Mr. Neeraj Jain, Delhi V. CIT, Meerut

ITA 3375/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77577 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 03-03-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 28-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: SUNIL JAIN
• Keywords: Depreciation; Principle of natural justice
• Section: 143(3); 194C; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI) BEFORE SHRI U. B. S. BEDI, JUDICIAL MEMBER AND SHRI T. S. KAPOOR , ACCOUNTANT MEMBER I.T.A. NO. 3375 /DEL/2013 (ASSESSMENT YEAR 2008-09) NEERAJ JAIN, VS. CIT, MEERUT 51, RISHABH VIHAR, DELHI-110 092 PAN/GIR NO.: AEHPJ5608J (APPELLANTS) (RESPONDENTS) ASSESSEE BY : SHRI SUNIL JAIN FCA DEPARTMENT BY: SHRI KEYUR PATEL, SR. DR ORDER PER U B S BEDI, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER PASSED BY LD. CIT, MEERUT U/S 263, DATED 25.03.2013 RELEVANT TO A SSESSMENT YEAR 2008-09 WHEREBY ASSESSEE HAS CHALLENGED INVOKING THE PROVIS IONS OF SECTION 263 AND SETTING ASIDE THE ASSESSMENT FRAMED ON 05.10.2013 U /S 143(3) BY MAKING VARIOUS OBSERVATIONS AND BY GIVING CERTAIN DIRECTIO NS WHILE MAKING FRESH ASSESSMENT. 2. THE FACTS INDICATE THAT THE ASSESSMENT ORDER U/S 143(3) WAS PASSED ON 05.10.2013 BY ACIT CIRCLE-2, MEERUT. ON EXAMINATIO N OF RECORDS BY CIT, IT WAS FOUND THAT THE ASSESSMENT WAS DONE WITHOUT PROP ER INQUIRY IN SO FAR AS DISCUSSED IN THE SUBSEQUENT PARAS. 3. ACCORDINGLY, NOTICE U/S 263 WAS ISSUED POINTING OUT AS UNDER: 2 A) AS PER BALANCE SHEET ASSESSEE HAS PAID THE INTER EST ON UNSECURED LOANS BUT NOT CHARGED THE INTEREST ON LOANS GIVEN T O OTHERS. THEREFORE, INTEREST WAS TO BE DISALLOWED ON PROPORTIONATE BASI S. B) SUNDRY CREDITORS OF RS.3,21,71,459/- HAVE NOT BE EN ENQUIRED INTO PROPERLY BEFORE ACCEPTING THE SAME. C) UNSECURED LOAN AT RS.95,28,007/- HAS NOT BEEN EN QUIRED INTO PROPERLY BEFORE ACCEPTING THE SAME. D) ASSESSEE HAS MADE AN ADDITION IN CAPITAL OF RS.1 6,00,000/- BUT NOT VERIFIED THE SOURCE OF ADDITION IN CAPITAL. E) DURING THE YEAR, ASSESSEE HAS MADE AN ADDITION I N FIXED ASSETS OF RS.23,13,334/- BUT THE A.O. HAS NOT OBTAINED THE BILLS NOR VERIFIED THE SOURCE OF INVESTMENT. F) THE A.O. HAS NOT TAKEN COMMISSION EXPENSES INTO ACCOUNT FOR WHICH THE CASE WAS SELECTED FOR SCRUTINY. G) THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUF ACTURING & EXPORTER OF STAINLESS STEEL AND PET PRODUCTS AND HA S SHOWN SALES OF 11,31,40,469/-. AGAINST THIS, THE ASSESSEE HAS SHO WN A N.P. OF RS.7,47,494/- ONLY WHICH IS APROX. 0.66% OF THE SAL ES. THE A.O. HAS ACCEPTED THE SAME WITHOUT ANY ENQUIRY INTO THE SAME . 4. IN VIEW OF ABOVE, THE ORDER OF THE A.O. WAS FOUN D TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE SINCE, A T THE TIME OF ASSESSMENT, THE A.O. WAS DUTY BOUND TO CALL FOR SUCH DETAILS AND EX AMINE THEM. IN THE CASE OF M/S. MALABAR INDUSTRIES, THE HONBLE APEX COURT HAS HELD THAT INCORRECT APPLICATION OF LAW WILL SUFFICE THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY WILL FALL ORDER PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE AND WITHOUT APPLICATION OF MIND. T HE FUNDAMENTAL PRINCIPLES EMERGED FORM THE HONBLE APEX COURT JUDGEMENT IN MA LABAR IND. CO. LTD. VS CIT (2000) 243 ITR 83 (S.C.) INCLUDE AS FOLLOWS: I) AN INCORRECT ASSUMPTION OF FACTS OR INCORRECT AP PLICATION OF LAW WILL SUFFICE THE REQUIREMENT OF THE ORDER BEING ERRONEOU S. II) IF THE ORDER IS PASSED WITHOUT APPLICATION OF M IND, SUCH ORDER WILL FALL UNDER THE CATEGORY OF ERRONEOUS ORDER. 3 FURTHER IT HAS BEEN HELD IN CIT VS V.N.M.A. RATHINA SABAPATHY NADAR, (1995) 215 ITR 309, 315 (MAD.) THAT IF AN ORDER IS PASSED IN IGNORANCE WITHOUT TAKING INTO CONSIDERATION OF THE RELEVANT F ACTS OR IS AFFECTED BY THE PRESENCE OF ANY IRRELEVANT FACT INTO CONSIDERATION, THE SAME IS ERRONEOUS. IT WAS NEXT OBSERVED THAT IT IS BEYOND DISPUTE THAT U/ S 263, THE COMMISSIONER DOES HAVE THE POWER TO SET ASIDE THE ASSESSMENT ORD ER AND SEND THIS MATER FOR A FRESH ASSESSMENT IF HE IS SATISFIED THAT FURTHER ENQUIRY IS NECESSARY, AND THAT THE ORDER OF THE A.O. IS PREJUDICIAL TO THE INTERES T OF THE REVENUE. IN SWARUP VEGETABLE PRODUCTS INDUSTRIES LTD. VS CIT (1991) 18 7 ITR 412, 415-416 (ALLD.) SIMILARLY, THE ACTION OF THE COMMISSIONER W AS UPHELD BY HON'BLE HIGH COURT. IN THE FACTS OF UMASHANKAR RICE MILL V S CIT, 187 ITR 638-39 (ORI.), THE TRIBUNAL WAS HELD JUSTIFIED IN UPHOLDIN G THE REVISIONAL ORDER OF THE COMMISSIONER WHICH WAS PASSED BY THE COMMISSION ER WHO FELT THAT THERE SHOULD BE A FURTHER ENQUIRY. FURTHER RELIANC E WAS PLACED BY CIT ON THE FOLLOWING CASE LAW: I) JAGDISH KUMAR GULATI VS CIT, 269 ITR 71 (ALL.) II) GEE VEE ENTERPRISES VS ADDL. CIT, 99 ITR 375 ( DEL.) III) RAMPYARI DEVI SARAOGI VS CIT, 67 ITR 84 (S.C. ) IV) DUGGAL & CO. VS CIT 220 ITR 456 (DEL.) V) CIT VS PUSHPA DEVI, 164 ITR 639 VI) CIT VS SMT. RAMBHA DEVI, 164 ITR 658 VII) CIT VS BELAL NISHA, 171 ITR 643 VIII) CIT VS SMT. KAUSHALYA DEVI, 171 ITR 686 (PAT .) IX) CIT VS BIBI KHODAIJA KHATOON, 171 ITR (SH.N.) II (PAT) X) CIT VS SMT. CHANDRAWATI DEVI, 171 ITR (SH.N.) I II (PAT.) XI) CIT VS SMT. DEVI 59 CTR (PAT.)3 XII) CIT VS BVHAGWANT KAUR, 63 CTR (PAT.) 326 XIII) CIT VS PUSHPA DEVI, 173 ITR 445 (PAT.) THE HONBLE JURISDICTIONAL ITAT DELHI BENCH IN THE CASE OF SHRI VIRENDRA KUMAR GUPTA VS CIT (I.T.A. NO. 2595/DEL/20 09 DATED 21.01.2011 RELYING UPON AFORESAID JUDGEMENTS, HAS HELD THAT TH E FACTS OF THE CASE WERE IN 4 PARI-MATERIA WITH ABOVE JUDGEMENTS. FURTHER, ON C ONSIDERATION OF THESE CASES, THE HONBLE ITAT VIEWED THAT THE LD. CIT WAS RIGHT IN EXERCISING THE REVISIONARY JURISDICTION DISMISSING THE APPEAL FILE D BY THE ASSESSEE. IN VIEW OF THE FOREGOING, IT IS EVIDENT THAT THE ORDER PASS ED BY THE A.O. IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF THE REVE NUE FOR THE REASONS AS STATED ABOVE. 5. IN THE COURSE OF THE PROCEEDINGS U/S 263, LD. CO UNSEL FOR THE ASSESSEE ATTENDED AND FILED WRITTEN SUBMISSIONS BUT FAILED T O PRODUCE THE BOOKS OF ACCOUNT AND THE CASE WAS ALSO DISCUSSED WITH HIM AN D LD. CIT AFTER TAKING EACH OF THE POINTS RAISED IN THE NOTICE U/S 263(1) AND VARIOUS CASE LAW AS MENTIONED BY HIM IN HIS ORDER, HAS CONCLUDED TO SET ASIDE THE ORDER OF ASSESSMENT TO THE EXTENT MENTIONED IN THE ORDER AND THE A.O. WAS DIRECTED TO PASS FRESH ORDER EXPEDITIOUSLY AFTER AFFORDING OPPO RTUNITY TO THE ASSESSEE. 6. AGGRIEVED BY THE ORDER OF LD. CIT, ASSESSEE HAS COME UP IN APPEAL AND WHILE REITERATING THE SUBMISSIONS AS MADE DURIN G THE PROCEEDINGS U/S 263 BEFORE THE COMMISSIONER, IT WAS PLEADED THAT AL L THE ISSUES RAISED BY LD. CIT WERE DULY REPLIED TO BY THE ASSESSEE IN RESPONS E TO THE NOTICE U/S 263 AND BY GIVING DETAILS AND DOCUMENTS, IT WAS PLEADED THAT SIMILAR DETAILS AND DOCUMENTS WERE SUBMITTED BEFORE THE A.O. AND IF HE HAS NOT MENTIONED ABOUT THE DISCUSSION AND DETAILS SUBMITTED BEFORE H IM AND HAS PASSED THE ASSESSMENT ORDER, IT CANNOT BE SAID THAT PROPER ENQ UIRY HAS NOT BE MADE BY THE A.O.; WHEN THE ORDER WAS PASSED U/S 143(3) AFTE R CALLING FOR VARIOUS DETAILS AND GIVING REFERENCE TO VARIOUS DOCUMENTS F ILED IN THE PAPER BOOK, IT WAS CONTENDED THAT THE A.O. HAS MADE PROPER ENQUIRY BEFORE PASSING THE ASSESSMENT ORDER. THEREFORE, THERE WAS NO OCCASION FOR CIT TO INVOKE THE JURISDICTION VESTED IN HIM U/S 263 TO SET ASIDE THE ORDER OF THE A.O. AND 5 REOPEN VARIOUS ISSUES WHICH HAVE ATTAINED FINALITY. SO, THE ORDER OF CIT MAY BE VACATED. 7. LD. D.R., WHILE RELYING UPON THE ORDER OF LD. CI T HAS PLEADED FOR CONFIRMATION OF THE IMPUGNED ORDER AND IT WAS STRON GLY PLEADED THAT ALL THE POINTS MENTIONED IN THE SHOW CAUSE NOTICE ISSUED BY CIT WHILE INVOKING PROVISIONS OF SECTION 263 HAVE NOT AT ALL BEEN TOUC HED UPON OR DISCUSSED BY THE A.O. WHILE PASSING THE ASSESSMENT ORDER. SO, I T HAS RIGHTLY BEEN OBSERVED BY CIT THAT PROPER INQUIRY HAS NOT BEEN CO NDUCTED BEFORE PASSING THE ASSESSMENT ORDER. THEREFORE, INVOKING OF POWER S U/S 263 IS FULLY JUSTIFIED AND THE MATTER HAS JUSTLY BEEN RESTORED T O THE A.O. FOR CONSIDERATION, AFTER EXAMINING AND CONDUCTING PROPE R INQUIRY ON THE POINTS RAISED IN THE ORDER. THEREFORE, IT WAS PLEADED FOR CONFIRMATION OF THE IMPUGNED ORDER. 8. WE HAVE HEARD BOTH THE SIDES, CONSIDERED THE MAT ERIAL ON RECORD AS WELL AS CASE LAW CITED BY RIVAL SIDES. BEFORE GOIN G INTO LEGAL AND FACTUAL ASPECTS, WE FEEL IT JUST AND APPROPRIATE TO REPRODU CE THE OPERATIVE AND RELEVANT PORTION OF THE ASSESSMENT ORDER U/S 143(3) DATED 05.10.2010, WHICH IS AS UNDER:- RETURN OF INCOME IN THIS CASE WAS FILED AT THE INC OME OF RS.9,84,680/- ON 29.09.2008. THE SAME WAS PROCESSE D U/S 143(1) OF I.T. ACT ON 11.03.2010. THE CASE HAS BEEN SELECTED TO BE CO MPLETED UNDER SCRUTINY IN VIEW OF CASS. ACCORDINGLY, NOTICE U/S 143(2) OF I. T. ACT, 1961 WAS ISSUED ON 25.08.2009 AND WAS DULY SERVED UPON THE A SSESSEE. THEREAFTER, IN VIEW OF VARIOUS NOTICES ISSUED U/S 143(2) AND 142(1 ) OF I. T. ACT, 1961. SHRI RAJEEV JAIN, CA, ATTENDED THE PROCEEDINGS FORM TIME TO TIME AND FURNISHED THE REPLIES TO THE VARIOUS QUERIES RAISED BY THIS O FFICE. BOOKS OF ACCOUNTS HAVE BEEN PRODUCED AND HAVE BEEN EXAMINED ON TEST C HECK BASIS. AFTER DISCUSSION AND TAKING IN TO CONSIDERATION TH E INFORMATION FILED BY THE LD. AR OF THE ASSESSEE THE ASSESSMENT IS COM PLETED HERE UNDER AS: ASSESSEE IS THE PROPRIETOR OF M/S. SWASTIK INDUSTR IES ENGAGED IN THE MANUFACTURING AND EXPORT OF STAINLESS STEEL AND PET PRODUCTS. 6 DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE H AS NOT DEPOSITED THE TAX DEDUCTED AT SOURCE IN TIME AT RS.3,46,592/- PAYABLE TO THE SHIPPING AGENCY U/S 194C OF THE I. T. ACT, 1961. THE SAME I S DISALLOWABLE U/S 40A(I) OF I. T. ACT, 1961 DURING THE YEAR UNDER CONSIDERAT ION AS THE SAME HAS BEEN PAID ON 31.03.2009. ACCORDINGLY, THE ADDITION OF R S.3,46,592/- IS MADE TO THE INCOME DECLARED BY HE ASSESSEE. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS CLAIMED THE CAR RUNNING EXPENSES AT RS.1,89,914/- AND DEPRECIATION ON THE SAME AT RS.2,95,114/-. PERSONAL USE OF THE CONVEYANCE CANN OT BE RULED OUT. ACCORDINGLY, THE SUM OF RS.48,502/- BEING THE 10% O F RS.4,85,028/- (1,89,914+2,95,114) IS DISALLOWED FOR PERSONAL USE OF THE SAME AND ADDED TO THE INCOME OF THE ASSESSEE AS DECLARED BY HIM. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS CLAIMED THE TELEPHONE EXPENSES AT RS.1,95,084/-. PERSONAL USE OF THE TELEPHONE CANNOT BE RULED OUT. ACCORDINGLY, THE SUM OF RS.19,508/- BEING THE 10% OF THE SAME IS DISALLOWED FOR PERSONAL USE OF THE SAME AND ADDE D TO THE INCOME OF THE ASSESSEE AS DECLARED BY HIM. KEEPING IN VIEW OF ABOVE, THE INCOME OF THE ASSESS EE IS COMPUTED HEREUNDER AS : THE TOTAL INCOME IS COMPUTED AS UNDER: INCOME AS PER PROFIT AND LOSS ACCOUNT RS. 7,47,49 5/- ADD DEPRECIATION TAKEN SEPARATELY RS.10,33,798/- ADDITION AS DISCUSSED ABOVE RS. 3,46,592/- ADDITION AS DISCUSSED ABOVE RS. 48,501/- ADDITION AS DISCUSSED ABOVE RS. 19,508/- INCOME FROM OTHER SOURCES RS. 3,184/- RS.21 ,99,079/- LESS: DEPRECIATION U/S VIA RS.10,33,798/- GROSS TOTAL INCOME RS.11,65,281/- LESS: DEDUCTION UNDER CHAPTER VIA RS. 1,12,596/- TOTAL INCOME RS.10,52,685/- ROUND OFF TO: RS.10,52,690/- ASSESSED U/S 143(3) AT THE INCOME OF RS.10,52,690/ -. ISSUE NOTICE OF DEMAND AND CHALLAN. CHARGE INTEREST AS PER LAW. I NFORM ACCORDINGLY. 9. FROM THE ABOVE REPRODUCED EFFECTIVE PORTION OF T HE ASSESSMENT ORDER, IT IS AMPLY CLEAR THAT NONE OF THE POINTS RAISED BY CIT, WHILE INVOKING THE PROVISION OF SECTION 263, AND DETAILED IN THE SHOW CAUSE NOTICE, HAVE BEEN 7 ENQUIRED INTO, TOUCHED UPON, DISCUSSED OR CONSIDERE D BEFORE PASSING THE ASSESSMENT ORDER. 10. THERE IS AN AUTHORITATIVE PRONOUNCEMENT OF HON' BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT (20 00) 243 ITR 83, WHEREIN IT WAS HELD AS UNDER: .PREREQUISITE FOR THE EXERCISE OF JURISDICTION BY THE COMMISSIONER SUO MOTU UNDER IT, IS THAT THE ORDER O F THE INCOME-TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE COMMISSIONER HAS TO BE SATISFIED OF T WIN CONDITIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUG HT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERE STS OF THE REVENUE. IF ONE OF THEM IS ABSENT IF THE ORDER OF THE INCOME TAX OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUE- RECOUR SE CANNOT BE HAD TO SECTION 263(1) OF THE ACT. THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COM MITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRO NEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUI REMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHO UT APPLICATION OF MIND. THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE IS NOT AN EXPRESSION OF ART AND IS NOT DEFINED IN THE ACT. UNDERSTOOD IN ITS ORDINARY MEANING IT IS OF WIDE IMPORT AND IS NOT CO NFIRMED TO LOSS OF TAX. THE SCHEME OF THE ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND THIS TASK IS ENT RUSTED TO THE REVENUE. IF DUE TO AN ERRONEOUS ORDER OF THE INCOME-TAX OFFI CER, THE REVENUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CE RTAINLY BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE 10.1 IT HAS BEEN FURTHER HELD IN THE ABOVE JUDGEMEN T AS UNDER: .. HE ACCEPTED THE ENTRY IN THE STATEMENT OF AC COUNT FILED BY THE APPELLANT IN THE ABSENCE OF ANY SUPPORTING MATE RIAL AND WITHOUT MAKING ANY INQUIRY. ON THESE FACTS THE CONCLUSION THAT THE ORDER OF THE INCOME-TAX OFFICER WAS ERRONEOUS WAS IRRESISTIB LE. THE HIGH COURT HAD RIGHTLY HELD THAT THE EXERCISE OF JURISDI CTION B Y THE COMMISSIONER UNDER SECTION 263(2) WAS JUSTIFIED. 8 10.2 FURTHER, THE HON'BLE DELHI HIGH COURT IN THE C ASE OF DUGGAL AND CO. AND CIT, 220 ITR 456, HAS HELD AS UNDER: THE INCOME-TAX OFFICER IS NOT 0NLY AN ADJUDICATOR BUT ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER INQUIR Y. IT IS INCUMBENT ON THE INCOME-TAX OFFICER TO FURTHER INVESTIGATE THE F ACTS STATED IN THE RETURN, WHEN CIRCUMSTANCES WOULD MAKE SUCH AN INQUI RY PRODUCT AND THE WORD ERRONEOUS IN SECTION 263 OF THE I. T. AC T, 1961, INCLUDES THE FAILURE TO MAKE SUCH AN ENQUIRY. THE ORDER BEC OMES ERRONEOUS BECAUSE SUCH AN INQUIRY HAS NOT BEEN MADE AND NOT B ECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF ALL THE FACTS STAT E THEREIN ARE ASSUMED TO BE CORRECT. 10.3 THE HONBLE ALLAHABAD HIGH COURT IN THE CASE O F SWARUP VEGETABLE PRODUCTS INDUSTRIES LTD. VS. CIT 187 ITR 412 HAS OB SERVED AS UNDER: IT IS BEYOND DISPUTE THAT, UNDER SECTION 263 OF TH E INCOME-TAX ACT, 1961, THE COMMISSIONER HAS POWER TO SET ASIDE THE A SSESSMENT ORDER AND SEND THE MATTER FOR FRESH ASSESSMENT IF HE IS S ATISFIED THAT FURTHER ENQUIRY IS NECESSARY AND THAT THE ORDER OF INCOME-0 TAX OFFICER IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 10.4 THE HON'BLE MADRAS HIGH COURT IN THE CASE OF E XPRESS NEWSPAPERS PVT. LTD. VS CIT 255 ITR 137 HAS HELD AS UNDER: THE COMMISSIONER HAS THE DISCRETION TO SET ASIDE T HE ASSESSMENT IN WHILE OR IN PART. THE EXERCISE OF THAT DISCRETION I S NOT TO BE ORDINARILY INTERFERED WITH UNLESS THE FACTS SHOW THAT THE EXER CISE OF THE DISCRETION ITSELF IS REQUIRED TO BE CHARACTERIZED AS ARBITRARY . 10.5 IN THE CASE OF CIT VS KOHINOOR TOBACCO PRODUCT S P. LTD. REPORTED IN 234 ITR 557, THE HONBLE MADHYA PRADESH HIGH COURT HAS HELD AS UNDER: THIS FAILURE ON THE PART OF THE ASSESSING OFFICE R TO MAKE NECESSARY ENQUIRY RENDERED THE ASSESSMENT ERRONEOUS AND ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE .. 9 10.6 THE HON'BLE MADHYA PRADESH HIGH COURT IN THE C ASE OF CIT VS MAHAVAR TRADERS 220 ITR 167 HAS HELD AS UNDER: HELD, THAT THE INCOME-TAX OFFICER SHOULD HAVE EXAM INED THE MATER IN THE LIGHT OF THE CONDITIONS MENTIONED IN BOTH THE S ECTIONS BEFORE GRANTING RELIEF. THE COMMISSIONER OF INCOME-TAX HA D NOT GIVEN ANY FINDING BUT ONLY REMANDED THE CASE TO THE INCOME-TA X OFFICER FOR MAKING ASSESSMENT AFRESH. THE TRIBUNAL INSTEAD OF APPROACHING THE MATTER IN THE PROPER PROSPECTIVE HAD ON THEIR OWN S TARTED MAKING ENQUIRIES AND FOUND THAT THE ORDER PASSED BY THE IN COME-TAX OFFICER WAS CORRECT. THIS WAS ERRONEOUS. THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX WAS VALID. 11. SINCE, THE ASSESSEE HAS NOT BEEN ABLE TO ESTABL ISH THAT PROPER ENQUIRY HAS BEEN CONDUCTED BY THE A.O. BEFORE FINALIZING TH E ASSESSMENT ORDER, THEREFORE, THE LD. CIT, CONSIDERING THIS VITAL ASPE CT WHILE INVOKING THE PROVISIONS OF SECTION 263, HAS CONCLUDED TO SET ASI DE THE ORDER OF THE A.O. FOR REDOING THE SAME BY CONDUCTING PROPER ENQUIRY A FTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. IT IS SETTLED LAW TH AT NON CONDUCTING OF PROPER ENQUIRY RENDERS THE ORDER OF THE ASSESSMENT ERRONEO US AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, THEREFORE, IN VIEW OF THE PRECEDENT RELIED UPON, WE ARE OF THE OPINION THAT THE ACTION OF LD. CIT IS JU STIFIED AND DOES NOT CALL FOR ANY INTERFERENCE. AS SUCH, THE IMPUGNED ORDER IS C ONFIRMED AND THE APPEAL OF THE ASSESSEE IS DISMISSED BEING DEVOID OF MERIT. 12. AS A RESULT, APPEAL OF THE ASSESSEE GETS DISMIS SED. 13. ORDER PRONOUNCED IN THE OPEN COURT ON 04 TH APRIL, 2014. SD./- SD./- (T. S. KAPOOR) (U.B.S.BEDI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 04 TH APRIL, 2014. 10 SP. COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A)-XXV, NEW DELHI AR, ITAT, 5. CIT(ITAT), NEW DELHI NEW DELHI