MUKESH H SANGHVI, MUMBAI V. CIT-15, MUMBAI

ITA 2271/MUM/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0409 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 03-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHANTANU SAIKIA
• Keywords: Revenue expenditure; Capital expenditure
• Section: 143(3); 142(1); 263; 63

Judgement Text

1 ITA NO.2271/MUM/2014 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B, MUMBAI BEFORE SHRI D.T. GARASIA (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.2271/MUM/2014 (ASSESSMENT YEAR 2009-10) SHRI MUKESH H SANGHVI GRD FLOOR, 51, KAPOL NIWAS 1 ST CARPENTER STREET, MUMBAI PAN : AAGPS1251H VS CIT-15, MUMBAI APPELLANT RESPONDENT APPELLANT BY SHRI PRAKASH PANDIT RESPONDENT BY SHRI SHANTANU SAIKIA DATE OF HEARING 22-06-2017 DATE OF PRONOUNCEMENT 11-08-2017 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF COMMISSIONER OF INCOME-TAX-15, MUMBAI DATED 12-03-2 014 PASSED U/S 263 OF THE ACT AND IT PERTAINS TO ASSESSMENT YEAR 2009-10. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S IN THE BUSINESS OF DEALING IN FERROUS AND NON FERROUS METALS, FILED HI S RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 19-02-2010 DECLARING TOT AL INCOME OF RS.12,91.361/-. THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS AND NOTICES U/S 143(2) AND 142(1) OF THE ACT WERE ISSUED. IN R ESPONSE TO NOTICES, THE 2 ITA NO.2271/MUM/2014 AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED AND FILED DETAILS VIDE LETTERS DATED 16-06-2011, 01-12-2011, 05-12-02011 A ND 09-12-2011. THE ASSESSMENT WAS COMPLETED U/S 143(3) ON 29-12-2011 D ETERMINING TOTAL INCOME OF RS.11,94,100 INTERALIA MAKING ADDITION TOWARDS I NTEREST RECEIVED FROM HDFC BANK OF RS.11,413. 3. SUBSEQUENTLY, THE CIT-15, MUMBAI ISSUED A SHOW CAUS E NOTICE DATED 27- 01-2014 AND ASKED THE ASSESSEE AS TO WHY ASSESSMENT ORDER PASSED BY THE AO U/S 143(3) OF THE ACT, DATED 29-12-2011 SHALL NOT B E REVISED UNDER THE PROVISIONS OF SECTION 263 OF THE ACT. THE CIT PROP OSED TO REVISE THE ASSESSMENT ORDER ON THE GROUND THAT THE AO HAS NOT VERIFIED THE ISSUE OF UNSECURED LOANS BORROWED BY THE ASSESSEE AND INTERE ST PAID ON SUCH LOANS CORRESPONDING WITH LOANS AND ADVANCES GIVEN TO OTHE RS AND INTEREST CHARGED ON SUCH LOANS. THE CIT PROPOSED TO REVISE THE ASSE SSMENT ORDER ON THE ISSUE OF PURCHASES MADE BY THE ASSESSEE FROM CERTAIN PARTIES AND CORRESPONDING SUNDRY CREDITORS. THE CIT OBSERVED THAT THE ASSESS EE HAS BORROWED UNSECURED LOANS AND ON THE SAME INTEREST HAS BEEN PAID, WHERE AS NO INTEREST HAS BEEN CHARGED ON LOANS AND ADVANCES GIVEN TO OTHERS. THE CIT FURTHER OBSERVED THAT THE ASSESSEE HAS SHOWN SUNDRY CREDITORS OF RS.8.89 CRORES ON TOTAL PURCHASES OF RS.16.86 CRORES WHICH IS MORE THAN THE PREVAILIN G TREND IN THE INDUSTRY WHICH ASPECT HAS NOT BEEN EXAMINED BY THE AO. IT W AS FURTHER OBSERVED THAT 3 ITA NO.2271/MUM/2014 LARGE NUMBER OF PARTIES FROM WHOM PURCHASES SHOWN T O HAVE BEEN MADE BY THE ASSESSEE ARE LISTED BY THE MAHARASHTRA SALES-TA X DEPARTMENT AS SUSPICIOUS HAWALA DEALERS. THE AO NOT ONLY EXAMINED THE ISSUE OF INTEREST CHARGED ON LOANS AND ADVANCES AND ALSO PURCHASES EFFECTED FROM ALLEGED HAWALA DEALERS, BUT ALSO FAILED TO APPLY HIS MIND TO THE FACTS. TH EREFORE, THE ASSESSMENT ORDER PASSED BY THE AO IS ERRONEOUS INSOFAR AS IT IS PREJ UDICIAL TO THE INTEREST OF THE REVENUE. 4. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE SUBM ITTED THAT ASSESSMENT ORDER PASSED BY THE AO U/S 143(3) OF THE ACT, DATED 29-12-2011 IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST O F THE REVENUE AS THE AO HAS CAUSED NECESSARY ENQUIRIES WITH REGARD TO THE LOANS AND ADVANCES GIVEN TO THREE PARTIES AND ALSO CALLED FOR NAMES AND ADDRESS ES OF THE SUNDRY CREDITORS FROM WHOM PURCHASES WERE EFFECTED. THE ASSESSEE HA S ALSO FILED NECESSARY DETAILS OF LOANS AND ADVANCES AND EXPLAINED TO THE AO THAT THE ADVANCES GIVE TO OTHER PARTIES AS OBSERVED BY THE CIT ARE NORMAL BUSINESS ADVANCES WHICH DID NOT CARRY ANY INTEREST. SIMILARLY, IN RESPECT OF PURCHASES AND SUNDRY CREDITORS, THE ASSESSEE HAS FURNISHED BOOKS OF ACCO UNT AND OTHER RELEVANT DOCUMENTS INCLUDING STOCK STATEMENTS TO JUSTIFY PUR CHASES MADE FROM THE ABOVE PARTIES. THE AO, AFTER SATISFYING WITH THE E XPLANATIONS OF THE ASSESSEE HAS CHOSEN TO COMPLETE THE ASSESSMENT WHICH IS EVID ENT FROM THE FACT THAT THE 4 ITA NO.2271/MUM/2014 AO HAS CALLED FOR VARIOUS DETAILS ON NUMBER OF OCCA SIONS FOR WHICH THE ASSESSEE HAS FILED DETAILS VIDE LETTERS DATED 16-06 -2011, 01-12-2011, 05-12- 2011 AND 09-12-2011. THEREFORE, ASSESSMENT ORDER P ASSED BY THE AO CANNOT BE TERMED AS ERRONEOUS INSOFAR AS IT IS PREJUDICI AL TO THE INTEREST OF THE REVENUE. 5. THE CIT, AFTER CONSIDERING THE SUBMISSIONS OF THE A SSESSEE OBSERVED THAT THE ASSESSMENT ORDER PASSED BY THE AO U/S 143(3) IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE AS THE A O HAS FAILED TO EXAMINE THE ISSUES POINTED OUT IN THE SHOW CAUSE NOTICE WITH RE FERENCE TO BOOKS OF ACCOUNT AND OTHER RELEVANT DETAILS. THE ASSESSMENT ORDER P ASSED BY THE AO IS BRIEF AND CRYPTIC AND DOES NOT SHOW ANY LIGHT ON THE VERIFICA TION CARRIED OUT BY THE AO IN RESPECT OF LOANS AND ADVANCES AND SUNDRY CREDITORS. THE AO BEING A QUASI JUDICIAL AUTHORITY IS EXPECTED TO CARRY OUT NECESSA RY ENQUIRIES BEFORE COMPLETION OF ASSESSMENT. HOWEVER, ON PERUSAL OF A SSESSMENT RECORDS IT IS EVIDENT THAT THE AO CALLED FOR CERTAIN DETAILS WI TH REGARD TO THE LOANS AND ADVANCES AND SUNDRY CREDITORS. IT IS A FACT THAT T HE AO HAS NOT CARRIED OUT NECESSARY ENQUIRIES WHICH CAUSED PREJUDICE TO THE I NTEREST OF THE REVENUE. THE CIT FURTHER OBSERVED THAT FOR THE PURPOSE OF IN VOKING JURISDICTION U/S 263 OF THE ACT, IT IS SETTLED LAW THAT THE REVISIONAL A UTHORITY SHOULD APPLY THE TEST AS TO WHETHER SUCH AN ORDER SHOULD BE CONSIDERED AS ER RONEOUS NOT ONLY FOR THE 5 ITA NO.2271/MUM/2014 REASON THAT IT CONTAINS SOME APPARENT ERROR OF REAS ONING OF LAW OR OF THE FACT ON THE FACE OF IT, BUT ALSO FOR THE REASON WHETHER IT IS AN ORDER WHEREIN THE AO SIMPLY ACCEPTED WHAT ASSESSEE HAS STATED IN HIS WRI TTEN SUBMISSION OR OTHER PARTICULARS FURNISHED BY HIM AND FAILED TO MAKE THE ENQUIRIES WHICH WERE CALLED FOR ON THE FACTS AND CIRCUMSTANCES OF THE CA SE. APPLIED THE ABOVE TEST, IT WOULD BE CLEAR FROM THE ABOVE DISCUSSION THAT THE A O HAS NOT EXAMINED THE ABOVE ISSUES WHICH WERE CALLED FOR, ON THE FACTS AN D CIRCUMSTANCES AND HENCE, THE IMPUGNED ASSESSMENT ORDER IS HELD AS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE . WITH THESE OBSERV ATIONS AND ALSO RELYING UPON THE DECISION OF HONBLE SUPREME COURT, IN THE CASE OF MALABAR INDUSTRIAL CO LTD 243 ITR 83 (SC), THE CIT SET ASIDE THE ORDER PASSED BY THE AO U/S 143(3) DATED 29-12-2011 AND DIRECTED THE AO TO PASS ASSESSMENT O RDER AFRESH AFTER PROPER ENQUIRY IN LINE WITH THE REQUIREMENT GIVEN IN CASS AND FOLLOWING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THE ASSES SMENT ORDER PASSED BY THE AO U/S 143(3) DATED 29-12-2011 IS NEITHER ER RONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE AS THE AO HAS EXAMINED THE ISSUES POINTED OUT BY THE CIT IN THE REVISION PROCEEDINGS. THE LD.AR FUR THER SUBMITTED THAT THE CIT WAS NOT CORRECT IN DIRECTING THE AO TO CONDUCT FURT HER ENQUIRIES WITH REGARD TO 6 ITA NO.2271/MUM/2014 THE ISSUES WHICH WERE ALREADY EXAMINED BY THE AO BY ISSUING SPECIFIC QUESTIONNAIRE FOR WHICH THE ASSESSEE HAS FILED NECE SSARY DETAILS. THE LD.AR REFERRING TO THE PAPER BOOK FILED, SUBMITTED THAT T HE AO HAS ISSUED VARIOUS NOTICES ON NUMBER OF OCCASIONS FOR WHICH THE ASSESS EE HAS FILED HIS SUBMISSIONS VIDE LETTERS DATED 16-06-2011, 01-12-2011, 05-12-2011 AN D 09- 12-2011 WHICH IS EVIDENT FROM THE FACT THAT THE AO HIMSELF HAS RECORDED THE DATES OF HEARING IN THE ASSESSMENT ORDER. THE LD.A R FURTHER SUBMITTED THAT ONCE THE ISSUES ON WHICH THE CIT WANTS FURTHER VER IFICATION WAS ALREADY DONE BY THE AO IN THE ASSESSMENT PROCEEDINGS, THEN THE C IT CANNOT ASSUME JURISDICTION U/S 263 UNDER THE GUISE OF LACK OF ENQ UIRY OR INADEQUATE ENQUIRY. ONCE IT IS PROVED THAT THE AO HAS CALLED FOR NECESS ARY DETAILS ON THE ISSUES ON WHICH THE CIT WANTS FURTHER VERIFICATION IT IS GENE RAL PRESUMPTION OF LAW THAT THE AO HAS APPLIED HIS MIND TO THE FACTS OF THE CAS E IN THE LIGHTS OF LAW APPLICABLE ON THOSE ISSUES. HOWEVER, CIT CANNOT PR ESUME THAT THE AO HAS NOT APPLIED HIS MIND. SINCE THE AO HAS CALLED FOR NECE SSARY DETAILS WITH REGARD TO THE ISSUES QUESTIONED BY THE CIT IN REVISION PROCEE DINGS, THE CIT CANNOT ASSUME JURISDICTION TO REVISE THE ASSESSMENT ORDER. THE LD.AR RELIED UPON THE DECISION OF HONBLE HIGH COURT OF BOMBAY IN THE CAS E OF CIT VS FINE JEWELLERY (INDIA) LTD (2015) 372 ITR 303 (BOM) AND ALSO THE D ECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT VS GERA DEVELOPMENT P LTD (2016) 387 ITR 691 (BOM). 7 ITA NO.2271/MUM/2014 THE ASSESSEE FURTHER RELIED UPON THE FOLLOWING JUDG EMENTS:- 1. T. MRTHIMARAN VS DCIT 69 SOT 521 (CHEN.TRIB) 2. MALABAR INDUSTRIAL CO LTD VS CIT 243 ITR 83 (SC) 3. K.N. AGRAWAL VS CIT 189 ITR 769 (ALL) 4. CIT VS KANDA RICE MILLS 178 ITR 446 (P&H) 5. CIT VS DEEPAK PEARL ESTATE 367 ITR 377 (RAJ) 6. CIT VS NIRMA CHEMICAL WORKS P LTD 309 ITR 67 (GU J) 7. CIT VS GABRIEL INDIA LTD 203 ITR 108 (BOM) 7. ON THE OTHER HAND, THE LD.DR SUBMITTED THAT THE CIT HAS RIGHTLY ASSUMED JURISDICTION TO REVISE THE ASSESSMENT ORDER U/S 263 OF THE ACT AS THE ASSESSMENT ORDER PASSED BY THE AO IS ERRONEOUS INSOFAR AS IT I S PREJUDICIAL TO THE INTEREST OF THE REVENUE WHICH IS EVIDENT FROM THE FACT THAT THE ASSESSMENT ORDER PASSED BY THE AO IS BRIEF AND CRYPTIC WHICH DOES NOT SHOW ANY LIGHT ON THE ASPECT OF VERIFICATION OF TWO ISSUES POINTED OUT BY THE CIT. THE LD.DR FURTHER SUBMITTED THAT THE CIT HAS RIGHTLY POINTED OUT THAT THE ASSES SEE HAS BORROWED UNSECURED LOAN AND PAID INTEREST ON SUCH LOANS WHEREAS NOT CH ARGED ANY INTEREST ON LOANS AND ADVANCES GIVEN TO OTHERS. THE AO NOT ONLY FAIL ED TO EXAMINE THE ISSUE OF LOANS AND ADVANCES AND ALSO FAILED TO APPLY HIS MIN D WHETHER THE ASSESSEE HAS DIVERTED INTEREST BEARING FUNDS TO GIVE LOANS AND A DVANCES TO OTHERS WHICH CAUSED PREJUDICES TO THE INTEREST OF THE REVENUE. THE LD.DR FURTHER SUBMITTED 8 ITA NO.2271/MUM/2014 THAT INSOFAR AS PURCHASES MADE FROM CERTAIN PARTIES , WHO ARE LISTED IN THE LIST PREPARED BY THE MAHARASHTRA SALES-TAX DEPARTMENT AS SUSPICIOUS HAWALA DEALERS, THE AO FAILED TO GATHER NECESSARY INFORMAT ION AND CONDUCT ENQUIRIES WHICH SHOWS NON APPLICATION OF MIND BY THE AO ON TH E ISSUE AND HENCE, THE CIT WAS RIGHT IN REVISING THE ASSESSMENT ORDER U/S 263 OF THE ACT AND HIS ORDER SHOULD BE UPHELD. 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIA LS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE CIT ASSUMED JURISDICTION TO REVISE THE ASSESSMENT ORDER FOR THE REASON THAT THE AO HAS NOT CONDUCTED REQUIRED ENQUIRIES IN RELATION TO LOANS A ND ADVANCES AND SUNDRY CREDITORS WHICH CAUSED PREJUDICE TO THE INTEREST OF THE REVENUE. ACCORDING TO THE CIT, THE ASSESSEE HAS BORROWED UNSECURED LOAN A ND ALSO ADVANCED LOANS TO THIRD PARTIES WITHOUT CHARGING ANY INTEREST. THE C IT FURTHER OBSERVED THAT ON VERIFICATION OF PURCHASE MADE BY THE ASSESSEE IT IS VERY CLEAR THAT THE ASSESSEE HAS EFFECTED PURCHASES FROM CERTAIN PARTIES, WHO AR E LISTED AS SUSPICIOUS HAWALA DEALERS. IT WAS FURTHER OBSERVED THAT SUNDR Y CREDITORS SHOWN AGAINST PURCHASES ARE ABNORMALLY MORE THAN THE INDUSTRIAL A VERAGE WHICH ASPECT HAS NOT BEEN EXAMINED BY THE AO. THE CIT FURTHER OBSER VED THAT THOUGH THE AO HAS CALLED FOR CERTAIN DETAILS, WHILE COMPLETING TH E ASSESSMENT, HE FAILED TO CONDUCT NECESSARY ENQUIRIES IN THE LIGHT OF THE FAC TS OF THE PRESENT CASE WHICH IS 9 ITA NO.2271/MUM/2014 EVIDENT FROM THE FACT THAT THE ASSESSMENT ORDER PAS SED BY THE AO IS BRIEF AND CRYPTIC WHICH DOES NOT SHOW ANY LIGHT ON THE ASPECT OF VERIFICATION OF THE ABOVE TWO ISSUES. 9. THE CIT REVISED THE ASSESSMENT ORDER ON THE GROUND THAT THE AO HAS FAILED TO CONDUCT REQUIRED ENQUIRIES OR ENQUIRIES CONDUCTE D BY THE AO IS INADEQUATE WHICH IS EVIDENT FROM THE FACT THAT THE ASSESSMENT ORDER PASSED BY THE AO IS BRIEF AND CRYPTIC. THE CIT ISSUED A SHOW CAUSE NOT ICE AND QUESTIONED TWO ISSUES, I.E. UNSECURED LOAN BORROWED BY THE ASSESSE E AND INTEREST PAID ON SUCH UNSECURED LOANS AND LOANS AND ADVANCES GIVEN TO OTH ERS WITHOUT CHARGING ANY INTEREST AND PURCHASES MADE FROM CERTAIN PARTIES A ND SUNDRY CREDITORS. THE ASSESSEE CLAIMS THAT TWO ISSUES POINTED OUT BY THE CIT IN THE REVISION PROCEEDINGS HAS BEEN EXAMINED BY THE AO IN THE ASSE SSMENT PROCEEDINGS BY A SPECIFIC QUESTIONNAIRE FOR WHICH THE ASSESSEE HAS R EPLIED ON VARIOUS DATES BY FILING DETAILS OF LOANS AND ADVANCES AND ALSO NAMES AND ADDRESSES OF THE PERSONS FROM WHOM THE PURCHASES WERE MADE AND ALSO LIST OF SUNDRY CREDITORS HAVING A BALANCE OF MORE THAN RS.1 LAKH. THE AO HA S SATISFIED WITH THE DETAILS FILED BY THE ASSESSEE AS HE CHOSE TO ACCEPT THE ISS UES. THEREFORE, WE ARE OF THE VIEW THAT ONCE THE AO HAS CONDUCTED NECESSARY ENQUI RIES ON THE ISSUES ON WHICH THE CIT WANTS FURTHER VERIFICATION, THE CIT C ANNOT ASSUME JURISDICTION UNDER THE GUISE OF INSUFFICIENT OR INADEQUATE ENQUI RIES. 10 ITA NO.2271/MUM/2014 10. THE ASSESSEE HAS FILED A PAPER BOOK CONTAINING VARI OUS DETAILS FILED BEFORE THE AO. THE ASSESSEE ALSO FILED A COPY OF INSTRUCT ION NO.7/2004 ISSUED BY CBDT EXPLAINING THE SCOPE OF ENQUIRY IN CASES SELECTED F OR SCRUTINY ON THE BASIS OF AIR / CID / 26AS MISMATCH. ON PERUSAL OF THE PAPER BOO K FILED BY THE ASSESSEE, WE FIND THAT THE AO HAS ISSUED VARIOUS SHOW CAUSE NOTI CES CALLING FOR THE DETAILS OF UNSECURED LOAN, LOANS AND ADVANCES, DETAILS OF QUA NTITATIVE DETAILS OF ITEMS DEALT, CONFIRMATION FROM LOAN CREDITORS AND SUNDRY CREDITORS. THE ASSESSEE HAS FILED ALL THE DETAILS VIDE LETTER DATED 16-06-2011, 01-12-2011, 05-12-2011 AND 09-12-2011 WHICH IS EVIDENT FROM THE FACT THAT THE AO HAS RECORDED THE DATES OF HEARING AND DETAILS SUBMITTED BY THE ASSESSEE IN THE BODY OF THE ASSESSMENT ORDER. ON VERIFICATION OF THE DETAILS FILED BY THE ASSESSEE, WE FIND THAT THE AO HAS POSED A SPECIFIC QUESTION FOR LOANS AND ADVANCE S AND ALSO PURCHASES MADE BY THE ASSESSEE AND OUTSTANDING SUNDRY CREDITORS SH OWN AS AT THE END OF THE FINANCIAL YEAR. THE ASSESSEE HAS FILED ALL THE DET AILS EXPLAINING THE LOAN GIVEN TO OTHERS AS PER WHICH THE LOANS GIVEN IN THE NORMAL C OURSE OF BUSINESS WITHOUT ANY CONDITION AS TO CHARGING INTEREST. INSOFAR AS THE PURCHASES AND SUNDRY CREDITORS, THE ASSESSEE HAS FILED A LIST OF SUNDRY CREDITORS HAVING OUTSTANDING BALANCE OF MORE THAN RS.1 LAKH WITH NAMES AND ADDRE SSES AND ALSO PAN. THE ASSESSEE ALSO FILED CONFIRMATION LETTERS FROM THE S UNDRY CREDITORS. THE AO, AFTER SATISFYING WITH THE DETAILS FILED BY THE ASSE SSEE HAS ACCEPTED THE 11 ITA NO.2271/MUM/2014 EXPLANATION WITH REGARD TO THOSE TWO ISSUES. THERE FORE, WE ARE OF THE VIEW THAT THE CIT WAS INCORRECT IN OBSERVING THAT THE AO HAS NOT CONDUCTED NECESSARY ENQUIRIES ON THE ISSUES ON WHICH HE WANTS FURTHER VERIFICATION. 11. THE CIT HAS POWER TO REVISE ASSESSMENT ORDER U/S 26 3 OF THE ACT, BUT TO INVOKE THE PROVISIONS OF SECTION 263, TWIN CONDITIO NS EMBEDDED IN THE SECTION MUST BE SATISFIED, I.E. (I) THE ORDER OF THE AO IS ERRONEOUS; (II) IT MUST BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. UNLESS BOTH THE CONDITIONS ARE SATISFIED, THE CIT CANNOT ASSUME JURISDICTION U/S 2 63 OF THE ACT. IT IS NOT NECESSARY THAT EVERY ORDER WHICH IS ERRONEOUS, MAY BE PREJUDICIAL TO THE INTEREST OF THE REVENUE OR VICE VERSA. IN SOME CAS ES, THE ASSESSMENT ORDER MAY BE ERRONEOUS BUT IT MAY NOT BE PREJUDICIAL TO THE I NTEREST OF THE REVENUE. UNLESS THE ORDER PASSED BY THE AO IS ERRONEOUS AND ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE, THE CIT CANNOT ASSUME JURI SDICTION TO REVISE THE ASSESSMENT ORDER, THIS IS BECAUSE THE TWIN CONDITIO NS I.E. THE ORDER OF THE AO IS ERRONEOUS; IT MUST BE PREJUDICIAL TO THE INTEREST O F THE REVENUE CO-EXIST. IN THE PRESENT CASE, ON PERUSAL OF THE FACTS, WE FIND THAT THE AO HAS CAUSED NECESSARY ENQUIRIES ON THE TWO ISSUES ON WHICH CIT WANTS FURT HER VERIFICATION WHICH IS EVIDENT FROM THE FACT THAT THE AO HAS ISSUED SHOW C AUSE NOTICE CALLING FOR VARIOUS DETAILS. NO DOUBT, THE ASSESSMENT ORDER PA SSED BY THE AO IS BRIEF AND CRYPTIC WHICH DOES NOT SHOW ANY LIGHT ON THE VERIFI CATION OF TWO ISSUES, BUT THE 12 ITA NO.2271/MUM/2014 FACTS REMAIN THAT THE AO HAS CAST NECESSARY ENQUIRI ES AND THE ASSESSEE HAS FURNISHED NECESSARY DETAILS WHICH FACT IS NOT DISPU TED BY THE CIT. THE CITS ONLY POINT IS THAT ENQUIRIES CONDUCTED BY THE AO ARE INA DEQUATE. NO DOUBT, IN THE OPINION OF THE CIT, THE AO OUGHT TO HAVE CONDUCTED FURTHER ENQUIRIES. BUT THAT ITSELF IS NOT A GROUND FOR REVISION OF ASSESSMENT O RDER U/S 263 BECAUSE ONCE THE ISSUES ON WHICH THE CIT WANTS FURTHER VERIFICATION WAS ALREADY EXAMINED BY THE AO, THEN THERE IS NO SCOPE FOR THE CIT TO CONDUCT F URTHER ENQUIRIES BY HOLDING THAT THE ENQUIRIES CONDUCTED BY THE AO ARE INADEQUA TE. 12. NOW IT IS PERTINENT TO DISCUSS THE CASE LAWS RELIED UPON BY THE ASSESSEE. THE ASSESSEE HAS RELIED UPON THE DECISION OF HONBL E BOMBAY HIGH COURT IN THE CASE OF CIT VS FINE JEWELLERY (INDIA) LTD (SUPRA). THE HONBLE BOMBAY HIGH COURT, UNDER SIMILAR SET OF FACTS HAS OBSERVED THAT ONCE THE AO HAS CALLED FOR CERTAIN DETAILS TO WHICH THE ASSESSEE HAS RESPONDED , THAT ITSELF WOULD BE AN INDICATION OF APPLICATION OF MIND BY THE AO WHILE P ASSING THE ASSESSMENT ORDER. THE FACT THAT THE ASSESSMENT ORDER DID NOT CONTAIN ANY DISCUSSION WITH REGARD TO THE ASPECT OF VERIFICATION ON THE ISSUES WOULD N OT BY ITSELF INDICATE NON APPLICATION OF MIND TO THE ISSUES BY THE AO IN VIEW OF THE SPECIFIC QUERIES MADE DURING THE ASSESSMENT PROCEEDINGS AND THE ASSESSES RESPONSE TO IT. THE RELEVANT PORTION OF THE JUDGMENT IS EXTRACTED BELOW :- HELD, DISMISSING THE APPEAL, THAT THE ORDER OF THE TRIBUN AL DID RECORD THE FACT THAT SPECIFIC QUERIES WERE MADE DURING THE 13 ITA NO.2271/MUM/2014 ASSESSMENT PROCEEDINGS WITH REGARD TO THE DETAILS O F EXPENDITURE CLAIMED UNDER THE HEAD 'MISCELLANEOUS E XPENSES' AGGREGATING TO RS. 2.94 CRORES. THE ASSESSEE HAD RE SPONDED TO THE QUERIES AND ON CONSIDERATION OF ITS RESPONSE, T HE ASSESSING OFFICER HELD THAT ONLY AN AMOUNT OF RS. 17.98 LAKHS INCURRED ON ACCOUNT OF REPAIRS AND MAINTENANCE OUT OF RS. 2.94 CRORES WAS CAPITAL EXPENDITURE. THIS ITSELF WOULD BE AN INDICA TION OF APPLICATION OF MIND BY THE ASSESSING OFFICER WHILE PASSING THE ORDER. THE FACT THAT THE ASSESSMENT ORDER DID NOT C ONTAIN ANY DISCUSSION WITH REGARD TO THE BALANCE AMOUNT OF EXP ENDITURE OF RS. 1.76 CRORES, I.E., RS. 2.94 CRORES LESS RS. 17. 98 LAKHS CLAIMED AS REVENUE EXPENDITURE WOULD NOT BY ITSELF INDICATE NO N- APPLICATION OF MIND TO THIS ISSUE BY THE ASSESSING OFFICER IN VIEW OF THE SPECIFIC QUERIES MADE DURING THE ASSESS MENT PROCEEDINGS AND THE ASSESSEE'S RESPONSE TO IT. MORE OVER, FROM THE NATURE OF EXPENDITURE AS EXPLAINED BY THE ASSESSEE TO THE ASSESSING OFFICER DURING THE ASSESSMENT PROC EEDINGS THE VIEW THAT THE EXPENSES WERE IN THE REALM OF REVENUE EXPENDITURE, WAS A POSSIBLE VIEW. THEREFORE, THERE WAS NO FAULT IN THE ORDER OF THE TRIBUNAL HAVING FOLLOWED THE BI NDING DECISION OF THE SUPREME COURT WHILE ALLOWING THE APPEAL BEFO RE IT. 13. THE ASSESSEE ALSO RELIED UPON THE DECISION OF BOMBA Y HIGH COURT, IN THE CASE OF CIT VS GERA DEVELOPERS P LTD (SUPRA). THE HONBLE HIGH COURT, UNDER SIMILAR FACTS HAS OBSERVED THAT THE AO HAD CONSIDER ED THE ISSUE BY RAISING QUESTIONS DURING THE ASSESSMENT PROCEEDINGS AND THE ASSESSEE RESPONDED JUSTIFYING THE EXPENSES. THE MERE FACT THAT THERE WAS NO DISCUSSION IN THE ASSESSMENT ORDER WOULD NOT IPSO FACTO LEAD TO THE C ONCLUSION THAT THE AO HAS NOT APPLIED HIS MIND. IF THE AO WAS SATISFIED WITH THE RESPONSE OF THE ASSESSEE ON THE ISSUE AND DROPPED THE LIKELY ADDITION, IT CO ULD NOT BE SAID TO BE NON APPLICATION OF MIND TO THE ISSUES AROSE BEFORE THE AO. THE RELEVANT PORTION OF 14 ITA NO.2271/MUM/2014 THE JUDGMENT IS EXTRACTED BELOW:- HELD, DISMISSING THE APPEAL, THAT ON THE ISSUE OF TAXABIL ITY OF THE TRANSFER OF DEVELOPMENT RIGHTS, THE ASSESSING O FFICER FORMED AN OPINION ON THE FACTS BEFORE HIM AND SUCH AN OPINION COULD NOT BE SAID TO BE ERRONEOUS AS IT DID NOT PRO CEED ON AN INCORRECT ASSUMPTION OF FACTS OR LAW AND THE VIEW T AKEN WAS A POSSIBLE VIEW. WHERE TWO VIEWS WERE POSSIBLE AND TH E OFFICER HAD TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DID NOT AGREE, THE ORDER COULD NOT BE TREATED AS ERRONEOUS AND PRE JUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER ITSELF WAS UNSUSTAINABLE IN LAW. WITH REGARD TO THE WARRANTY EXPENSES, THE ASSESSING 'OFFICER HAD C ONSIDERED THE ISSUE BY RAISING QUESTIONS DURING THE ASSESSMEN T PROCEEDINGS AND THE ASSESSEE RESPONDED JUSTIFYING T HE WARRANTY EXPENSES.IE MERE FACT THAT THERE WAS NO DI SCUSSION DISCUSSION IN THE ASSESSMENT ORDER WOULD NOT IPSO F ACTO LEAD TO THE CONCLUSION THAT THE ASSESSING OFFICER DID NOT APPLY HIS , MIND. IF THE ASSESSING OFFICER WAS SATISFIED WITH THE RESPON SE OF THE ASSESSEE ON THE ISSUE AND DROPPED THE LIKELY ADDITI ON, IT COULD NOT BE SAID TO BE NON-APPLICATION OF MIND TO THE IS SUE ARISING BEFORE THE ASSESSING OFFICER. 14. IN THIS VIEW OF THE MATTER AND ALSO CONSIDERING THE RATIO OF THE CASE LAWS DISCUSSED ABOVE, WE ARE OF THE VIEW THAT THE ASSESS MENT ORDER PASSED BY THE AO U/S 143(3) OF THE ACT, DT 29-12-2011 IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. THEREFORE, WE QUASH T HE ORDER PASSED BY THE CIT U/S 263 OF THE ACT, AND RESTORE THE ASSESSMENT ORDE R PASSED BY THE AO U/S 143(3) OF THE ACT. 15 ITA NO.2271/MUM/2014 14. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH AUGUST, 2017. SD/- SD/- (D.T. GARASIA) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 11 TH AUGUST, 2017 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI