Ashok Arora, New Delhi V. CIT, New Delhi

ITA 3024/DEL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6820 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 03-05-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 15-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI JAIN
• Keywords: Business expenditure; Opportunity of being heard; Deemed dividend; Capital expenditure
• Section: 153A; 263; 132

Judgement Text

ITA NO. 3024/DEL/2013 ASHOK ARORA PAGE 1 OF IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE VICE PRESIDENT & SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.-3024/DEL/2013 ( ASSESSMENT YEAR: 2007-08) ASHOK ARORA UNIT NO. 134, 1 ST FLOOR, RECTANGLE 1, SAKET DISTRICT CENTRE, SAKET, NEW DELHI. AEPPK9937B VS CIT CENTRAL-III NEW DELHI. ASSESSEE BY SH. SALIL KAPOOR, ADV. MS. ANANYA KAPOOR, ADV. REVENUE BY SH. RAVI JAIN, CIT DR ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER : THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGA INST THE ORDER DATED 13/03/2013 PASSED BY THE LD. COMMISSION ER OF INCOME TAX (CENTRAL)-III, NEW DELHI FOR AY 2007-08. DATE OF HEARING 03.05.2016 DATE OF PRONOUNCEMENT 28.07.2016 ITA NO. 3024/DEL/2013 ASHOK ARORA PAGE 2 OF 2. THE FACTS OF THE CASE ARE THAT THE ORIGINAL RETU RN OF INCOME WAS FILED ON 31/07/2007 DECLARING AN INCOME OF RS. 8,35 ,640/-. SUBSEQUENTLY, ACTION U/S 132 OF THE INCOME TAX ACT, 1961 WAS TAKEN IN THE DAWAT GROUP OF CASES INCLUDING THE ASSESSEE ON 10/02/2009. NOTICE U/S 153A WAS ISSUED FOR AY 2007-08 BEING ONE OF THE SIX ASSESSMENT YEARS PRECEDING THE ASSESSMENT YEAR RELE VANT TO THE PREVIOUS YEAR IN WHICH THE SEARCH WAS CONDUCTED. I N RESPONSE TO THE SAID NOTICE U/S 153A, THE ASSESSEE FILED THE RETURN OF HIS INCOME DECLARING INCOME AT RS. 8,35,640/-. THE RETURNED I NCOME OF THE ASSESSEE WAS ACCEPTED U/S 153A OF THE INCOME TAX AC T, 1961 VIDE ASSESSMENT ORDER DATED 30/12/2010. SUBSEQUENTLY, T HE LD. COMMISSIONER OF INCOME TAX (CENTRAL)-III, NEW DELHI ISSUED A SHOW CAUSE NOTICE DATED 29/01/2013 U/S 263 OF THE INCOM E TAX ON THE GROUND THAT IN THE CASE OF LT FOODS PVT. LTD., THE FLAGSHIP COMPANY OF DAWAT GROUP, SPECIAL AUDIT U/S 142(2A) WAS CONDU CTED IN WHICH THE SPECIAL AUDITOR HAD POINTED OUT THAT DURING THE FINANCIAL YEAR 2006-07, RELEVANT TO THE AY 2007-08, THE ASSESSEE H ELD 14.57% SHARES OF LT FOODS LTD. AND THAT DURING THIS PERIOD M/S LT FOODS LTD. WAS NOT A COMPANY IN WHICH THE PUBLIC WERE SUBSTANT IALLY INTERESTED. THE SHOW CAUSE NOTICE STATED THAT AS PER THE SPECIA L AUDITORS ITA NO. 3024/DEL/2013 ASHOK ARORA PAGE 3 OF REPORT, DURING AY 2007-08, LT FOODS LTD. HAD ADVANC ED A LOAN OF RS. 1,74,000/- TO THE ASSESSEE ON VARIOUS DATES AND THE ASSESSEE WAS REQUIRED TO SHOW CAUSE AS TO WHY THIS AMOUNT OF RS. 1,74,000/- SHOULD NOT BE DEEMED AS DIVIDEND U/S 22(2)(E) OF TH E INCOME TAX ACT. IN RESPONSE THE ASSESSEE SUBMITTED THAT THE A MOUNT OF RS. 1,74,000/- WAS NEITHER AN ADVANCE NOR A LOAN TO THE ASSESSEE SHAREHOLDER BUT WAS SIMPLY AN IMPREST TO MEET THE D AY TO DAY BUSINESS EXPENDITURE OF THE COMPANY. IT WAS SUBMIT TED THAT THE ASSESSEE WAS THE PRESIDENT OF THE PUNJAB OPERATIONS OF THE COMPANY AND THE CASH OF THE COMPANY WAS GIVEN TO TH E PRESIDENT I.E. THE ASSESSEE FOR ITS SAFE CUSTODY AND THE SAID CASH IS RETURNED TO THE COMPANY AS AND WHEN SO NEEDED BY THE COMPANY. IT WAS ALSO SUBMITTED THAT THESE TRANSACTIONS WERE DONE IN THE NORMAL COURSE OF BUSINESS FOR THE PURPOSE ADMINISTRATION OF BUSINESS AFFAIRS OF THE COMPANY AND ACCORDINGLY, DID NOT QUALIFY TO BE TREA TED AS DEEMED DIVIDEND. HOWEVER, THE LD. CIT DID NOT ACCEPT THE ASSESSEES CONTENTION AND HELD THAT IT WAS NOT DISPUTED THAT T HE ASSESSEE WAS THE BENEFICIAL SHAREHOLDER IN LT FOODS LTD. HOLDING MORE THAN 10% OF THE VOTING POWER. THE LD. CIT OPINED THAT IT WAS AL SO NOT DISPUTED THAT ADVANCES HAD BEEN RECEIVED BY THE ASSESSEE FRO M LT FOODS ITA NO. 3024/DEL/2013 ASHOK ARORA PAGE 4 OF LTD. THE LD. CIT WAS OF THE OPINION THAT THE AO HA D NOT MADE ANY ENQUIRY ON THE ISSUE OF APPLICABILITY OF THE PROVIS IONS OF SEC. 2(22)(E) OF THE ACT AND HENCE IT WAS A CLEAR CASE OF LACK OF ENQUIRY AND THAT THE FAILURE ON THE PART OF THE AO TO MAKE THE NECES SARY ENQUIRIES HAD MADE THE ASSESSMENT ORDER BOTH ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE ISSUE WAS RESTORE D TO THE FILE OF THE AO TO DECIDE THE ISSUE AFRESH. 3. AGGRIEVED THE ASSESSEE IS NOW IN APPEAL BEFORE T HE ITAT AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE NOTICE ISSUED UNDER SECTION 263 OF THE INC OME TAX ACT, 1961 AND THE ORDER PASSED UNDER THAT SECTION ARE ILLEGAL , BAD IN LAW AND WITHOUT JURISDICTION. 2. THAT THE ORDER UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 IS BAD IN LAW AND WITHOUT JURISDICTION AS THE CIT HAS FAIL ED TO APPRECIATE THAT NO INCRIMINATING MATERIAL WAS FOUND DURING THE COUR SE OF SEARCH AS SUCH THE ASSESSING OFFICER HAS NO JURISDICTION TO A DD AMOUNT OF RS. 1,74,000/- AS DEEMED DIVIDEND UNDER SECTION 2(22)(E ) WHILE FILING ASSESSMENT UNDER SECTION 153A. 3. THAT THE COMMISSION OF INCOME TAX HAS IN VIEW OF TH E FACTS AND CIRCUMSTANCES OF THE CASE, HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING O FFICER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE, ON THE ITA NO. 3024/DEL/2013 ASHOK ARORA PAGE 5 OF GROUND THAT THE SPECIAL AUDIT REPORT IN THE CASE OF L T FOODS LIMITED IS NOT CONSIDERED BY THE ASSESSING OFFICER, WHEREAS TH E SAID REPORT OF THE SPECIAL AUDITOR WAS GIVEN MUCH AFTER THE COMPLE TION OF ASSESSMENT IN THE CASE OF THE APPELLANT. 4. THAT THE COMMISSIONER OF INCOME TAX HAS IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE HAS FAILED TO APPRECIATE THAT SPECIAL AUDIT REPORT WAS OBTAINED IN THE CASE OF L T FOODS LIMITE D AND NOT IN THE CASE OF ASSESSEE. HENCE IT CANNOT BE SAID THAT IT H AS BEEN IGNORED BY THE ASSESSING OFFICER OR IT IS THE PART OF THE RECO RD OF ASSESSEE. 5. THAT WITHOUT PREJUDICE THE COMMISSIONER OF INCOME T AX HAS IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE HAS FAIL ED TO APPROPRIATE THAT THE REPORT OF THE SPECIAL AUDITORS HAD EXCEEDE D ITS TERM OF REFERENCE AND AS SUCH THE ASSESSING OFFICER COULD N OT HAVE TAKEN COGNIZANCE OF SUCH A REPORT EVEN IF IT WOULD HAVE B EEN RECEIVED BEFORE THE COMPLETION OF ASSESSMENT. 6. THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE ORDER OF THE COMMISSIONER OF INCOME TAX IS UNJUST, ILLEGAL A ND BAD IN LAW BECAUSE THE AMOUNT GIVEN BY THE COMPANY FOR SAFE CU STODY TO ITS DIRECTOR / SENIOR EMPLOYEES IS NEITHER A LOAN NOR A N ADVANCE AND AS SUCH THE PROVISIONS OF SECTION 2(22)(E) ARE NOT APP LICABLE. 7. THAT THE COMMISSIONER OF INCOME TAX HAS IGNORED THE FACT THAT KEEPING OF CASH WITH THE DIRECTOR / SENIOR EMPLOYEE S IS A NORMAL BUSINESS PRACTICE BEING FOLLOWED FOR THE LAST MANY YEARS AND THE ASSESSING OFFICER COULD NOT HAVE MADE THE ADDITION BASED ON THE PRINCIPAL OF CONSISTENCY. ITA NO. 3024/DEL/2013 ASHOK ARORA PAGE 6 OF 8. THAT THE ORDER PASSED BY ASSESSING OFFICER UNDER SE CTION 153A/143(3) IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERES T OF REVENUE AND AS SUCH THE ORDER PASSED COMMISSIONER OF INCOME TAX UN DER SECTION 263 IN CANCELLING THE ASSESSMENT TO THE EXTENT OF ISSUE OF DEEMED DIVIDEND IS ILLEGAL AND BAD IN LAW. 9. THAT WITHOUT PREJUDICE THE COMMISSIONER OF INCOME T AX HAS FAILED TO APPRECIATE THAT A DETAILED QUESTIONNAIRE WAS ISSUED TO THE ASSESSEE DURING THE COURSE OF ASSESSMENT AND A QUESTION WITH REFERENCE TO LOANS /DIVIDEND WAS SPECIFICALLY ASKED AND AS SUCH IT CANNOT BE A CASE OF LACK OF ENQUIRY. 10. THAT THE COMMISSIONER OF INCOME TAX FAILED TO APPRE CIATE THE FACT THAT THE VIEW TAKEN BY THE ASSESSING OFFICER I S A POSSIBLE VIEW AND AS SUCH THERE IS NO LEGAL INFIRMITY IN THE ORDE R AND IS BEYOND THE PURVIEW OF SECTION 263. 11. THAT ALL THE FACTS AND CIRCUMSTANCES OF THE CASE AN D THE MATERIAL AVAILABLE ON RECORD HAVE NOT BEEN PROPERLY CONSIDERED BY THE COMMISSIONER OF INCOME TAX WHILE PASSING THE OR DER UNDER SECTION 263. THE IMPUGNED ORDER IS ILLEGAL, ARBITRA RY AND BAD IN LAW. 12. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTE R AND / OR MODIFY THE GROUNDS OF APPEAL OF THE SAID APPEAL. 4. THE LD. AR SUBMITTED THAT THE SPECIAL AUDIT REPO RT WAS OBTAINED IN THE CASE OF LT FOODS LTD. AND NOT IN THE CASE OF THE ASSESSEE AND HENCE THE LD. CIT WAS WRONG IN CONCLUDING THAT IT W AS IGNORED BY THE ITA NO. 3024/DEL/2013 ASHOK ARORA PAGE 7 OF AO SINCE IT WAS NEVER A PART OF THE RECORD OF THE A SSESSEE. IT WAS ALSO SUBMITTED THAT THE REPORT OF THE SPECIAL AUDIT OR WAS RECEIVED MUCH AFTER THE COMPLETION OF THE ASSESSMENT OF THE ASSESSEE AND HENCE IT WAS IMPOSSIBLE FOR THE AO TO HAVE CONSIDER ED THE SAME. THE LD. AR ALSO SUBMITTED THAT THE AMOUNT GIVEN BY A COMPANY FOR THE SAFE CUSTODY OF CASH TO ITS DIRECTORS OR SENIOR EMPLOYEES IS NEITHER A LOAN NOR AN ADVANCE SO AS TO COME WITHIN THE PURVIEW OF SEC. 2(22)(E) OF THE ACT. IT WAS FURTHER SUBMITTED THAT KEEPING OF SUCH CASH WITH THE DIRECTOR WAS A NORMAL BUSINESS PRACTI CE FOLLOWED BY THE COMPANY FOR MANY YEARS. THE LD. AR ALSO SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS A DETAILED QUESTIO NNAIRE WAS ISSUED TO THE ASSESSEE AND A QUESTION WITH THE REFE RENCE LOANS/DIVIDEND WAS SPECIFICALLY ASKED AND, THEREFOR E, IT CANNOT BE A CASE OF LACK OF ENQUIRY. THE LD. AR DREW OUR ATTEN TION TO PAGES 25 & 26 OF THE PAPER BOOK WHICH CONTAINED A COPY OF QUES TIONNAIRE DATED 18/08/2010, WHEREIN THE RELEVANT QUESTION APPEARS A T SL. NO. 13. HE ALSO DREW ATTENTION TO PAGE 28 OF THE PB, WHEREIN A T SL. NO. 18 THE DETAILS OF LOANS HAVE BEEN PROVIDED TO THE AO DURIN G THE ASSESSMENT PROCEEDINGS. THE LD. AR SUBMITTED THAT IN VIEW OF HIS SUBMISSIONS THE IMPUGNED ORDER U/S 263 WAS NOT AT ALL MAINTAINA BLE AND WAS ITA NO. 3024/DEL/2013 ASHOK ARORA PAGE 8 OF HENCE LIABLE TO BE QUASHED. HE ALSO DREW OUR ATTEN TION TO PAGES 62 & 63 OF THE PB WHICH IS A COPY OF THE ACCOUNT OF MR . ASHOK ARORA IN THE BOOKS OF LT FOODS LTD. TO HIGHLIGHT THE POINT T HAT CASH WAS PAID INTO THE CUSTODY OF THE ASSESSEE FOR SAFE-KEEPING A S WELL AS WITHDRAWN FROM HIS CUSTODY REGULARLY DEPENDING ON T HE BUSINESS NECESSITIES. IT WAS ALSO EMPHASIZED THAT NO INCRIM INATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH AND THE RETUR NED INCOME WAS ACCEPTED IN THE ORDER PASSED U/S 153A OF THE ACT AN D ON THAT COUNT ALSO, THE PROCEEDINGS U/S 263 OF THE ACT WERE NOT L EGALLY TENABLE. 5. THE LD. CIT (DR), IN RESPONSE, DEFENDED THE IMPU GNED ORDER AND SUBMITTED THAT 263 PROCEEDINGS HAD BEEN INITIAT ED LEGALLY IN THE CASE OF THE ASSESSEE AND THE IMPUGNED LOAN/ADVANCE CLEARLY ATTRACTED THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT AND SINCE THERE WAS AN EVIDENT LACK OF ENQUIRY ON PART OF THE AO, T HE FINDINGS OF THE LD. CIT OUGHT TO BE UPHELD. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORDS. THE PROVISIONS OF SECTION 263 READ AS UNDER: '263. (1) THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSE SSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE ITA NO. 3024/DEL/2013 ASHOK ARORA PAGE 9 OF INTEREST OF THE REVENUE, HE MAY, AFTER GIVING THE A SSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORD ER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLIN G THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. 7. IT WILL BE EXPEDIENT TO REITERATE THE GOVERNING PRINCIPLES LAID DOWN BY THE HONBLE COURTS WITH REGARD TO THE EXERC ISE OF POWER BY THE COMMISSIONER UNDER THE PROVISIONS OF S ECTION 263 OF THE ACT. THE POWER OF SUO MOTO REVISION EXERCISABLE BY THE COMMISSIONER IS UNDOUBTEDLY SUPERVISORY IN NATU RE. THE OPENING WORDS OF SECTION 263 EMPOWER THE COMMISSION ER TO CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDINGS UNDER THE ACT. A BARE READING OF SECTION 263 ALSO MAKES IT CL EAR THAT THE COMMISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS , NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REV ISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERE ST OF THE REVENUE. IF ONE OF THEM IS ABSENT - IF THE ORDER OF THE ASSE SSING OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IT IS PREJUDICIAL TO THE REVENUE - RE COURSE CANNOT ITA NO. 3024/DEL/2013 ASHOK ARORA PAGE 10 OF BE HAD TO SECTION 263(1) OF THE ACT [SEE MALABAR INDUSTRIAL CO. LTD. VS. CIT, ( 2000) 243 ITR 83 (SC)]. 8. AS REGARDS THE SCOPE AND AMBIT OF THE EXPRESSION 'ERRONEOUS', A DIVISION BENCH OF THE HONBLE BOMBAY HIGH COURT IN CIT VS. GABRIEL INDIA LTD., (1993) 203 ITR 108 (BOMBAY), HELD WITH REFERENCE TO BLACK'S LAW DICTIO NARY THAT AN 'ERRONEOUS JUDGMENT' MEANS 'ONE RENDERED ACCORDI NG TO COURSE AND PRACTICE OF COURT, BUT CONTRARY TO LAW, UPON MISTAKEN VIEW OF LAW; OR UPON ERRONEOUS APPLICATION OF LEGAL PRINCIPLES' AND THUS IT IS CLEAR THAT AN ORDER CANN OT BE TERMS AS 'ERRONEOUS' UNLESS IT IS NOT IN ACCORDANCE WITH LAW . IF ASSESSING OFFICER ACTING IN ACCORDANCE WITH LAW MAK ES A CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDED AS 'ERRONEOUS' BY THE COMMISSIONER SIMPLY BECAUSE, ACC ORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN DIFFEREN TLY OR MORE ELABORATELY. THE SECTION DOES NOT VISUALIZE THE SUB STITUTION OF THE JUDGMENT OF THE COMMISSIONER FOR THAT OF THE AS SESSING OFFICER, WHO PASSED THE ORDER UNLESS THE DECISION I S NOT IN ACCORDANCE WITH LAW. THEN AGAIN, ANY AND EVERY ERRO NEOUS ITA NO. 3024/DEL/2013 ASHOK ARORA PAGE 11 OF ORDER CANNOT BE THE SUBJECT MATTER OF REVISION BECA USE THE SECOND REQUIREMENT ALSO MUST BE FULFILLED. THERE MU ST BE MATERIAL ON RECORD TO SHOW THAT TAX WHICH WAS LAWFU LLY EXIGIBLE HAS NOT BEEN IMPOSED [SEE GABRIEL INDIA LTD. (SUPRA )]. HOWEVER, THE EXPRESSION 'PREJUDICIAL TO THE INTERES T OF THE REVENUE', AS HELD BY THE HONBLE SUPREME COURT IN T HE MALABAR INDUSTRIAL CO. LTD.'S CASE, IS NOT AN EXPRE SSION OF ART AND IS NOT DEFINED IN THE ACT AND, THEREFORE, MUST BE UNDERSTOOD IN ITS ORDINARY MEANING. IT IS OF WIDE I MPORT AND IS NOT CONFINED TO THE LOSS OF TAX [SEE DAWJEE DADABHO Y & CO. (SUPRA), CIT VS. T. NARAYANA PAI (1975) 98 ITR 422 (KAR), CIT VS. GABRIEL INDIA LTD. (SUPRA) AND CIT VS. SMT. MIN ALBEN S. PARIKH, (1995) 215 ITR 81 (GUJ)]. 9. AT THE SAME TIME, THE WORDS 'PREJUDICIAL TO THE INTEREST OF THE REVENUE ', AS OBSERVED IN DAWJEE DADABHOY AND CO. VS. S.P. JAIN, (1957) 311 ITR 872 (CALCUTTA), CAN ONLY MEAN THAT 'THE ORDERS OF ASSESSMENT CHALLENGED ARE SUCH AS AR E NOT IN ACCORDANCE WITH LAW, IN CONSEQUENCE WHEREOF THE LAW FUL REVENUE DUE TO THE STATE HAS NOT BEEN REALIZED OR C ANNOT BE ITA NO. 3024/DEL/2013 ASHOK ARORA PAGE 12 OF REALIZED. ' THUS, THE COMMISSIONER'S EXERCISE OF REVISIONAL JURISDICTION UNDER THE PROVISIONS OF SECTION 263 CA NNOT BE BASED ON WHIMS OR CAPRICE. IT IS TRITE LAW THAT IT IS A QUASI JUDICIAL POWER HEDGED IN WITH LIMITATION AND NOT AN UNBRIDLED AND UNCHARTERED ARBITRARY POWER. THE EXERCISE OF TH E POWER IS LIMITED TO CASES WHERE THE COMMISSIONER ON EXAMININ G THE RECORDS COMES TO THE CONCLUSION THAT THE EARLIER FI NDING OF THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND THAT A FRESH DETERMINATION OF THE CASE IS WARRANTED. THERE MUST BE MATERIAL TO JUSTIFY THE COMMISSIONER'S FINDING THAT THE ORDER OF THE ASSESS MENT WAS ERRONEOUS INSOFAR AS IT WAS PREJUDICIAL TO THE INTE REST OF THE REVENUE. 10. IT IS ALSO TRITE THAT THERE IS A FINE, THOUGH S UBTLE DISTINCTION, BETWEEN 'LACK OF INQUIRY' AND 'INADEQUATE INQUIRY' . IT IS ONLY IN CASES OF 'LACK OF INQUIRY' THAT THE COMMISSIONER IS EMPOWERED TO EXERCISE HIS REVISIONAL POWERS BY CALLING FOR AN D EXAMINING THE RECORDS OF ANY PROCEEDINGS UNDER THE ACT AND PA SSING ITA NO. 3024/DEL/2013 ASHOK ARORA PAGE 13 OF ORDERS THEREON. IN GABRIEL INDIA LTD. (SUPRA), IT W AS EXPRESSLY OBSERVED:- 'THE COMMISSIONER CANNOT INITIATE PROCEEDINGS WITH A VIEW TO STARTING FISHING AND ROVING ENQUIRIES IN MA TTERS OR ORDERS WHICH ARE ALREADY CONCLUDED. SUCH ACTION WIL L BE AGAINST THE WELL-ACCEPTED POLICY OF LAW THAT THERE MUST BE A POINT OF FINALITY IN ALL LEGAL PROCEEDINGS, THAT STALE ISSUES SHOULD NOT BE REACTIVATED BEYOND A PARTICULAR STAGE AND THAT LAPSE OF TIME MUST INDUCE REPOSE IN AND SET AT REST JUDICIAL AND QUASI-JUDICIAL CONTROVERSIES AS IT MUS T IN OTHER SPHERES OF HUMAN ACTIVITY [SEE PARASHURAM POTTERY WORKS CO. LTD. VS. ITO, (1977) 106 ITR 1 (SC)]. IT WAS FURTHER OBSERVED AS UNDER:- 'FROM THE AFORESAID DEFINITIONS AS IT IS CLEAR THAT AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW. IF AN INCOME-TAX OFFICER ACTIN G IN ACCORDANCE WITH LAW MAKES A CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY. TH IS SECTION DOES NOT VISUALIZE A CASE OF SUBSTITUTION O F THE JUDGMENT OF THE COMMISSIONER FOR THAT OF THE INCOME -TAX OFFICER, WHO PASSED THE ORDER UNLESS THE DECISION I S HELD TO BE ERRONEOUS. CASES MAY BE VISUALIZED WHERE THE INCOME-TAX OFFICER WHILE MAKING AN ASSESSMENT EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOU NTS OR BY MAKING SOME ESTIMATE HIMSELF. THE COMMISSIONE R, ON PERUSAL OF THE RECORDS, MAY BE OF THE OPINION TH AT THE ESTIMATE MADE BY THE OFFICER CONCERNED WAS ON THE L OWER SIDE AND LEFT TO THE COMMISSIONER HE WOULD HAVE ESTIMATED THE INCOME AT A FIGURE HIGHER THAN THE ON E DETERMINED BY THE INCOME-TAX OFFICER. THAT WOULD NO T VEST THE COMMISSIONER WITH POWER TO RE-EXAMINE THE ACCOU NTS AND DETERMINE THE INCOME HIMSELF AT A HIGHER FIGURE . IT IS ITA NO. 3024/DEL/2013 ASHOK ARORA PAGE 14 OF BECAUSE THE INCOME-TAX OFFICER HAS EXERCISED THE QU ASI- JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRIVED AT CONCLUSION AND SUCH A CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEEL SATISFIED WITH THE CONCL USION. X X X X THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD T O SHOW THAT TAX WHICH WAS LAWFULLY EXIGIBLE HAS NOT B EEN IMPOSED OR THAT BY THE APPLICATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTERPRETATION A LESS ER TAX THAN WHAT WAS JUST HAS BEEN IMPOSED. 11. FROM THE ABOVE IT IS CLEAR THAT IN THE ULTIMATE ANA LYSIS IT IS A PRE- REQUISITE THAT THE COMMISSIONER MUST GIVE REASONS T O JUSTIFY THE EXERCISE OF SUO MOTO REVISIONAL POWERS BY HIM TO RE-OPEN A CONCLUDED ASSESSMENT. A BARE REITERATION BY HIM THAT THE ORDE R OF THE INCOME-TAX OFFICER IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL T O THE INTEREST OF THE REVENUE, WILL NOT SUFFICE. THE EXERCISE OF THE POWE R BEING QUASI- JUDICIAL IN NATURE, THE REASONS MUST BE SUCH AS TO SHOW THAT THE ENHANCEMENT OR MODIFICATION OF THE ASSESSMENT OR CA NCELLATION OF THE ASSESSMENT OR DIRECTIONS ISSUED FOR A FRESH ASSESSM ENT WERE CALLED FOR, AND MUST IRRESISTIBLY LEAD TO THE CONCLUSION T HAT THE ORDER OF THE INCOME- TAX OFFICER WAS NOT ONLY ERRONEOUS BUT WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THUS, WHILE THE AO IS NOT CALLED UPON TO WRITE AN ELABORATE JUDGMENT GIVING DETAILED REASONS IN RE SPECT OF EACH AND ITA NO. 3024/DEL/2013 ASHOK ARORA PAGE 15 OF EVERY DISALLOWANCE, DEDUCTION, ETC., IT IS INCUMBEN T UPON THE COMMISSIONER NOT TO EXERCISE HIS SUO MOTO REVISIONAL POWERS UNLESS SUPPORTED BY ADEQUATE REASONS FOR DOING SO. 12. THE HONBLE MADRAS HIGH COURT HELD IN THE CASE OF CIT V VALLIAMMAL (D.) (1998) 230 ITR 695 (MAD) THAT ASSES SMENT ORDER MADE AFTER CONSIDERING ALL FACT AND INFORMATION CAN NOT BE REVISED. WHERE THE ASSESSEE HAD FURNISHED THE REQUISITE INFO RMATION AND THE ASSESSING OFFICER HAD COMPLETED THE ASSESSMENT AFTE R CONSIDERING AND THE FACTS BUT THE COMMISSIONER REVISED THE ASSE SSMENT ORDER ON THE GROUND THAT THE ASSESSING OFFICER HAD NOT MADE PROPER ENQUIRIES, THE TRIBUNAL WAS HELD JUSTIFIED IN REVERSING THE OR DER OF THE COMMISSIONER AND RESTORING THAT OF THE ASSESSING OF FICER. COMMISSIONER CANNOT RE-EXAMINE ACCOUNTS AND SUBSTIT UTE HIS JUDGMENT FOR THAT OF THE ASSESSING OFFICER. AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LA W. IF ASSESSING OFFICER MAKES ASSESSMENT IN ACCORDANCE WITH LAW, TH E SAME CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTE N MORE ELABORATELY. THIS SECTION DOES NOT VISUALIZE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE COMMISSIONER FOR THAT OF THE AS SESSING OFFICER ITA NO. 3024/DEL/2013 ASHOK ARORA PAGE 16 OF UNLESS THE DECISION IS HELD TO BE ERRONEOUS. CASES MAY BE VISUALIZED WHERE THE ASSESSING OFFICER EXAMINES THE ACCOUNTS, MAKES ENQUIRES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY MAKING THE ACCOUNTS OR BY MAKING SOME ESTIMATES HIMSELF. THE COMMISSIONER, ON PERUSA L OF THE RECORDS, MAY BE OF THE OPINION THAT THE ESTIMATE MA DE BY THE OFFICER WAS ON LOWER SIDE AND, LEFT TO THE COMMISSIONER, HE WOULD HAVE ESTIMATED THE INCOME AT A HIGHER FIGURE THAT THE ON E DETERMINED BY THE ASSESSING OFFICER. THAT WOULD NOT VEST THE COMM ISSIONER WITH THE POWER TO RE-EXAMINE THE ACCOUNTS AND DETERMINE THE INCOME HIMSELF AT A HIGHER FIGURE. FURTHER IN THE CASE OF INFOSYS TECHNOLOGIES V JCIT (ASST) (2006) 286 ITR (AT) 211, THE BANGALORE BENCH OF THE ITAT HELD THAT WHERE THE A.O AS EXAMINED AND CONSIDERED AND ISSUE, THOUGH NOT MENTIONED IN THE ASSESSMENT ORDER, IT CA NNOT BE SAID THAT THE ORDER PASSED WAS ERRONEOUS. IN CIT V GABRIEL INDIA LTD. (1993) 203 ITR 108 (BOM), THE HONBLE BOMBAY HIGH COURT HE LD THAT ONCE THE ASSESSING OFFICER HAS EXERCISED THE QUASI-JUDIC IAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRIVED AT A CONCLUS ION, SUCH A CONCLUSION CANNOT BE CONSIDERED ERRONEOUS SIMPLY BE CAUSE THE COMMISSIONER DOES NOT FEEL SATISFIED WITH THE CONCL USION. IT MAY BE ITA NO. 3024/DEL/2013 ASHOK ARORA PAGE 17 OF THAT IN THE OPINION OF THE COMMISSIONER, THE ORDER IN QUESTION IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. BUT TH AT BY ITSELF WOULD NOT BE ENOUGH TO VEST THE COMMISSIONER WITH THE POWERS OF SUO MOTU REVISION BECAUSE THE FIRST REQUIREMENT, NAMELY, THA T THE ORDER IS ERRONEOUS, IS LACKING. 13. THE HONBLE DELHI HIGH COURT IN CIT VS. SUNBEA M AUTO LTD 332 ITR 167 (DEL) HAS OPINED IN PARA 17 OF ITS ORDER AS UNDER:- 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF TH E COUNSEL ON THE OTHER SIDE AND HAVE GONE THROUGH THE RECORDS. THE FIRST ISSUE THAT ARISES FOR OUR CONSID ERATION IS ABOUT THE EXERCISE OF POWER BY THE COMMISSIONER OF INCOME-TAX UNDER SECTION 263 OF THE INCOME- TAX ACT . AS NOTED ABOVE, THE SUBMISSION OF LEARNED COUNSEL FOR THE REVENUE WAS THAT WHILE PASSING THE ASSESSMENT ORDER , THE ASSESSING OFFICER DID NOT CONSIDER THIS ASPECT SPEC IFICALLY WHETHER THE EXPENDITURE IN QUESTION WAS REVENUE OR CAPITAL EXPENDITURE. THIS ARGUMENT PREDICATES ON THE ASSES SMENT ORDER, WHICH APPARENTLY DOES NOT GIVE ANY REASONS W HILE ALLOWING THE ENTIRE EXPENDITURE AS REVENUE EXPENDIT URE. HOWEVER, THAT BY ITSELF WOULD NOT BE INDICATIVE OF THE FACT THAT THE ASSESSING OFFICER HAD NOT APPLIED HIS MIND ON THE ISSUE. THERE ARE JUDGMENTS GALORE LAYING DOWN THE P RINCIPLE THAT THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IS NOT REQUIRED TO GIVE DETAILED REASON IN RESPECT OF EACH AND EVERY ITEM OF DEDUCTION, ETC. THEREFORE, ONE HAS TO SEE FROM THE RECORD AS TO WHETHER THERE WAS APPLICATION OF MIND BEFORE ALLOWING THE EXPENDITURE IN QUESTION AS REVE NUE EXPENDITURE. LEARNED COUNSEL FOR THE ASSESSEE IS RI GHT IN ITA NO. 3024/DEL/2013 ASHOK ARORA PAGE 18 OF HIS SUBMISSION THAT ONE HAS TO KEEP IN MIND THE DIS TINCTION BETWEEN LACK OF INQUIRY AND INADEQUATE INQUIRY. IF THERE WAS ANY INQUIRY, EVEN INADEQUATE THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE COMMISSIONER TO PASS ORDERS UN DER SECTION 263 OF THE ACT, MERELY BECAUSE HE HAS A DIF FERENT OPINION IN THE MATTER. IT IS ONLY IN CASES OF LACK OF INQUIRY THAT SUCH A COURSE OF ACTION WOULD BE OPEN. 14. IN THE INSTANT APPEAL BEFORE US, IT IS NOT THE DEPARTMENTS CASE THAT NO INFORMATION REGARDING THE LOAN/ADVANCE WAS CALLED FOR BY THE AO. THAT RELEVANT DETAILS AND DOCUMENTS WERE FURNIS HED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS AND FORM S PART OF THE REORD. HENCE, NO INFERENCE CAN BE DRAWN THAT THE AO HAS NOT EXAMINED THE ISSUE ALTHOUGH HE HAS NOT EXPRESSED IT IN AS MANY TERMS AS MAY BE CONSIDERED APPROPRIATE BY HIS SUPER IOR AUTHORITY AND EVEN IF THE SAME IS FOUND TO BE INADEQUATE THE SAME CANNOT BE A GROUND FOR REVISION. IT IS CLEAR THAT AN ORDER CANN OT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW. THIS SECTION DOES NOT VISUALIZE A CASE OF SUBSTITUTION OF THE JUDGMEN T OF THE COMMISSIONER FOR THAT OF THE AO. THEREFORE, IT CANN OT BE HELD THAT IN THE INSTANT CASE THE AOS ORDER WAS ERRONEOUS AND P REJUDICIAL TO THE INTEREST OF THE REVENUE WITHIN THE TERMS OF SECTION 263 OF THE ACT. ONCE THE ISSUE OF LOAN/ADVANCE WAS CONSIDERED AND E XAMINED BY THE ITA NO. 3024/DEL/2013 ASHOK ARORA PAGE 19 OF ASSESSING OFFICER, LD. COMMISSIONER CANNOT SET ASID E THE ORDER WITHOUT RECORDING A CONTRARY FINDING. THIS WILL BE CONTRARY TO SECTION 263 OF THE ACT. THEREFORE, IN VIEW OF THE FACTUAL MATRIX OF THE CAS E AND RESPECTFULLY FOLLOWING THE RATIO OF THE VARIOUS JUD ICIAL PRONOUNCEMENTS AS DISCUSSED ABOVE, WE ARE OF THE CONSIDERED OPINIO N THAT THE IMPUGNED ACTION OF THE LD. CIT U/S 263 OF THE ACT W AS PATENTLY ILLEGAL AND IS LIABLE TO BE QUASHED. THE PROCEEDINGS U/S 2 63 OF THE ACT ARE ACCORDINGLY QUASHED. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 28.07.2016 SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA ) VICE PRESIDENT JUDICIAL MEMBER DATED: 28/07/2016 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI