful consideration of various documents placed in the Paper-Book and decided judicial rulings, to which our attention has been invited by Ld. AR in preceding paras, we find that the Issue No. 2,3,4 were out of the domain of AO and therefore the Ld. PCIT had not no jurisdiction to raise those issues in revision-proceeding. Hence the revision cannot be sustained quaIssue No. 2,3,4. Regarding Issue No. 1,5,6,7 we find that there were specific queries raised by Ld. AO and the assessee too made replies/ submissions which cannot be rebutted by revenue. Clearly, therefore, it is discernible that the Ld. AO has considered those replies / submissions and thereafter taken plausible / possible view on those issues. Thus, everything hinges on the point as to whether the assessment-order can be said to be erroneous-cum-prejudicial to the interest of revenue merely for the only reason that the Ld. AO has not discussed Issue No. 1,5,6,7 in the assessment-order or in other words not written his assessment-order as a perfectionist. In our considered view, the writing of assessment-order is a Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 23 of 29 task of AO and the same is neither controlled nor helped by the assessee. In fact, the assessee has no hand or mind in writing the assessment-order. Being so, we are afraid to accept the pleading of Ld. DR that the assessment-order could be said to be erroneous-cum-prejudicial for that reason. We are consciously aware of the decision taken by Hon’ble ITAT, Mumbai in Reliance Payment Solutions Ltd. Vs. Pr. CIT (2022) 136 taxmann.com 277 where the same view was upheld: “9. Clearly, therefore, as long as the action of the Assessing Officer cannot be said to be lacking bonafides, his action in accepting an explanation of the assessee cannot be faulted merely because it could have been lawful to make mere detailed inquiries or because he did not write specific reasons of accepting the explanation. As for learned PCIT's observations regarding accepting the explanation "without appropriate evidence", there is nothing to question the bonafides of the Assessing Officer or to elaborate as to what should have been 'appropriate' evidence. The fact remains that the specific issue raised, in the revision order was specifically looked into, detailed submissions were made and these submissions were duly accepted by the Assessing Officer. Merely because the Assessing Officer did not write specific reasons for accepting the explanation of the assessee cannot be reason enough to invoke powers under section 263, and non-mentioning of these reasons do not render the assessment order "erroneous and prejudicial to the interest of the revenue". [Emphasis supplied] 12. Regarding introduction of Explanation 2 to section 263, as claimed by Ld. DR before us, we only need to submit that the present case involves AY 2014-15 and the said amendment introduced through Finance Act, 2015 w.e.f. 01.06.2015 is interpreted to be applicable prospectively and not to AY 2014-15. Hence in the first blush, Explanation 2 is not applicable to present case. Even otherwise, it is also held in several decisions that the said Explanation does not give unfettered power to the PCIT to assume revisional- jurisdiction to revise every order of the Assessing Officer to re-examine the issues already examined during assessment-proceeding. It is judicially interpreted in several decisions that the intention of legislature behind Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 24 of 29 introduction of Explanation 2 could not have been to enable the PCIT to find fault with each and every assessment-order in unlimited terms, since such an interpretation would lead to unending litigation and there would not be any point of finality of assessment-proceeding done by Ld. AO. 13. Hon’ble ITAT, Rajkot in M/s Pramukh Realty, Junagadh, ITA No. 93/Rjt/2022 dated 30.06.2022, has extensively dealt a case where theAO raised queries during assessment-proceeding and the assessee filed details / documents. After a thorough analysis, the Hon’ble Bench has held that in such circumstances, revision u/s 263 cannot be done. The relevant paragraphs of the decision are reproduced below: “5. The learned AR before us filed a paper book running from pages 1 to 157 and contended that all the necessary details about the advances received from the parties, sales shown in the financial statement and details of the service tax returns were filed during the assessment proceedings. The learned AR further contended that the assessment was framed by the AO after considering the necessary details and verification and application of mind. The learned AR in support of his contention drew our attention on pages 151 to 153 of the paper book where the copy of the notice under section 142(1) of the Act was placed. Likewise, the learned AR also drew our attention on pages 154 to 157 of the paper book where the reply of the assessee in response to the notice issued under section 142(1) of the Act was placed. Thus, the learned AR contended that there cannot be said that the assessment order is erroneous and causing prejudice to the interest of Revenue in the given facts and circumstances on account non-verification. 6. On the contrary, the learned DR before us contended that reconciliation of the amount shown in the service tax return and financial statement was not available before the AO during the assessment proceedings. Accordingly the learned DR vehemently supported the order of the learned PCIT. 7. We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the present case relates whether the assessment order has been passed by AO without making inquiries or verification with respect to the difference in the figures as discussed above and hence the assessment is erroneous insofar prejudicial to the interest of the Revenue. Thus, requiring revision by Pr. CIT u/s 263 of the Act. 7.1 An inquiry made by the Assessing Officer, considered inadequate by the Commissioner of Income Tax, cannot make the order of the Assessing Officer erroneous. In our view, the order can be erroneous if the Assessing Officer fails to apply the law rightly on the facts of the case. As far as adequacy of inquiry is considered, there is no law which provides the extent of inquiries to be made by the Assessing Officer. It is Assessing Officer’s prerogative to make Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 25 of 29 inquiry to the extent he feels proper. The Commissioner of Income Tax by invoking revisionary powers under section 263 of the Act cannot impose his own understanding of the extent of inquiry. There were a number of judgments by various Hon’ble High Courts in this regard. 7.2 Delhi High Court in the case of CIT Vs. Sunbeam Auto 332 ITR 167 (Del.), made a distinction between lack of inquiry and inadequate inquiry. The Hon’ble court held that where the AO has made inquiry prior to the completion of assessment, the same cannot be set aside u/s 263 of the Act on the ground of inadequate inquiry. The relevant observation of Hon’ble Delhi High Court reads as under: “12. ..... There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between “lack of inquiry” and “inadequate inquiry”. If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of “lack of inquiry”, that such a course of action would be open. ——— From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Income-tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 26 of 29 15. Thus, even the Commissioner conceded the position that the Assessing Officer made the inquiries, elicited replies and thereafter passed the assessment order. The grievance of the Commissioner was that the Assessing Officer should have made further inquires rather than accepting the explanation. Therefore, it cannot be said that it is a case of ‘lack of inquiry’.” 7.3 The Hon’ble Bombay High Court in case of Gabriel India Ltd. [1993] 203 ITR 108 (Bom), discussed the law on this aspect in length in the following manner: “The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasijudicial controversies as it must in other spheres of human activity. 7.4 The Mumbai ITAT in the case of Sh. Narayan Tatu Rane Vs. ITO, I.T.A. No. 2690/2691/Mum/2016, dt. 06.05.2016 examined the scope of enquiry under Explanation 2(a) to section 263 in the following words:- “20. Further clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provision shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. CIT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO vis-à-vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying our enquiries or verification, which a reasonable and prudent officer would have carried out or not. It does not authorise or give unfettered powers to the Ld Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made. In our view, it is the responsibility of the Ld Pr. CIT to show that the enquiries or verification conducted by the AO was not in accordance with the enquries or verification that would have been carried out by a prudent officer. Hence, in our view, the question as to whether the amendment brought in by way of Explanation 2(a) shall have retrospective or prospective application shall not be relevant.” Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 27 of 29 7.5 The Hon’ble Supreme Court in recent case of Principal Commissioner of Income-tax 2 v. Shree Gayatri Associates*[2019] 106 taxmann.com 31 (SC), held that where Pr. CIT passed a revised order after making addition to assessee's income under section 69A in respect of on-money receipts, however, said order was set aside by Tribunal holding that AO had made detailed enquiries in respect of such on-money receipts and said view was also confirmed by High Court, SLP filed against decision of High Court was liable to be dismissed. The facts of this case were that pursuant to search proceedings, assessee filed its return declaring certain unaccounted income. The Assessing Officer completed assessment by making addition of said amount to assessee's income. The Principal Commissioner passed a revised order under section 263 on ground that Assessing Officer had failed to carry out proper inquiries with respect to assessee's on money receipt. In appeal, the Tribunal took a view that Assessing Officer had carried out detailed inquiries which included assessee's on-money transactions and Tribunal, thus, set aside the revised order passed by Commissioner. The Hon’ble High Court upheld Tribunal's order. The Hon’ble Supreme Court while dismissing the SLP filed by the Department held as under:- “We have heard learned counsel for the Revenue and perused the documents on record. In particular, the Tribunal has in the impugned judgment referred to the detailed correspondence between Assessing Officer and the assessee during the course of assessment proceedings to come to a conclusion that the Assessing Officer had carried out detailed inquiries which includes assessee's on-money transactions. It was on account of these findings that the Tribunal was prompted to reverse the order of revision. No question of law arises. Tax Appeal is dismissed”. 7.6 The Supreme Court in the another recent case of Principal Commissioner of Income-tax-2, Meerut v. Canara Bank Securities Ltd[2020] 114 taxmann.com 545 (SC), dismissed the Revenue’s SLP holding that 263 proceedings are invalid when AO had made enquiries and taken a plausible view in law, with the following observations: “Having heard learned counsel for the parties and having perused the documents on record, we see no reason to interfere with the view of the Tribunal. The question whether the income should be taxed as business income or as arising from the other source was a debatable issue. The Assessing Officer has taken a plausible view. More importantly, if the Commissioner was of the opinion that on the available facts from record it could be conclusively held that income arose from other sources, he could and ought to have so held in the order of revision. There was simply no necessity to remand the proceedings to the Assessing Officer when no further inquiries were called for or directed” 7.7 From an analysis of the above judicial precedents, the principle which emerges is that the phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an Assessing Officer adopts one of the course permissible in law and it has resulted in loss of revenue; or where two views are possible and the Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 28 of 29 Assessing Officer has taken one view with which the Commissioner of Income- tax does not agree, it cannot be treated as an erroneous order causing prejudice to the interests of the Revenue unless the view taken by the Assessing Officer is unsustainable in law, or the AO has completely omitted to make any enquiry altogether or the order demonstrates non-application of mind. 7.8 Now in the facts before us, in the case of the assessee the AO during the course of assessment proceedings, made enquiries on this issue and after consideration of written submissions filed by the assessee and documents / evidence placed on record, framed the assessment under section 143(3) of the Act without making the addition of the amount as note above. This fact can be verified from the notice under section 142(1) of the Act by the AO and submission in reply of the assessee against such notice. XXX 7.9 From the above it is revealed that it is not the case that the AO has not made any enquiry. Indeed the Pr. CIT initiated proceedings under section 263 of the Act on the ground that the AO has not made enquiries or verification which should have been made in respect of cash deposited during the demonization period. It is not the case of the Pr. CIT that the Ld. AO did not apply his mind to the issue on hand or he had omitted to make enquiries altogether. In the instant set of facts, the AO had made enquiries and after consideration of materials placed on record accepted the genuineness of the claim of the assessee. 7.10 At this juncture, it is also important to note that the learned PCIT in his order passed under section 263 of the Act has made reference to the explanation 2 of section 263 of the Act. It was attempted by the learned PCIT to hold that there were certain necessary enquiries which should have been made by the AO during the assessment proceedings but not conducted by him. Therefore, on this reasoning the order of the AO is also erroneous insofar prejudicial to the interest of revenue. In this regard, we make our observation that the learned PCIT has also not specified the nature and the manner in which the enquiries which should have been conducted by the AO in the assessment proceedings. Thus, in the absence of any specific finding of the learned PCIT with respect to the enquiries which should have been made, we are not convinced by his order passed under section 263 of the Act.” 14. In view of above discussion and for the reasons stated therein, we are persuaded to hold that the facts of the present case do not warrant application of section 263 for any of the seven issues raised by Ld. PCIT. Therefore, the revision-order passed by Ld. PCIT is not a valid order. We, thus, quash the revision-order and restore the original assessment-order passed by Ld. AO. The assessee succeeds in this appeal. Shri Khalid Aman ITA No.225/Ind/2021 Assessment year 2014-15 Page 29 of 29 15. Resultantly, this appeal of assessee is allowed. Order pronounced as per Rule 34 of I.T.A.T. Rules, 1963 on 10/01/2023. Sd/- Sd/- (SUCHITRA KAMBLE) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore दनांक/Dated : 10.01.2023 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore 1. Date of taking dictation 13.12.22 2. Date of typing & draft order placed before the Dictating Member 13.12.22 3. Date on which the approved draft comes to the Sr. P.S./P.S. 13.12.22 4. Date on which the approved draft is placed before other Member 5. Date on which the fair order is placed before the Dictating Member for pronouncement 6. Date on which the file goes to the Bench Clerk 7. Date on which the file goes to the Head Clerk 8. Date on which the file goes to the Assistant Registrar for signature on the order 9. Date of dispatch of the Order