SHRI SATISH KUMAR. S/O. SH. HANS RAJ , HOSHIARPUR V. INCOME TAX OFFICER WARD-4, HOSHIARPUR

ITA 258/ASR/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0429 (ITAT-AMRITSAR)
• Duration Of Justice: 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 22-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Difference of opinion; Prejudicial to interest; Change of opinion; Revenue expenditure; TDS; Set aside
• Section: 143(3); 142(1); 194C; 13; 263

Judgement Text

SATISH KUMAR V. PR.CIT- JALANDHAR/I.T.A.NO. 258/ASR /2019/A.Y. 14-15 PAGE 1 OF 20 IN THE INCOME TAX APPELLATE TRIBUNAL AMNRITSAR BENCH, AMRITSAR BEFORE SHRI N.K. CHOUDHRY, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . .. . . .. . ./ ././ ./ I.T.A NO.258/ASR/2019 / // / A.Y.:2014-15 SHRI SATISH KUMAR S/O HANS RAJ, B-12, MCH-366/13, BILLA HOUSE, NEW JAGATPURA, HOSHIARPUR PAN: AAWPK 0932 D VS. PRINCIPAL COMMISSIONER OF INCOME-TAX-1, JALANDHAR APPELLANT /RESPONDENT /ASSESSEE BY SHRI SURINDER MAHAJAN, CA /REVENUE BY SHRI ALOK KUMAR, CIT (D.R.) / DATE OF HEARING: 16.12.2019 # /PRONOUNCEMENT ON: 19 .12.2019 /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED PRINCIPAL COMMISSIONER OF INCOME-TAX-1, JALANDHAR ( IN SHORT THE PR.CIT) DATED 26.03.2019PERTAINING TO ASSESSMENT Y EAR 2014-15, PASSED UNDER SECTION 263 OF INCOME TAX ACT, 1961 (IN SHORT THE ACT). SATISH KUMAR V. PR.CIT- JALANDHAR/I.T.A.NO. 258/ASR /2019/A.Y. 14-15 PAGE 2 OF 20 2. GROUND NO. 1 TO 6 OF APPEAL STATES THAT PR.CIT HAS ERRED IN PASSING ORDER UNDER SECTION 263 OF THE ACT, WHICH I S ILLEGAL AND WITHOUT JURISDICTION AND PR.CIT HAS GROSSLY ERRED I N HOLDING THE ASSESSMENT ORDER PASSED UNDER SECTION 143 (3) AS ER RONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, EVEN TH OUGH THE AO HAS CARRIED OUT NECESSARY ENQUIRIES BY ISSUE OF QUESTIO NNAIRE. THE ASSESSMENT ORDER WAS NOT PREJUDICIAL AS ASSESSMENT ORDER WAS SELECTED FOR LIMITED SCRUTINY UNDER CASS TO VERIFY AND EXAMI NE LARGE OTHER EXPENSES AS CLAIMED IN THE PROFIT & LOSS ACCOUNT. T HEREFORE, PR.CIT HAS GROSSLY ERRED IN SETTING-ASIDE THE ORDER AND DI RECTING THE AO TO MAKE FRESH ASSESSMENT AFTER MAKING PROPER ENQUIRIES , WHICH AMOUNTS TO CHANGE OF OPINION AND THE ASSESSMENT FRAMED IS N EITHER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 2. SUCCINCTLY, FACTS AS CULLED OUT FROM THE ORDERS OF LOWER AUTHORITIES ARE THAT THE ASSESSEE IS ENGAGED IN BUSINESS OF REA L ESTATE, LIQUOR CONTRACTOR AND TOLL PLAZA CONTRACTOR. THE ASSESSEE HAS FILED RETURN OF INCOME ON 19.09.2014 DECLARING TOTAL INCOME OF RS.1 8,37,730 WHICH WAS SELECTED UNDER CASS FOR LIMITED SCRUTINY FOR EXAMIN ATION OF LARGE EXPENSES. THE SAME WAS ASSESSED AT RS.18,63,230 VID E ORDER DATED 21.11.2016 UNDER SECTION 143(3) OF THE ACT. ON EXAM INATION OF RECORDS, SATISH KUMAR V. PR.CIT- JALANDHAR/I.T.A.NO. 258/ASR /2019/A.Y. 14-15 PAGE 3 OF 20 THE PR. CIT NOTICED THAT THE ASSESSEE HAS DEBITED I N THE PROFIT & LOSS ACCOUNT TOLL PLAZA EXPENSES OF RS.1,48,97,057 WHICH INCLUDED EXPENSES OF RS. 3,62,608 OF COMPUTER EXPENSES AND RS.3,68,192 O N WEIG BRIDGE EXPENSES. AS THESE EXPENSES WERE PAID TO PARTICULAR ENTITY WHICH ARE IN THE NATURE OF WORKS CONTRACT AND LIABLE TO TDS UNDE R SECTION 194C OF THE ACT. HOWEVER, THE PERUSAL OF RECORDS SUGGEST THAT T HERE IS NOTHING ON RECORD THAT TDS WAS DEDUCTED ON THESE PAYMENTS. THE PR.CIT FURTHER, OBSERVED THAT THE ASSESSEE HAS DEBITED RS.5,91,030 AS COURT FEES PAID FOR CIVIL SUIT TO RECOVER RS. 2,09,00,000 AND RS.17,53, 638 AGAINST KAMALDEEP SINGH AND M/S. GUPTA TRADERS RESPECTIVELY. HOWEVER, THE PERUSAL OF RECORDS SUGGEST THAT THESE ARE NOT RELATING TO ANY BUSINESS ACTIVITY OF THE ASSESSEE, HENCE, SUCH EXPENSES ARE APPARENTLY NOT ALLOWABLE. FURTHER, THE DISPUTED ASSETS INVOLVED IN RECOVERY OF RS.2,26 ,53,638 WERE NOT FIND PLACE IN BALANCE SHEET HENCE, NATURE OF SOURCE OF F UNDS HAS NOT BEEN EXAMINED BY THE AO. FURTHER, PERUSAL OF DETAILS OF LICENCE FEE EXPENSES IN RESPECT OF LIQUOR BUSINESS SHOWED THAT THE ASSES SEE WAS RUNNING AHATAS (DRINKING PLACE AT LEAST AT FOUR PLACES) BUT NO INC OME FROM AHATAS HAS BEEN SHOWN. THEREFORE, THE PR.CIT HAS ISSUED A SHOW -CAUSE NOTICE TO THE ASSESSEE TO HOLD AS TO WHY THE ORDER PASSED SHOULD NOT BE TREATED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. THE ASSESSEE SATISH KUMAR V. PR.CIT- JALANDHAR/I.T.A.NO. 258/ASR /2019/A.Y. 14-15 PAGE 4 OF 20 HAS REPLIED THAT PAYMENT MADE FOR COMPUTER AND WEIG H BRIDGE EXPENSES ON ACCOUNT OF PAYMENT MADE IN LAST YEAR AND APPROPR IATED TO EXPENSES ACCOUNT DURING THE YEAR UNDER CONSIDERATION. THE TO LL PLAZA CONTRACT WAS ALLOTTED FOR NINE MONTHS ONLY. COMPUTER AND WEIGH B RIDGE INSTALLED ON THE TOLL PLAZA ARE TAKEN OVER BY THE NEW CONTRACTOR AND EXPENSES ARE WRITTEN OFF PROPORTIONATELY AND CLAIMED IN PROFIT & LOSS ACCOUNT ON WHICH NO TDS WAS REQUIRED TO BE MADE. THE AMOUNT OF RS.2, 09,00,000 FROM KAMALDEEP SINGH AND RS.17,53,638 FROM GUPTA TRADERS ARE RELATES TO BUSINESS OF THE ASSESSEE. THE AMOUNT DUE HAS BEEN D EBITED IN CAPITAL ACCOUNT SINCE LIQUOR LICENCE IS FOR ONE YEAR AND AL L AMOUNT DUE HAS BEEN DEBITED IN CAPITAL ACCOUNT. AS REGARDS INCOME FROM AHATAS, IT WAS SUBMITTED THAT THE AHATAS WERE GIVEN TO THE INDEPEN DENT PERSON, WHO RUN THE AHATAS ON DAILY PAYMENTS OF RS.300 TO RS.10 00 PER DAY AND AMOUNT RECEIVED IS CREDITED IN SALES ACCOUNT. FURT HER, ON LEGAL GROUND, IT WAS SUBMITTED THAT THE AO HAS MADE ALL THE ENQUIRIE S AND TEST CHECKED THE BOOKS OF ACCOUNTS AND COMPLETED THE ASSESSMENT AFTER VERIFICATION. THEREFORE, THE ASSESSMENT ORDER IS NOT ERRONEOUS AN D PREJUDICIAL TO THE INTEREST OF THE REVENUE AS HELD BY THE HON`BLE SUPR EME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. V. CIT [2000] 243 IT R 83 (SC) : [2003] 183 CTR 228 (SC) : [2003] 131 TAXMAN 535 (SC). THE LD. AR OF THE ASSESSEE SATISH KUMAR V. PR.CIT- JALANDHAR/I.T.A.NO. 258/ASR /2019/A.Y. 14-15 PAGE 5 OF 20 HAS ALSO RELIED IN THE CASE OF CIT V. AMAR JEWELLER S LTD. V. DCIT [2002]259 ITR 502, CIT V. SUNBEAM AUTO LTD. [2011] 332 ITR 16 7 (DELHI) [2010] 189 TAXMAN 436 (DELHI), CIT V. VINOD KUMAR GUPTA [2007] 165 TAXMAN 225 (P&H) AND OTHERS WHICH HAVE BEEN REPRODUCED BY THE PR.CIT IN HIS ORDER PASSED UNDER SECTION 263 OF THE ACT. HOWEVER, THE P R. CIT OBSERVED THAT THE OBJECTION REGARDING DIFFERENCE OF OPINION BETWE EN THE AO AND PR.CIT, IS CONCERNED THE POSITION HAS BEEN SUBSTANTIALLY AL TERED WITH INSERTION OF EXPLANATION-2 TO SECTION 263 BY THE FINANCE ACT, 20 15 AND THE DEEMING PROVISIONS WOULD NOT APPLY PERTAINING TO PRE AMEND ED PERIOD DOES NOT HOLD GOOD. THE ASSESSEE HAS OBJECTED THAT CASE WAS SELECTED UNDER LIMITED SCRUTINY UNDER CASS, HENCE, THIS CANNOT BE EXTENDED TO OTHER QUERIES. HOWEVER, PR.CIT OBSERVED THAT THIS CASE WA S SELECTED FOR VERIFICATION AND EXAMINATION OF LARGE EXPENSES CLAI MED UNDER THE HEAD OF OTHER EXPENSES. THE PR. CIT OBSERVED THAT REGARDING COMPUTER EXPENSE AND WEIGH BRIDGE EXPENSES THE ASSESSEE HAS NOT FILE D SATISFACTORY REPLY FOR NON DEDUCTION OF TDS. REGARDING EXPENSES OF RS. 5,91,030, THE CLAIM OF BUSINESS RELATION AND EXPENSES DEBITED TO CAPITA L ACCOUNT BUT NO DETAILS ARE FILED. HENCE, THESE EXPENSES WERE LIABL E TO BE DISALLOWED. THE AO WAS REQUIRE TO MAKE ENQUIRY FOR RECOVERY SUI T CLAIM OF RS.2,26,53,638 AND WHY THESE WERE NOT REFLECTED IN BALANCE SHEET. SATISH KUMAR V. PR.CIT- JALANDHAR/I.T.A.NO. 258/ASR /2019/A.Y. 14-15 PAGE 6 OF 20 REGARDING AHATAS INCOME THE ASSESSEE HAS ONLY FILED A LEDGER ACCOUNT SHOWING INCOME RECEIVED AS AHATAS INCOME BUT DETAIL S OF SAME HAS NOT BEEN FILED. THUS, AFTER CONSIDERING REPLY TO SHOW-C AUSE NOTICE, THE PR. CIT OBSERVED THAT THE ORDER PASSED BY THE AO IS ERR ONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE BECAUSE ASSE SSMENT ORDER PASSED WITHOUT MAKING REQUIRED INQUIRIES AND VERIFICATION IN RESPECT OF ABOVE ISSUES. THEREFORE, THE ORDER WAS CONSIDERED TO BE E RRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE HENCE, W AS SET-ASIDE TO THE FILE OF THE AO WITH A DIRECTION TO MAKE FRESH ASSESSMENT ON THE ABOVE MENTIONED ISSUES AFTER GIVING DUE OPPORTUNITY TO TH E ASSESSEE. 3. AGGRIEVED WITH ORDER OF PR.CIT, THE ASSESSEE FILED THIS APPEAL BEFORE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE VEHE MENTLY CONTENDED THAT THE AO HAS DULY VERIFIED AND APPLIED HIS MIND TO THE ISSUES UNDER CONSIDERATION; THEREFORE, THE ORDER OF THE AO IS NO T ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE LEA RNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PR.CIT CAN ASSUME JURIS DICTION UNDER SECTION 263 OF THE ACT ONLY IF THE ORDER OF THE AO IS ERRON EOUS AS FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. BOTH TH E CONDITIONS HAVE TO BE FULFILLED BEFORE ACTION UNDER SECTION 263 IS INITIA TED. THE LD. COUNSEL FOR THE ASSESSEE HAS DRAWN OUR ATTENTION TO POINT NO. 1 OF QUESTIONNAIRE (PB- SATISH KUMAR V. PR.CIT- JALANDHAR/I.T.A.NO. 258/ASR /2019/A.Y. 14-15 PAGE 7 OF 20 16) OF NOTICE UNDER SECTION 142(1) DATED 22.08.2016 (PAPER BOOK PAGE NO.14 TO 23 ) BY WHICH THE DETAILS OF TOLL PLAZA EX PENSES OF RS.1,48,97,057 WAS CALLED FOR AND THE ASSESSEE HAS FILED HIS REPLY VIDE LETTER DATED 29.08.2016 (PB 24 TO27) VIDE POINT NO. 1 GIVING DETAILS OF TOLL PLAZA EXPENSES. WITH REFERENCE TO ISSUE NO. 2, BEI NG COURT FEES EXPENSES OF RS.5,91,030, IT WAS SUBMITTED TO THE AO HAS RAIS ED QUERY VIDE PARA NO.7 OF QUESTIONNAIRE DATED 22.08.2016 OF WHICH REP LY WAS FURNISHED BY THE ASSESSEE VIDE PARAGRAPH NO.3 (PLACED AT PB-18). WITH REGARD TO LICENSING FEES OF RS.2,70,39,107. THE LEARNED COUNS EL SUBMITTED THAT THE AO HAS RAISED QUERY VIDE PARA 2 OF NOTICE UNDER SEC TION 142(1) DATED 22.08.2016 (PB-17) WHICH WAS REPLIED BY THE ASSESSE E VIDE PARA NO. 2 OF WHICH REPLY IS PLACED THE ASSESSEE PAPER BOOK PAGE NO. 18 AND ALSO DETAIL EXPLANATION WAS FILED VIDE PARAGRAPH NO. 2 OF EXPLA NATION WHICH IS PLACED AT THE ASSESSEE`S PAPER BOOK PAGE NO. 25. WITH REGA RD TO RECOVERY SUIT EXPENSES, THE LEARNED COUNSEL FOR THE ASSESSEE SUBM ITTED THAT A COPY OF LEDGER ACCOUNT WAS FILED WHICH IS PLACED AT PAPER B OOK PAGE NO. 51 SHOWING THE EXPENSES DEBITED IN THE NAME OF SHRI KA MALDEEP SINGH ANAND AND GUPTA TRADERS. HENCE, IT WAS CONTENDED THAT SUC H EXPENSES ARE REFLECTED IN THE LEDGER ACCOUNT, WHICH HAVE BEEN DE BITED TO CAPITAL ACCOUNT OF THE ASSESSEE. THE COPY OF ACCOUNT IS PLA CED AT PAPER BOOK SATISH KUMAR V. PR.CIT- JALANDHAR/I.T.A.NO. 258/ASR /2019/A.Y. 14-15 PAGE 8 OF 20 PAGE NO. 53 OF KAMALDEEP SINGH AND OF GUPTA TRADERS AT PAPER BOOK PAGE NO.54. THE DETAILS OF SUIT RECOVERY ARE GIVEN AT PA PER BOOK PAGE NO. 55 TO 64. THUS, THE ASSESSMENT ORDER PASSED AFTER MAKING ENQUIRIES AND VERIFICATION. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER REFERRED PAPER BOOK PAGE NO. 65 OF WHICH COPY OF AHATAS ACCOUNT SH OWING MONTHLY INCOME FROM AHATAS TOTALING TO RS.4,73,200 FOR THE YEAR UNDER CONSIDERATION. THE DETAILS OF SAME WERE SUBMITTED A LONG WITH BOOKS OF ACCOUNTS DURING THE COURSE OF ASSESSMENT PROCEEDING S. THEREFORE, THE ASSESSMENT ORDER PASSED AFTER VERIFICATION AND ENQU IRY IS NOT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE PR.CIT HAS NOT SPECIFIED THAT WHICH ENQUIRIES WERE OUGHT TO HAVE M ADE. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE PR.CIT IN HIS NOTICE HIMSELF MENTIONED THAT THE ASSESSEE EXAMINATION OF RECORDS SHOWED THE DISCREPANCIES, WHICH MEANS THE DETAILS WERE ON RECO RD AND WERE EXAMINED BY THE AO. THE LEARNED COUNSEL FOR THE ASS ESSEE FURTHER SUBMITTED THAT THE ASSESSMENT YEAR INVOLVED IS ASSE SSMENT YEAR 2014-15 AND AMENDMENT BY WAY OF EXPLANATION 2 TO SECTION 26 3 WAS INSERTED WITH EFFECT FROM 01.06.2015, HENCE, SAME IS NOT APPLICAB LE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION AS IT IS NOT RETROSPECTIVE IN NATURE. IT WAS SUBMITTED THAT ERRONEOUS ORDER MEANS THE ASSESSMENT THAT DEVIATE FROM SATISH KUMAR V. PR.CIT- JALANDHAR/I.T.A.NO. 258/ASR /2019/A.Y. 14-15 PAGE 9 OF 20 LAW AND NOT IN ACCORDANCE WITH LAW. IF THE AO, ACTI NG IN ACCORDANCE WITH LAW MAKES CERTAIN ASSESSMENT, THE SAME CANNOT BE TE RMED AS ERRONEOUS. 4. FURTHER, IN SUPPORT OF HIS CONTENTIONS, THE LD. COU NSEL FOR THE ASSESSEE RELYING ON PLETHORA OF DECISIONS, INCLUDIN G THE DECISIONS OF THE HONBLE SUPREME COURT IN MALABAR INDUSTRIAL CO. LIM ITED (243 ITR 83); CIT V. ARVIND JEWELLERS 259 ITR 502 (GUJARAT), CIT V. V INOD KUMAR GUPTA [2007] 165 TAXMAN 225 (P&H), CIT V/S. MAX INDIA LTD . 2007] 295 ITR 282 (SC), ITO V. DG HOUSING PROJECTS LIMITED [2012] 343 ITR 329 (DEL),RANKA JEWELLERS V. ADDL. CIT [2010] 328 ITR 148 (BOMBAY) , CIT V. SUNBEAM AUTO LTD. [2011] 332 ITR 167 (DELHI) [2010] 189 TAXMAN 4 36 (DELHI) NARAIN SINGLA V. PR.CIT 62 TAXMANN.COM 225 (CHANDIGARH-TRI B) , JIVAN KUMAR V. PR.CIT [I.T.A.NO. 219 & 672/ASR/2016 AND OTHERS AS PER HIS CASE LAWS PAPER BOOK. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT IS A SETTLED POSITION OF LAW THAT WHEN THE ASSESSING OFF ICER HAS TAKEN A CERTAIN VIEW ON THE BASIS OF EVIDENCE BEFORE HIM ON THE INF ORMATION FURNISHED BY THE ASSESSEE REGARDING ISSUE UNDER CONSIDERATION IN RESPONSE TO ENQUIRIES MADE BY THE ASSESSING OFFICER, THE PR.CIT CANNOT SE EK TO REVISE THE ASSESSMENT ORDER UNDER SECTION 263 OF THE ACT BY TA KING A DIFFERENT VIEW. 5. AU CONTRAIRE, THE LD. CIT (DR) SUBMITTED THIS IS A CASE WHERE TH E AO HAS NOT MADE REQUIRED ENQUIRIES. THE CASE WAS SELEC TED FOR LIMITED SATISH KUMAR V. PR.CIT- JALANDHAR/I.T.A.NO. 258/ASR /2019/A.Y. 14-15 PAGE 10 OF 20 SCRUTINY, BUT THAT DOES NOT MEAN THAT THE AO WAS NO T REQUIRED TO MAKE ENQUIRIES, WHICH ARE NECESSARY. THE ASSESSEE HAS CL AIMED VARIOUS EXPENSES BUT THE AO HAS NOT EXAMINED THE SAME PROPE RLY. THEREFORE, EXPLANATION-2 TO SECTION 263 OF THE ACT IS VERY MUC H APPLICABLE, AS THE AO HAS NOT MADE REQUIRED ENQUIRY. THEREFORE, THE ORDER PASSED BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. HENCE, PR.CIT HAS RIGHTLY ASSUMED JURISDICTION TO SET-ASIDE THE I SSUE TO THE AO FOR FRESH ASSESSMENT AS THE AO TO EXAMINE THE ISSUE UNDER DIS PUTE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE ARE OF THE VIE W THAT SECTION 263 OF THE ACT ENABLES SUPERVISORY JURISDICTION TO THE PR. CIT OVER THE AO. THE PR.CIT IS EMPOWERED TO ACT U/S. 263 OF THE ACT WHEN HE CONSIDERS THAT AO'S ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDIC IAL TO THE INTEREST OF REVENUE. IT IS A SETTLED POSITION OF LAW THAT THE A FORESAID TWIN CONDITION I.E. AO'S ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE IS SINE QUA NON FOR ASSUMPTION OF REVISIONARY JURISDIC TION BY PR.CIT. AS PER THE SCHEME OF THE ACT, AO HAS A DUAL ROLE TO DISCHA RGE WHILE ASSESSING THE INCOME OF AN ASSESSEE. HE IS BOTH AN INVESTIGATOR A S WELL AS AN ADJUDICATOR. IF THE AO FAILS IN DISCHARGING ANY OF THE TWO SAID DUTIES I.E. AS AN INVESTIGATOR OR THAT OF AN INDEPENDENT/IMPART IAL ADJUDICATOR, THE SATISH KUMAR V. PR.CIT- JALANDHAR/I.T.A.NO. 258/ASR /2019/A.Y. 14-15 PAGE 11 OF 20 PR. CIT'S SUPERVISORY JURISDICTION IS ATTRACTED BEC AUSE THE ORDER OF THE AO WOULD BE ERRONEOUS FOR LACK OF INQUIRY. THUS IF HE DOES NOT INVESTIGATE, IT WOULD BE ERRONEOUS FOR FAILURE OF AO TO ADJUDICATE AS AN INDEPENDENT/IMPARTIAL ADJUDICATOR WHICH MEANS THAT IF THE AO PASSES ASSESSMENT ORDER IN VIOLATION OF NATURAL JUSTICE, O R THERE IS BIAS OR ARBITRARINESS ETC. THEN ALSO THE ORDER OF AO WOULD BE ERRONEOUS. WHEN WE SAY THAT LACK OF INQUIRY MAKES AN AO'S ORDER ERRONE OUS, ONE HAS TO KEEP IN MIND THE DIFFERENCE BETWEEN LACK OF INQUIRY AND INA DEQUATE INQUIRY. LACK OF INQUIRY MAKES THE AO'S ORDER ERRONEOUS, BUT INAD EQUATE INQUIRY DOES NOT MAKE THE ORDER OF AO ERRONEOUS. THE SUPREME COU RT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. V. CIT [2000] 243 ITR 8 3 (SC) 109 TAXMAN 66 (SC) HAD INTERPRETED THE PROVISIONS OF SECTION 263 (1) IN THE FOLLOWING WORDS : 'A BARE READING OF THIS PROVISION MAKES IT CLEAR THA T THE PREREQUISITE TO THE EXERCISE OF JURISDICTION BY THE CO MMISSIONER SUO- MOTO-MOTO UNDER IT, IS THAT THE ORDER OF THE INCOME- TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERE STS OF THE REVENUE. THE COMMISSIONER HAS TO BE SATISFIED OF TWIN CONDIT IONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT IF THE ORDER OF THE INCOME-TAX OFFICER IS E RRONEOUS BUT IS NOT SATISH KUMAR V. PR.CIT- JALANDHAR/I.T.A.NO. 258/ASR /2019/A.Y. 14-15 PAGE 12 OF 20 PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUERECOURSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT. ---- THERE CAN BE NO DOUBT THAT THE PROVISION CANNOT BE I NVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN IN CORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND . . .THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE' HAS TO BE READ IN C ONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVER Y LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER C ANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. FOR EXAMPL E, WHEN AN INCOME-TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSI BLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE; OR WHERE TWO VIEWS A RE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH TH E COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDE R PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY TH E INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW.' SATISH KUMAR V. PR.CIT- JALANDHAR/I.T.A.NO. 258/ASR /2019/A.Y. 14-15 PAGE 13 OF 20 7. FOLLOWING THE AFORESAID JUDGMENT, THE SUPREME COURT IN CIT V. MAX INDIA LTD. [2007] 295 ITR 282 (SC) REITERATED THAT THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE' AS USED IN SECTION 263(1) OF THE ACT MUST BE READ IN CONJUNCTION WITH THE EXPRESSION 'ERRONEO US' AND UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS FOUND TO BE UNSUSTAINABLE IN LAW, THE POWERS UNDER SECTION 263 OF THE ACT CANNOT BE I NVOKED. 8. NO DOUBT, CLAUSE (A) OF THE EXPLANATION 2 TO SECTIO N 263 DEEMS THE ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERE ST OF THE REVENUE IN CASE ORDER IS PASSED WITHOUT MAKING ENQUIRIES OR VE RIFICATION WHICH SHOULD HAVE BEEN MADE IN THE OPINION OF PR.CIT. IN OUR OPI NION, FOR THE APPLICABILITY OF CLAUSE (A) OF EXPLANATION , IT IS NECESSARY THAT THE PR. CIT MUST MENTION IN THE ORDER WHAT INQUIRIES OR VERIFIC ATION THE PR. CIT DESIRES TO HAVE BEEN CARRIED OUT BY THE AO. THE PR. CIT IN THIS CASE EVEN THOUGH STATED THAT THE AO FAILED TO EXAMINE COMPUTE R EXPENSES AND WEIGH BRIDGE, COURT FEE, LICENSEE FEE AND RECOVERY DUES DURING THE COURSE OF ASSESSMENT PROCEEDINGS, BUT DID NOT POINTED OUT WHAT TYPE OF INQUIRY OF VERIFICATION SHOULD HAVE BEEN CARRIED OUT IN THI S REGARD BY THE AO. HOWEVER, THE ORDER PASSED BY THE AO, IN OUR OPINION , SHALL BE DEEMED TO BE ERRONEOUS IN SO FAR AS IT PREJUDICIAL TO THE INT EREST OF THE REVENUE, IF THE PR. CIT WOULD HAVE SPECIFICALLY POINTED OUT WHI CH OF INQUIRIES OR SATISH KUMAR V. PR.CIT- JALANDHAR/I.T.A.NO. 258/ASR /2019/A.Y. 14-15 PAGE 14 OF 20 VERIFICATION SHOULD HAVE BEEN CARRIED OUT BY THE AO IN THIS REGARD AND THE AO FAILED TO CARRY OUT THOSE INQUIRIES AND VERIFICA TION AS DESIRED BY THE PR.CIT. SINCE THE PR. CIT HAS NOT SUGGESTED THE BAS IS OF INQUIRY OR VERIFICATION TO BE CARRIED OUT BY THE AO, THE ORDER PASSED BY THE AO CANNOT BE DEEMED TO BE ERRONEOUS IN SO AS FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 9. SIMILAR VIEW HAS BEEN IN THE CASE OF CIT V. SUNBEAM AUTO LTD. [2011] 332 ITR 167 (DELHI) [2010] 189 TAXMAN 436 (D ELHI) WHEREIN THE HON`BLE HIGH COURT HELD THAT INADEQUACY OF ENQUIRY WILL NOT GIVE JURISDICTION TO COMMISSIONER UNDER SECTION 263. IN THIS CASE THE HON`BLE HIGH COURT HAS HELD AS UNDER: (HEAD NOTE) : SECTION 263 OF THE INCOME- TAX ACT, 1961 - REVISION- OF ORDER PREJUDICIAL TO I NTEREST OF REVENUE- ASSESSMENT YEAR 2001-02- WHETHER IF WHILE MAKING AS SESSMENT, ASSESSING OFFICER HAS MADE AN INADEQUATE ENQUIRY, T HAT WOULD NOT, BY ITSELF, GIVE OCCASION TO COMMISSIONER TO PASS ORDER UNDER SECTION 263, MERELY BECAUSE HE HAS DIFFERENT OPINION IN MATTER, IT IS ONLY IN CASES OF 'LACK OF INQUIRY' THAT SUCH A COURSE OF ACTION W OULD BE OPEN- HELD, YES - ASSESSEE-COMPANY WAS ENGAGED IN BUSINESS OF M ANUFACTURING AND SUPPLYING AUTO PARTS - IN ASSESSMENT FOR RELEVANT A SSESSMENT YEAR, IT HAD BEEN ALLOWED DEDUCTION OF EXPENDITURE INCURRED ON TOOLS AND DYES SATISH KUMAR V. PR.CIT- JALANDHAR/I.T.A.NO. 258/ASR /2019/A.Y. 14-15 PAGE 15 OF 20 AS REVENUE EXPENDITURE - COMMISSIONER, HOWEVER, SET ASIDE ASSESSMENT ORDER IN EXERCISE OF HIS POWERS UNDER SE CTION 263 ON GROUND THAT ASSESSING OFFICER HAD ALLOWED AFORESAID EXPENDITURE WITHOUT MAKING PROPER ENQUIRY - HE, ACCORDINGLY, RE MITTED MATTER BACK TO ASSESSING OFFICER TO RE-EXAMINE ISSUE - WHE THER WHEN FACTS CLEARLY SHOWED THAT ASSESSING OFFICER HAD UNDERTAKE N EXERCISE OF EXAMINING AS TO WHETHER EXPENDITURE INCURRED BY ASS ESSEE IN REPLACEMENT OF DYES AND TOOLS WAS TO BE TREATED AS REVENUE EXPENDITURE OR NOT AND ON BEING SATISFIED WITH ASSE SSEE'S EXPLANATION, HE ACCEPTED SAME, IT COULD BE SAID TO BE A CASE OF LACK OF INQUIRY - HELD, NO - WHETHER FURTHER, ON FACTS AND LAW, VIEW TAKEN BY ASSESSING OFFICER WAS ONE OF POSSIBLE VIEWS AND, THEREFORE, A SSESSMENT ORDER PASSED BY ASSESSING OFFICER COULD NOT BE HELD TO BE PREJUDICIAL TO INTEREST OF REVENUE - HELD, YES - WHETHER, THEREFOR E, TRIBUNAL WAS JUSTIFIED IN SETTING ASIDE ORDER OF COMMISSIONER - HELD, YES 10. THE PR. CIT HAS NOTICED THAT THE ASSESSEE HAS DEBIT ED IN THE PROFIT & LOSS ACCOUNT TOLL PLAZA EXPENSES INCLUDED RS.3,62,6 08 OF COMPUTER EXPENSES AND RS.3,68,192 ON WEIGH BRIDGE EXPENSES W HICH WERE WORKS CONTRACT AND LIABLE TO TDS UNDER SECTION 194C OF TH E ACT. THE ASSESSEE DEBITED RS.5,91,030 AS COURT FEES PAID FOR CIVIL SU IT TO RECOVER RS. SATISH KUMAR V. PR.CIT- JALANDHAR/I.T.A.NO. 258/ASR /2019/A.Y. 14-15 PAGE 16 OF 20 2,09,00,000 AND RS.17,53,638 AGAINST KAMALDEEP SING H AND M/S. GUPTA TRADERS RESPECTIVELY HOW THESE ARE RELATED TO BUSIN ESS ACTIVITY NOT EXAMINED AND NO INCOME FROM AHATAS HAS BEEN SHOWN, BUT DID NOT POINTED OUT AS TO WHY ORDER IS ERRONEOUS WHEN THE A LL DETAILED OF BALANCE SHEET AND NOTES APPENDED THERETO WERE ON RECORD OF THE AO. THAT THE ORDER PASSED BY THE AO, IN OUR OPINION, SHALL BE DE EMED TO BE ERRONEOUS IN SO FAR AS IT PREJUDICIAL TO THE INTEREST OF THE REVENUE, IF THE PR. CIT WOULD HAVE SPECIFICALLY POINTED OUT WHICH OF INQUIR IES OR VERIFICATION SHOULD HAVE BEEN CARRIED OUT BY THE AO IN THIS REGA RD AND THE AO FAILED TO CARRY OUT THOSE INQUIRIES AND VERIFICATION AS DE SIRED BY THE PR. COMMISSIONER OF INCOME-TAX. SINCE THE PR. CIT HAS N OT SUGGESTED THE BASIS OF INQUIRY OR VERIFICATION TO BE CARRIED OUT BY THE AO, THE ORDER PASSED BY THE AO CANNOT BE DEEMED TO BE ERRONEOUS I N SO AS FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 11. IN THE CASE OF CIT V. SUNBEAM AUTO LTD. [2011] 332 ITR 167 (DELHI) [2010] 189 TAXMAN 436 (DELHI) IT WAS HELD THAT IF T HERE IS SOME ENQUIRY BY THE ASSESSING OFFICER IN THE ORIGINAL PROCEEDINGS, EVEN IF INADEQUATE, THAT CANNOT CLOTHE THE COMMISSIONER WITH JURISDICTION UN DER SECTION 263 MERELY BECAUSE HE CAN FORM ANOTHER OPINION. AT THE MOST, THE CASE OF THE ASSESSEE CAN BE REGARDED TO BE LACK OF INQUIRY IN A CCORDANCE WITH SATISH KUMAR V. PR.CIT- JALANDHAR/I.T.A.NO. 258/ASR /2019/A.Y. 14-15 PAGE 17 OF 20 COMMISSIONER OF INCOME TAX IF HE HAS DIFFERENT OPIN ION HOW TO PROCEED WITH ASSESSMENT OF THE CASE. 12. IN THE LIGHT OF THE ABOVE MENTIONED JUDICIAL PRECED ENTS AND FACTS OF THE PRESENT CASE, WHAT HAS TO BE SEEN IS WHETHER TH E AO HAS MADE ENQUIRIES ABOUT ISSUE UNDER CONSIDERATION. THE LD. COUNSEL FOR THE ASSESSEE HAS DRAWN OUR ATTENTION TO POINT NO. 1 OF QUESTIONNAIRE (PB-16) OF NOTICE UNDER SECTION 142(1) DATED 22.08.2016 (PA PER BOOK PAGE NO.14 TO 23 ) BY WHICH THE DETAILS OF TOLL PLAZA EXPENSES OF RS.1,48,97,057 WERE CALLED FOR AND THE ASSESSEE HAS FILED HIS REPLY VID E LETTER DATED 29.08.2016 (PB 24 TO 27) VIDE POINT NO. 1 GIVING DE TAILS OF TOLL PLAZA EXPENSES. WITH REFERENCE TO ISSUE NO. 2, BEING COU RT FEES EXPENSES OF RS.5,91,030, IT WAS SUBMITTED TO THE AO HAS RAISED QUERY VIDE PARA NO.7 OF QUESTIONNAIRE DATED 22.08.2016 OF WHICH REPLY WA S FURNISHED BY THE ASSESSEE VIDE PARAGRAPH NO.3 (PLACED AT PB-18). WIT H REGARD TO LICENSING FEES OF RS.2,70,39,107,THE LEARNED COUNSEL SUBMITTE D THAT THE AO HAS RAISED QUERY VIDE PARA 2 OF NOTICE UNDER SECTION 14 2(1) DATED 22.08.2016 (PB-17) WHICH WAS REPLIED BY THE ASSESSEE VIDE PARA NO. 2 OF WHICH REPLY IS PLACED THE ASSESSEE PAPER BOOK PAGE NO. 18 AND ALSO DETAIL EXPLANATION WAS FILED VIDE PARAGRAPH NO. 2 OF EXPLA NATION IS PLACED AT THE ASSESSEE`S PAPER BOOK PAGE NO. 25. WITH REGARD TO R ECOVERY SUIT SATISH KUMAR V. PR.CIT- JALANDHAR/I.T.A.NO. 258/ASR /2019/A.Y. 14-15 PAGE 18 OF 20 EXPENSES, THE LEARNED COUNSEL FOR THE ASSESSEE SUBM ITTED THAT A COPY OF LEDGER ACCOUNT WAS FILED WHICH IS PLACED AT PAPER B OOK PAGE NO. 51 SHOWING THE EXPENSES DEBITED IN THE NAME OF SHRI KA MALDEEP SINGH ANAND AND GUPTA TRADERS. HENCE, IT WAS CONTENDED THAT SUC H EXPENSES ARE REFLECTED IN THE LEDGER ACCOUNT, WHICH HAVE BEEN DE BITED TO CAPITAL ACCOUNT OF THE ASSESSEE. THE COPY OF ACCOUNT IS PLA CED AT PAPER BOOK PAGE NO. 53 OF KAMALDEEP SINGH AND OF GUPTA TRADERS AT PAPER BOOK PAGE NO.54. THE DETAILS OF SUIT RECOVERY ARE GIVEN AT PA PER BOOK PAGE NO. 55 TO 64. THUS, THE ASSESSMENT ORDER HAS BEEN PASSED AF TER MAKING ENQUIRIES AND VERIFICATION. THE LEARNED COUNSEL FOR THE ASSES SEE FURTHER REFERRED PAPER BOOK PAGE NO. 65 OF WHICH COPY OF AHATAS ACCO UNT SHOWING MONTHLY INCOME FROM AHATAS TOTALING TO RS.4,73,200 FOR THE YEAR UNDER CONSIDERATION. THE DETAILS OF SAME WERE SUBMITTED A LONG WITH BOOKS OF ACCOUNTS DURING THE COURSE OF ASSESSMENT PROCEEDING S. THEREFORE, THE ASSESSMENT ORDER PASSED AFTER VERIFICATION AND ENQU IRY IS NOT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE PR.CIT HAS NOT SPECIFIED THAT WHICH ENQUIRIES WERE OUGHT TO HAVE M ADE. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE PR.CIT IN HIS NOTICE HIMSELF MENTIONED THAT THE ASSESSEE EXAMINATION OF RECORDS SHOWED THE DISCREPANCIES, WHICH MEANS THAT THE DETAILS WERE ON RECORD AND WERE SATISH KUMAR V. PR.CIT- JALANDHAR/I.T.A.NO. 258/ASR /2019/A.Y. 14-15 PAGE 19 OF 20 EXAMINED BY THE AO. FURTHER, EXPLANATION 2 TO SECTI ON 263 WAS INSERTED WITH EFFECT FROM 01.06.2015, HENCE, SAME IS NOT APP LICABLE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION AS IT IS NOT RE TROSPECTIVE IN NATURE. THEREFORE, THE ASSESSMENT ORDER PASSED AFTER VERIFI CATION AND ENQUIRY IS NOT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF TH E REVENUE. MERELY JUST BECAUSE THE VIEW TAKEN BY THE AO WAS NOT FOUND ACCE PTABLE DOES NOT MEAN THAT THE AO HAS FAILED TO MAKE REQUISITE ENQUI RIES. IF THE ANSWER IS AFFIRMATIVE THEN SECOND QUESTION ARISES WHETHER THE ACCEPTANCE OF THE CLAIM BY THE AO WAS A PLAUSIBLE VIEW OR ON THE FACT S OF THE FINDING ON THE FACTS THAT THE SAID FINDING OF THE AO CAN BE TERMED AS SUSTAINABLE IN LAW. WE FIND THAT VIDE QUESTIONNAIRE, THE ASSESSEE WAS A SKED REGARDING TOLL PLAZA EXPENSES CONSISTING COMPUTER AND WEIGH BRIDGE EXPENSES, COURT FEE EXPENSES, WHICH WERE APPROPRIATED IN NEW CONTRACTOR ACCOUNT, THE COURT FEE EXPENSES AND RECOVERY SUIT EXPENSES WERE RELATI NG TO BUSINESS OF THE ASSESSEE LICENCE FEE, AHATAS INCOME IS DULY SHOWN A S PARA COPY OF LEDGER ACCOUNT FILED. THE ASSESSEE HAD FURNISHED HIS REPLY , WHICH IS FOUND PLACED IN THE PAPER BOOK PAGES AS REFERRED ABOVE. THEREFOR E, THE AO HAD MADE ENQUIRIES UNDER LIMITED SCRUTINY ASSESSMENT. WE FIN D THAT THE AO HAS MADE DUE ENQUIRIES AND HAD TAKEN A PLAUSIBLE VIEW, HENCE, SAME, CANNOT BE DISTURBED BY PR.CIT IN THE NAME OF FURTHER, VERI FICATION AND FRAMING SATISH KUMAR V. PR.CIT- JALANDHAR/I.T.A.NO. 258/ASR /2019/A.Y. 14-15 PAGE 20 OF 20 FRESH ASSESSMENT. SINCE THE AO HAS MADE DURING ENQU IRY AND EXAMINED THE ISSUES, HENCE, INVOCATION OF EXPLANATION 2 OF S ECTION 263 IS NOT JUSTIFIED NO IT IS APPLICABLE FOR THE ASSESSMENT YE AR UNDER CONSIDERATION AS IT WAS INSERTED WITH EFFECT FROM 01.06.2015. THE PR. CIT HAS NOT DONE ANY ENQUIRY AND NOT SUGGESTED WHAT ENQUIRIES WERE T O BE CARRIED OUT. IN VIEW OF THIS MATTER, AND RELYING ON ABOVE MENTIONED JUDICIAL PRONOUNCEMENTS, WE FIND THAT TWIN CONDITION WERE NO T SATISFIED FOR INVOKING THE JURISDICTION UNDER SECTION 263 OF THE ACT. THEREFORE, IN ABSENCE OF THE SAME THE LD. PR. CIT WAS NOT CORRECT IN EXERCISE THE JURISDICTION UNDER SECTION 263 OF THE ACT AND SETTI NG ASIDE ASSESSMENT FOR MAKING DENOVO AND ACCORDINGLY, WE QUASH THE IMPUGNE D ORDER PASSED UNDER SECTION 263 OF THE ACT AND ALLOW THE APPEAL O F THE ASSESSEE. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS AL LOWED. 14. THE ORDER PRONOUNCED IN THE OPEN COURT ON 19.12.201 9 SD/- SD/- (N.K.CHOUDHRY) (O.P.MEENA) JUDICIAL MEMBER ACC OUNTANT MEMBER AMRITSAR: DATED: DECEMBER 19, 2019/OPM COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A) / ITAT (DR)/ GUARD FILE OF ITAT. BY ORDER ASSISTANT REGISTRAR, ITAT