PVS Multiplex (India) Ltd., Meerut V. CIT, Meerut

ITA 2370/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97055 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 01-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 22-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIVEK WADEKAR
• Keywords: Business income; Proportionate interest; Question of law; Right to appeal; Revenue expenditure
• Section: 143(3); 263; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F : NEW DELHI BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER ITA NO.2370/DEL /2013 ASSESSMENT YEAR : 2008-2009 PVS MULTIPLEX (INDIA) LTD. VS. COMMISSIONER OF INC OME TAX, 328, KISHANPURA, MEERUT. BAGHPAT ROAD, MEERUT- 250002 (PAN AACCP 8168 R) (APPELLANT) (RESPONDENT) DATE OF HEARING : 01.07.2015 DATE OF PRONOUNCEMENT : ..08.2015 ASSESSEE BY : SRI SU NIL KUMAR, FCA RESPONDENT BY: SRI VI VEK WADEKAR, CIT. D.R. ORDER PER CHANDRA MOHAN GARG, JUDICIAL MEMBER 1. THIS APPEAL BY THE ASSESSEE HAS BEEN DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX, MEERUT DATED 25.03.2013 PASSED U/S 263 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) FOR AY 2 008-09. ITA NO. 2370/DEL/2013 2 2. THE GROUND NOS. 1 & 7 OF THE ASSESSEE ARE OF GEN ERAL IN NATURE, WHICH NEED AT NO ADJUDICATION. REMAINING GROUNDS OF THE A SSESSEE READS AS UNDER:- 2. THAT THE LD. CIT IS NOT LEGALLY JUSTIFIED IN IS SUING THE NOTICE U/S 263 OF THE IT ACT, 1961 AND IS ALSO NOT JUSTIFIED IN HOLDI NG THE VALIDITY OF NOTICE U/S 263 WHEN SPECIFICALLY CHALLENGED DURING PROCEED INGS U/S 263 ON THE BASIS OF FACTS, LAW AND CIRCUMSTANCES OF THE MATTER , INCLUDING THE FOLLOWING:- A. THAT THE ASSESSMENT ORDER DATED 29.12.2010 AS PA SSED BY THE ADD. COMMISSIONER OF INCOME TAX, RANGE-2, MEERUT WAS NEI THER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. B. THAT THE LD CIT HAD NO JURISDICTION TO INVOKE TH E PROVISIONS OF SECTION 263 OF THE IT ACT, 1961. C. THAT THE LD. ASSESSING OFFICER HAS PASSED THE AS SESSMENT ORDER DATED 29.12.2010 AFTER PROPER APPLICATION OF MIND AND AFT ER VERIFYING ALL RECORDS EITHER FILED DURING ASSESSMENT PROCEEDINGS OR PRODUCED BEFORE HIM DURING ASSESSMENT PROCEEDINGS. D. THAT VARIOUS OBSERVATIONS AND DIRECTIONS MADE BY THE LD. CIT IN HER ORDER U/S 263 ARE EITHER FACTUALLY INCORRECT OR AR E NOT TENABLE IN LAW. E. THAT THE PLETHORA OF JUDGMENTS RELIED UPON BY TH E LD. CIT IN HER ORDER U/S 263 ARE EITHER NOT APPLICABLE TO THE APPELLANT' S CASE OR ARE DISTINGUISHABLE ON FACTS OF APPELLANT'S CASE. 3. THAT THE LD. CIT WAS NOT CORRECT AND JUSTIFIED I N DIRECTING THE ASSESSING OFFICER TO DISALLOW PROPORTIONATE INTEREST ON THE L OANS AND ADVANCES GIVEN BY THE APPELLANT ON THE BASIS OF FACTS AND CI RCUMSTANCES OF THE CASE. 4. THAT THE LD. CIT WAS NOT CORRECT AND JUSTIFIED I N DIRECTING THE ASSESSING OFFICER TO VERIFY THE TDS DEDUCTED OR NOT ON THE PA YMENTS MADE FOR BUILDING REPAIRS & MAINTENANCE ON THE BASIS OF FACT S AND CIRCUMSTANCES OF THE CASE. 5. THAT THE LD. CIT WAS NOT CORRECT AND JUSTIFIED I N DIRECTING THE ASSESSING OFFICER TO DISALLOW THE DEDUCTION U/S SOIB (7A) OF THE IT ACT, 1961 PROPORTIONATELY ON PROFIT ON SALE OF SHOPPING AREA OF MULTIPLEX AND INTEREST ON FDR ON THE BASIS OF FACTS AND CIRCUMSTA NCES OF THE CASE. 6. THAT THE IMPUGNED ORDER 0 THE LD. CIT PASSED BY HER U/S 263 DESERVES TO BE CANCELLED/ANNULLED ON THE BASIS OF LAW, FACTS AND CIRCUMSTANCES. ITA NO. 2370/DEL/2013 3 3. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APP EAL ARE THAT IN THIS CASE ASSESSMENT ORDER U/S 143(3) OF THE INCOME TAX ACT, 1961 WAS PASSED ON 29.12.2010 BY THE ADDL. CIT, RANGE-2, MEERUT AT RET URNED INCOME OF RS.1,06,57,220/- WITHOUT MAKING ANY DISALLOWANCE OR ADDITIONS. SUBSEQUENTLY, THE CASE WAS PICKED UP BY THE CIT, MEERUT AND NOTIC E U/S 263 OF THE ACT WAS ISSUED TO THE ASSESSEE ON 12.02.2013 WHICH WAS REPL IED BY THE ASSESSEE VIDE LETTER DATED 04.03.2013. FINALLY, THE CIT PASSED IM PUGNED ORDER ON 25.03.2013 SETTING ASIDE THE IMPUGNED ASSESSMENT ORDER ON THRE E ISSUES FOR PROPORTIONATE DISALLOWANCE ON INTEREST PAID BY THE ASSESSEE OF IN TEREST FREE ADVANCES FOR NON BUSINESS PURPOSES, FOR VERIFICATION OF TDS ON CERTA IN PAYMENTS AND TO EXCLUDE INCOME ON SALE OF SHOPS AND FDR INTEREST FROM BUSIN ESS INCOME FOR THE PURPOSE OF CALCULATION OF DEDUCTION U/S 80IB(7A) OF THE ACT . NOW THE AGGRIEVED ASSESSEE IS BEFORE THIS TRIBUNAL IN THIS APPEAL WITH THE GRO UNDS AS REPRODUCED HEREINABOVE. 4. WE HAVE HEARD THE ARGUMENTS ON BOTH THE SIDES AN D CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. INTER ALIA , THE IMPUGNED ORDER OF THE CIT DATED 29.12.2010 PASSED U/S 263 OF THE ACT CONTAINS OF THE NOTICE PAPER BOOK 1 AND 2 OF THE ASSESSEE CONTAINING 37 & 39 PAGES AND PAPER BOOK OF THE REVENUE SPREAD OVER 38 PAGES FILED BY THE LD. DR. ITA NO. 2370/DEL/2013 4 5. LD. COUNSEL OF THE ASSESSEE REITERATING ITS CONT ENTION BEFORE THE CIT IN REPLY TO NOTICE U/S 263 OF THE ACT DATED 04.03.2013 SUBMITTED THAT THE LD. CIT IS NOT LEGALLY JUSTIFIED IN ISSUING NOTICE U/S 263 OF THE ACT AND IN HOLDING THAT THE VALIDITY OF THE NOTICE WHEN SPECIFICALLY CHALLENGED BY THE ASSESSEE ON THE BASIS OF RELEVANT FACTS AND CIRCUMSTANCES AND A PROVISION S OF THE ACT. THE LD. AR VEHEMENTLY CONTENDED THAT THE IMPUGNED ORDER DATED 29.12.2010 WAS PASSED BY THE AO AFTER DUE ENQUIRY ON ALL IMPORTANT ISSUES BY ISSUING A DETAIL QUESTIONNAIRE DATED 11.06.2010 WHICH WAS REPLIED BY THE ASSESSEE VIDE ITS SUBMISSION DATED 13.07.2010, 16.09.2010 AND 11.11.2 010 DURING THE ASSESSMENT PROCEEDING. LD. AR FURTHER CONTENDED THAT THE ASSES SMENT ORDER WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENU E AND THE CIT HAD NO VALID JURISDICTION TO INVOKE THE PROVISIONS OF SECTION 26 3 OF THE ACT. LD. AR STRENUOUSLY CONTENDING THAT THE PLETHORA OF JUDGMEN T RELIED BY THE CIT IN HER IMPUGNED ORDER ARE NOT APPLICABLE TO THE ASSESSEE C ASE AND ARE DISTINGUISHABLE ON THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. 6. LD. AR ALSO POINTED OUT THAT THE CIT WAS NOT COR RECT AND JUSTIFIED IN DIRECTING THE AO TO DISALLOW THE PROPORTIONATE INTE REST WITH HIGHER LOW ADVANCE GIVEN BY THE ASSESSEE ON THE BASIS OF FACTS AND CIR CUMSTANCES OF THE CASE AS THE ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS IN ITS HANDS FOR ADVANCEMENT OF INTEREST FREE ADVANCES WHICH WERE GIVEN OUT OF BUSI NESS PURPOSES. LD. AR FURTHER DRAWN OUR ATTENTION TOWARDS ISSUE OF TDS AG ITATED BY THE CIT AND ITA NO. 2370/DEL/2013 5 SUBMITTED THAT THE CIT WAS NOT CORRECT AND JUSTIFIE D IN DIRECTING THE AO TO VERIFY THE TDS DEDUCTED OR NOT ON PAYMENTS MADE FOR BUILDI NG REPAIRS AND MAINTENANCE ON THE BASIS OF FACTS AND CIRCUMSTANCES BECAUSE THE ASSESSEE FILED ENTIRE DETAILS OF TDS BEFORE THE AO, WHICH WAS DULY VERIFIED AND EXAMINED DURING THE ASSESSMENT PROCEEDING AND EVEN THERE COU LD BE NO ADDITION DURING THE REASSESSMENT PROCEEDING HELD IN PURSUANT TO IMPUGNE D ORDER U/S 263 OF THE ACT ON THIS ISSUE TO SUPPORT THIS CONTENTION. THE LD. A R ALSO DRAWN OUR ATTENTION TOWARDS REASSESSMENT ORDER DATED 18.03.2014 PASSED IN PURSUANT TO THE IMPUGNED ORDER OF CIT U/S 263/154, 143(3) OF THE AC T WHEREIN NO ADDITION ON THE ISSUE OF TDS HAS BEEN MADE BY THE AO. THE LD. A R FURTHER SUBMITTED THAT THE CIT WAS NOT CORRECT AND JUSTIFIED IN DIRECTING THE AO TO DISALLOW THE DEDUCTION U/S 80IB(7A) OF THE ACT PROPORTIONATELY O N PROFIT OF SALE OF SHOP AREA OF MULTIPLEX ON INTEREST OF FDR IN THE PECULIAR FAC TS AND CIRCUMSTANCES OF THE PRESENT CASE BECAUSE THESE INCOMES WAS ACCRUED TO T HE ASSESSEE OUT OF ACTIVE AND COMPLEX BUSINESS ACTIVITIES. LD. COUNSEL FINALLY PR AYED THAT THE IMPUGNED NOTICE AND ORDER U/S 263 OF THE ACT ISSUED AND PASSED BY T HE CIT DESERVES TO BE CANCELLED/ANNULLED ON THE BASIS OF LAW, FACTS AND C IRCUMSTANCES OF THE CASE AND THEREFORE, THE SAME MAY KINDLY BE QUASHED. 7. LD. AR PLACED RELIANCE ON THE DECISION OF ITAT K OLKATTA BENCH IN THE CASE OF PFH MALL & RETAIL MANAGEMENT LTD. VS. ITO (2008) 110 ITD 337 AND SUBMITTED THAT THE RENTAL INCOME EARNED BY THE ASSE SSEE IN THE BUSINESS OF ITA NO. 2370/DEL/2013 6 RUNNING MULTIPLEX IS ASSESSABLE AS BUSINESS INCOME AND NOT AS INCOME FROM HOUSE PROPERTY. HOWEVER, LD. AR FAIRLY SUBMITTED TH AT THIS ISSUE WAS MENTIONED BY THE CIT AT SERIAL NO.(B) IN THE NOTICE DATED 12.12.2013 ISSUED U/S 263 BUT IN THE FINAL ORDER U/S 263 THIS ISSUE HAS B EEN DROPPED AND CONCLUSION OF THE AO HAS BEEN IMPLIEDLY ACCEPTED BY THE CIT, MEER UT. 8. REPLYING TO THE ABOVE, LD. DEPARTMENTAL REPRESEN TATIVE (DR) AT THE VERY BEGINNING TOOK US THROUGH THE COPY OF THE ORIGINAL ASSESSMENT ORDER DATED 29.12.2010 AVAILABLE AT PAGE 4 OF THE ASSESSEES PA PER BOOK NO.1 AND SUBMITTED THAT THE AO PASSED A VERY BRIEF ONE PAGE ORDER ACCE PTING THE RETURN INCOME OF THE ASSESSEE IN TOTO AND WITHOUT MAKING ANY FURTHER VERIFICATIONS AND EXAMINATION ON THE ALL RELEVANT ISSUES SPECIALLY ON THE FIVE ISSUES AGITATED BY THE CIT IN HER NOTICE ISSUED U/S 263 OF THE ACT. LD. DR SUBMITTED THAT THE CIT WAS QUITE JUSTIFIED IN FAIR IN PASSING THE ORDER WHEREI N SHE DROPPED ISSUE OF TREATMENT RENTAL INCOME AND ON THE ISSUE OF ASSESSEES CLAIM FOR DEDUCTION U/S 80IB(7A) OF THE ACT AND ONLY DISTURBED THE ASSESSMENT ORDER ON THE ISSUE OF INTEREST PAID ON INTEREST FREE INVESTMENT, ADVANCES AND LOAN, ON THE ISSUE OF TDS AND ON THE ISSUE OF CLAIMING DEDUCTION U/S 80IB(7A) OF THE ACT INCUR RED TO INCOME EARNED FROM SALE OF SHOP AND INTEREST ON FDR. THE LD. DR PLACIN G RELIANCE ON THE VARIOUS ORDERS/JUDGMENTS OF THE HONBLE SUPREME COURT AND H ONBLE JURISDICTIONAL HIGH COURT OF DELHI INCLUDING RECENT DECISION OF THE HON BLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. GOETZE (INDIA) LTD. (2014) 361 ITR 505 (DEL) WHEREIN ITA NO. 2370/DEL/2013 7 SUBMITTED THAT THE REVENUE DEPARTMENT DOES NOT HAVE ANY RIGHT TO APPEAL AGAINST THE ORDER OF THE ASSESSING OFFICER THEREFOR E, THE POWER OF REVISION HAS BEEN CONFERRED OF ON THE COMMISSIONER U/S 263 OF TH E ACT TO REVISE ERRONEOUS ASSESSMENT ORDERS WHICH ARE ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE. LD. DR SUPPORTING THE ACTION OF THE CIT, STRENUOUSLY CO NTENDED THAT WHEN THE ASSESSING OFFICER TAKES A VIEW BUT THE VIEW IS NOT CORRECT AND IS ERRONEOUS ACCORDING TO THE FINDINGS RECORDED BY THE COMMISSIO NER WITH THE FINDINGS THAT THE ORDER PASSED BY THE AO WAS ALSO PREJUDICIAL TO THE INTEREST OF REVENUE. THEN THE ORDER OF THE COMMISSIONER CANNOT BE SET ASIDE O N THE GROUND THAT THE TWO VIEWS ARE POSSIBLE OR PROBABLE. THE LD. DR ALSO POI NTED OUT THAT IN THE PRESENT CASE, THE ASSESSING OFFICER ACCEPT RETURNED INCOME OF THE ASSESSEE WITHOUT ANY EXAMINATION VERIFICATION ON THE RELEVANT ISSUES THE REFORE, THE ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE FURTHER PLACING RELIANCE ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF CIT VS. NAGESH KNITWEARS P. LTD. (2012) 345 ITR 135 (DELHI) SUBMITTED THAT IF THE ASSESSING OFFICER OMITS TO CONDUCT REQUIRED EXA MINATION AND INVESTIGATION ON IMPORTANT ISSUES THEN HE (AO) COMMITS AN ERROR A ND THE WORD ERRONEOUS INCLUDES FAILURE TO MAKE THE ENQUIRY AND IN SUCH CA SES, THE ORDER BECOMES ERRONEOUS BECAUSE ENQUIRY OR VERIFICATION HAS NOT B EEN MADE BY THE AO AND NOT BECAUSE A WRONG ORDER HAS BEEN PASSED ON MERITS. ITA NO. 2370/DEL/2013 8 9. THE LD. AR PLACED A REJOINDER TO THE ABOVE SUBMI SSIONS AND CONTENTION OF THE DR AND KIND DRAWN OUR ATTENTION TOWARDS COPY OF THE QUESTIONNAIRE DATED 13.07.2010, 16.09.2010 AND 11.11.2010 AVAILABLE FRO M PAGES 28TO37 OF THE ASSESSEES PAPER BOOK PAPER BOOK-2 AND SUBMITTED TH AT THE ASSESSING OFFICER ISSUED DETAILS QUESTIONNAIRE ON ALL THE RELEVANT IS SUES WHICH WERE PICKED UP BY THE CIT WHILE ISSUANCE NOTICE U/S 263 OF THE ACT. T HAT LD. AR ALSO POINTED OUT THAT IN REPLY TO THE QUERY RAISED BY THE AO THE ASS ESSEE IN ITS REPLY DATED 16.09.2010 IN PARA 7 SUBMITTED ALL THE RELEVANT FAC TS INCURRED TO OPERATIONAL INCOME INCLUDING INCOME FROM SALE OF SHOPS. LD. AR FURTHER POINTED OUT IN THE SAME REPLY DATED 16.09.2010 IN PARA 10 THE ASSESSEE SUBMITTED DETAILS OF ADVANCE OF RS.18,00,000/-GIVEN TO RAJPUR RESIDENCY DEHRADIN AND ALL RELATED FACTS. THE LD. AR FURTHER SUBMITTED THAT THE ASSESS EE IN ITS REPLY DATED 11.10.2010 IN PARA 5 SUBMITTED DETAILS OF INVESTMEN T OF RS.19,15,000/- MADE IN THE SHARES OF M/S TUFFEST SAFTY GLASSES (P) LTD AND ALL DETAILS HAVE BEEN SUBMITTED. 10. THE LD. AR SUPPORTING THE ASSESSMENT ORDER SUBM ITTED THAT THE ASSESSING OFFICER WAS QUITE JUSTIFIED AND CORRECT WHILE GRANT ING DEDUCTION TO THE ASSESSEE U/S 80IB(7A) OF THE ACT AND CONCLUDING THAT THUS TH E ASSESSEE WAS CORRECT IN SUBMITTING ALL RELEVANT DETAILS OF THE TDS. THE LD. AR ALSO PLACED RELIANCE ON THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COU RT OF DELHI IN THE CASE OF CIT VS. ANIL KUMAR SHARMA (2011) 335 ITR 83 (DELHI) AND SUBMITTED THAT THE ITA NO. 2370/DEL/2013 9 ACTION OF THE CIT ISSUANCE OF NOTICE U/S 263 OF THE ACT AND PASSING IMPUGNED ORDER IS NOT VALID AND BAD IN LAW, WHICH IS ALSO NO T SUSTAINABLE IN THE LIGHT OF THE PROVISIONS OF SECTION 263 AND OTHER RELEVANT PROVIS IONS OF THE ACT. 11. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISS IONS OF BOTH THE SIDES AND CAREFULLY PERUSAL OF RELEVANT PAPER BOOK FILED BY B OTH THE SIDES, AT THE VERY OUTSET, WE NOTE THAT THE CIT ISSUED NOTICE U/S 263 OF THE ACT AGITATING FIVE ISSUES IN THE IMPUGNED ORDER OF THE CIT AND PARTLY SET ASI DE THE ASSESSMENT ORDER ON THREE ISSUES DIRECTING THE AO TO WORK OUT INTEREST FREE ADVANCES FOR NON BUSINESS PURPOSES AND DISALLOWANCES OF PROPORTIONATE INTERES T FREE THEREON, FOR VERIFICATION OF TDS ON CERTAIN PAYMENTS NOTED IN PO INT NO. (2) OF NOTICE U/S 263 OF THE ACT AND TO EXCLUDE INCOME ON SALE OF SHOPS A ND FDR INTEREST FROM BUSINESS INCOME FOR THE PURPOSE OF DEDUCTION U/S 80 IB(7A) OF THE ACT, WHEN WE ANALYSE AND EXAMINED THE QUESTIONNAIRE DATED 11.06. 2010 (PAGES 25 TO 27 OF ASSESSEE PAPER BOOK 2) WE NOTE THAT THE ASSESSING O FFICER HAVE NOT RAISED ANY QUERY IN REGARD TO INTEREST FREE ADVANCES FOR NON B USINESS PURPOSES SHOWING INTENTION TO DISALLOW PROPORTIONATE INTEREST THEREO N AND ALSO ON THE ISSUE OF VERIFICATION OF TDS ON CERTAIN PAYMENTS NOTED BY TH E CIT. HOWEVER, WE NOTE THAT THE ASSESSEE IN ITS REPLY DATED 16.09.2010 AT PARA 10 AND IN REPLY DATED 11.10.2010 IN PARA 5 HAS GIVEN DETAILS OF ADVANCE T O RAJPUR RESIDENCY DEHRADUN AND INVESTMENT MADE IN THE SHARES OF M/S TUFFEST SA FTY GLASSES (P) LTD. TO BED THERE IS NO QUERY OR VERIFICATION OR EXAMINATION BY THE AO TO WORK OUT INTEREST ITA NO. 2370/DEL/2013 10 FREE ADVANCES FOR NON BUSINESS PURPOSES AND FOR MAK ING IN PROPORTIONATE DISALLOWANCE OF INTEREST PAID BY THE ASSESSEE THERE ON. ON THE ISSUE OF VERIFICATION OF TDS, ON CERTAIN PAYMENTS AGITATED A LLEGED BY THE CIT, WE NOTE THAT THERE IS NO QUERY IN THE ADDL. CITS NOTE DATE D 11.06.2010 ISSUED BY THE AO AND THERE IS NO REPLY OR DETAILS FROM THE ASSESSEE SHOWING THE CORRECTNESS OF THE TDS AND ITS DEPOSIT TO THE EXCHEQUER PROPERLY. HOWE VER, WE ALSO NOTE THAT DURING THE REASSESSMENT PROCEEDING, IN PURSUANT TO IMPUGNED ORDER PASSED U/S 263 OF THE ACT, THE ASSESSING OFFICER IN THE REASSE SSMENT ORDER DATED 18.03.2014 AT PAGE 2 IN PARA 4 HAS NOTED THAT THE ASSESSEE HAS SUBMITTED DETAILS OF TDS OF BILL ON CHALLAN NO ADVERSE INFERENCE DRAWN AGAINST THE ASSESSEE ON THE THIRD ISSUE OF EXCLUSION OF INCOME ON SALE OF SHOP AND FDR INTE REST FROM BUSINESS INCOME FOR THE PURPOSE CALCULATION OF DEDUCTION U/S 80IB(7 A) OF THE ACT. WE NOTE THAT IN THE QUESTIONNAIRE ISSUED BY THE AO (SUPRA) THERE IS NO SPECIFIC QUERY ABOUT THE CLAIM OF DEDUCTION U/S 80IB(7A) OF THE ACT. HOWEVER , IN REPLY DATED 16.09.2010 AT PAGE 2 PARA 7 THE ASSESSEE HAS SUBMITTED FACTS A ND DETAILS PERTAINING TO RECEIPT/INCOME ON SALE OF SHOPS AND SUBMITTING THE ENTIRE AMOUNT OF SALE OF SHOP HAS BEEN SHOWN UNDER THE HEAD PROFIT OF SALE OF PRO PERTY IN THE LIST OF OPERATIONAL INCOME OF THE BALANCE SHEET. AT THE SAME TIME, WE C LEARLY OBSERVE THAT THE ASSESSING OFFICER HAS NOT RAISED ANY QUERY AND HAS NOT MADE ANY EXAMINATION AND VERIFICATION ON THE ISSUE OF CLAIM OF DEDUCTION OF THE ASSESSEE U/S 80IB(7A) OF THE ACT AND ON THE BASIS OF CALCULATION AND CLAI M OF DEDUCTION UNDER THE SAID ITA NO. 2370/DEL/2013 11 SECTION AND THE AO HAS NOT PAID ANY HEAL OF DEDUCTI ON TOWARDS TREATMENT OF INCOME ON SALE OF SHOPS AND FDR INTEREST ACCRUED T O THE ASSESSEE DURING THE RELEVANT ASSESSMENT PERIOD WHICH WAS INCLUDED BY TH E ASSESSEE FOR THE PURPOSE OF CALCULATION OF DEDUCTION U/S 80IB(7A) OF THE ACT . IN THIS SITUATION, ON THE LOGICAL ANALYSIS FOR THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND VIGILANT CONSIDERATION OF SUBMISSION OF CONTENTION OF BOTH T HE SIDES WE CLEARLY OBSERVE THAT THERE WAS ENQUIRY BY THE AO ON THE ISSUE OF IN TEREST FREE ADVANCES FOR NON BUSINESS PURPOSES AND PROPORTIONATE DISALLOWANCE IN TEREST THEREON ON THE ISSUE OF VERIFICATION OF TDS CERTIFICATES ON CERTAIN PAYM ENTS AND ON EXCLUSION OF INCOME ON SALE OF SHOPS AND FDR INTEREST FROM BUSIN ESS INCOME AND ON THE ISSUE OF CLAIM OF ASSESSEE AND ITS CLAIM OF PERTAINING TO DEDUCTION U/S 80IB(7A) OF THE ACT. 12. NOW, WE PROCEED TO CONSIDER THE RATIO OF THE OR DERS/JUDGMENTS RELIED BY THE LD. AR AT THE VERY OUTSET, WE NOTE THAT SINCE T HE CIT DROPPED THE ISSUE OF TREATMENT OF RENTAL INCOME AS BUSINESS INCOME BY TH E ASSESSEE IN THE FINAL IMPUGNED ORDER PASSED U/S 263 OF THE ACT, THEREFORE , BENEFIT OF THE RATIO OF THE ORDER OF THE ITAT KOKATTA A BENCH IN THE CASE OF PFH MALL & RETAIL MANAGEMENT LTD. (SUPRA) IS NOT AVAILABLE FOR THE AS SESSEE IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. ON CAREFUL CONSI DERATION OF THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT OF DE LHI IN THE CASE OF CIT VS. SUNBEAM AUTO LTD. [2011] 332 ITR 167 (DELHI) WHICH WAS ALSO CONSIDERED BY ITA NO. 2370/DEL/2013 12 THE HONBLE HIGH COURT IN ITS SUBSEQUENT JUDGMENT W ITH THE SIMILAR ISSUES IN THE CASE OF CIT VS. ANIL KUMAR SHARMA (SUPRA) WE OBSERV E THAT DISMISSING THE APPEAL OF THE REVENUE THEIR LORDSHIP HELD THAT THE ASSESSING OFFICER ALLOWED THE CLAIM OF THE ASSESSEE ON BEING SATISFIED WITH THE E XPLANATION OF THE ASSESSEE AND ON SUCH DECISION OF THE AO COULD NOT BE HELD AS ERR ONEOUS SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE ELABORATE DISCUSSION IN THIS REGARD IN THE CASE OF CIT VS. ANIL KUMAR SHAMA (SUPRA) THEIR LORDSHIP ALSO HELD T HAT BEING THE POSITION AND FACTS AND CIRCUMSTANCES OF THAT CASE WOULD NOT BE H ELD LACK OF INQUIRY AND EVEN IF THE INQUIRY WAS TERMED INADEQUATE THAT WOUL D NOT BY ITSELF GIVE OCCASION TO THE COMMISSIONER TO PASS ORDERS U/S 263 OF THE A CT, MERELY BECAUSE HE HAS A DIFFERENT OPINION IN THE MATTER. 13. ON CAREFUL AND RESPECTFUL CONSIDERATION OF THES E JUDGMENTS OF THE HONBLE HIGH COURT IN OUR HUMBLE UNDERSTANDING WE ARE OF TH E VIEW THAT THESE JUDGMENTS ARE RELATED TO THE CASES AND WHEREIN THER E WAS AN ALLEGATION OF INADEQUATE INQUIRY AND THE HONBLE HIGH COURT HELD THAT THE ASSESSMENT ORDER COULD NOT BE HELD AS ERRONEOUS SIMPLY BECAUSE IN HI S ORDER THE AO DID NOT MAKE ELABORATE DISCUSSION IN THAT REGARD. IN THE CASE OF ANIL KUMAR SHARMA (SUPRA) THEIR LORDSHIP AFTER CONSIDERING THE RATIO OF ITS E ARLIER POSITION IN THE CASE CIT VS. SUNBEAM AUTO LTD. (SUPRA) HELD AS FOLLOWS:- IN VIEW OF THE ABOVE DISCUSSION, IT IS APPARENT TH AT THE TRIBUNAL ARRIVED AT A CONCLUSIVE FINDING THAT, THOUGH THE AS SESSMENT ORDER DOES NOT PATENTLY INDICATE THAT THE ISSUE IN QUESTI ON HAD BEEN ITA NO. 2370/DEL/2013 13 CONSIDERED BY THE ASSESSING OFFICER, THE RECORD SHO WED THAT THE ASSESSING OFFICER HAD APPLIED HIS MIND. ONCE SUCH A PPLICATION OF MIND IS DISCERNABLE FROM THE RECORD, THE PROCEEDING S UNDER SECTION 263 WOULD FELL INTO THE AREA OF THE COMMISSIONER HA VING A DIFFERENT OPINION. WE ARE OF THE VIEW THAT THE FINDINGS OF FA CTS ARRIVED AT BY THE TRIBUNAL DO NOT WARRANT INTERFERENCE OF THIS CO URT. THAT BEING THE POSITION, THE PRESENT CASE WOULD NOT BE ONE OF LACK OF INQUIRY AND, EVEN IF THE INQUIRY WAS TERMED AS INADEQUATE, FOLLOWING THE DECISION IN SUNBEAM AUTO LTD [2011] 332 ITR 167 (DE LHI) (PAGE 180) :, THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE COMMISSIONER TO PASS ORDERS UNDER SECTION 263 OF THE SAID ACT, M ERELY BECAUSE HE HAS A DIFFERENT OPINION IN THE MATTER. NO SUBSTANT IAL QUESTION OF LAW ARISES FOR OUR CONSIDERATION. 14 WHEN WE ANALYISE THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, IN THE LIGHT OF RATIO LAID DOWN BY THE HONBLE HIGH COURT IN THE JUDGMENT OF CIT VS. SUNBEAM AUTO LTD. (SUPRA) WE NOTE THAT THE PRESENT CASE IS NOT A CASE OF LACK OF INQUIRY OR INADEQUATE INQUIRY BUT PRESENT CASE IS THE CASE WHEREIN THE ASSESSING OFFICER HAS NOT MADE REQUIRED INQUIRY ON THE ISSUE OF INTEREST FREE ADVANCES FOR NON BUSINESS PURPOSES AND CONSEQUENTLY PROPORTIONAT E DISALLOWANCE OF INTEREST THEREON, ON THE ISSUE OF VERIFICATION OF TDS AND ON THE ISSUE OF CLAIM OF DEDUCTION OF THE ASSESSEE U/S 80IA(7A) OF THE ACT S PECIALLY ON THE ISSUE OF EXCLUSION ON INCOME OF SALE OF SHOP AND FDR INTERES T FROM FINDING INCOME FOR THE PURPOSE OF COMPUTATION OF CLAIM OF DEDUCTION UN DER THE SAID PROVISION. FOR THE FACTS AND CIRCUMSTANCES, WE RESPECTFULLY HOLD T HAT THE BENEFIT OF RATIO OF DECISION IN THE CASE OF CIT VS. SUNBEAM AUTO LTD. ( SUPRA) AND CIT VS. ANIL KUMAR SHARMA (SUPRA) IS NOT AVAILABLE FOR THE ASSES SEE AS THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE CLEARLY DISTI NGUISHABLE FROM THESE CASES. ITA NO. 2370/DEL/2013 14 15. WHEN WE PROCEED TO CONSIDER THE RATIO OF JUDGM ENT OF THE HONBLE JURISDICTIONAL HIGH COURT OF DELHI RELIED BY THE LD . DR IN THE CASE OF CIT VS. NAGESH KNITWEARS P. LTD. (SUPRA) AND IN THE RECENT JUDGMENT IN THE CASE OF CIT VS. GOETZE (INDIA) LTD. (SUPRA) WE OBSERVE THAT THE IR LORDSHIP AFTER CONSIDERING AND REFERRING THE RATIO OF THE LAND MARK JUDGMENTS OF HONBLE SUPREME COURT IN THE CASE OF RAM PYARI DEVI SARGOSI 67 ITR 84 (SC) A ND IN THE CASE OF TARA DEVI AGGARWAL VS. CIT (1973), 88 ITR 323 (SC) AND THE J UDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NAGESH KNITWEARS P. LTD. (S UPRA) AND THE JUDGMENT IN THE CASE OF CIT VS. SUNBEAM AUTO LTD.(S UPRA) AND ITO VS. DG HOUSING PROJECTS LTD. (2012) 343 ITR 329 (DELHI) HE LD THAT IN THE CASES WHERE THE BARE READING OF THE ORDER PASSED BY THE COMMISS IONER SHOWED THAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AND P REJUDICIAL TO THE INTEREST OF REVENUE THEN THE TRIBUNAL WAS WRONG IN HOLDING THAT THE ORDER PASSED BY THE COMMISSIONER U/S 263 OF THE ACT WAS PASSED IN CONTR ARY TO THE PROVISIONS OF THE ACT. THE RELEVANT OPERATIVE PART OF THE ORDER OF HO NBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NAGESH KNITWEARS P. LTD. (SUPRA) RE ADS AS UNDER:- AS FAR AS SECTION 263 IS CONCERNED, WE HAVE EXAMI NED THE SAID SECTION IN DEPTH AND DETAIL IN ITO VS. D G HOUSING PROJECTS LTD. DECIDED ON 1ST MARCH, 2012, IN ITA NO. 179/2011 AND OBSERVED AS UNDER:- ITA NO. 2370/DEL/2013 15 THE REVENUE DOES NOT HAVE ANY RIGHT TO APPEAL TO T HE FIRST APPELLATE AUTHORITY AGAINST AN ORDER PASSED BY THE ASSESSING OFFICER. SECTION 263 HAS BEEN ENACTED TO EMPOWER THE CIT TO EXERCISE POWER OF REVISION AND REVISE ANY ORDER PASSED BY THE ASSESSI NG OFFICER, IF TWO CUMULATIVE CONDITIONS ARE SATISFIED. FIRSTLY, THE O RDER SOUGHT TO BE REVISED SHOULD BE ERRONEOUS AND SECONDLY, IT SHOULD BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE EXPRESSION PREJUD ICIAL TO THE INTEREST OF THE REVENUE IS OF WIDE IMPORT AND IS NOT CONFINED TO MERELY LOSS OF TAX. THE TERM ERRONEOUS MEANS A WRONG/INCORRECT DECISION DEVIATING FROM LAW. THIS EXPRESSION POSTUL ATES AN ERROR WHICH MAKES AN ORDER UNSUSTAINABLE IN LAW. THE ASSESSING OFFICER IS BOTH AN INVESTIGATOR AND A N ADJUDICATOR. IF THE ASSESSING OFFICER AS AN ADJUDIC ATOR DECIDES A QUESTION OR ASPECT AND MAKES A WRONG ASSESSMENT WHI CH IS UNSUSTAINABLE IN LAW, IT CAN BE CORRECTED BY THE CO MMISSIONER IN EXERCISE OF REVISIONARY POWER. AS AN INVESTIGATOR, IT IS INCUMBENT UPON THE ASSESSING OFFICER TO INVESTIGATE THE FACTS REQUIRED TO BE EXAMINED AND VERIFIED TO COMPUTE THE TAXABLE INCOME . IF THE ASSESSING OFFICER FAILS TO CONDUCT THE SAID INVESTI GATION, HE COMMITS AN ERROR AND THE WORD ERRONEOUS INCLUDES FAILURE TO MAKE THE ENQUIRY. IN SUCH CASES, THE ORDER BECOMES ERRONEOUS BECAUSE ENQUIRY OR VERIFICATION HAS NOT BEEN MADE AND NOT B ECAUSE A WRONG ORDER HAS BEEN PASSED ON MERITS. THE DELHI HIGH COURT IN GEE VEE ENTERPRISES V. ADDI TIONAL COMMISSION OF INCOME-TAX, DELHI-I, (1975) 99 ITR 37 5, HAS OBSERVED AS UNDER:- 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 ACCEPTED BY A CIVIL COURT IN THE AB SENCE OF ANY REBUTTAL. THE CIVIL COURT IS NEUTRAL. IT SIMPLY GIV ES DECISION ON THE BASIS OF THE PLEADING AND EVIDENCE WHICH COMES BEFO RE IT. THE INCOME-TAX OFFICER IS NOT ONLY AN ADJUDICATOR BUT A LSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER INQUIR Y. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETU RN WHEN THE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE AN INQUIRY. THE MEANING TO BE GIVEN TO THE WORD ERRONEOUS IN SECT ION 263 EMERGES OUT OF THIS CONTEXT. IT IS BECAUSE IT IS INCUMBENT ON THE INCOME-TAX OFFICER TO FURTHER INVESTIGATE THE FACTS STATED IN THE RETURN WHEN CIRCUMSTANCES WOULD MAKE SUCH AN INQUIRY PRUDENT TH AT THE WORD ITA NO. 2370/DEL/2013 16 ERRONEOUS IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN INQUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH A N INQUIRY HAS NOT BEEN MADE AND NOT BECAUSE THERE IS ANYTHING WRO NG WITH THE ORDER IF ALL THE FACTS STATED THEREIN ARE ASSUMED T O BE CORRECT. IN THE SAID JUDGMENT, DELHI HIGH COURT HAD REFERRED TO EARLIER DECISIONS OF THE SUPREME COURT IN RAMPYARI DEVI SAR OGIV. CIT (1968) 67 ITR 84 (SC) AND TARA DEVI AGGARWAL V. CIT (1973) 88 ITR 323 (SC), WHEREIN IT HAS BEEN HELD THAT WHERE A SSESSING OFFICER HAS ACCEPTED A PARTICULAR CONTENTION/ISSUE WITHOUT ANY ENQUIRY OR EVIDENCE WHATSOEVER, THE ORDER IS ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF THE REVENUE. AFTER REFERENCE TO THESE T WO DECISIONS, THE DELHI HIGH COURT OBSERVED:- THESE TWO DECISIONS SHOW THAT IT IS NOT NECESSARY FOR THE COMMISSIONER TO MAKE FURTHER INQUIRIES BEFORE CANCE LLING THE ASSESSMENT ORDER OF THE INCOME-TAX OFFICER. THE COM MISSIONER CAN REGARD THE ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE THE INCOME-TAX OFFICER SH OULD HAVE MADE FURTHER INQUIRIES BEFORE ACCEPTING THE STATEMENTS M ADE BY THE ASSESSEE IN HIS RETURN. THE AFORESAID OBSERVATIONS HAVE TO BE UNDERSTOOD IN THE FACTUAL BACKGROUND AND MATRIX INVOLVED IN THE SAID TWO CASES BEFORE THE SUPREME COURT. IN THE SAID CASES, THE ASSESSING OFFICER HAD NOT CONDUCTED ANY ENQUIRY OR EXAMINED EVIDENCE WHATSOEV ER. THERE WAS TOTAL ABSENCE OF ENQUIRY OR VERIFICATION. THESE CAS ES HAVE TO BE DISTINGUISHED FROM OTHER CASES (I) WHERE THERE IS E NQUIRY BUT THE FINDINGS ARE INCORRECT/ERRONEOUS; AND (II) WHERE TH ERE IS FAILURE TO MAKE PROPER OR FULL VERIFICATION OR ENQUIRY. IN THE CASE OF COMMISSIONER OF INCOME TAX V. SUNBEA M AUTO LTD. (2011) 332 ITR 167 (DEL), DELHI HIGH COURT WAS CONSIDERING THE ASPECT, WHEN THERE IS NO PROPER OR FULL VERIFIC ATION, AND IT WAS HELD AS UNDER:- WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE CO UNSEL ON THE OTHER SIDE AND HAVE GONE THROUGH THE RECORDS. T HE FIRST ISSUE THAT ARISES FOR OUR CONSIDERATION IS ABOUT THE EXER CISE OF POWER BY THE COMMISSIONER OF INCOME-TAX UNDER SECTION 263 OF THE INCOME- TAX ACT. AS NOTED ABOVE, THE SUBMISSION OF LEARNED COUNSEL FOR THE REVENUE WAS THAT WHILE PASSING THE ASSESSMENT ORDER , THE ASSESSING OFFICER DID NOT CONSIDER THIS ASPECT SPECIFICALLY W HETHER THE EXPENDITURE IN QUESTION WAS REVENUE OR CAPITAL EXPE NDITURE. THIS ARGUMENT PREDICATES ON THE ASSESSMENT ORDER, WHICH APPARENTLY DOES ITA NO. 2370/DEL/2013 17 NOT GIVE ANY REASONS WHILE ALLOWING THE ENTIRE EXPE NDITURE AS REVENUE EXPENDITURE. HOWEVER, THAT BY ITSELF WOULD NOT BE INDICATIVE OF THE FACT THAT THE ASSESSING OFFICER HAD NOT APPL IED HIS MIND ON THE ISSUE. THERE ARE JUDGMENTS GALORE LAYING DOWN THE P RINCIPLE THAT THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IS NOT RE QUIRED TO GIVE DETAILED REASON IN RESPECT OF EACH AND EVERY ITEM O F DEDUCTION, ETC. THEREFORE, ONE HAS TO SEE FROM THE RECORD AS TO WHE THER THERE WAS APPLICATION OF MIND BEFORE ALLOWING THE EXPENDITURE IN QUESTION AS REVENUE EXPENDITURE. LEARNED COUNSEL FOR THE ASSESS EE IS RIGHT IN HIS SUBMISSION THAT ONE HAS TO KEEP IN MIND THE DISTINC TION BETWEEN LACK OF INQUIRY AND INADEQUATE INQUIRY. IF THER E WAS ANY INQUIRY, EVEN INADEQUATE THAT WOULD NOT BY ITSELF G IVE OCCASION TO THE COMMISSIONER TO PASS ORDERS UNDER SECTION 263 OF TH E ACT, MERELY BECAUSE HE HAS A DIFFERENT OPINION IN THE MATTER. I T IS ONLY IN CASES OF LACK OF INQUIRY THAT SUCH A COURSE OF ACTION W OULD BE OPEN. IN GABRIEL INDIA LTD. [1993] 203 ITR 108 (BOM), LAW ON THIS ASPECT WAS DISCUSSED IN THE FOLLOWING MANNER (PAGE 113): FROM A RENDING OF SUB-SECTION (1) OF SECTION 26 3, IT IS CLEAR THAT THE POWER OF SUO MOTU REVISION CAN BE EXERCISED BY THE COMMISSIONER ONLY IF, ON EXAMINATION OF THE RECORDS OF ANY PROCEEDINGS UNDER THIS ACT, HE CONSIDERS THAT ANY O RDER PASSED THEREIN BY THE INCOME-TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE . IT IS NOT AN ARBITRARY OR UNCHARTERED POWER, IT CAN BE EXERCISED ONLY ON FULF ILMENT OF THE REQUIREMENTS LAID DOWN IN SUB-SECTION (1). THE CONS IDERATION OF THE COMMISSIONER AS TO WHETHER AN ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, MUST B E BASED ON MATERIALS ON THE RECORD OF THE PROCEEDINGS CALLED F OR 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 COUL D HAVE COME TO SUCH A CONCLUSION, THE VERY INITIATION OF PROCEE DINGS BY HIM WILL BE ILLEGAL AND WITHOUT JURISDICTION. THE COMMISSION ER CANNOT INITIATE PROCEEDINGS WITH A VIEW TO STARTING FISHIN G AND ROVING ENQUIRIES IN MATTERS OR ORDERS WHICH ARE ALREADY CO NCLUDED. SUCH ACTION WILL BE AGAINST THE WELL-ACCEPTED POLICY OF LAW THAT THERE MUST BE A POINT OF FINALITY IN ALL LEGAL PROCEEDINGS, TH AT STALE ISSUES SHOULD NOT BE REACTIVATED BEYOND A PARTICULAR STAGE AND TH AT LAPSE OF TIME MUST INDUCE REPOSE IN AND SET AT REST JUDICIAL AND QUASI-JUDICIAL CONTROVERSIES AS IT MUST IN OTHER SPHERES OF HUMAN ACTIVITY. (SEE PARASHURAM POTTERY WORKS CO. LTD. V. ITO [1977] 106 ITR 1 (SC) AT PAGE 10) ITA NO. 2370/DEL/2013 18 FROM THE AFORESAID DEFINITIONS IT IS CLEAR THAT AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDAN CE WITH LAW. IF AN INCOME-TAX OFFICER ACTING IN ACCORDANCE WITH LAW MA KES 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 DO ES NOT VISUALISE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE COMMISS IONER 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 ACC OUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUM STANCES 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 ESTIMAT E 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 OF FICER. THAT WOULD NOT VEST THE COMMISSIONER WITH POWER TO RE-EX AMINE THE ACCOUNTS AND DETERMINE THE INCOME HIMSELF AT A HIGH ER FIGURE. IT IS BECAUSE THE INCOME-TAX OFFICER HAS EXERCISED THE QU ASI-JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRI VED AT A CONCLUSION AND SUCH A CONCLUSION CANNOT BE FORMED T O BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEEL SATIS FIED WITH THE CONCLUSION THERE MUST BE SOME PRIMA FACIE MATERIA L ON RECORD TO SHOW THAT TAX WHICH WAS LAWFULLY EXIGIBLE HAS NOT B EEN IMPOSED OR THAT BY THE APPLICATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTERPRETATION A LESSER TAX THAN WHAT WA S JUST HAS BEEN IMPOSED WE MAY NOW EXAMINE THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THE POWERS OF THE COMMISSIONER SET OUT ABOVE. TH E INCOME-TAX OFFICER IN THIS CASE HAD MADE ENQUIRIES IN REGARD T O THE NATURE OF THE EXPENDITURE INCURRED BY THE ASSESSEE. THE ASSES SEE HAD GIVEN DETAILED EXPLANATION IN THAT REGARD BY A LETTER IN WRITING. ALL THESE ARE PART OF THE RECORD OF THE CASE. EVIDENTLY, THE CLAIM WAS ALLOWED BY THE INCOME-TAX OFFICER ON BEING SATISFIED WITH T HE EXPLANATION OF THE ASSESSEE. SUCH DECISION OF THE INCOME-TAX OFFIC ER CANNOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD. THUS, IN CASES OF WRONG OPINION OR FINDING ON MERIT S, THE CIT HAS TO COME TO THE CONCLUSION AND HIMSELF DECIDE TH AT THE ORDER IS ERRONEOUS, BY CONDUCTING NECESSARY ENQUIRY, IF REQU IRED AND ITA NO. 2370/DEL/2013 19 NECESSARY, BEFORE THE ORDER UNDER SECTION 263 IS PA SSED. IN SUCH CASES, THE ORDER OF THE ASSESSING OFFICER WILL BE E RRONEOUS BECAUSE THE ORDER PASSED IS NOT SUSTAINABLE IN LAW AND THE SAID FINDING MUST BE RECORDED. CIT CANNOT REMAND THE MATTER TO THE AS SESSING OFFICER TO DECIDE WHETHER THE FINDINGS RECORDED ARE ERRONEO US. IN CASES WHERE THERE IS INADEQUATE ENQUIRY BUT NOT LACK OF E NQUIRY, AGAIN THE CIT MUST GIVE AND RECORD A FINDING THAT THE ORDER/I NQUIRY MADE IS ERRONEOUS. THIS CAN HAPPEN IF AN ENQUIRY AND VERIFI CATION IS CONDUCTED BY THE CIT AND HE IS ABLE TO ESTABLISH AN D SHOW THE ERROR OR MISTAKE MADE BY THE ASSESSING OFFICER, MAKING TH E ORDER UNSUSTAINABLE IN LAW. IN SOME CASES POSSIBLY THOUGH RARELY, THE CIT CAN ALSO SHOW AND ESTABLISH THAT THE FACTS ON RECOR D OR INFERENCES DRAWN FROM FACTS ON RECORD PER SE JUSTIFIED AND MAN DATED FURTHER ENQUIRY OR INVESTIGATION BUT THE ASSESSING OFFICER HAD ERRONEOUSLY NOT UNDERTAKEN THE SAME. HOWEVER, THE SAID FINDING MUST BE CLEAR, UNAMBIGUOUS AND NOT DEBATABLE. THE MATTER CANNOT BE REMITTED FOR A FRESH DECISION TO THE ASSESSING OFFICER TO CONDUC T FURTHER ENQUIRIES WITHOUT A FINDING THAT THE ORDER IS ERRON EOUS. FINDING THAT THE ORDER IS ERRONEOUS IS A CONDITION OR REQUIREMEN T WHICH MUST BE SATISFIED FOR EXERCISE OF JURISDICTION UNDER SECTIO N 263 OF THE ACT. IN SUCH MATTERS, TO REMAND THE MATTER/ISSUE TO THE ASS ESSING OFFICER WOULD IMPLY AND MEAN THE CIT HAS NOT EXAMINED AND D ECIDED WHETHER OR NOT THE ORDER IS ERRONEOUS BUT HAS DIREC TED THE ASSESSING OFFICER TO DECIDE THE ASPECT/QUESTION. THIS DISTINCTION MUST BE KEPT IN MIND BY THE CIT WH ILE EXERCISING JURISDICTION UNDER SECTION 263 OF THE AC T AND IN THE ABSENCE OF THE FINDING THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, EXERCISE OF JURISDICTION U NDER THE SAID SECTION IS NOT SUSTAINABLE. IN MOST CASES OF ALLEGE D INADEQUATE INVESTIGATION, IT WILL BE DIFFICULT TO HOLD THAT T HE ORDER OF THE ASSESSING OFFICER, WHO HAD CONDUCTED ENQUIRIES AND HAD ACTED AS AN INVESTIGATOR, IS ERRONEOUS, WITHOUT CIT CONDUCTING VERIFICATION/INQUIRY. THE ORDER OF THE ASSESSING OF FICER MAY BE OR MAY NOT BE WRONG. CIT CANNOT DIRECT RECONSIDERATION ON THIS GROUND BUT ONLY WHEN THE ORDER IS ERRONEOUS. AN ORDER OF R EMIT CANNOT BE PASSED BY THE CIT TO ASK THE ASSESSING OFFICER TO D ECIDE WHETHER THE ORDER WAS ERRONEOUS. THIS IS NOT PERMISSIBLE. AN OR DER IS NOT ERRONEOUS, UNLESS THE CIT HOLD AND RECORDS REASONS WHY IT IS ERRONEOUS. AN ORDER WILL NOT BECOME ERRONEOUS BECAU SE ON REMIT, THE ASSESSING OFFICER MAY DECIDE THAT THE ORDER IS ERRONEOUS. THEREFORE CIT MUST AFTER RECORDING REASONS HOLD THA T THE ORDER IS ITA NO. 2370/DEL/2013 20 ERRONEOUS. THE JURISDICTIONAL PRECONDITION STIPULAT ED IS THAT THE CIT MUST COME TO THE CONCLUSION THAT THE ORDER IS ERRON EOUS AND IS UNSUSTAINABLE IN LAW. WE MAY NOTICE THAT THE MATERI AL WHICH THE CIT CAN RELY INCLUDES NOT ONLY THE RECORD AS IT STA NDS AT THE TIME WHEN THE ORDER IN QUESTION WAS PASSED BY THE ASSESS ING OFFICER BUT ALSO THE RECORD AS IT STANDS AT THE TIME OF EXAMINA TION BY THE CIT [SEE CIT V. SHREE MANJUNATHESWARE PACKING PRODUCTS, 231 ITR 53 (SC)]. NOTHING BARS/PROHIBITS THE CIT FROM COLLECTI NG AND RELYING UPON NEW/ADDITIONAL MATERIAL/EVIDENCE TO SHOW AND S TATE THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS. IT IS IN THIS CONTEXT THAT THE SUPREME COURT IN MAL ABAR INDUSTRIAL CO. LTD. V. COMMISSIONER OF INCOME TAX, (2000) 243 ITR 83 (SC), HAD OBSERVED THAT THE PHRASE PREJUDICIAL TO THE INTEREST OF REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS OR DER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVE NUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CA NNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF REVENUE. THUS, WH EN THE ASSESSING OFFICER HAD ADOPTED ONE OF THE COURSES PERMISSIBLE AND AVAILABLE TO HIM, AND THIS HAS RESULTED IN LOSS TO REVENUE; OR T WO VIEWS WERE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VI EW WITH WHICH THE CIT MAY NOT AGREE; THE SAID ORDERS CANNOT BE TR EATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF REVE NUE UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABL E IN LAW. IN SUCH MATTERS, THE CIT MUST GIVE A FINDING THAT THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW AND, THER EFORE, THE ORDER IS ERRONEOUS. HE MUST ALSO SHOW THAT PREJUDICE IS CAUS ED TO THE INTEREST OF THE REVENUE. 16. IN THE CASE OF CIT VS. GOETZE (INDIA) LTD. (SUP RA) THEIR LORDSHIP AFTER REFERRING TO THE RATIO LAID DOWN BY IT IN THE CASE OF CIT VS. NAGESH KNITWEARS P. LTD. HELD AS FOLLOWS:- THE FIRST QUESTION RAISED IS WHETHER THE ORDER UND ER SECTION 263 OF THE ACT IS JUSTIFIED AND IN ACCORDANCE WITH LAW. SE CTION 263 HAS BEEN ELUCIDATED AND EXPLAINED IN COMMISSIONER OF INCOME TAX VERSUS NAGESH KNITWEARS PRIVATE LIMITED, (2012) 345 ITR 13 5 (DELHI). IN THE SAID DECISION, REFERENCE WAS MADE TO MALABAR IN DUSTRIAL COMPANY LIMITED VERSUS CIT, (2000) 243 ITR 83 (SC) AND DECISIONS OF DELHI HIGH COURT IN NABHA INVESTMENTS PRIVATE LI MITED VERSUS UNION OF INDIA, (2000) 246 ITR 41 (DELHI) AND ITO V ERSUS DG ITA NO. 2370/DEL/2013 21 HOUSING PROJECTS LIMITED, (2012) 343 ITR 329 (DELHI ). IT HAS BEEN OBSERVED IN NAGESH KNITWEARS PRIVATE LIMITED (SUPRA ):- THE REVENUE DOES NOT HAVE ANY RIGHT TO APPEAL TO THE FIRST APPELLATE AUTHORITY AGAINST AN ORDER PASSED BY THE ASSESSING OFFICER. SECTION 263 HAS BEEN ENACTED TO EMPOWER THE CIT TO EXERCISE POWER OF REVISION AND REVISE ANY ORDER PASSED BY THE ASSE SSING OFFICER, IF TWO CUMULATIVE CONDITIONS ARE SATISFIED. FIRSTLY, T HE ORDER SOUGHT TO BE REVISED SHOULD BE ERRONEOUS AND SECONDLY, IT SHO ULD BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE EXPRESSION PRE JUDICIAL TO THE INTEREST OF THE REVENUE IS OF WIDE IMPORT AND IS NOT CONFINED TO MERELY LOSS OF TAX. THE TERM ERRONEOUS MEANS A WRONG/INCORRECT DECISION DEVIATING FROM LAW. THIS EXPRESSION POSTUL ATES AN ERROR WHICH MAKES AN ORDER UNSUSTAINABLE IN LAW. THE ASSESSING OFFICER IS BOTH AN INVESTIGATOR AND AN ADJUDICATOR. IF THE ASSESSING OFFICER AS AN ADJUDICATOR DECIDES A Q UESTION OR ASPECT AND MAKES A WRONG ASSESSMENT WHICH IS UNSUSTAINABLE IN LAW, IT CAN BE CORRECTED BY THE COMMISSIONER IN EXERCISE OF REV ISIONARY POWER. AS AN INVESTIGATOR, IT IS INCUMBENT UPON THE ASSESS ING OFFICER TO INVESTIGATE THE FACTS REQUIRED TO BE EXAMINED AND V ERIFIED TO COMPUTE THE TAXABLE INCOME. IF THE ASSESSING OFFICER FAILS TO CONDUCT THE SAID INVESTIGATION, HE COMMITS AN ERROR AND THE WORD ER RONEOUS INCLUDES FAILURE TO MAKE THE ENQUIRY. IN SUCH CASES , THE ORDER BECOMES ERRONEOUS BECAUSE ENQUIRY OR VERIFICATION H AS NOT BEEN MADE AND NOT BECAUSE A WRONG ORDER HAS BEEN PASSED ON MERITS. THE DELHI HIGH COURT IN GEE VEE ENTERPRISES V. ADDI TIONAL COMMISSION OF INCOME-TAX, DELHI-I, (1975) 99 ITR 37 5, HAS OBSERVED AS UNDER:- THE REASON IS OBVIOUS. THE POSITION AND FUNCTION O F 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 ACCEPTED BY A CIVIL COURT IN THE AB SENCE OF ANY REBUTTAL. THE CIVIL COURT IS NEUTRAL. IT SIMPLY GIV ES DECISION ON THE BASIS OF THE PLEADING AND EVIDENCE WHICH COMES BEFO RE IT. THE INCOME-TAX OFFICER IS NOT ONLY AN ADJUDICATOR BUT A LSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER INQUIR Y. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETU RN WHEN THE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE AN INQUIRY. THE MEANING TO BE GIVEN TO THE WORD ERRONEOUS IN SECT ION 263 EMERGES OUT OF THIS CONTEXT. IT IS BECAUSE IT IS INCUMBENT ON THE INCOME-TAX ITA NO. 2370/DEL/2013 22 OFFICER TO FURTHER INVESTIGATE THE FACTS STATED IN THE RETURN WHEN CIRCUMSTANCES WOULD MAKE SUCH AN INQUIRY PRUDENT TH AT THE WORD ERRONEOUS IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN INQUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH A N INQUIRY HAS NOT BEEN MADE AND NOT BECAUSE THERE IS ANYTHING WRO NG WITH THE ORDER IF ALL THE FACTS STATED THEREIN ARE ASSUMED T O BE CORRECT. REFERENCE WAS ALSO MADE TO DECISIONS OF THE SUPREME COURT IN RAMPYARI DEVI SARAOGI VERSUS CIT, (1968) 67 ITR 84 (SC) AND TARA DEVI AGGARWAL (SMT) VERSUS CIT, (1973) 88 ITR 323 ( SC) WHEREIN IT HAS BEEN OBSERVED THAT WHERE THE ASSESSING OFFICER HAD ACCEPTED A PARTICULAR CONTENTION OR ISSUE WITHOUT INQUIRY WHAT SOEVER, THE ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF RE VENUE. THESE TWO DECISIONS WERE EXPLAINED IN THE CASE OF DG HOUSING PROJECT LIMITED (SUPRA) IN THE FOLLOWING WORDS:- THESE TWO DECISIONS SHOW THAT IT IS NOT NECESSARY FOR THE COMMISSIONER TO MAKE FURTHER INQUIRIES BEFORE CANCE LLING THE ASSESSMENT ORDER OF THE INCOME-TAX OFFICER. THE COM MISSIONER CAN REGARD THE ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE THE INCOME-TAX OFFICER SH OULD HAVE MADE FURTHER INQUIRIES BEFORE ACCEPTING THE STATEMENTS M ADE BY THE ASSESSEE IN HIS RETURN. THE AFORESAID OBSERVATIONS HAVE TO BE UNDERSTOOD IN THE FACTUAL BACKGROUND AND MATRIX INVOLVED IN THE SAID TWO CASES BEFORE THE SUPREME COURT. IN THE SAID CASES, THE ASSESSING OFFICER HAD NOT CONDUCTED ANY ENQUIRY OR EXAMINED EVIDENCE WHATSOEV ER. THERE WAS TOTAL ABSENCE OF ENQUIRY OR VERIFICATION. THESE CAS ES HAVE TO BE DISTINGUISHED FROM OTHER CASES (I) WHERE THERE IS E NQUIRY BUT THE FINDINGS ARE INCORRECT/ERRONEOUS; AND (II) WHERE TH ERE IS FAILURE TO MAKE PROPER OR FULL VERIFICATION OR ENQUIRY. IN NAGESH KNITWEARS PRIVATE LTD. (SUPRA), REFERENC E WAS MADE TO CIT VS. SUNBEAM AUTO LTD. (2011) 332 ITR 16 7, WITH THE FOLLOWING QUOTE FROM THE LATER DECISION:- IN THE CASE OF CIT V. SUNBEAM AUTO LTD (2011) 332 ITR 167 (DELHI), THE DELHI HIGH COURT WAS CONSIDERING THE A SPECT, WHEN THERE IS NO PROPER OR FULL VERIFICATION AND IT WAS HELD AS UNDER (PAGE 179) WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE C OUNSEL ON THE OTHER SIDE AND HAVE GONE THROUGH THE RECORDS. T HE FIRST ISSUE THAT ARISES FOR OUR CONSIDERATION IS ABOUT THE EXER CISE OF POWER BY ITA NO. 2370/DEL/2013 23 THE COMMISSIONER OF INCOME-TAX UNDER SECTION 263 OF THE INCOME- TAX ACT. AS NOTED ABOVE, THE SUBMISSION OF LEARNED COUNSEL FOR THE REVENUE WAS THAT WHILE PASSING THE ASSESSMENT ORDER , THE ASSESSING OFFICER DID NOT CONSIDER THIS ASPECT SPECIFICALLY W HETHER THE EXPENDITURE IN QUESTION WAS REVENUE OR CAPITAL EXPE NDITURE. THIS ARGUMENT PREDICATES ON THE ASSESSMENT ORDER, WHICH APPARENTLY DOES NOT GIVE ANY REASONS WHILE ALLOWING THE ENTIRE EXPE NDITURE AS REVENUE EXPENDITURE. HOWEVER, THAT BY ITSELF WOULD NOT BE INDICATIVE OF THE FACT THAT THE ASSESSING OFFICER HAD NOT APPL IED HIS MIND ON THE ISSUE. THERE ARE JUDGMENTS GALORE LAYING DOWN THE P RINCIPLE THAT THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IS NOT RE QUIRED TO GIVE DETAILED REASON IN RESPECT OF EACH AND EVERY ITEM O F DEDUCTION, ETC. THEREFORE, ONE HAS TO SEE FROM THE RECORD AS TO WHE THER THERE WAS APPLICATION OF MIND BEFORE ALLOWING THE EXPENDITURE IN QUESTION AS REVENUE EXPENDITURE. LEARNED COUNSEL FOR THE ASSESS EE IS RIGHT IN HIS SUBMISSION THAT ONE HAS TO KEEP IN MIND THE DISTINC TION BETWEEN LACK OF INQUIRY AND INADEQUATE INQUIRY. IF THER E WAS ANY INQUIRY, EVEN INADEQUATE THAT WOULD NOT BY ITSELF G IVE OCCASION TO THE COMMISSIONER TO PASS ORDERS UNDER SECTION 263 OF TH E ACT, MERELY BECAUSE HE HAS A DIFFERENT OPINION IN THE MATTER. I T IS ONLY IN CASES OF LACK OF INQUIRY THAT SUCH A COURSE OF ACTION W OULD BE OPEN. IN GABRIEL INDIA LTD. [1993] 203 ITR 108 (BOM), LAW ON THIS ASPECT WAS DISCUSSED IN THE FOLLOWING MANNER (PAGE 113): FROM A RENDING OF SUB-SECTION (1) OF SECTION 263 , IT IS CLEAR THAT THE POWER OF SUO MOTU REVISION CAN BE EX ERCISED BY THE COMMISSIONER ONLY IF, ON EXAMINATION OF THE RECORDS OF ANY PROCEEDINGS UNDER THIS ACT, HE CONSIDERS THAT ANY O RDER PASSED THEREIN BY THE INCOME-TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE . IT IS NOT AN ARBITRARY OR UNCHARTERED POWER, IT CAN BE EXERCISED ONLY ON FULF ILMENT OF THE REQUIREMENTS LAID DOWN IN SUB-SECTION (1). THE CONS IDERATION OF THE COMMISSIONER AS TO WHETHER AN ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, MUST B E BASED ON MATERIALS ON THE RECORD OF THE PROCEEDINGS CALLED F OR 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 COUL D HAVE COME TO SUCH A CONCLUSION, THE VERY INITIATION OF PROCEE DINGS BY HIM WILL BE ILLEGAL AND WITHOUT JURISDICTION. THE COMMISSION ER CANNOT INITIATE PROCEEDINGS WITH A VIEW TO STARTING FISHIN G AND ROVING ENQUIRIES IN MATTERS OR ORDERS WHICH ARE ALREADY CO NCLUDED. SUCH ACTION WILL BE AGAINST THE WELL-ACCEPTED POLICY OF LAW THAT THERE MUST ITA NO. 2370/DEL/2013 24 BE A POINT OF FINALITY IN ALL LEGAL PROCEEDINGS, TH AT STALE ISSUES SHOULD NOT BE REACTIVATED BEYOND A PARTICULAR STAGE AND TH AT LAPSE OF TIME MUST INDUCE REPOSE IN AND SET AT REST JUDICIAL AND QUASI-JUDICIAL CONTROVERSIES AS IT MUST IN OTHER SPHERES OF HUMAN ACTIVITY. (SEE PARASHURAM POTTERY WORKS CO. LTD. V. ITO [1977] 106 ITR 1 (SC) AT PAGE 10)........ FROM THE AFORESAID DEFINITIONS IT IS CLEAR THAT AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDAN CE WITH LAW. IF AN INCOME-TAX OFFICER ACTING IN ACCORDANCE WITH LAW MA KES 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 DO ES NOT VISUALISE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE COMMISS IONER 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 ACC OUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUM STANCES 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 ESTIMAT E 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 OF FICER. THAT WOULD NOT VEST THE COMMISSIONER WITH POWER TO RE-EX AMINE THE ACCOUNTS AND DETERMINE THE INCOME HIMSELF AT A HIGH ER FIGURE. IT IS BECAUSE THE INCOME-TAX OFFICER HAS EXERCISED THE QU ASI-JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRI VED AT A CONCLUSION AND SUCH A CONCLUSION CANNOT BE FORMED T O BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEEL SATIS FIED WITH THE CONCLUSION THERE MUST BE SOME PRIMA FACIE MATERIA L ON RECORD TO SHOW THAT TAX WHICH WAS LAWFULLY EXIGIBLE HAS NOT B EEN IMPOSED OR THAT BY THE APPLICATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTERPRETATION A LESSER TAX THAN WHAT WA S JUST HAS BEEN IMPOSED THEREAFTER, IT WAS OBSERVED AND ELUCIDATED IN NAGE SH KNITWEARS PRIVATE LIMITED (SUPRA), WHEN AND HOW POW ER UNDER SECTION 263 CAN BE EXERCISED WHERE THERE WAS NO PRO PER OR FULL VERIFICATION AND WHEN THE TWIN PRE-CONDITIONS ARE S ATISFIED:- THUS, IN CASES OF WRONG OPINION OR FINDING ON MERI TS, THE CIT HAS TO COME TO THE CONCLUSION AND HIMSELF DECID E THAT THE ORDER IS ERRONEOUS, BY CONDUCTING NECESSARY ENQUIRY, IF R EQUIRED AND ITA NO. 2370/DEL/2013 25 NECESSARY, BEFORE THE ORDER UNDER SECTION 263 IS PA SSED. IN SUCH CASES, THE ORDER OF THE ASSESSING OFFICER WILL BE E RRONEOUS BECAUSE THE ORDER PASSED IS NOT SUSTAINABLE IN LAW AND THE SAID FINDING MUST BE RECORDED. CIT CANNOT REMAND THE MATTER TO THE AS SESSING OFFICER TO DECIDE WHETHER THE FINDINGS RECORDED ARE ERRONEO US. IN CASES WHERE THERE IS INADEQUATE ENQUIRY BUT NOT LACK OF E NQUIRY, AGAIN THE CIT MUST GIVE AND RECORD A FINDING THAT THE ORDER/I NQUIRY MADE IS ERRONEOUS. THIS CAN HAPPEN IF AN ENQUIRY AND VERIFI CATION IS CONDUCTED BY THE CIT AND HE IS ABLE TO ESTABLISH AN D SHOW THE ERROR OR MISTAKE MADE BY THE ASSESSING OFFICER, MAKING TH E ORDER UNSUSTAINABLE IN LAW. IN SOME CASES POSSIBLY THOUGH RARELY, THE CIT CAN ALSO SHOW AND ESTABLISH THAT THE FACTS ON RECOR D OR INFERENCES DRAWN FROM FACTS ON RECORD PER SE JUSTIFIED AND MAN DATED FURTHER ENQUIRY OR INVESTIGATION BUT THE ASSESSING OFFICER HAD ERRONEOUSLY NOT UNDERTAKEN THE SAME. HOWEVER, THE SAID FINDING MUST BE CLEAR, UNAMBIGUOUS AND NOT DEBATABLE. THE MATTER CANNOT BE REMITTED FOR A FRESH DECISION TO THE ASSESSING OFFICER TO CONDUC T FURTHER ENQUIRIES WITHOUT A FINDING THAT THE ORDER IS ERRONEOUS. FIND ING THAT THE ORDER IS ERRONEOUS IS A CONDITION OR REQUIREMENT WHICH MU ST BE SATISFIED FOR EXERCISE OF JURISDICTION UNDER SECTION 263 OF T HE ACT. IN SUCH MATTERS, TO REMAND THE MATTER/ISSUE TO THE ASSESSIN G OFFICER WOULD IMPLY AND MEAN THE CIT HAS NOT EXAMINED AND DECIDED WHETHER OR NOT THE ORDER IS ERRONEOUS BUT HAS DIRECTED THE ASS ESSING OFFICER TO DECIDE THE ASPECT/QUESTION. THIS DISTINCTION MUST BE KEPT IN MIND BY THE CIT WH ILE EXERCISING JURISDICTION UNDER SECTION 263 OF THE AC T AND IN THE ABSENCE OF THE FINDING THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, EXERCISE OF JURISDICTION U NDER THE SAID SECTION IS NOT SUSTAINABLE. IN MOST CASES OF ALLEGE D INADEQUATE INVESTIGATION, IT WILL BE DIFFICULT TO HOLD THAT T HE ORDER OF THE ASSESSING OFFICER, WHO HAD CONDUCTED ENQUIRIES AND HAD ACTED AS AN INVESTIGATOR, IS ERRONEOUS, WITHOUT CIT CONDUCTING VERIFICATION/INQUIRY. THE ORDER OF THE ASSESSING OF FICER MAY BE OR MAY NOT BE WRONG. CIT CANNOT DIRECT RECONSIDERATION ON THIS GROUND BUT ONLY WHEN THE ORDER IS ERRONEOUS. AN ORDER OF R EMIT CANNOT BE PASSED BY THE CIT TO ASK THE ASSESSING OFFICER TO D ECIDE WHETHER THE ORDER WAS ERRONEOUS. THIS IS NOT PERMISSIBLE. AN OR DER IS NOT ERRONEOUS, UNLESS THE CIT HOLD AND RECORDS REASONS WHY IT IS ERRONEOUS. AN ORDER WILL NOT BECOME ERRONEOUS BECAU SE ON REMIT, THE ASSESSING OFFICER MAY DECIDE THAT THE ORDER IS ERRONEOUS. THEREFORE CIT MUST AFTER RECORDING REASONS HOLD THA T THE ORDER IS ITA NO. 2370/DEL/2013 26 ERRONEOUS. THE JURISDICTIONAL PRECONDITION STIPULAT ED IS THAT THE CIT MUST COME TO THE CONCLUSION THAT THE ORDER IS ERRON EOUS AND IS UNSUSTAINABLE IN LAW. WE MAY NOTICE THAT THE MATERI AL WHICH THE CIT CAN RELY INCLUDES NOT ONLY THE RECORD AS IT STA NDS AT THE TIME WHEN THE ORDER IN QUESTION WAS PASSED BY THE ASSESS ING OFFICER BUT ALSO THE RECORD AS IT STANDS AT THE TIME OF EXAMINA TION BY THE CIT [SEE CIT V. SHREE MANJUNATHESWARE PACKING PRODUCTS, 231 ITR 53 (SC)]. NOTHING BARS/PROHIBITS THE CIT FROM COLLECTI NG AND RELYING UPON NEW/ADDITIONAL MATERIAL/EVIDENCE TO SHOW AND S TATE THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS. IT IS IN THIS CONTEXT THAT THE SUPREME COURT IN MAL ABAR INDUSTRIAL CO. LTD. V. COMMISSIONER OF INCOME TAX, (2000) 243 ITR 83 (SC), HAD OBSERVED THAT THE PHRASE PREJUDICIAL TO THE INTEREST OF REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS OR DER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVE NUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CA NNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF REVENUE. THUS, WH EN THE ASSESSING OFFICER HAD ADOPTED ONE OF THE COURSES PERMISSIBLE AND AVAILABLE TO HIM, AND THIS HAS RESULTED IN LOSS TO REVENUE; OR T WO VIEWS WERE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VI EW WITH WHICH THE CIT MAY NOT AGREE; THE SAID ORDERS CANNOT BE TR EATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF REVE NUE UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABL E IN LAW. IN SUCH MATTERS, THE CIT MUST GIVE A FINDING THAT THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW AND, THER EFORE, THE ORDER IS ERRONEOUS. HE MUST ALSO SHOW THAT PREJUDICE IS CAUS ED TO THE INTEREST OF THE REVENUE. 17. IN VIEW OF ABOVE, IF WE ANALYISE FACTS AND CIRC UMSTANCES OF THE PRESENT CASE, WHEREIN THE ASSESSING OFFICER CONDUCT THE ASS ESSMENT PROCEEDING AND PASSED IMPUGNED ASSESSMENT ORDER ACCEPTING THE RETU RN OF INCOME OF THE ASSESSEE WE CLEARLY OBSERVE THAT THE ASSESSING OFFI CER HAS NOT MADE INQUIRY ON THE ISSUE OF INTEREST FREE ADVANCES AND PROPORTIONA TE DISALLOWANCE OF INTEREST THEREON, ON THE ISSUE OF VERIFICATION ON TDS AND ON THE CLAIM AND CALCULATION OF THE ASSESSEE FOR THE PURPOSE OF DEDUCTION U/S 80IB( 7A) OF THE ACT SPECIALLY ON ITA NO. 2370/DEL/2013 27 THE ISSUE OF EXCLUSION OF INCOME/RECEIPT ON SALE OF SHOP AND FDR INTEREST. IN THIS SITUATION, WE HAVE NO HESITATION TO HOLD THAT THE O RDER OF THE AO WHICH IS APPARENTLY VERY PRECISE AND CRYPTIC, WAS NOT PASSED AFTER DUE EXAMINATION AND VERIFICATION OF CERTAIN OR ISSUE AND THEREFORE, THE RE WAS AN ERROR ON THE PART OF AO WHICH LEADS TO A CORRECT CONCLUSION OF THE CIT W ITH THE ORDER OF THE AO IS NOT ONLY ERRONEOUS OR ALSO PREJUDICIAL TO THE INTER EST OF REVENUE. WE MAY FURTHER POINT OUT THAT THE ASSESSMENT ORDER SUFFERS LACK OF NECESSARY ENQUIRY ON CERTAIN IMPORTANT ISSUES WHICH HAVE BEEN RAISED BY THE CIT IN THE NOTICE ISSUED TO THE ASSESSEE AND IMPUGNED ORDER U/S 263 OF THE ACT. THE REFORE, WE REACH TO A CONCLUSION THAT THE ASSESSMENT ORDER IS NOT SUSTAIN ABLE AND IN ACCORDANCE WITH THE PROVISIONS OF THE ACT WHICH IS NOT ONLY ERRONEO US BUT ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE. 18. HENCE, WE ARE INCLINED TO HOLD THAT THE ISSUANC E OF NOTICE U/S 263 OF THE ACT AND IMPUGNED ORDER PASSED BY THE CIT U/S 263 OF THE ACT IS VALIDLY ASSUMED JURISDICTION OF REVISIONAL POWERS U/S 263 OF THE AC T WHICH CANNOT BE ALLEGED AS INVALID ASSUMPTION OF JURISDICTION OR BAD IN LAW AN D WE CONFIRM THE SAME. ACCORDINGLY, GROUNDS NO. 2 TO 6 OF THE ASSESSEE BEI NG DEVOID OF MERITS DESERVES TO BE DISMISSED AND WE DISMISS THE SAME. ITA NO. 2370/DEL/2013 28 18. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. NOTICE AND THE IMPUGNED ORDER OF THE CIT U/S 263 OF THE ACT IS UPHELD. THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 14 TH AUGUST, 2015. SD/- SD/- (J.S. REDDY) (CHAN DRAMOHAN GARG) ACCOUNTANT MEMBER JUDI CIAL MEMBER DATED: 14 TH AUGUST, 2015. AKS/- COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI ITA NO. 2370/DEL/2013 29 DATE 1. DRAFT DICTATED ON 23.07.2015 PS 2. DRAFT PLACED BEFORE AUTHOR .07.2015 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.