RELIANCE COMMUNICATIONS LTD, NAVI MUMBAI V. ASST CIT 10(3), MUMBAI

ITA 2915/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1804 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 28-01-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 30-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS RUPINDER BRAR
• Assessee Lawyers: SOLI DASTUR
• Keywords: Gift; Business income; Depreciation; Principle of natural justice; Transactions in derivatives; Assessment record; Revocable transfer; Revenue expenditure; Capital expenditure
• Section: 80HHC; 32; 68; 263; 63

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI .. , ! ' #. $.. % , & ', ' BEFORE SHRI R.S.SYAL, AM AND DR.T.M.PAVALAN, JM ITA NO.2915/MUM/2012 : ASST.YEAR 2007-2008 M/S.RELIANCE COMMUNICATIONS LIMITED H BLOCK, 1 ST FLOOR DHIRUBHAI AMBANI KONWLEDGE CITY NAVI MUMBAI 400 710 PAN : AACCR7832C. THE ASSTT.COMMISSIONER OF INCOME-TAX CIRCLE 10(3) MUMBAI. ( () / // / APPELLANT) % % % % / VS. ( +,()/ RESPONDENT) () - -- - . . . . / APPELLANT BY : SHRI SOLI DASTUR AND SH. NIRAJ SHETH +,() - . - . - . - . / RESPONDENT BY : MRS. RUPINDER BRAR % - /! / / / / DATE OF HEARING : 28.01.2013 012 - /! / DATE OF PRONOUNCEMENT : 05.02.2013 ' 3 ' 3 ' 3 ' 3 / / / / O R D E R PER R.S.SYAL (AM) : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDE R PASSED BY THE CIT U/S. 263 OF THE INCOME-TAX ACT, 1961 (HEREINAFT ER CALLED `THE ACT) ON 30.3.2012 IN RELATION TO THE ASSESSMENT Y EAR 2007-08. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSMENT IN THIS CASE WAS COMPLETED U/S.143(3) OF THE ACT ON 11.6.20 09 COMPUTING THE TOTAL INCOME AT RS.NIL AFTER ALLOWING SET OFF OF BR OUGHT FORWARD BUSINESS LOSS TO THE TUNE OF RS.244.93 CRORE AND UN ABSORBED ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 2 DEPRECIATION AMOUNTING TO RS.2615.92 CRORE. ON PER USAL OF THE ASSESSMENT RECORDS, IT WAS OBSERVED BY LD CIT THAT: (1) THE ASSESSEE COMPANY CLAIMED TO HAVE RAISED FU NDS TO THE TUNE OF RS.6485 CRORES BY WAY OF FOREIGN CURRENCY C ONVERTIBLE BONDS (FCCBS) DURING THE YEAR UNDER CONSIDERATION. NO INVESTIGATION WAS CARRIED OUT BY THE AO TO ESTABLIS H THE NAME AND ADDRESS, GENUINENESS AND CREDITWORTHINESS OF TH E ACTUAL SUBSCRIBERS TO SUCH FCCBS IN TERMS OF SECTION 68 OF THE ACT. (2) OUT OF THE PROCEEDS OF THE SAID FCCB FUNDS, AN AMOUNT OF RS.5142 CRORE WAS GIVEN TO M/S. RELIANCE INFO INVES TMENTS LTD., (RIIL), WHICH WAS INVESTED BY THIS COMPANY ON WHICH INTEREST INCOME OF RS.157.95 CRORES WAS EARNED. SUC H GRANTING OF INTEREST FREE FUNDS WOULD BE DEEMED TO BE TRANSF ER OF AN ASSET AND IN VIEW OF THE PROVISIONS OF SECTION 60 TO 63 O F THE ACT, THE THE AO FAILED TO CLUB SUCH INTEREST INCOME WITH THE ASSESSEES TOTAL INCOME. (3) THE ASSESSEE ACQUIRED DERIVATIVE INSTRUMENTS FO R HEDGING AND RECOGNIZED LOSSES ON THE SETTLEMENT DAY OR THE REPORTING DAY, WHICHEVER IS EARLIER. THE SAID MARK TO MARKET LOSSES (MTM) AS ON THE REPORTING DAY WERE NOTIONAL LOSSES AND HENCE CONTINGENT IN NATURE NOT ALLOWABLE FOR SET OFF AGAI NST THE TOTAL INCOME. THE AO WAS WRONG IN ALLOWING SUCH SET OFF. ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 3 3. ON BEING SHOW CAUSED AS TO WHY THE ASSESSMENT OR DER BE NOT REVISED IN VIEW OF THE ABOVE REASONS, THE ASSESSEE SUBMITTED DETAILED ARGUMENTS WHICH HAVE BEEN SUMMARIZED BY THE LD. CIT IN THE IMPUGNED ORDER. NOT CONVINCED WITH THE ASSESSEES S UBMISSIONS, HE CAME TO HOLD THAT THE ASSESSING OFFICER (AO) FAILED TO EXAMINE THE ABOVE REFERRED THREE ASPECTS PROPERLY, WHICH RENDER ED THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE ASSESSMENT ORDER WAS SET ASIDE TO THAT EXTENT. THE ASSESSEE HAS COME UP IN APPEAL AGAINST THE REASONING AND CONCLUSIONS DRAWN BY THE LD. CIT FOR REVISING THE ASSESSMENT ORDER. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE R ELEVANT MATERIAL ON RECORD. BEFORE PROCEEDING FURTHER, IT I S RELEVANT TO RECORD THAT THE LD. SENIOR AUTHORISED REPRESENTATIVE WAS F AIR ENOUGH TO ACCEPT AND RIGHTLY SO, THAT THERE IS NO DISCUSSION/ REFERENCE TO THESE ASPECTS IN THE ASSESSMENT ORDER. HE, HOWEVER, MAINT AINED THAT THE AO CONDUCTED PROPER ENQUIRY IN RESPECT THEREOF AND GOT SATISFIED WITH THE ASSESSEES EXPLANATION. IN ORDER TO APPRECIATE AS T O WHETHER OR NOT THE ACTION OF THE LD. CIT IN RESPECT OF ABOVE THESE ITE MS WARRANTED REVISION OF THE ASSESSMENT ORDER PASSED BY THE AO U /S.143(3), IT IS APT TO SCRUTINIZE THE MERITS AND CORRECTNESS OF THE CONCLUSIONS DRAWN BY THE LD. CIT THEREON. ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 4 5. FOREIGN CURRENCY CONVERTIBLE BONDS 5.1. THE FACTUAL MATRIX AS REGARDS THIS ITEM IS THA T THE ASSESSEE RAISED FUNDS THROUGH THREE ISSUES OF FCCBS DURING THE PREV IOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION . FCCB MEANS A BOND EXPRESSED IN FOREIGN CURRENCY, THE PRINCIPAL A ND INTEREST IN RESPECT OF WHICH IS PAYABLE IN FOREIGN CURRENCY, IS SUED BY AN ISSUING COMPANY AND SUBSCRIBED TO BY A PERSON WHO IS RESIDE NT OUTSIDE INDIA, IN FOREIGN CURRENCY AND EXCHANGEABLE INTO EQUITY S HARES OF THE COMPANY AFTER A SPECIFIED PERIOD OR TO THE REDEEMED . THE ASSESSEE RECEIVED PROCEEDS OF FCCB ISSUES IN DEUTSCHE BANK, SINGAPORE (DB) OF US$ 500 MILLION; AND JP MORGAN NEW YORK AND HON G KONG AND SHANGHAI BANKING CORPORATION OF US$ 1000 MILLION. THESE FCCBS WERE SUBSCRIBED TO BY THE LEAD MANAGERS NAMELY, DE UTSCHE BANK HONG KONG (DB HK) FOR US$ 500 MILLION; JP MORGAN SECURITIES LTD. U.K. AND HONG KONG AND SHANGHAI BANKING CORPOR ATION FOR US$1000 MILLION. 5.2. THE AO ENQUIRED ABOUT THIS ASPECT OF THE MA TTER AND THE ASSESSEE FURNISHED ITS REPLY DATED 17.4.2009, A COP Y OF WHICH HAS BEEN PLACED AT PAGE 25 OF THE PAPER BOOK (PB). BY THE SAID REPLY, THE ASSESSEE SUBMITTED THAT IT ISSUED FCCBS IN THRE E TRANCHES AGGREGATING TO US$ 1500 MILLION. THE NAME AND ADDR ESS OF THE SUBSCRIBERS TO THE THREE TRANCHES OF FCCBS AND THE CORRESPONDING AMOUNTS WERE DULY INDICATED BY SHOWING NAME AND ADD RESS OF THE SUBSCRIBERS SUCH AS DB HK FOR THE FCCB US$ 500 MIL LION. THE ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 5 DETAILS OF THE BANK IN WHICH THE PROCEEDS OF FCCBS WERE PARKED IN THE FOREIGN COUNTRIES AND FROM WHERE THESE WERE TRA NSFERRED TO INDIAN BANK, WERE ALSO FURNISHED. ALONG WITH THE SAID REP LY, THE ASSESSEE SUBMITTED COPIES OF OFFER MEMORANDUM OF THE FCCBS I SSUED, GLOBAL CERTIFICATE ALONG WITH THE REGISTRARS CONFIRMATION OF ENTRIES OF THE BONDHOLDER IN REGISTER, FOREIGN INWARD REMITTANCE C ERTIFICATE AND THE DETAILS OF FCCBS AS PER THE OFFER DOCUMENTS AND GLOBAL CERTIFICATES. 5.3. BOTH THE SIDES ARE IN AGREEMENT THAT THE F ACTS AND CIRCUMSTANCES OF THE THREE FCCB ISSUES ARE SIMILAR. FOR THE SAKE OF CONVENIENCE AND ON REPRESENTATIVE BASIS, THE PARTIE S CHOSE TO TAKE UP THE FCCB ISSUE OF US$ 500 MILLION WITH DB HK AS LEA D MANAGER FOR MAKING THEIR RESPECTIVE SUBMISSIONS. THE ASSE SSEE ENTERED INTO A SUBSCRIPTION AGREEMENT WITH DB HK ON 21.3.2006, AS PER WHICH DB HK AGREED TO SUBSCRIBE TO THE FCCB ISSUE OF US$ 500 MILLION. AS PER CLAUSE-1 OF THE AGREEMENT, THE ASSESSEE AGREED TO ISSUE THE BONDS AND THE LEAD MANGER AGREED TO SUBSCRIBE AND P AY FOR OR TO PROCURE SUBSCRIBERS TO SUBSCRIBE AND PAY FOR THE BO NDS ON THE CLOSING DATE AT THE ISSUE PRICE OF HUNDRED PER CENT OF THE AGGREGATE PRINCIPAL AMOUNT OF THE BONDS LESS THE COMMISSION AND CONCESS ION REFERRED TO IN CLAUSE-5. AS PER CLAUSE 1.2, THE ISSUER ASSESSE E UNDERTOOK TO PREPARE AND DELIVER TO THE LEAD MANAGER AN OFFERING CIRCULAR NOT LATER THAN FOUR BUSINESS DAYS PRIOR TO THE CLOSING DATE. THE ASSESSEE ISSUED OFFERING DOCUMENT DT. 05.05.2006 TO DB HK, C LARIFYING THAT ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 6 THE BONDS WOULD BE REPRESENTED BY SINGLE GLOBAL CER TIFICATE (GC). UPON ISSUANCE, THE BONDS WERE REPRESENTED BY A GLOB AL CERTIFICATE DEPOSITED WITH A COMMON DEPOSITARY. THE TERMS AND CONDITIONS OF THE BONDS GIVEN AS PER SCHEDULE-1 TO THE AGREEMENT PROVIDE THAT THE BONDS WERE TO BE ISSUED IN THE REGISTERED FORM IN T HE DENOMINATION OF US$ 1000 EACH. AS PER CLAUSE 3.2, NO INDIVIDUAL CE RTIFICATES IN RESPECT OF INTEREST (SHARE) IN ANY BONDS WERE TO BE ISSUED IN EXCHANGE FOR THE GLOBAL CERTIFICATE EXCEPT IN THE CIRCUMSTAN CES PROVIDED IN CLAUSE 3.3. ACCORDING TO CLAUSE 3.3, INDIVIDUAL C ERTIFICATES WERE TO BE ISSUED ONLY IN THE PRESCRIBED CIRCUMSTANCES, SUC H AS, THE COMMON DEPOSITARY OR ANY SUCCESSOR TO THE COMMON DEPOSITAR Y NOTIFYING TO THE COMPANY IN WRITING THAT IT IS AT ANY TIME UNWIL LING OR UNABLE TO CONTINUE TO ACT AS A DEPOSITARY AND A SUCCESSOR DEP OSITARY IS NOT APPOINTED BY THE COMPANY WITHIN 90 DAYS OR EUROCLE AR, CLEARSTREAM LUXEMBOURG (STOCK EXCHANGE) IS CLOSED FOR BUSINESS FOR A CONTINUOUS PERIOD OF 14 DAYS, ETC. AS PER THE PAYING, CONVERS ION AND TRANSFER AGENCY AGREEMENT DATED 9.5.2006, A COPY OF WHICH HA S BEEN PLACED IN THE PB, THE ASSESSEE COMPANY AGREED TO DELIVER TO THE REGISTRAR A DULY EXECUTED GC. SUCH GC WAS ISSUED ON 09.05.2006, BEING THE CLOSING DATE OF FCCB, AND DELIVERED TO DB, LUXEMBUR G (REGISTRAR). A COPY OF THE GLOBAL CERTIFICATE ISSUED BY THE ASSE SSEE IN THE NAME OF BT GLOBENET NOMINEES LIMITED FOR US$ 500 MILLION IS AVAILABLE AT PAGES 42 ONWARDS OF PB. IT WAS REGISTERED IN THE NA ME OF BT GLOBENET AS THE NOMINEE OF DB LONDON, WHICH WAS THE COMMON DEPOSITORY. THE REGISTRAR AUTHENTICATED THE GLOBAL CERTIFICATE UPON ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 7 THE WRITTEN ORDER OF THE COMPANY AND ARRANGED FOR T HE DELIVERY OF THE GLOBAL CERTIFICATE TO THE DEPOSITARY. THE ASSESSEE INSTRUCTED DB LONDON TO HOLD THE GC ON ITS BEHALF TILL DB HK INST RUCTS IT TO EFFECT THE PAYMENT AND THEREAFTER TO HOLD IT FOR THE SUBSC RIBER, THAT IS, DB HK. PAYMENT OF US$497.500 MILLION (NET AFTER DEDUCT ION OF EXPENSES AND COMMISSION) WAS MADE BY DB HK, THAT IS, THE SUB SCRIBER, ON THE INSTRUCTIONS OF THE ASSESSEE. COPIES OF THE LETTER AUTHORIZING PAYMENT AND THE CROSS RECEIPT IN RESPECT OF US$ 497,500,000 ARE AVAILABLE AT PAGES 61 AND 62 OF PB. THE ASSESSEE RECEIVED SUCH PAYMENT ON 09.05.2006 WHICH WAS REFLECTED IN ITS BOOKS OF ACCO UNT. THE ASSESSEE DULY INFORMED THE RESERVE BANK OF INDIA (RBI) ABOUT SUCH ISSUES OF FCCBS FROM TIME TO TIME AT THE RELEVANT STAGES. IT CAN BE NOTICED FROM LETTER DATED 28.3.2005 ISSUED BY RBI AUTHORIZI NG THE ASSESSEE TO ISSUE FCCBS UNDER AUTOMATIC APPROVAL ROUTE. 5.4. THE CASE OF LD. CIT IS THAT THE AO SHOUL D HAVE EXAMINED THE IDENTITY, CAPACITY AND CREDIT WORTHINESS OF THE `AC TUAL SUBSCRIBERS TO THE FCCB ISSUE IN TERMS OF SECTION 68. IN HIS OPIN ION, THE ACCEPTANCE BY THE AO OF THE ASSESSEES CONTENTION THAT THE AMO UNT WAS EVENTUALLY RECEIVED FROM DB HK, THE SUBSCRIBER, WAS NOT APPROPRIATE. NOW THE QUESTION ARISES AS TO WHETHER THE LD. CIT WAS JUSTIFIED IN HOLDING THAT THE ONUS U/S 68 OF THE AC T COULD HAVE BEEN DISCHARGED ONLY ON PROVING THREE PRE-REQUISITES - IDENTITY, CAPACITY AND CREDITWORTHINESS - IN RESPECT OF ACTUAL SUBSC RIBERS AND NOT DB HK, WHO UNDERTOOK TO SUBSCRIBE TO THE FCCB AND REM ITTED THE ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 8 PROCEEDS AFTER PARTLY FINDING SOME FURTHER SUBSCRIB ERS AND PARTLY ITSELF SUBSCRIBING TO THE FCCB. 5.5. SECTION 68 OF THE ACT CLEARLY PROVIDES T HAT WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAIN ED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATI ON ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HI M IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE A SSESSEE OF THAT PREVIOUS YEAR. A BARE PERUSAL OF THIS PROVISION DI VULGES THAT THERE IS AN OBLIGATION ON THE ASSESSEE TO PROVE THE IDENTITY , CAPACITY AND CREDIT WORTHINESS OF THE PERSON FROM WHOM THE MONEY IS ACT UALLY RECEIVED. AT THE COST OF REPETITION, WE SUMMARIZE THE ENTIRE PROCEEDINGS IN RESPECT OF FCCB OF US$ 500 MILLION WHICH WAS UNDERT AKEN TO BE SUBSCRIBED TO BY DB HK. A GC FOR THE WHOLE ISSUE WA S ISSUED IN FAVOUR OF THE NOMINEE OF DB HK, WHO COULD HAVE EIT HER SUBSCRIBED TO ALL THE BONDS ITSELF OR SOLICITED CUSTOMERS. IT WAS THE SOLE DISCRETION/OBLIGATION OF THE DB HK TO FIND SUCH CUS TOMERS, IF IT WANTED. ADMITTEDLY, DB HK SUBSCRIBED TO/COLLECTED T HE SUM IN RESPECT OF US$ 500 MILLION AND AFTER DEDUCTION OF T HEIR COMMISSION, REMITTED THE BALANCE USD 497,500,000 TO THE ASSESSE . 5.6. IT IS PALPABLE FROM THE ABOVE NARRATION O F FACTS THAT THE ASSESSEE WAS CONCERNED WITH AND DID ACTUALLY RECEIV E US$ 497.500 MILLION FROM AND ON BEHALF OF DB HK, WHICH WAS DULY RECORDED IN ITS ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 9 NAME. IT IS NOT UNDERSTANDABLE, IN THE FACTS AND CI RCUMSTANCES OF THE EXTANT CASE, THAT HOW THE ASSESSEE COULD HAVE ENTER ED THE NAMES AND ADDRESSES OF THE ACTUAL SUBSCRIBERS IN ITS BOOKS OF ACCOUNT, WHEN THE SUBSCRIBER, AS FAR AS THE ASSESSEE IS CONCERNED, WA S DB HK. THE GLOBAL CERTIFICATE WAS ISSUED BY THE ASSESSEE IN TH E NAME OF DB HK. IT WAS FOR DB HK TO SUBSCRIBE TO THE ENTIRE FCCB OR FIND CUSTOMERS FOR A PART OR TOTAL OF SUCH ISSUE. THE DECISION ON INVITING OTHER CUSTOMERS FROM OUTSIDE INDIA TO SUBSCRIBE TO THE FC CB AND TO WHAT EXTENT WAS THE SOLE RESPONSIBILITY OF DB HK, WITHOU T ANY INSTRUCTIONS OR INVOLVEMENT OF THE ASSESSEE IN INDIA. IN SO FAR AS THE ASSESSEE IS CONCERNED, IT WAS ONLY SUPPOSED TO GET THE AMOUNT A GAINST FCCB FROM DB HK, WHICH IT, IN FACT, RECEIVED. THE FACT THAT GLOBAL CERTIFICATE WAS ISSUED IN THE NAME OF NOMINEE OF DB HK AMPLY PROVES THAT IT WAS THE OBLIGATION OF DB HK TO PAY T OWARDS FCCB ISSUE OF US$ 500 MILLION. THE LD. CIT HAS NOT REFER RED TO ANY MATERIAL WHICH INDICATES THAT THE ASSESSEE HAD DETAILS OF TH E `ACTUAL SUBSCRIBERS AT THE TIME OF ISSUANCE OF FCCB OR IT WAS OBLIGED TO KEEP SUCH DETAILS. NO MATERIAL HAS BEEN BROUGHT TO OUR NOTICE EVEN BY THE LD. DR TO SHOW THAT AT THAT STAGE THE ASSESSEE HAD ANY DIRECT CONTACT WITH THE ACTUAL SUBSCRIBERS TO THE FCCB, DIFFERENT FROM DB HK. IT CAN BE OBSERVED FROM THE DETAILS OF THE SHARES ISSU ED, ON CONVERSION OF FCCB AT A MUCH LATER STAGE, THAT DB HK ITSELF OPTED TO SUBSCRIBE FOR A CERTAIN PART OF THE FCCB AND ISSUED A PORTION THEREOF TO OTHER CUSTOMERS WHO ALSO HAPPEN TO BE INTERNATIONAL FINAN CIAL INSTITUTIONS ONLY. AT THE STAGE OF ISSUANCE OF BONDS, THERE WAS PRIVITY OF CONTRACT ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 10 BETWEEN THE ASSESSEE AND DB HK ON ONE HAND AND BETW EEN DB HK AND ACTUAL SUBSCRIBERS ON THE OTHER. IT WAS THE DUT Y OF DB HK TO EVENTUALLY GET THE SHARES ALLOTTED OR REFUND GRANTE D TO ITSELF AND OTHER INTERNATIONAL FINANCIAL INSTITUTIONS AT THE RELEVAN T POINT OF TIME. IT WAS ONLY AT THE STAGE OF ISSUANCE OF SHARES OR THE GRAN TING OF REFUND, THAT THE ASSESSEE WAS TO DO THE NEEDFUL UPON INTIMATION BY DB HK ABOUT THE PERSONS WHO HAD PURCHASED SEPARATE INTEREST (SH ARES) IN THE GC. IT IS A MATTER OF RECORD THAT THE ASSESSEE ISSUED S HARES ON CONVERSION TO CERTAIN PARTIES, SUCH AS, JP MORGAN SECURITIES LTD., THE HONG KONG AND SHANGHAI BANKING CORPORATION LIMITED AND D B HK ITSELF IN NEXT YEAR ON VARIOUS DATES FROM 18.10.2007 TO 31 .1.2008. ONLY ON THE ISSUANCE OF SHARES, THESE INTERNATIONAL FINANCI AL INSTITUTIONS COULD BE SAID TO HAVE COME INTO DIRECT CONTACT WITH THE A SSESSEE COMPANY. AT THE STAGE OF ISSUANCE OF BONDS IN THE PREVIOUS Y EAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, SUCH CUSTOMER S OF DB HK WERE NOT ENTITLED TO DIRECTLY APPROACH THE ASSESSEE COMPANY IN RESPECT OF ANY MATTER CONCERNING THE ISSUANCE OF BO NDS. WHEN SUCH IS THE SITUATION, WE FAIL TO APPRECIATE AS TO HOW THE ASSESSEE COULD RECORD THE NAMES OF ACTUAL SUBSCRIBERS OTHER THAN DB HK IN ITS BOOKS OF ACCOUNT AND FURTHER PROVE THEIR IDENTITY, CAPACITY AND CREDIT WORTHINESS. ON A SPECIFIC QUERY FROM THE BENCH, TH E LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT BRING TO OUR NOTICE ANY STATUTORY REQUIREMENT OR GUIDELINE ISSUED BY THE R BI OR ANY OTHER GOVERNMENT AUTHORITY FASTENING OBLIGATION ON THE AS SESSEE TO MAINTAIN A RECORD OF THE ACTUAL SUBSCRIBERS AT THAT STAGE AND RECORDING ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 11 THEIR NAMES INSTEAD OF DB HK, WHO ACTUALLY SIGNED S UBSCRIPTION AGREEMENT WITH THE ASSESSEE. DURING THE CURENCY OF THE GC, ONLY DB HK REMAINED THE SUBSCRIBER TO THE FCCB ISSUE OF TH E ASSESSEE. THE ASSESSEE WAS ONLY REQUIRED TO PROVE THE IDENTITY, C APACITY AND CREDITWORTHINESS OF DB HK WHO SUBSCRIBED TO ITS FUL L ISSUE OF FCCB (SOME PART DIRECTLY AND SOME PART THROUGH ITS OWN C USTOMERS), WHICH IS NOT IN DOUBT. THE FACT THAT THE ASSESSEE RECEIV ED THE AMOUNT OF SUBSCRIPTION OF BONDS FROM DB HK HAS NOT BEEN DENIE D BY LD CIT. THE FURTHER FACT THAT GLOBAL CERTIFICATE IN RESPECT OF BONDS WAS ISSUED IN FAVOUR OF DB HK AND UPON CONVERSION OF SUCH BOND S, SOME OF THE SHARES WERE ISSUED IN FAVOUR OF DB HK AND REMAINING IN FAVOUR OF OTHER INTERNATIONAL FINANCIAL INSTITUTIONS HAS ALSO NOT BEEN DISPUTED BY THE LD. CIT. IN OUR CONSIDERED OPINION, THE ASSESS EE ADEQUATELY DISCHARGED THE ONUS CAST UPON IT IN TERMS OF SECTIO N 68. THE PROBE SUGGESTED BY THE LD. CIT COULD HAVE BEEN POSSIBLE I N THE ASSESSMENT OF DB HK, WHO EVENTUALLY PARTLY SUBSCRIBED TO THE B ONDS ITSELF AND PARTLY ISSUED THESE TO THE INTERNATIONAL FINANCIAL INSTITUTIONS. IN VIEW OF THESE FACTS, WE ARE OF THE CONSIDERED OPINION TH AT LD. CIT WAS NOT JUSTIFIED IN PUTTING OBLIGATION ON THE ASSESSEE TO PROVE THE IDENTITY, CAPACITY AND CREDITWORTHINESS OF THE ACTUAL SUBSCRI BERS, WHICH FACT WAS BEYOND ITS REACH AT THE RELEVANT TIME. WE, THE REFORE, DO NOT APPROVE THE STAND TAKEN BY LD. CIT ON THIS ISSUE. 6.1. THE LEARNED DEPARTMENTAL REPRESENTATIVE LE NT SUPPORT TO THE IMPUGNED ORDER FROM ONE MORE ANGLE. WHILE REFERRIN G TO A CIRCULAR ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 12 ISSUED BY RESERVE BANK OF INDIA DATED 02.07.2012 WI TH SUBJECT MATTER MASTER CIRCULAR ON EDUCATIONAL, COMMERCIAL BORROWINGS AND TRADE CREDITS, SHE SUBMITTED THAT THE ASSESSING OFFICER MISERABLY FAILED TO EXAMINE THE FACTUM OF THE COMPLIANCE OR O THERWISE OF THE RBI GUIDELINES IN CONNECTION WITH ITS FCCB ISSUE. T HIS, IN HER OPINION, ALSO CONSTITUTED A SOLID DEFECT MAKING T HE ASSESSMENT ORDER ERRONEOUS AND ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 6.2. A PERUSAL OF THE IMPUGNED ORDER INDICATE S THE CONCLUSION DRAWN BY THE LEARNED CIT ON THIS ASPECT IS CONTAINE D IN PARA 4.3.5. HE OPINED THAT THE ASSESSEE DID NOT DISCHARGE ITS ONUS OF FULFILLING THE REQUISITE CONDITIONS OF SECTION 68 OF THE ACT IN RE SPECT TO THE ACTUAL SUBSCRIBERS TO THE FCCB ISSUE, AS IT ONLY FURNISHE D THE IDENTITY OF THE LEAD MANAGERS WHO ARE DISTINCT FROM THE SUBSCRIBER S TO THE ISSUE. HE NOTICED THAT : THE NAMES AND ADDRESSES AND CREDITW ORTHINESS ETC. OF THE ACTUAL SUBSCRIBERS TO THE FCCB ISSUES HAVE NOT BEEN FURNISHED / ESTABLISHED BY THE ASSESSEE EITHER DURING THE COURS E OF ASSESSMENT PROCEEDINGS OR EVEN NOW, DURING THE COURSE OF PROCE EDINGS U/S 263. THEREAFTER, HE RECORDED THAT VARIOUS JUDICIAL DECIS IONS RELIED UPON BY THE ASSESSEE WERE OF NO HELP AS THE ASSESSEE DID NO T FURNISH DETAILS ABOUT THE NAMES AND ADDRESSES, PANS ETC. AND CREDIT WORTHINESS OF THE PERSONS FROM WHOM THE FCCB FUNDS WERE INTRODUCED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, WHICH IS A PRIMARY CONDITI ON FOR THE APPLICABILITY OF THE SAID DECISIONS TO THE ASSESSEE S CASE. HE FURTHER NOTICED THAT : IN THE ABSENCE OF ABOVE, COMPLIANCE TO THE PROCEDURE ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 13 AND RULES OF VARIOUS REGULARITY AUTHORITIES IN RESP ECT OF FCCB CITED BY THE ASSESSEE CANNOT BE SUBSTITUTED FOR ESTABLISH ING THE IDENTITY AND CREDITWORTHINESS ETC. OF SUBSCRIBERS TO THE FCCB.. A CURSORY LOOK AT THE ABOVE FINDINGS RECORDED BY THE LD.CIT ON THIS I SSUE REVEALS THAT HE WAS NOT SATISFIED WITH THE ASSESSMENT ORDER BECA USE IN HIS OPINION, THE NECESSARY INGREDIENTS FOR THE APPLICABILITY OF SECTION 68, BEING IDENTITY, CAPACITY AND CREDIT WORTHINESS OF THE `AC TUAL SUBSCRIBERS WERE REQUIRED TO BE EXAMINED, WHICH THE AO FAILED T O DO. THERE IS NO REFERENCE WHATSOEVER TO THE NON-EXAMINATION BY THE AO OF THE COMPLIANCE OR OTHERWISE OF THE RBI GUIDELINES IN RESPECT OF FCCB ISSUES. NOW THE QUESTION ARISES AS TO WHETHER THE L D. DR CAN BE HELD TO BE WITHIN HER POWER TO PRESS FOR APPROVING THE I MPUGNED ORDER FROM AN ANGLE DIFFERENT FROM THAT TAKEN NOTE OF BY THE LD. CIT. 6.3. THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT V. JAGADHRI ELECTRIC SUPPLY AND INDUSTRIAL CO. [(1983) 140 ITR 490 (P&H)] HAS HELD THAT THE JURISDICTION VESTING IN THE CIT U/S 263(1) IS OF A SPECIAL AND EXCLUSIVE NATURE. AT THE TIME OF HEARING OF THE APPEAL AGAINST CITS ORDER U/S 263(1), IF THE A SSESSEE CAN SATISFY THE TRIBUNAL THAT THE GROUNDS FOR DECISION GIVEN IN THE ORDER BY THE CIT ARE WRONG ON FACTS OR ARE NOT TENABLE IN LAW, T HE TRIBUNAL HAS NO OPTION, BUT TO ACCEPT THE APPEAL AND TO SET ASIDE T HE ORDER OF THE CIT. THE TRIBUNAL CANNOT UPHOLD THE ORDER OF THE CIT ON ANY OTHER GROUND WHICH, IN ITS OPINION, WAS AVAILABLE TO THE CIT AS WELL BUT WAS NOT RELIED UPON BY CIT IN HIS ORDER. IT FURTHER HELD TH AT IF THE TRIBUNAL IS ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 14 ALLOWED TO FIND OUT THE GROUNDS AVAILABLE TO THE CI T TO PASS AN ORDER U/S 263(1), THEN IT WILL AMOUNT TO SHARING OF THE E XCLUSIVE JURISDICTION VESTING IN THE CIT, WHICH IS NOT WARRANTED UNDER TH E ACT. THE NUTSHELL OF THIS JUDGMENT IS THAT THE TRIBUNAL IN A N APPEAL AGAINST REVISION ORDER CANNOT SUBSTITUTE THE GROUNDS WHICH THE COMMISSIONER DID NOT FIND PROPER TO FORM THE BASIS OF HIS ORDER. THIS JUDGMENT HAS BEEN FOLLOWED BY THE HONBLE KERALA HIGH COURT IN THE CASE OF CIT V. CHANDRIKA EDUCATIONAL TRUST [(1994) 207 ITR 108 (KER.)] . IN VIEW OF THE FOREGOING PRECEDENTS IT IS ABUNDANTLY CLEAR THAT THE TRIBUNAL CAN VET ONLY THE REASONS RECORDED BY THE CIT FOR DE TERMINING AS TO WHETHER THE ORDER U/S 263 IS SUSTAINABLE OR NOT. 6.4. IT IS OUT OF PLACE FOR THE LD. DR TO RE LY ON THE RBI GUIDELINES IN THE PRESENT PROCEEDINGS FOR BRINGING HOME THE PO INT THAT THE A.O. DID NOT EXAMINE THE ASPECT OF COMPLIANCE OF SUCH GU IDELINES. IT HAS BEEN NOTICED ABOVE THAT THE LD. CIT DID NOT TOUCH T HIS ASPECT IN THE IMPUGNED ORDER. IN THAT VIEW OF THE MATTER, IF THE LD. DR IS ALLOWED TO SUPPLEMENT THE REASONS FOR REVISION, IT WOULD AM OUNT TO USURPING THE JURISDICTION OF THE LD. CIT U/S 263, WHICH OBVI OUSLY IS IMPERMISSIBLE. THE CONCLUSION DRAWN BY THE LD. CIT AS TO WHETHER THE ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE CAN BE EXAMINED AND DECIDED ONLY ON THE TOUCHSTONE OF THE REASONS GIVEN BY HIM ALONE. NO ARGUING OR ADJUD ICATING AUTHORITY CAN PUT FORTH OR CONSIDER ANY REASON OTHER THAN THA T ADOPTED BY THE CIT FOR TESTING THE SUSTAINABILITY OR OTHERWISE OF THE ORDER U/S 263. ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 15 6.5. COMING BACK TO THE FACTS OF THE INSTANT C ASE WE FIND THAT THE LD. CIT HAS HELD THE ASSESSMENT ORDER TO BE ERRONEO US AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE ON THIS ISSUE ONLY BECAUSE THE IDENTITY, CAPACITY AND CREDITWORTHINESS ETC. OF `ACTUAL SUBSC RIBERS, OTHER THAN DB HK WERE NOT FURNISHED / ESTABLISHED BY THE ASSES SEE. IN EARLIER PARAS WE HAVE EXPRESSED OUR DISAGREEMENT WITH THE V IEW TAKEN BY THE LD. CIT ON THIS ISSUE. AS SUCH, IT IS NOT OPEN TO T HE LEARNED DEPARTMENTAL REPRESENTATIVE TO SUPPORT THE IMPUGNED ORDER WITH NEW REASONS. WE, THEREFORE, REFUSE TO EXAMINE THIS ASPEC T OF THE MATTER. IT IS, THEREFORE, HELD THAT THE LD. CIT WAS NOT JUSTIF IED IN HOLDING THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE ON THIS ISSUE. 7. APPLICABILITY OF SECTIONS 60 TO 63 7.1. THE SECOND POINT CONSIDERED BY LD. CIT MAK ING THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE IS ABOUT THE ATTRACTABILITY OF THE PROVISIONS OF SECTIONS 60 TO 63 OF THE ACT ON INTEREST INCOME EARNED BY RIIL ON THE BANK DEPOSITS , WHICH AMOUNT WAS ADVANCED BY THE ASSESSEE COMPANY FREE OF INTERE ST. THE LD. CIT NOTICED THAT : THE ASSESSEE COMPANY TRANSFERRED IT S ASSETS BY VIRTUE OF A REVOCABLE TRANSFER WHICH IN EFFECT MEANS TRANSFER OF INCOME WITHOUT THE TRANSFER OF THE ASSETS. HE FURTHER OBSERVED T HAT : IF AN INTEREST FREE LOAN IS GIVEN BY A PERSON TO ANOTHER PERSON, I T IS A CASE OF TRANSFER OF AN ASSET AND THE TRANSFER IS TO BE TREATED AS A REVOCABLE TRANSFER ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 16 BECAUSE THE TRANSFEROR WOULD RECEIVE THE FUND BACK THUS INVOKING PROVISIONS OF SECTION 60 TO 63. AS THIS ASPECT WA S NOT PROPERLY CONSIDERED IN THIS ASSESSMENT ORDER, THE LD. CIT OP INED THAT IT LED TO MAKING THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICI AL TO THE INTERESTS OF THE REVENUE. 7.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PER USED THE RELEVANT MATERIAL ON RECORD. IN THIS REGARD, IT IS OBSERVED THAT THE AO ENQUIRED ABOUT THIS ASPECT OF THE MATTER DURING THE COURSE O F THE ASSESSMENT PROCEEDINGS. THE ASSESSEE, VIDE ITS LETTER DATED 20.5.2009 ADDRESSED TO THE AO, EXPLAINED THAT OUT OF THE PROCEEDS OF T HE FCCB, A SUM OF RS.1,343 CRORE WAS UTILIZED FOR CAPITAL EXPENDITURE AND THE BALANCE AMOUNT OF RS.5,142 CRORE WAS TEMPORARILY HELD IN VA RIOUS NATIONALIZED BANKS BY RIIL, A WHOLLY OWNED SUBSIDIA RY OF THE ASSESSEE COMPANY. THE ASSESSEE FURTHER INTIMATED T HAT RIIL EARNED INTEREST INCOME OF RS.157.95 CRORE ON THE SAID FIXE D DEPOSIT AND ACCOUNTED FOR THE SAME IN ITS PROFIT AND LOSS ACCOU NT. COPY OF ACCOUNTS OF RIIL FOR THE YEAR ENDING 31.3.2007 WAS ALSO FURNISHED TO THE AO WITH FURTHER DETAILS OF FIXED DEPOSITS GIVEN THROUGH ANNEXURES 4 & 5 OF ASSESSEES LETTER. 7.3. NOW WE TURN TO THE APPLICABILITY OF THE PROVISIONS OF SECTIONS 60 TO 63 TO THE PRESENT FACTUAL POSITION. FIRSTLY, IT IS RELEVANT TO NOTE THAT THE LD. CIT HAS REFERRED TO SECTIONS 60 TO 63 IN A COMPOSITE MANNER WITHOUT PARTICULARLY POINTING OUT AS TO UNDE R WHICH SPECIFIC ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 17 PROVISION THE CASE FALLS. AS SUCH, WE WILL ALSO EXA MINE THE CASE ACCORDINGLY. SECTION 60 CONTEMPLATES CLUBBING OF IN COME IN THE HANDS OF THE TRANSFEROR WHEN THE ASSET IS RETAINED WITH SELF BUT THE INCOME IS TRANSFERRED. THIS SECTION CATEGORICALLY P ROVIDES THAT ALL INCOME ARISING TO ANY PERSON BY VIRTUE OF A TRANSFE R WHETHER REVOCABLE OR NOT, SHALL BE CHARGEABLE TO INCOME TAX AS THE INCOME OF THE TRANSFEROR WHERE THERE IS NO TRANSFER OF THE AS SET FROM WHICH THE INCOME ARISES. IT IS QUITE MANIFEST ALSO THAT WHEN THE ASSET IS RETAINED BY THE TRANSFEROR HIMSELF BUT ONLY INCOME IS TRANSF ERRED, SUCH INCOME IS LIABLE TO BE INCLUDED IN THE TOTAL INCOME OF THE TRANSFEROR. SECTION 61 DEALS WITH THE CLUBBING OF INCOME FROM A REVOCAB LE TRANSFER OF ASSET. THIS SECTION PROVIDES THAT ALL INCOME ARISIN G TO ANY PERSON BY VIRTUE OF A REVOCABLE TRANSFER OF ASSETS SHALL BE C HARGEABLE TO INCOME TAX AS THE INCOME OF THE TRANSFEROR AND SHALL BE IN CLUDED IN HIS TOTAL INCOME. REVOCABLE TRANSFER HAS BEEN DEFINED IN SE CTION 63. CLAUSE (A) OF SECTION 63 PROVIDES THAT A TRANSFER SHALL BE DEEMED TO BE REVOCABLE IF (I) IT CONTAINS ANY PROVISION FOR THE RE-TRANSFER DIRECTLY OR INDIRECTLY OF THE WHOLE OR ANY PART OF THE INCOME O R ASSETS TO THE TRANSFEROR, OR (II) IT, IN ANY WAY, GIVES THE TRANS FEROR A RIGHT TO RE- ASSUME POWER DIRECTLY OR INDIRECTLY OVER THE WHOLE OR ANY PART OF THE INCOME OR ASSETS. WHEN WE READ SECTION 61 IN CONJUN CTION WITH SECTION 63, IT BECOMES MANIFEST THAT IN CASE OF A R EVOCABLE TRANSFER OF ASSET AS DEFINED IN SECTION 63(A), THE INCOME IS CH ARGEABLE IN THE HANDS OF THE TRANSFEROR AND NOT THE TRANSFEREE. ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 18 7.4. NOW THE QUESTION ARISES AS TO THE APPLICA BILITY OR OTHERWISE OF SECTIONS 60 TO 63 OF THE ACT TO THE INTEREST INCOME IN A CASE WHERE INTEREST FREE LOAN IS GIVEN BY ONE TO ANOTHER AND T HE LATER EARNS INTEREST INCOME THEREON. THE LD. COUNSEL VEHEMENTLY ARGUED THAT THE CLUBBING PROVISIONS CANNOT BE ATTRACTED IN CASE OF INTEREST EARNED BY THE BORROWER ON THE INTEREST BEARING OR INTEREST FR EE LOAN ADVANCED BY THE LENDER. PER CONTRA, THE LD. DR FORCEFULLY RELIE D ON THE RELEVANT PROVISIONS TO CONTEND THAT THERE IS NO BAR ON SUCH CLUBBING. SHE REFERRED TO THE PROVISIONS OF SECTION 63(A)(I) TO C ONTEND THAT WHAT IS CONTEMPLATED IS THE RE-TRANSFER OF AN ASSET. HER A RGUMENT WAS THAT IN EVERY LOAN, THE PRE-REQUISITE OF RE-TRANSFER IS ALW AYS PRESENT. IF THE PROVISION OF RE-TRANSFER IS OBLITERATED IN A MONEY TRANSACTION, THEN IT BECOMES A CASE OF GIFT. IN EVERY CASE OF LOAN, SHE SUBMITTED, THAT THE PROVISIONS OF SECTION 63(A)(I) WILL BE ATTRACTED TO MAKE IT A CASE OF REVOCABLE TRANSFER AND CONSEQUENTLY THE INTEREST IN COME EARNED BY THE BORROWER SHALL BECOME ELIGIBLE FOR CLUBBING IN THE HANDS OF THE LENDER. ON A POINTED QUERY, THE LD. DR FAILED TO D RAW OUR ATTENTION TOWARDS ANY PRECEDENT IN SUPPORT OF HER CONTENTION. 7.5. THOUGH, EX FACIE , WE FIND SOME FORCE IN THE SUBMISSIONS ADVANCED ON BEHALF OF THE REVENUE IN THIS REGARD, W E EQUALLY FIND THAT THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CAS E OF ITO V. NALINBHAI M.SHAH [(2000) 93 TTJ (AHD) 107] HAS HELD THAT INCOME EARNED BY FAMILY MEMBERS OF THE ASSESSEE BY EMPLOYI NG INTEREST FREE ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 19 LOAN ADVANCED TO THEM BY THE ASSESSEE OUT OF HIS FU NDS CANNOT BE MADE SUBJECT MATTER OF ADDITION U/S 60. IN THE LIG HT OF THE ABOVE, IT IS CLEAR THAT THE QUESTION AS TO WHETHER INCOME EARNED BY THE BORROWER FROM THE INTEREST FREE LOAN ADVANCED BY THE LENDER BE CLUBBED IN THE HANDS OF THE LENDER, IS DEFINITELY DEBATABLE AND NO T CONCLUSIVE. SUFFICE TO SAY, WE ARE DEALING WITH PROCEEDINGS U/S 263. THE SCOPE OF SUCH PROCEEDINGS IS RESTRICTED TO REVISING AN ORDER WHICH IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. AN ORDER CANNOT BE SAID TO BE ERRONEOUS WHEN THE AO FOLLOWED ONE OF TH E LEGALLY SUSTAINABLE VIEW OUT OF THE TWO VIEWS AVAILABLE ON THE POINT. THE CIT CAN NOT CALL AN ASSESSMENT ORDER TO BE ERRONEOUS SI MPLY BECAUSE HE IS INCLINED TO FOLLOW THE OTHER LEGALLY SUSTAINABLE VI EW IN PREFERENCE TO THE ONE FOLLOWED BY THE AO. THE HONBLE SUMMIT COUR T IN MALABAR INDUSTRIAL CO. LTD. V. CIT [(2000) 243 ITR 83 (SC)] HAS HELD THAT : `WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OF FICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE , IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE IN TERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW. THE SA ME VIEW HAS BEEN REITERATED BY SEVERAL HONBLE HIGH COURTS INCLUDING THE HONBLE DELHI HIGH COURT IN CIT VS. ANSAL PROPERTIES & IND. (P) LTD. (2009) 315 ITR 225 (DEL). IN THIS CASE IT HAS BEEN NOTICED THAT : `THAT AT T HE TIME WHEN THE COMMISSIONER ISSUED THE NOTICE UNDER SECTION 263 AND PASSED THE ORDER DATED MARCH 23, 2004, THE QUESTION OF SURCHARGE ON UNDISCLOSED INCOME WAS A DEBATABLE ONE. WHEN AN ISS UE WAS ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 20 DEBATABLE, THE PROVISIONS OF SECTION 263 COULD NOT BE INVOKED. FROM THE ABOVE DISCUSSION IT IS AXIOMATIC THAT NO REVISI ON CAN BE DONE ON A DEBATABLE ISSUE. AN ISSUE BECOMES DEBATABLE IF TWO LEGALLY SUSTAINABLE VIEWS EXIST ON A PARTICULAR POINT. WHE N THE A.O. ACCEPTS AND ADOPTS ONE POSSIBLE VIEW, THE POWER OF THE CIT IS OUSTED TO REVISE THE ASSESSMENT ORDER ON HIS FINDING THE OTHE R LEGALLY SUSTAINABLE VIEW AS MORE LOGICAL IN PREFERENCE TO T HE ONE ADOPTED BY THE AO. COMING BACK TO THE ISSUE IN HAND, WE FIND THAT THE CONTROVERSY HERE LIES IN NARROW COMPASS INASMUCH AS THE EXISTENCE OF ONE POSSIBLE VIEW IN FAVOUR OF THE ASSESSEE ALSO EX ISTS. WITHOUT GOING DEEP INTO THE INTERPRETATION OF THE RELEVANT PROVIS IONS, WE LEAVE THIS POINT HERE BY HOLDING THAT THIS ASPECT CANNOT BE TA KEN OUT FROM THE REALM OF DEBATABLE ISSUE AND HENCE THERE CAN BE N O REVISION OF THE ASSESSMENT ORDER ON THIS POINT. 8. MARK TO MARKET LOSS/GAIN 8.1. THE NEXT POINT CONSIDERED BY LD. CIT FOR A SSUMING JURISDICTION U/S.263 IS ABOUT MARK TO MARKET (MTM) LOSSES CLAIME D BY THE ASSESSEE. THE LD. CIT NOTICED THAT THERE WAS A COMP ONENT OF MTM LOSS ON FOREIGN EXCHANGE DERIVATIVES WHICH WAS INCL UDED BY THE ASSESSEE UNDER THE HEAD FOREIGN CURRENCY EXCHANGE F LUCTUATION LOSS/GAIN (NET) IN SCHEDULE O, THAT IS, FINANCIAL CHARGES. THE SAID MTM LOSS AS ON THE REPORTING DATE WAS HELD BY THE L D. CIT TO BE ONLY NOTIONAL AND CONTINGENT IN NATURE NOT ELIGIBLE FOR SET OFF AGAINST TAXABLE INCOME. IN REACHING THIS CONCLUSION, THE L D. CIT TOOK ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 21 ASSISTANCE FROM CBDT INSTRUCTION NO.3 /2010, WHICH PROVIDES THAT NO BENEFIT OF ADJUSTMENT OF INCOME OR GAIN SHOULD B E GIVEN AGAINST SUCH LOSSES. HE NOTICED THAT IT WAS NOT CLEAR, IN THE ABSENCE OF DETAILS OF GAINS AMOUNTING TO RS.21.89 CRORES, THAT HOW MUC H COMPONENT WAS OF LOSS SET OFF AGAINST THE INCOME. AS THIS IS SUE WAS NOT EXAMINED BY THE AO, THE LD. CIT HELD THE ASSESSMENT ORDER TO BE ERRONEOUS AND ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 8.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND P ERUSED THE RELEVANT MATERIAL ON RECORD. MARK-TO-MARKET OR FAIR VALUE AC COUNTING REFERS TO ACCOUNTING FOR THE 'FAIR VALUE' OF AN ASSET OR LIABIL ITY BASED ON THE CURRENT MARKET VALUE ON THE LAST BUSINESS DAY OF TH E YEAR, AND ANY GAIN OR LOSS IS TAKEN INTO ACCOUNT FOR THAT YEAR. WE FIND THAT THE AO EXAMINED FINANCIAL CHARGES DEBITED TO PROFIT AND LO SS ACCOUNT TO THE TUNE OF RS.264,91,96,232, THE DETAILS OF WHICH ARE AVAILABLE AT PAGE 82 OF PB. IT HAS SEVERAL SUB-COMPONENTS. PRESENTLY WE ARE CONCERNED WITH SUB-COMPONENT H WITH TITLE: FOREIGN CURRENCY EXCHANGE FLUCTUATION LOSS/(GAIN)/(NET). UNDER THIS SUB-HEA D, THERE ARE SIX TRANSACTIONS - FOUR REPRESENTING GAIN ON ACCOUNT OF FOREIGN CURRENCY EXCHANGE FLUCTUATION, INTER ALIA, A SUM OF RS.21.89 CRORES TOWARDS `UREALISED FOREX GAIN DERIVATIVES AND TWO ITEMS OF LOSSES. THERE IS AN OVERALL EXCESS OF GAIN OF FOREIGN CURRENCY EX CHANGE FLUCTUATION OVER THE LOSS UNDER THIS SUB-COMPONENT TO THE EXTEN T OF RS.69.42 CRORES, WHICH HAS BEEN REDUCED FROM THE TOTAL FINAN CIAL CHARGES DEBITED TO THE PROFIT AND LOSS ACCOUNT. THERE IS N O DISPUTE ON ANY ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 22 OTHER ITEM EVEN UNDER SUB-COMPONENT H, EXCEPT UNREA LIZED FOREX GAIN OF DERIVATIVES AMOUNTING TO RS.21.89 CRORES. THE LD. CIT RELIED ON CBDT INSTRUCTION NO.3/2010 TO BOLSTER HIS POINT OF VIEW THAT THE LOSS ON ACCOUNT OF DERIVATIVES CANNOT BE CLAIMED AS DEDUCTION. WE HAVE PERUSED THIS INSTRUCTION. THE CRUX OF THE INST RUCTION IS THAT THE LOSS ON ACCOUNT OF FOREX DERIVATIVES CANNOT BE ALLO WED AGAINST TAXABLE INCOME. 8.3. IN CIT V. WOODWARD GOVERNOR INDIA (P.) LTD. [(2009) 31 2 ITR 254 (SC)] , THE ASSESSEE DEBITED TO ITS PROFIT AND LOSS ACCOU NT CERTAIN UNREALIZED LOSS DUE TO FOREIGN EXCHANGE FLU CTUATION IN FOREIGN CURRENCY TRANSACTIONS TOWARDS REVENUE ITEMS AS ON T HE LAST DAY OF THE ACCOUNTING YEAR. THE A.O. HELD THAT THE LIABILITY A S ON THE LAST DATE OF THE PREVIOUS YEAR WAS NOT AN ASCERTAINED BUT A CONT INGENT LIABILITY. RESULTANTLY, THE SAME WAS ADDED BACK TO THE TOTAL I NCOME. THE CIT(A) ECHOED THE ASSESSMENT ORDER. HOWEVER, THE T RIBUNAL HELD THAT THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF UNR EALIZED LOSS DUE TO FOREIGN EXCHANGE FLUCTUATION AS ON THE LAST DATE OF THE PREVIOUS YEAR WAS DEDUCTIBLE. THE SAID ORDER OF THE TRIBUNAL WAS UPHELD BY THE HONBLE HIGH COURT. ON FURTHER APPEAL, THE HONBLE SUPREME COURT HELD THAT THE LOSS SUFFERED BY THE ASSESSEE ON REVE NUE ACCOUNT TOWARDS FOREIGN EXCHANGE DIFFERENCE AS ON THE DATE OF BALANCE SHEET IS AN ITEM OF EXPENDITURE DEDUCTIBLE U/S 37(1). IT FURTHER OBSERVED THAN AN ENTERPRISE HAS TO REPORT OUTSTANDING LIABIL ITY RELATING TO IMPORT OF RAW MATERIAL USING CLOSING RATE OF FOREIGN EXCHA NGE AND ANY ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 23 DIFFERENCE, LOSS OR GAIN, ARISING ON CONVERSION OF SAID LIABILITY AT CLOSING RATE SHOULD BE RECOGNIZED IN PROFIT AND LOS S ACCOUNT FOR REPORTING PERIOD. IN PARA 21 OF THE REPORT, THE HON BLE SUPREME COURT SUMMED UP ITS CONCLUSION BY OBSERVING THAT IN ORDER TO FIND OUT IF AN EXPENDITURE IS DEDUCTIBLE CERTAIN FACTORS, INTER ALIA , THE FOLLOWING SHOULD BE TAKEN INTO CONSIDERATION: WHETHER THE AS SESSEE HAS BEEN CONSISTENT AND DEFINITE IN MAKING ENTRIES IN THE AC COUNT BOOK IN RESPECT OF LOSSES AND GAINS; WHETHER THE METHOD ADO PTED BY THE ASSESSEE FOR MAKING ENTRIES IN THE BOOKS OF ACCOUNT IN RESPECT OF LOSSES AND GAINS IS AS PER NATIONALLY ACCEPTED ACCO UNTING STANDARDS. FROM THE JUDGMENT OF THE HONBLE SUMMIT COURT IT CA N BE CLEARLY DEDUCED THAT UNREALIZED LOSS DUE TO FOREIGN EXCHANG E FLUCTUATION IN FOREIGN CURRENCY TRANSACTIONS ON REVENUE ITEMS AS O N THE LAST DATE OF THE ACCOUNTING YEAR IS DEDUCTIBLE. A FURTHER IMPORT ANT FACTOR WHICH NEEDS CONSIDERATION IS THAT THE SAME TREATMENT NEED S TO BE GIVEN TO LOSSES AS WELL AS GAINS ACCRUING TO THE ASSESSEE ON ACCOUNT OF FLUCTUATIONS IN FOREIGN CURRENCY RATE AS AT THE END OF THE YEAR. 8.4. REVERTING TO THE FACTS OF THE INSTANT CASE , IT IS SEEN THAT THE ASSESSEE SHOWED NET `UNREALISED FOREX GAIN ON DERIV ATIVES AMOUNTING TO RS.21.89 CRORE. IN OTHER WORDS, IT IS A CASE OF OVERALL GAIN ON DERIVATIVES DUE TO CHANGE IN THE MARKET RAT E AS AT THE END OF THE YEAR AND NOT THAT OF THE LOSS. THUS IT BECOMES MANIFEST THAT ON THIS COUNT, THE ASSESSEE OFFERED FOR TAXATION THE S AID SUM AND DID NOT CLAIM DEDUCTION FOR LOSS. THIS FACT FINDS PROMINENC E IN THE IMPUGNED ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 24 ORDER AS WELL. DESPITE THAT, THE LD. CIT HAS HELD T HAT THE COMPONENT OF FOREX LOSS ON DERIVATIVES WAS NOT ELIGIBLE FOR DEDU CTION. THERE IS NO DOUBT THAT THE CBDT INSTRUCTION PROVIDES THAT NO DE DUCTION CAN BE ALLOWED ON ACCOUNT OF FOREX LOSSES. SUCH INSTRUCTIO N HAS BEEN OBVIOUSLY ISSUED AFTER THE JUDGMENT IN THE CASE OF WOODWARD GOVERNOR (SC) AND RESTRICTS ITSELF TO THE DISALLOWABILITY OF LOS S ON ACCOUNT OF CURRENCY DERIVATIVES. GOING BY THIS INST RUCTION, IT BECOMES PATENT THAT SUCH FOREX LOSS IS NO MORE DEDUCTIBLE. WE FAIL TO UNDERSTAND THE LOGIC OF THE VIEW THAT THE FOREX LOS S BE IGNORED BUT THE FOREX GAIN ON DERIVATIVES BE TAXED. ANY PROFIT AND LOSS FROM AN ITEM CANNOT GO IN THE OPPOSITE DIRECTIONS. THIS POSITION CAN BE OBSERVED FROM THE JUDGMENT OF THE HONBLE SUPREME COURT IN WOODWARD GOVERNOR (SUPRA) . THE INSTRUCTION OF CBDT SIMPLY STATES THE LOSS ON ACCOUNT OF FOREX DERIVATIVES CANNOT BE ALLOWED S INCE IT IS A CONTINGENT LOSS. IT CANNOT BE ACCEPTED THAT THE DE DUCTION CLAIMED BY THE ASSESSEE TOWARDS LOSS DUE TO FOREIGN EXCHANGE F LUCTUATION IN FOREIGN CURRENCY TRANSACTIONS IN DERIVATIVES SHOULD BE CONSIDERED AS CONTINGENT AND HENCE IGNORED BUT THE GAIN DUE TO SU CH FOREIGN EXCHANGE FLUCTUATIONS IN FOREIGN CURRENCY TRANSACTI ONS ON DERIVATIVES SHOULD BE ASSESSED TO TAX. BOTH THE LOSS / GAIN ASS UME THE SAME CHARACTER OF EITHER CONTINGENT OR NON-CONTINGENT. I F THE FOREX LOSS ON ACCOUNT OF DERIVATIVES IS CONSIDERED AS CONTINGENT AND HENCE INELIGIBLE FOR DEDUCTION, THE FOREX GAIN WILL ALSO HAVE TO BE CONSIDERED AS CONTINGENT AND HENCE IMMUNE FROM TAXA TION. IF THERE IS A PROHIBITION IN NOT ALLOWING THE LOSS ON ACCOUNT O F FOREX DERIVATIVES, ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 25 EQUALLY THERE CAN BE NO QUESTION OF CHARGING TO TAX THE GAIN ON ACCOUNT OF FOREX DERIVATIVES. IT IS AXIOMATIC THAT BOTH LOSS OR GAIN CAN MOVE IN TANDEM AND NOT IN DIAMETRICALLY OPPOSITE DI RECTIONS. 8.5. BE THAT AS IT MAY, IT IS OBSERVED FROM T HE IMPUGNED ORDER AS WELL AS THE DETAILS OF THE FINANCIAL CHARGES THAT T HE AMOUNT OF RS.21.89 CRORES REPRESENTS GAIN ON ACCOUNT OF FOREX DERIVATIVES. THIS FACT HAS ALSO BEEN ADMITTED BY LD CIT IN PARA 6.3 O F THE IMPUGNED ORDER. WHEN THERE IS A NET GAIN OF RS.21.89 CRORES, WHICH THE ASSESSEE INCLUDED IN ITS TOTAL INCOME, WE FAIL TO A PPRECIATE THE REASON FOR CHARGING THE GROSS GAIN OF FOREX DERIVATIVES TO TAX BUT IGNORING THE LOSS ON ACCOUNT OF SUCH FOREX DERIVATIVES. AS THE ULTIMATE NET FIGURE ON ACCOUNT OF FOREX DERIVATIVES IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE IS THAT OF GAIN WHICH WAS OFFERED FOR T AXATION, IT IS MANIFEST THAT THE ASSESSMENT ORDER IN ACCEPTING SAI D FIGURE OF GAIN AS CHARGEABLE TO TAX, CANNOT BE DESCRIBED AS PREJUDICI AL TO THE INTERESTS OF THE REVENUE. WE ARE, THEREFORE, UNABLE TO COUNTE NANCE THE VIEW CANVASSED IN THE IMPUGNED ORDER ON THIS ISSUE. 9. NOW WE SHALL ESPOUSE THE CASES RELIED BY THE LD. DR TO ACCENTUATE ON THE VALIDITY OF THE REVISION PROCEEDI NGS. FIRST IN THIS LINE IS THE ORDER PASSED BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ARVEE INTERNATIONAL V. ADDL.CIT [(2006) 101 ITD 49 5 (MUM.)] . IN THIS CASE A LOSS RETURN FILED BY THE ASSESSEE WAS ACCEPTED IN THE ASSESSMENT COMPLETED U/S 143(3). THE CIT FOU ND THAT SINCE THE ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 26 VALUE OF IMPORT LICENCES HAD ALREADY BEEN CONSIDERE D WHILE GIVING DEDUCTION U/S 80HHC FOR AN EARLIER YEAR, THE CLAIM OF THE ASSESSEE FOR FURTHER DEDUCTION BY WAY OF LOSS ON SALE OF THE SAI D LICENCES DURING THE YEAR UNDER CONSIDERATION WAS UNTENABLE. HE FURT HER OPINED THAT THERE WAS FAILURE ON THE PART OF THE ASSESSING OFFI CER IN NOT EXAMINING THE SAID CLAIM OF THE ASSESSEE ON MERITS AND IN ACCORDANCE WITH LAW AT THE ASSESSMENT STAGE. RESULTANTLY, THE ASSESSMENT ORDER WAS HELD TO BE PASSED MECHANICALLY AND WITHOUT APPL ICATION OF MIND WHICH WAS SET ASIDE. THE TRIBUNAL UPHELD THE ORDER PASSED BY THE CIT. IT CAN BE OBSERVED FROM PARA 14 OF THE TRIBUNA L ORDER THAT THE ASSESSMENT ORDER WAS PASSED WITHOUT ANY ENQUIRY OR VERIFICATION OF THE ISSUE IN QUESTION. THE ASSESSEES STATEMENT GIV EN IN THE RETURN WAS ACCEPTED AS SUCH. THE TRIBUNAL IN SUCH CIRCUMSTANCE S HELD THAT THE ASSESSING OFFICER SHOULD HAVE MADE FURTHER ENQUIRIE S BEFORE ACCEPTING THE CLAIM MADE BY THE ASSESSEE IN ITS RET URN. ON GOING THROUGH THE FACTS OF THIS CASE IT CAN BE EASILY NOT ICED THAT THE ASSESSING OFFICER ACCEPTED THE ASSESSEES STATEMENT GIVEN IN THE RETURN WITHOUT ANY VERIFICATION. NO ENQUIRY WORTH T HE NAME WAS MADE. HOWEVER, WHEN WE TURN TO THE FACTS OF THE INS TANT CASE, WE FIND THAT THE ASSESSING OFFICER DID EMBARK UPON PROPER E NQUIRY AND SOUGHT NECESSARY DETAILS FROM THE ASSESSEE IN RESPE CT OF ALL THE ISSUES TAKEN NOTE OF BY THE LEARNED CIT IN THE IMPUGNED OR DER. AS SUCH, THIS DECISION DOES NOT ADVANCE THE CASE OF THE REVENUE. ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 27 10. THE NEXT CASE RELIED BY THE LEARNED DEPARTME NTAL REPRESENTATIVE IS CIT V. NALWA INVESTMENTS LTD. [(2011) 338 ITR 522 (DEL.)] . IN THIS CASE THE ASSESSEE WAS A NON-BANKING FINAN CE COMPANY ENGAGED IN THE BUSINESS OF INVESTMENT IN SHARES, SE CURITIES, OTHER DEBT INSTRUMENTS AND FINANCING LOANS AND PROVIDING GUARA NTEES. THE INCOME OF THE ASSESSEE COMPRISED OF INTEREST ON LOA NS AND SECURITIES, PROFESSIONAL INCOME AS WELL AS DIVIDEND INCOME. ENT IRE INCOME WAS SHOWN UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AND PROFESSION. THE A.O. CATEGORIZED DIVIDEND INCOME UNDER THE HEAD `INCOME FROM OTHER SOURCES. HOWEVER, HE ALLOWED SET OFF OF BROU GHT FORWARD BUSINESS LOSSES OF EARLIER YEARS AGAINST SAID DIVID END INCOME AS WELL. THE CIT, WHILE EXERCISING POWER U/S 263, SET ASIDE THE ORDER OF THE ASSESSING OFFICER ON THE GROUND THAT THE A.O. FAILE D TO EXAMINE THE NATURE OF INVESTMENTS ON WHICH DIVIDEND WAS EARNED AND TO CONDUCT PROPER INQUIRY AS REGARDS THE APPLICATION OF PROVIS IONS OF SECTION 72. THE TRIBUNAL QUASHED THE ORDER U/S 263 BY HOLDING T HAT THE A.O. ADOPTED PLAUSIBLE VIEW. SETTING ASIDE THE ORDER PAS SED BY THE TRIBUNAL, THE HONBLE DELHI HIGH COURT HELD THAT TH E A.O. FAILED TO APPLY HIS MIND TO ISSUE AS TO WHETHER DIVIDEND INCO ME COULD BE GIVEN CHARACTER OF BUSINESS INCOME FOR PURPOSES OF SET OF F AND THERE WAS NO QUESTION OF A PLAUSIBLE VIEW EXISTING ON THIS ISSUE . FROM THE ABOVE NARRATION OF FACTS OF THE CASE BEFORE THE HONBLE D ELHI HIGH COURT, IT IS OBVIOUS THAT THE ASSESSING OFFICER WRONGLY ALLOW ED SET OFF OF THE DIVIDEND INCOME FALLING UNDER THE HEAD `INCOME FROM OTHER SOURCES AGAINST THE BROUGHT FORWARD BUSINESS LOSS, WHICH IS NOT POSSIBLE AS ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 28 PER THE PROVISIONS UNDER THE ACT. WHEN WE REVERT T O THE FACTS OF THE INSTANT CASE, IT IS NOTICED THAT THE ASSESSING OFFI CER DID NOT COMMIT ANY MISTAKE. ALL THE THREE ISSUES TAKEN NOTE OF BY THE LEARNED CIT IN THE IMPUGNED ORDER ARE SUCH ON WHICH EITHER THE A.O . TOOK THE CORRECT VIEW OR CHOSE TO FOLLOW ONE OF THE POSSIBLE VIEWS. IT IS, THEREFORE, CLEAR THAT THE SAID JUDGMENT IS ALSO OF NO ASSISTANCE TO BUTTRESS THE CASE OF THE REVENUE. 11. NEXT IS THE JUDGMENT IN CIT V. BHAGAWANDAS [(2005) 142 TAXMANN 1 (ALL.)] . IN THIS CASE, THE ASSESSEE FILED RETURN CLAIMING EXEMPTION OF INCOME FROM AGRICULTURE AND POULTRY FA RM. THE SAME WAS ALLOWED BY THE A.O. AS SUCH. THE CIT INITIATED PROCEEDINGS U/S 263 ON THE GROUND THAT IN MAKING THE ASSESSMENT, TH E A.O. DID NOT MAKE ANY ENQUIRY OR INVESTIGATION AS REGARDS THE NA TURE, SOURCE OR EXTENT OF INCOME DERIVED FROM AGRICULTURE AND POULT RY FARM. THE TRIBUNAL ALLOWED THE ASSESSEES APPEAL. WHEN THE MAT TER CAME UP BEFORE THE HONBLE ALLAHABAD HIGH COURT, IT WAS OBS ERVED THAT THE A.O. GRANTED EXEMPTION TO THE INCOME FROM AGRICULTU RE AND POULTRY FARM WITHOUT MAKING AN ENQUIRY OR INVESTIGATION AS REGARDS THE NATURE, SOURCE OR EXTENT OF INCOME AND FURTHER THER E WAS NO DISCUSSION IN THE ASSESSMENT ORDER IN THIS REGARD. THAT IS HOW THE REVISION ORDER CAME TO BE UPHELD. IT CAN BE SEEN FR OM THE FACTS OF THE CASE BEFORE THE HONBLE ALLAHABAD HIGH COURT THAT T HE ASSESSING OFFICER IN THAT CASE ALLOWED EXEMPTION WITHOUT MAKI NG ANY ENQUIRY OR INVESTIGATION AND NATURALLY, THERE COULD HAVE B EEN NO POINT OF ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 29 MAKING ANY DISCUSSION IN THE ASSESSMENT ORDER ON TH IS ISSUE. WHEN WE COME BACK TO THE FACTS OF THE INSTANT CASE, IT C AN BE SEEN THAT THE ASSESSING OFFICER DID MAKE PROPER ENQUIRY AND INVES TIGATION INTO ALL RELEVANT ISSUES. THE NON-FINDING OF DISCUSSION ON T HESE THREE ISSUES IN THE ASSESSMENT ORDER IS DUE TO THE ACCEPTANCE, AFTE R DUE VERIFICATION AND INVESTIGATION, BY THE A.O. OF THE ASSESSEES CL AIM IN THIS REGARD. AS SUCH THIS JUDGMENT ALSO CANNOT BE HELD TO BE SUP PORTING THE VIEW OF THE REVENUE. 12. OTHER DECISIONS RELIED BY THE LEARNED DEPAR TMENTAL REPRESENTATIVE ARE REITERATION OF THE RATIO LAID DOWN IN THE ABOVE CASES AS DISCUSSED ABOVE. ACCORDINGLY, WE DO NOT PR OPOSE TO UNNECESSARILY BURDEN OUR ORDER WITH THE REPETITIVE NATURE OF CASES. 13. A SURVEY OF THE ABOVE CASES INDICATES THAT T HAT REVISION HAS BEEN HELD TO BE VALID WHERE EITHER THE ASSESSMENT O RDER WAS PASSED WITHOUT ANY ENQUIRY OR VERIFICATION OF THE ISSUES T AKEN UP BY THE CIT OR WHERE IT WAS FOUND THAT THE ASSESSING OFFICER WR ONGLY APPLIED THE PROVISIONS OF THE ACT TO THE FACT SITUATION PREVAIL ING BEFORE HIM. 14.1. HAVING SEEN THE CASES RELIED BY THE LEARNE D DEPARTMENTAL REPRESENTATIVE, LET US EXAMINE THE RELEVANT JUDGMEN TS HAVING A BEARING ON THE FACTS OF THE CASE RENDERED BY THE HO NBLE JURISDICTIONAL HIGH COURT. IN CIT V. GABRIAL INDIA LTD. [(1993) 203 ITR 108 (BOM.)] THE ASSESSEE CLAIMED DEDUCTION OF A PARTICULAR SUM DESCRIBED ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 30 AS PLANT RE-LAY-OUT EXPENSES. ON A QUERY BY THE A .O., IT WAS STATED BY THE ASSESSEE THAT THIS EXPENDITURE WAS INCURRED IN CONNECTION WITH THE MERGER OF TWO EXISTING PLANTS. THE CASE OF THE ASSESSEE WAS THAT AS THE LAY OUT OF TWO PLANTS WAS NOT CONDUCIVE, THE MANAGEMENT DECIDED TO MERGE THESE TWO PLANTS AND RE-LAY-OUT TH E SAME ACCORDING TO THE FLOW OF OPERATIONS CONDUCIVE TO MORE PRODUCT ION. ACCORDINGLY THE ASSESSEE CLAIMED THAT IT WAS DEDUCTIBLE BUSINES S EXPENDITURE. THE A.O. ACCEPTED THE EXPLANATION AND ALLOWED THE DEDUC TION. THE CIT ISSUED NOTICE U/S 263 OF THE ACT ON THE GROUND THAT THE ORDER OF THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE ON THE QUESTION OF ALLOWANCE OF DEDUCTION O F THE EXPENDITURE. THE EXPENDITURE WAS CAPITAL IN NATURE IN THE OPINION OF THE CIT. THE ASSESSEE APPEARED BEFORE THE CIT AND E XPLAINED ITS POSITION, WHO TURNED DOWN THE ASSESSEES CONTENTION BY OBSERVING THAT THE ORDER OF THE A.O. DID NOT CONTAIN ANY DISC USSION ON THE ALLOWABILITY OF THIS CLAIM. THE ASSESSEES VIEW PO INT WAS ACCEPTED BY THE TRIBUNAL. WHEN THE MATTER CAME UP BEFORE THE HO NBLE HIGH COURT, IT OBSERVED THAT THE POWER U/S 263 CAN BE EX ERCISED BY THE COMMISSIONER IF, ON EXAMINATION OF THE RECORDS OF A NY PROCEEDINGS UNDER THIS ACT, HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE A.O. IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE I NTERESTS OF THE REVENUE. UPHOLDING THE ORDER PASSED BY THE TRIBUNAL , THE HONBLE JURISDICTIONAL HIGH COURT OBSERVED THAT UNLESS BOTH THE CONDITIONS OF (I) THE ORDER BEING ERRONEOUS AND (II) IT BEING PRE JUDICIAL TO THE INTERESTS, ARE SATISFIED, THE CIT CANNOT EXERCISE POWER OF REVISION. IT ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 31 OBSERVED THAT AN ORDER CANNOT BE TERMED AS ERRONEO US UNLESS IT IS NOT IN ACCORDANCE WITH LAW. IF THE A.O., ACTING IN ACC ORDANCE WITH LAW MAKES CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDE D AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE ACCORDING TO HIM THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY. THE HON BLE HIGH COURT FURTHER VISUALIZED AND SET OUT CERTAIN SITUATIONS W ARRANTING AND NOT WARRANTING ACTION U/S 263. IT WAS HELD THAT ANY AN D EVERY ERRONEOUS ORDER CANNOT BE SUBJECT MATTER OF REVISION BECAUSE THE SECOND REQUIREMENT ALSO MUST BE FULFILLED. THE HONBLE HIG H COURT ALSO OBSERVED THAT : THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT TAX WHICH WAS LAWFULLY EXIGIBLE HAS NO T BEEN IMPOSED OR THAT BY THE APPLICATION OF THE RELEVANT STATUTE, ON AN INCORRECT OR INCOMPLETE INTERPRETATION, A LESSER TAX THAN WHAT W AS JUST HAS BEEN IMPOSED. THE HONBLE COURT FURTHER HELD THAT DECIS ION OF THE AO COULD NOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD. IT NOTICED THAT : `MOREOVER, IN THE INSTANT CASE, THE COMMISSIONER HI MSELF, EVEN AFTER INITIATING PROCEEDINGS FOR REVISION AND HEARING THE ASSESSEE, COULD NOT SAY THAT THE ALLOWANCE OF THE CLAIM OF THE ASSESSEE WAS ERRONEOUS AND THAT THE EXPENDITURE WAS NOT REVENUE EXPENDITURE BU T AN EXPENDITURE OF CAPITAL NATURE. HE SIMPLY ASKED THE INCOME-TAX O FFICER TO RE- EXAMINE THE MATTER. THAT WAS NOT PERMISSIBLE. 14.2. RECENTLY, THE HONBLE BOMBAY HIGH COU RT IN CIT V. HINDUSTAN LEVER LIMITED [(2012) 343 ITR 161 (BOM.)] REVISITED THE ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 32 LAW ON SECTION 263. IN THIS CASE THE ASSESSEE FILED RETURN OF INCOME CLAIMING DEDUCTIONS U/SS 80-I, 80-IA AND 80HH FOR C ERTAIN AMOUNTS. THE A.O. RESTRICTED THE AMOUNT OF DEDUCTIONS CLAIME D UNDER THESE SECTIONS TO A CERTAIN LEVEL. THE CIT, ON VERIFICATI ON OF THE RECORDS, OBSERVED THAT SOME EXPENSES HAVING BEARING ON THE P ROFITS OF THE UNITS ELIGIBLE FOR THE ABOVE DEDUCTIONS, WERE NOT C ONSIDERED FOR ALLOCATION. AS SUCH THE ASSESSMENT ORDER WAS REVISE D. THE TRIBUNAL SET ASIDE THE ORDER U/S 263. REVERSING THE ORDER OF THE TRIBUNAL, THE HONBLE BOMBAY HIGH COURT, INTER ALIA , NOTICED THAT THOUGH THE A.O. HAD IN LETTER DATED 30.01.2001 SOUGHT AN EXPLANATIO N AS TO WHY CAPITAL EXPENDITURE ON RESEARCH AND DEVELOPMENT AND ON SCIE NTIFIC CAPITAL EXPENDITURE SHOULD NOT BE ALLOCATED, THE ASSESSEES REPLY CONTAINED VIRTUALLY NO MATERIAL OR DETAILS TO ESTABLISH THAT THERE WAS NO DIRECT NEXUS BETWEEN THE EXPENDITURE INCURRED UNDER THE HE AD IN QUESTION AND THE BUSINESS OF THE UNDERTAKINGS WITH REFERENCE TO WHICH THE DEDUCTIONS WERE CLAIMED. IT WAS NOTICED THAT DURING THE COURSE OF PROCEEDINGS U/S 263 THE ASSESSEE CAME OUT WITH ANOT HER EXPLANATION THAT RESEARCH WAS NOT UNDERTAKEN AT THE UNITS, BUT THAT THE PRODUCTS WHICH WERE BEING MANUFACTURED BY THE UNITS WERE THO SE IN RESPECT OF WHICH THE COMPANY ALREADY POSSESSED THE REQUISITE K NOW-HOW. IN REACHING THE CONCLUSION THAT THE ASSESSMENT ORDER W AS BOTH ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE BEC AUSE THERE WAS NO DUE APPLICATION OF MIND BY THE AO, THE HONBLE HIGH COURT ALSO CONSIDERED EARLIER DECISION RENDERED IN THE CASE OF GABRIAL INDIA LTD.(SUPRA) . ABOUT THE JUDGMENT IN GABRIAL INDIA LTD. (SUPRA) , IT WAS ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 33 NOTICED IN THE LATER DECISION OF HINDUSTAN LEVER LTD. (SUPRA) THAT THE FORMER CONFINED THE CATEGORIES WITHIN WHICH THE JUR ISDICTION U/S 263 COULD BE EXERCISED TO A SITUATION IN WHICH THE ORD ER OF THE ASSESSING OFFICER COULD BE REGARDED AS NOT BEING IN ACCORDANC E WITH LAW OR WHICH HAS BEEN PASSED WITHOUT MAKING AN ENQUIRY IN UNDUE HASTE. THE HONBLE HIGH COURT OBSERVED THAT BY THE EXPOSIT ION OF THE LAW BY THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. (SUPRA) , THE JUDGMENT OF THE DIVISION BENCH IN GABRIEL INDIA (SUPRA) , `TO THE EXTENT TO WHICH IT CONFINED THE JURISDICTIO N UNDER SECTION 263 ONLY TO THESE CATEGORIES STANDS MODIFIED. THE JUDG MENT OF THE HONBLE SUPREME COURT WAS FOUND TO BE NOT WARRANTIN G A RESTRICTION ON THE JURISDICTION U/S 263 ONLY TO A SITUATION WH ERE THE JUDGMENT OF THE ASSESSING OFFICER IS CONTRARY TO LAW OR WHERE T HE ASSESSING OFFICER HAS NOT MADE ANY ENQUIRY IN UNDUE HASTE. T HE HONBLE HIGH COURT CONSIDERED THE MANDATE OF THE APEX COURT JUDG MENT IN MALABAR INDUSTRIAL CO. (SUPRA) BY WHICH IT HAS BEEN LAID DOWN THAT AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT AP PLICATION OF LAW AND ALSO THE ORDERS PASSED WITHOUT APPLYING THE PRINCIP LES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND, WILL SATIS FY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IT ALSO OBSERVED THAT IF DUE TO AN ERRONEOUS ORDER OF THE A.O., THE REVENUE IS LOSING TAX LAWFUL LY PAYABLE BY A PERSON, IT WOULD CERTAINLY BE PREJUDICIAL TO THE IN TERESTS OF THE REVENUE. ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 34 14.3. WHEN WE CONSIDER THE ABOVE JUDGMENTS OF THE HONBLE JURISDICTIONAL HIGH COURT IN GABRIAL INDIA LTD. (SUPRA) AND HINDUSTAN LEVER LIMITED (SUPRA) IN JUXTAPOSITION TO EACH OTHER, IT EMERGES THAT THE FORMER JUDGMENT HAS BEEN MODIFIED IN HINDUSTAN LEVER LIMITED (SUPRA) ONLY TO THE EXTENT BY WHICH IT CONFINED THE JURIS DICTION U/S 263 ONLY TO CERTAIN CATEGORIES, THEREBY ALIGNING IT WITH THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. (SUPRA) , WHICH EXPANDED THE SCOPE OF AN ERRONEOUS ORDER T O SITUATIONS WHEN THERE IS AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW OR WHERE THE ORDER WAS PASSED WITHOUT APPLICATION OF MIND. ON ALL OTHER ASPECTS, THE JUDG MENT IN GABRIEL INDIA LTD.(SUPRA) STANDS UNDILUTED AND STILL HOLDS PRECEDENT VALUE. GOING BY ANOTHER ASPECT DEALT WITH IN THE CASE OF GABRIEL INDIA LTD. (SUPRA) AS A NECESSARY CONDITION FOR INVOKING THE POWER U/S 263, WE FIND THAT THE CIT MUST IN THE FIRST INSTANCE SHOW A S TO HOW THE ASSESSMENT ORDER WAS ERRONEOUS ON A PARTICULAR ISSU E. IT FOLLOWS THAT WHERE THE AO CONDUCTED ENQUIRY ON A PARTICULAR MATT ER, WHICH IS EVIDENT EITHER FROM THE ASSESSMENT ORDER OR THE ASS ESSMENT RECORD, REVISION IS NOT POSSIBLE UNLESS THE CIT SHOWS THE A SSESSMENT ORDER TO BE ERRONEOUS. 15. ON A BIRDS EYE VIEW OF THE THE RATIO DECIDENDI OF THE ABOVE JUDGMENTS, BOTH FOR AND AGAINST THE EXERCISE OF POW ER U/S 263, THE FOLLOWING LEGAL PROPOSITIONS ARE DISCERNIBLE :- ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 35 15.1. WHILE FINALIZING ASSESSMENT, IT IS THE DUTY OF THE AO TO EXAMINE EACH AND EVERY ASPECT OF THE RETURN EXCEPT TINY OR INCONSEQUENTIAL ITEMS. HOWEVER, IT IS NOT NECESSAR Y TO INCORPORATE ALL THE ASPECTS EXAMINED BY HIM IN THE ASSESSMENT ORDER . AN ASSESSMENT ORDER ORDINARILY CONTAINS DISCUSSION ON THE ASPECTS WITH WHICH THE AO DOES NOT AGREE WITH THE ASSESSEE AND PROPOSES TO MAKE ADDITIONS. IT IS SO BECAUSE HIS ACTION IS AGAIN SUBJECT TO SCR UTINY BY APPELLATE AUTHORITIES. AT THE SAME TIME, THERE IS NO BAR ON THE AO TO ALSO INCLUDE ALL OR ANY OF THE RELEVANT ASPECTS OF ASSES SMENT IN HIS ORDER, WHERE HE EVEN AGREES WITH THE ASSESSEES CLAIM. BU T INCORPORATING SUCH RELEVANT ASPECTS IN THE ASSESSMENT ORDER IS DI SCRETIONARY AND NOT MANDATORY. IF A VIEW IS TAKEN THAT AN ASSESSMENT OR DER MUST CONTAIN EACH AND EVERY ASPECT EXAMINED BY HIM DURING THE CO URSE OF ASSESSMENT PROCEEDINGS WITH THE REASONS AS TO WHY H E AGREES OR DISAGREES WITH THE ASSESSEE, THEN THE ASSESSMENT OR DER WOULD BECOME NEEDLESSLY LARGE. SO LONG AS THERE IS MATERIAL ON RECORD TO INDICATE THAT THE AO DID ENQUIRE INTO ALL THE RELEVANT ASPEC TS OF THE ASSESSMENT, IT CANNOT BE CONSIDERED AS A CASE OF LA CK OF ENQUIRY EMPOWERING THE CIT TO EXERCISE JURISDICTION U/S 263 . IF WE SIMPLY GO BY NON-MENTIONING OF A PARTICULAR ISSUE IN THE ASSE SSMENT ORDER AS A MARK OF NON-APPLICATION OF MIND BY THE A.O., THEN P ROBABLY EVERY ASSESSMENT ORDER WOULD FALL WITHIN THE DOMAIN OF AN ERRONEOUS ORDER. THE CRUX OF THE MATTER IS THAT WHERE THE A SSESSING OFFICER APPLIED HIS MIND, WHICH IS EVIDENT FROM THE ENQUIRY CONDUCTED BY HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSMENT ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 36 ORDER CANNOT BE BRANDED AS ERRONEOUS DUE TO NON-APP LICATION OF MIND MERELY BECAUSE THERE IS NO MENTION OF CERTAIN ISSUE S IN THE ASSESSMENT ORDER ON WHICH THE ASSESSING OFFICER, AFTER DUE ENQ UIRY, GOT SATISFIED. WHERE, HOWEVER, THE AO FAILS TO ENQUIRE INTO ALL OR ANY OF THE ASPECTS OF THE ASSESSMENT, WHICH FACT IS AMPLY PROVED FROM THE ASSESSMENT ORDER AS WELL AS THE ASSESSMENT RECORDS, IT WOULD O BVIOUSLY BRING THE CASE WITHIN THE FOLD OF SEC. 263. THE MERE FACT OF NO ENQUIRY ON ALL OR ANY OF THE RELEVANT ASPECTS OF ASSESSMENT IS SUFFIC IENT TO ENABLE THE CIT FOR INVOKING JURISDICTION U/S 263. THE CASES O F ARVEE INTERNATIONAL (MUM.)(SUPRA) AND BHAGAWANDAS (ALL.) (SUPRA) DESCEND INTO THIS CATEGORY BECAUSE IN BOTH THESE CA SES THE AO FAILED TO CONDUCT PROPER ENQUIRY INTO THE ASPECTS TAKEN NO TE OF BY THE CIT. IN THE LIKE MANNER, THE CASES OF OVERLOOKING THE FA CT THAT THE ASSESSEE TENDERED INCOMPLETE INFORMATION TO THE AOS REQUISI TION AND THE ASSESSMENT BEING FINALIZED ACCORDINGLY, ALSO FALL I N THIS CATEGORY. NOTICING THIS MERE FACT FROM THE ASSESSMENT ORDER/R ECORD IS IN ITSELF SUFFICIENT FOR THE CIT TO VALIDLY ASSUME AUTHORITY U/S 263. 15.2.I. THEN COMES THE CATEGORY OF CASES, IN WHICH THE AO MADE ENQUIRY ON ALL THE RELEVANT ASPECTS OF THE ASSESSME NT AND THE ASSESSEE ALSO FURNISHED THE REQUIRED DETAILS, BUT THE AO FAI LED TO REACH A LOGICAL CONCLUSION. SUCH CASES ENABLE THE CIT TO V ALIDLY ASSUME POWER U/S 263 OF THE ACT. THIS WOULD EMBRACE TWO BR OADER CATEGORIES VIZ., FIRST, WHERE THE AO DID NOT APPRECIATE THE FA CTS IN RIGHT PERSPECTIVE; AND SECOND, WHERE HE FAILED TO CORRECT LY APPLY THE ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 37 RELEVANT LEGAL PROVISIONS TO THE FACTUAL POSITION O BTAINING BEFORE HIM. FIRST CATEGORY, BEING THE FAILURE TO APPRECIATE THE FACTS CORRECTLY COULD CONTEMPLATE VARIOUS SITUATIONS, SUCH AS, (A) WHERE FULL INFORMATION, AS DEMANDED, WAS FURNI SHED BY THE ASSESSEE BUT THE AO FAILED TO TAKE NOTE OF CERTAIN GLARING INCONSISTENCIES APPARENT TO NAKED EYE IN SUCH INFOR MATION. FOR EXAMPLE, WHERE THE AO DEMANDED BALANCE CONFIRMATION OF A PARTY, WHICH WAS MADE AVAILABLE BY THE ASSESSEE, BUT THE A O FAILED TO NOTICE THAT THE BALANCE AS CONFIRMED BY SUCH PARTY DID NOT TALLY WITH THE BALANCE SHOWN BY THE ASSESSEE IN ITS BOOKS OF A CCOUNT AND FURTHER THE ASSESSEE FAILED TO SUBMIT ANY RECONCILIATION. A CCEPTING THE CORRECTNESS OF SUCH ACCOUNT CAN RIGHTLY EMPOWER THE CIT TO ASSUME JURISDICTION U/S 263. (B) WHERE THE ASSESSEE FURNISHED COMPLETE INFORMATI ON AS DEMANDED BY THE AO BUT A CAREFUL AND DEEP CONSIDERATION OF S UCH INFORMATION, IN CONTRADISTINCTION TO THE GLARING OR APPARENT CON TRADICTION IN THE EARLIER SITUATION MENTIONED IN PARA (A) ABOVE, WOU LD HAVE REVEALED THE FALLACY OR INCOMPLETENESS OF THE INFORMATION, W HICH THE AO FAILED TO NOTICE. THIS WILL COVER A SITUATION AKIN TO THAT PREVAILING IN THE CASE OF HINDUSTAN LEVER LTD. (SUPRA) IN WHICH ALBEIT THE ASSESSEE SUPPLIED THE DETAILS OF INCOME OF THE UNITS ELIGIBLE FOR DED UCTIONS UNDER CHAPTER VI-A, BUT THE AO FAILED TO NOTE THAT THE AS SESSEE HAD NOT ALLOCATED PROPER AMOUNT OF EXPENSES TO SUCH ELIGIBL E UNITS, WHICH HE WAS REQUIRED TO OBSERVE FROM THE DETAILS FILED BY T HE ASSESSEE. ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 38 15.2.II. THE SECOND BROAD CATEGORY COMPRISES O F CASES WHERE THE AO FAILED TO CORRECTLY APPLY THE RELEVANT LEGAL PRO VISIONS TO THE FACTUAL POSITION OBTAINING BEFORE HIM. IT MAY INCLU DE BOTH THE CASES, VIZ., WHERE A WRONG PROVISION IS APPLIED OR WHERE A CORRECT PROVISION IS APPLIED WRONGLY. IT IS IN SUCH CIRCUMSTANCES TH AT THE CIT CAN ASSUME POWER U/S 263. THE CASE OF NALWA INVESTMENTS LTD. (DEL.) (SUPRA) FALLS IN THIS CATEGORY BECAUSE THE AO FAILED TO C ORRECTLY APPLY THE PROVISIONS OF SECTION 72 OF THE ACT. 15.2.III. HOWEVER, THERE IS ONE VITAL DIFFERENCE BETWEEN THE SITUATIONS DISCUSSED IN PARA 15.1 ON ONE HAND AND P ARA 15.2.I AND II. ON THE OTHER. UNLIKE THE CASES IN PARA 15.1. ABOVE WHERE THE MERE FACT OF NO OR INADEQUATE ENQUIRY BY THE AO ON SOME OR ALL THE RELEVANT ASPECTS OF ASSESSMENT IS SUFFICIENT TO CLO THE THE CIT WITH JURISDICTION U/S 263, IN THE CASES FALLING IN BOTH THE BROADER CATEGORIES AS PER PARA 15.2.I. AND II. ABOVE, THE CIT CAN ASSU ME POWER ONLY WHEN HE POINTS OUT, AT LEAST, PRIMA FACIE THAT, THE AO WENT WRONG IN CORRECTLY APPRECIATING THE FACTUAL POSITION STATED BEFORE HIM OR APPLYING THE PROVISIONS OF THE ACT IN A CORRECT MAN NER. IN SOME SITUATIONS, IT MAY BE POSSIBLE FOR THE CIT TO STRAI GHTWAY SHOW INACCURACY OF THE AOS ACTION FROM THE MATERIAL AVA ILABLE ON RECORD AND THEN SET IT RIGHT HIMSELF. IN OTHER SITUATIONS, IT MAY BE POSSIBLE ONLY TO SHOW INACCURACY OF THE AOS ACTION BUT SETT ING IT RIGHT MAY REQUIRE FURTHER CALLING OF INFORMATION AND EXAMINAT ION OF THE ISSUE. IN ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 39 SUCH A LATER CASE, THE CIT CAN SET ASIDE THE ASSESS MENT ORDER AND ASK THE AO TO REDO THE ASSESSMENT IN THE LIGHT OF THE O BSERVATIONS MADE BY HIM IN SHOWING THE INACCURACY OF THE AOS ACTION . HOWEVER, IN BOTH THE CASES IT IS OF PARAMOUNT IMPORTANCE FOR TH E CIT TO SHOW THAT THE ASSESSMENT ORDER IS WRONG IN CATEGORIES OF CASE S MENTIONED IN 15.2.I AND II. ABOVE. HE CANNOT SET ASIDE THE ASSE SSMENT IN SUCH CASES BY MERELY MENTIONING THAT THE POSSIBILITY OF SOMETH ING WRONG WITH THE ASSESSMENT ORDER CANNOT BE RULED OUT WITHOUT SH OWING AS TO WHERE THE AO WENT OFF THE TRACK. IN CASE THE CIT FA ILS TO POINT OUT THE MISTAKE OF THE AO IN SUCH CATEGORIES OF THE CASES, NO REVISION IS POSSIBLE. THE ASSESSEE ESCAPED REVISION IN GABRIAL INDIA LTD.(SUPRA) BECAUSE THE AO HAD CONDUCTED ENQUIRY ON THE ASPECT TAKEN NOTE OF IN THE REVISION BUT THE CIT COULD NOT POINT OUT AS TO HOW THE ASSESSMENT ORDER WAS ERRONEOUS ON THIS ISSUE. IT GOES WITHOUT SAYING THAT AN ASSESSMENT ORDER CAN BE CONSTRUED AS WRONG ONLY WHE RE THE AO ADOPTS A VIEW WHICH IS NOT SUSTAINABLE IN LAW OR, I N OTHER WORDS, IS NOT A POSSIBLE VIEW. 16. ADVERTING TO THE FACTS OF THE INSTANT CAS E, WE FIND THAT THE ASSESSING OFFICER MADE ENQUIRY ABOUT THE ABOVE REFE RRED THREE ASPECTS WHICH HAVE BEEN NOTED BY THE CIT FOR EXERCI SING JURISDICTION U/S 263. UPON SUCH ENQUIRY, THE ASSESSEE MADE SUBMI SSIONS BY PLACING ALL THE RELEVANT DOCUMENTS BEFORE THE AO. T HUS IT CAN BE SEEN THAT THIS CASE DOES NOT FALL IN THE CATEGORY DISCUS SED IN PARA 15.1. ABOVE. THE MERE FACT THAT THE ASSESSING OFFICER DID NOT MAKE ANY ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 40 REFERENCE TO THESE THREE ISSUES IN THE ASSESSMENT O RDER CANNOT MAKE THE ASSESSMENT ORDER ERRONEOUS WHEN THESE ISSUES WE RE PROPERLY LOOKED INTO BY THE ASSESSING OFFICER. NOW LET US SE E WHETHER IT CAN BE BROUGHT WITHIN THE AMBIT OF PARA 15.2. ABOVE. FR OM THE DETAILS FILED BY THE ASSESSEE IT CAN BE INFERRED THAT THE A O NOT ONLY ENQUIRED INTO THESE THREE ISSUES BUT ALSO GOT SATISFIED WITH THE ASSESSEES REPLY SUBMITTED FROM TIME TO TIME IN SUPPORT OF ITS STAND . RESORTING TO THE PROVISIONS OF SECTION 263 IN SUCH A SITUATION COULD HAVE BEEN POSSIBLE ONLY ON THE LD. CIT SHOWING THAT THE ASSESSMENT ORD ER WAS ERRONEOUS ON SUCH THREE ASPECTS. FROM THE DETAILED DISCUSSION MADE ABOVE ON THESE ISSUES, IT IS MANIFEST THAT THE AO TOOK EITHE R PERFECTLY CORRECT OR A POSSIBLE VIEW. AS SUCH, THE EXTANT ASSESSMENT OR DER CAN NOT BE HELD AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF TH E REVENUE. THE NATURAL COROLLARY WHICH, THEREFORE, FOLLOWS IN THE PRESENT CASE IS THAT THE LEARNED CIT WAS NOT JUSTIFIED IN INVOKING HIS J URISDICTION U/S 263 OF THE ACT. WE, THEREFORE, SET ASIDE THE IMPUGNED O RDER. 17. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED ON THIS 05 TH DAY OF FEBRUARY, 2013. ' 3 - 012 4'%5 1 - 6 SD/- SD/- (DR.T.M.PAVALAN) (R.S.SYAL) & ' & ' & ' & ' / JUDICIAL MEMBER ! ' ! ' ! ' ! ' / ACCOUNTANT MEMBER MUMBAI ; 4'% DATED : 05 TH FEBRUARY, 2013. DEVDAS* ITA NO.2915/MUM/2012. M/S.RELIANCE COMMUNICATIONS LIMITED. 41 ' 3 - +&/78 9 82/ ' 3 - +&/78 9 82/ ' 3 - +&/78 9 82/ ' 3 - +&/78 9 82// COPY OF THE ORDER FORWARDED TO : 1. () / THE APPELLANT 2. +,() / THE RESPONDENT. 3. : () / THE CIT - 10, MUMBAI. 4. : / CIT 5. 8=6 +&/&% , , / DR, ITAT, MUMBAI 6. 6 > / GUARD FILE. ' 3% ' 3% ' 3% ' 3% / BY ORDER, ,8/ +&/ //TRUE COPY// ? ? ? ?/ // /@ A @ A @ A @ A ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI