M/s. Abhinav Enterprises, Indore V. PCIT-2, Indore, Indore

ITA 339/Ind/2023

• Counselvise Citation: [2024] 130 COUNSELVISE.COM (IT) 3921 (ITAT-INDORE)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-02-2024
• Assessment Year: 2015-2016
• Appeal Filed On: 04-09-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASSESSEE ALSO FILED A LETTER DATED ..; ASHISH PORWAL
• Assessee Lawyers: S.S. DESHPANDE
• Keywords: Set aside; Business income; TDS; Search and seizure; Revision of order
• Section: 143(3); 142(1); 263; 22; 133(6); 13; 69A; 2(A); 20

Judgement Text

Page 1 of 23 आयकर अपीलीय अिधकरण, इंदौर Ɋायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER ITA No.339/Ind/2023 Assessment Year : 2015-16 M/s. Abhinav Enterprises, 85, Ramchandra Nagar Extn., Aerodrum Road, Indore. बनाम/ Vs. Pr. Commissioner of Income-tax-2, Indore. (Appellant/Assessee) (Respondent/Revenue) PAN : AANFA6300Q Assessee by Shri S.S.Deshpande, CA & AR Revenue by Shri Ashish Porwal, Sr. DR Date of Hearing 05.02.2024 Date of Pronouncement 11.03.2024 आदेश / O R D E R Per B.M. Biyani, A.M.: Feeling aggrieved by revision-order dated 14.08.2019 passed by learned Pr. Commissioner of Income-Tax-2, Indore [“PCIT”] u/s 263 of Income-tax Act, 1961 [“the Act”], which in turn arises out of assessment-order dated 30.08.2017 passed by learned ITO, 4(4), Indore [“AO”] u/s 143(3) of the Act for Assessment-Year [“AY”] 2015-16, the assessee has filed this appeal on the grounds raised in Appeal-Memo (Form No. 36). M/s. Abhinav Enterprises, Indore. Vs. PCIT-2, Indore. ITA No. 339/Ind/2023 – AY 2015-16 Page 2 of 23 2. The present appeal is filed by assessee/appellant on 05.09.2023 impugning the revision-order passed by PCIT on 14.08.2019. Thus, prima facie there appears a delay in filing appeal. However, in Form No. 36, the assessee has mentioned ‘date of service’ of impugned order as 01.09.2023 in Column No. 3(c). Further, the assessee has mentioned ‘No’ in Column No. 11 asking ‘whether there is any delay in filing of appeal?’. When countered during hearing, Ld. AR for assessee submitted that the impugned order was never served upon it. Therefore, the assessee had to apply to the office of PCIT as well as ITO-Ward(1), Indore [Present “AO”] for supply of impugned order. Only then, the order was provided on 01.09.2023. Hence, the ‘date of service’ has been rightly mentioned as 01.09.2023. Ld. AR went on submitting that immediately on receipt of order, the assessee paid appeal- fee on 01.09.2023 and also arranged to file appeal on 05.09.2023, thus there is no delay in fact. To support his submission, Ld. AR drew our attention to the following noting made on last page of the impugned order by the office of PCIT: “Copy to: 1. The Income-tax Officer-4(4), Indore. He is directed to serve the order on the assessee and send acknowledgement to this office for record.” Ld. AR contended that the office of PCIT has passed the impugned order but not served upon assessee, instead directed the ITO-4(4) [“AO”] to serve the same upon assessee which is quite unusual. Be that as it may, he further contended that the office of AO has also not served the impugned order upon assessee till 01.09.2023. Ld. AR made these submissions with full M/s. Abhinav Enterprises, Indore. Vs. PCIT-2, Indore. ITA No. 339/Ind/2023 – AY 2015-16 Page 3 of 23 force and strength. Ld. DR for revenue, however, sought time to submit a report from the office of AO. Ld. DR was given liberty to file the report by 15.02.2024. Subsequently, Ld. DR filed report of ITO-4(1), Indore [present “AO”] dated 10.02.2024 on 12.02.2024 to the office of ITAT with a copy to Ld. AR. The said report is scanned and re-produced below: M/s. Abhinav Enterprises, Indore. Vs. PCIT-2, Indore. ITA No. 339/Ind/2023 – AY 2015-16 Page 4 of 23 3. Thereafter, Ld. AR for assessee also filed a letter dated 14.02.2024 countering the above report of AO; copy of same is also served by Ld. AR directly upon Ld. DR which is acknowledged by the office of Ld. DR. 4. On perusal of above report of present AO, we find that the revenue’s stand is such that the impugned order dated 14.08.2019 was served upon assessee vide dispatch No. 347 of the erstwhile AO i.e. ITO-4(4), Indore. It is further submitted that an effort is underway to search the dispatch register of erstwhile AO. It is also claimed that the assessee has raised this contention after four years after passing of the order and not raised this issue during the course of assessment proceeding or appellate proceeding consequential to the impugned revision-order. On these footings, the revenue is requesting to reject the plea of assessee. 5. On the other hand, in counter-reply to aforesaid report of AO, Ld. AR has contended that there is no proof of having dispatched the order. He has also re-iterated that the impugned order was served only on 01.09.2023 while mentioning that during the course of appellate proceeding consequential to impugned revision-order, the factum of non-service of impugned order was also brought to the notice of CIT(A). He has filed a copy of letter filed to CIT(A) containing such a submission having been made. Ld. AR has also enclosed copies of letters submitted by assessee to PCIT/AO for supply of impugned order. M/s. Abhinav Enterprises, Indore. Vs. PCIT-2, Indore. ITA No. 339/Ind/2023 – AY 2015-16 Page 5 of 23 6. We have considered rival submissions of both sides and perused the material placed before us. At first, we find that the impugned order was passed by PCIT but it was not served upon assessee by the office of PCIT, instead the AO was directed to serve order upon assessee. The direction given by office of PCIT, as re-produced earlier, states “Copy to – 1. The Income-tax Officer-4(4), Indore. He is directed to serve the order on the assessee and send acknowledgement to this office for record.” That means, the AO was required to send an acknowledgement of service to the office of PCIT for record. But no such acknowledgement has been brought before us from the record of PCIT. In the circumstance, one can draw an inference that there was no service upon assessee. Going further, there is a claim in AO’s report submitted to ITAT that the impugned order was ‘duly served’ upon assessee but there is no mention of the date when it was served. Thus, the claim of ‘duly served’ remains an unsubstantiated claim. Going next, the AO’s report states that the impugned order was served through dispatch No. 347 of ITO-4(4), Indore but no proof of dispatch is brought on record. Rather it is mentioned “an effort is underway to search the dispatch register of erstwhile ward-4(4), Indore”. That means, the revenue has miserably failed to prove the service of impugned order upon assessee prior to 01.09.2023. Section 253(3) of the Act provides for filing of appeal within 60 days of the date on which the order sought to be appealed against is communicated to the assessee. Since, in the present case, when the service of order was on 01.09.2023, the filing of appeal by assessee on 05.09.2023 is within M/s. Abhinav Enterprises, Indore. Vs. PCIT-2, Indore. ITA No. 339/Ind/2023 – AY 2015-16 Page 6 of 23 prescribed time-limit. Needless to mention that section 253(5) also empowers the ITAT to admit a belated appeal in case of sufficient cause and the Hon’ble Supreme Court has also held in Collector, Land Acquisition Vs Mst. Katiji and others 1987 AIR 1353, 1987 2 SCC 387 that whenever substantial justice and technical considerations are opposed to each other, the cause of substantial justice must be preferred by adopting a justice- oriented approach. Therefore, the assessee could also take shelter of section 253(5) or the decision of Hon’ble Supreme Court but since the revenue is not able to produce any proof of service upon assessee prior to 01.09.2023, there is no necessity of invoking provisions of section 253(5) or decision of Hon’ble Supreme Court. In the situation, we are inclined to accept the present appeal as having been filed in time and we accept so. Accordingly, this appeal is admitted and proceeded for hearing. 7. The brief facts of the case are such that the assessee filed return of income of relevant AY 2015-16 which was subjected to scrutiny-assessment and the AO completed assessment u/s 143(3) vide order dated 30.08.2017. Subsequently, Ld. PCIT examined the record of assessment-proceeding and viewed that the assessment-order passed by AO is erroneous in so far it is prejudicial to the interest of revenue which attracts revisionary-jurisdiction u/s 263. Accordingly, the PCIT issued show-cause notice dated 09.07.2018, the relevant portion of show-cause notice is re-produced below: “3. As per the information available on records, it is noted that the assessee has shown advance received from various parties against sale/services at Rs. 3,54,53,725/-. In fact, the AO should have verified from M/s. Abhinav Enterprises, Indore. Vs. PCIT-2, Indore. ITA No. 339/Ind/2023 – AY 2015-16 Page 7 of 23 these parties by issuing notice u/s 133(6) of the IT Act, so as to ascertain whether the amount is actually advance received or part of sale of receipt of contract amount. It is also noted that the assessee has received certain amounts from various parties through cheques and no transaction for sales have been made. In such cases the AO should have called for confirmations from these parties treating the same as unsecured loans. Further, it is also noted that the assessee has shown purchase of Rs. 17.60 crores in respect of contract receipts Rs. 21.51 crores shown. The purchase should have been verified from the angle of genuineness as it is almost 81% of total contract amount received. On perusal of copies of ledger a/c in the case of M/s. JSM Devcon (Pinnacle), it appears that opening balance of Rs. 64,36,893/- and there is no transaction during the year. The genuineness of this outstanding amount should have been investigated. Further, it is also noted that the assessee has shown an amount of Rs. 11,41,380/- payable to Sainath Infrastructure Pvt. Ltd. as on 01.04.2014 and the assessee has received further amount of Rs. 45,00,000/- during the year through bank and closing balance is Rs. 46,41,380/-. These transactions should have been investigated. The AO has not examined these factors and no enquiry/investigation has been made. Therefore, the assessment-order passed by the AO is erroneous in so far as it is prejudicial to the interest of the revenue.” 8. In response to show-cause notice, the assessee filed reply which is re- produced by PCIT in Para 2 of revision-order. However, the PCIT rejected assessee’s reply. Further, the PCIT also observed that since the section 263 has been amended and Explanation 2 had been introduced therein, the assessment-order is deemed to be erroneous-cum-prejudicial to the interest of revenue if the same had been passed without inquiries or verification which should have been made. 9. Aggrieved by such revision-order, the assessee has come in this appeal before us. M/s. Abhinav Enterprises, Indore. Vs. PCIT-2, Indore. ITA No. 339/Ind/2023 – AY 2015-16 Page 8 of 23 10. Ld. AR for assessee initially explained the nature of business carried on by assessee. He submitted that the assessee is a partnership firm mainly engaged in the business of distributorship/trading of heavy electrical equipments of ABB India Ltd, which is a multinational manufacturer. However, the assessee also undertakes installation work. Thus, the assessee has two segments of business which can be described as ‘trading segment’ and ‘contract segement’. He submitted that nature of business carried on by assessee is such that it receives orders from customers for supply with advance-moneys, places those orders with the manufacturer and ultimately when the work is accomplished, the advances are adjusted against sales/service which happens with a time-gap. 11. Then, Ld. AR carried us to the show-cause notice issued by PCIT, re- produced in foregoing para, and submitted that the PCIT has identified following issues for conducting revision: (i) The assessee has shown advances received from parties against sale/ service at Rs. 3,54,53,725/-. The AO should have verified from those parties by issuing notices u/s 133(6). Further, the AO should have called confirmation from parties having no transactions of sales by assessee. (ii) The assessee has shown purchases of Rs. 17.60 crores against contact-receipts of Rs. 21.51 crores which is almost 81%. The purchases should have been verified from angle of genuineness. M/s. Abhinav Enterprises, Indore. Vs. PCIT-2, Indore. ITA No. 339/Ind/2023 – AY 2015-16 Page 9 of 23 (iii) The AO should have verified the genuineness of the opening balance of Rs. 64,36,893/- in the a/c of M/s JSM Devcon (Pinnacle). (iv) The AO should have verified the opening balance of Rs. 11,41,380/- (+) further receipt of Rs. 45,00,000/- in the a/c of M/s Sainath Infrastructure Pvt. Ltd. 12. Then, Ld. AR submitted that during the course of assessment- proceeding, the AO has called enough details/documents from assessee and the assessee also filed vehement replies qua the issues raised by PCIT, which is very much evident from following documents filed in Paper-Book and also available in assessment-record held by department: (a) Paper-Book Page 55-89 - The books of accounts were duly audited under the provisions of Income-tax Act, 1961 and the assessee filed audited financial statements and audit-report. (b) Paper-Book Page 31-33 – The AO issued notice dated 08.09.2016 u/s 142(1) requiring assessee to submit following details/documents among others: “3. Please file complete details with regard to contract receipts along with agreements and other documentary evidences and justify low net profit as compared to large contract receipts and also, file comparative details of Trading and profit and loss account with last two years and justify your trading results. 9. Please file duly confirmed copy of accounts of sundry creditors and Advance received against sales/services in excess of Rs. 2,00,000/- and a chart showing PAN, addresses and the balances in the account of each M/s. Abhinav Enterprises, Indore. Vs. PCIT-2, Indore. ITA No. 339/Ind/2023 – AY 2015-16 Page 10 of 23 sundry creditors as on the last day of previous year in last three years, to justify the non-applicability of provisions of section 41(1).” (c) Paper-Book Page 34-36 – The AO repeated same notice u/s 142(1) on 25.01.2017 requiring assessee to submit the very same details/ documents. (d) Paper-Book Page 37-39 – The assessee filed replies vide letter dated 01.02.2017: “3. Regarding filing of complete details with regard to Contract Receipts along with agreement and other documentary evidences and justification of law net profit as compared to large contract receipts and filing of comparative details to Trading and profit and loss account with last two, years and justification of Trading results :- Complete details of Contract receipts with Copies of Accounts of the Parties alongwith the details of TDS are attached. Comparative details of Trading and profit and loss account with last two years is also attached herewith. 9. Regarding filing of duly confirmed copy of accounts of sundry creditors and advance received against sales/services in excess of Rs. 2,00,000/- with a chart showing PAN, Addresses and the balances in the account of each such creditors as on the last day of section 41(1):- Relevant chart with complete details and copies of accounts of such parties are attached.” 14. Regarding production of books of accounts with sales/purchases invoices, expenses vouchers and original bank statements for verification :- Sir, we are ready to produce books of accounts with other papers as and when it is called for from hour honour.” (e) Paper-Book Page 40-41 – The AO issued notice dated 27.02.2017 u/s 142(1) raising following queries: “1. Please file complete details with regard to contract receipts alongwith agreements and other documentary evidences and justify low net profit as compared to large contract receipts and also justify your trading results.” M/s. Abhinav Enterprises, Indore. Vs. PCIT-2, Indore. ITA No. 339/Ind/2023 – AY 2015-16 Page 11 of 23 5.1. Please refer to copies of accounts of sundry creditors and advance received against sales/services in excess of Rs. 2,00,000/-, wherein some cases amounts are outstanding from earlier years and no transactions have been entered into during the year in question. Please file copies of account for the earlier two years and for the ay 2016-17 and also, justify the non- applicability of provisions of section 41(1) in all such cases.” (f) Paper-Book Page 42-43 – The AO repeated same notice u/s 142(1) on 07.04.2017 requiring assessee to submit the very same details/ documents. (g) Paper-Book Page 44-45 – The assessee filed a detailed reply-letter to AO accompanied by A/c Copy of M/s JSM Devcom for the years 2012- 13 to 2017-18. We re-produce below the reply-letter filed by assessee: M/s. Abhinav Enterprises, Indore. Vs. PCIT-2, Indore. ITA No. 339/Ind/2023 – AY 2015-16 Page 12 of 23 M/s. Abhinav Enterprises, Indore. Vs. PCIT-2, Indore. ITA No. 339/Ind/2023 – AY 2015-16 Page 13 of 23 M/s. Abhinav Enterprises, Indore. Vs. PCIT-2, Indore. ITA No. 339/Ind/2023 – AY 2015-16 Page 14 of 23 13. Thus, the Ld. AR submitted that the AO has made vehement enquiries qua the contract-receipts, profitability, sundry creditors and advances received against sales/services (which includes M/s JSM Devcon and M/s Sainath Infrastructure Pvt. Ltd. also); the assessee has submitted full details/documents; and the AO has passed assessment-order after due consideration of assessee’s submission. Ld. AR submitted that the AO has clearly noted this clinching fact in Para 2 of assessment-order thus: “With reference to above notices, on behalf of the assessee Shri G.R. Patel, Tax Practitioner, attended hearing time to time and filed written submission with reference to queries raised through notice u/s 142(1) and order-sheet entry, which placed on record. Books of accounts were produced and examined on test check basis.” 14. Ld. AR submitted that there is no lack of enquiry on the part of AO. He submitted that the PCIT is trying to treat the assessment-order as erroneous-cum-prejudicial only to substitute his own thinking in place of AO’s conclusion. Ld. AR submitted that such an approach of PCIT is not permissible u/s 263. Ld. AR argued that it is judicially well-settled that if the AO has passed assessment-order accepting the explanations made by assessee, the assessment-order cannot be said to be erroneous. Reliance is also placed on following decisions: (a) CIT Vs. Max India Ltd. 295 ITR 282 (b) CIT Vs. DLF Power 329 ITR 289 (Delhi) (c) CIT Vs. Govindram Sakseria Trust 166 ITR 580 (MP) (d) CIT Vs. Ratlam Coal Ash Co. 171 ITR 141 (MP) M/s. Abhinav Enterprises, Indore. Vs. PCIT-2, Indore. ITA No. 339/Ind/2023 – AY 2015-16 Page 15 of 23 (e) CIT Vs. Gabriel (India) Ltd. 203 ITR 108 (Bom) 15. While arguing, Ld. AR also submitted that in the show-cause notice the PCIT has wrongly taken the figure of purchases of Rs. 17.60 crores of ‘trading segment’ as pertaining to ‘contract segment’ and also wrongly picked a figure of Rs. 21.51 crores as receipts relating to ‘contract segment’. There is no figure of Rs. 21.51 crores in financial statements of assessee, there is only Rs. 2.15 crore of receipts of ‘contract segment’. Thus, in the show-cause notice itself, the PCIT started with wrong figures and reached to a heighted conclusion of ratio of purchase/contract-receipts at 81%. When this discrepancy was informed to PCIT, he mentioned regret in revision- order and noted figures of purchase at Rs. 1.76 crore which again is wrong. Thus, the PCIT has mis-conceived financials of assessee at the initiation stage as well as during adjudication of revision. 16. With aforesaid submissions, Ld. AR prayed to quash the revision- order as not being in accordance with section 263. He prayed to re-store the original assessment-order passed by AO. 17. Per contra, Ld. DR for revenue relied heavily upon revision-order. He submitted that the PCIT has identified specific issues where the AO has not made due enquiries and passed assessment-order. He submitted that mere raising queries before assessee and keeping response of assessee in the departmental file cannot be treated as conduct of enquiries by AO. M/s. Abhinav Enterprises, Indore. Vs. PCIT-2, Indore. ITA No. 339/Ind/2023 – AY 2015-16 Page 16 of 23 According to Ld. DR, had the AO analysed the replies of assessee, he would have certainly made a detailed noting in the assessment-order but this is not so in present case. He submitted that the assessment-order is silent / cryptic on the issues raised by Ld. PCIT, which clearly demonstrates that the AO has not made enquiries as required and hence Ld. PCIT was constrained to conduct revision-proceeding. He contended that the PCIT has also relied upon Explanation 2 to section 263 according to which if the AO has passed any order without making enquiries or verification, the order shall be deemed to be erroneous. Accordingly, he prayed to uphold the impugned order. 18. We have considered rival contentions of both sides and perused the impugned order as well as the material held on record to which our attention has been drawn. On a careful consideration of various documents placed in the Paper-Book, as noted in the foregoing discussion, we find that during the course of assessment-proceeding, there were specific queries raised by AO with regard to the issues contemplated by Ld. PCIT and the assessee too made detailed replies / submissions. To this extent, there cannot be any dispute or rebuttal by revenue. Clearly, therefore, it is discernible that the Ld. AO has considered those replies / submissions and thereafter taken a plausible view. Further, the action of AO in accepting the replies/ submissions of assessee does not lack bonafides and cannot be said to be faulty. Thus, everything hinges on the point as to whether the assessment-order can be said to be erroneous-cum-prejudicial to the M/s. Abhinav Enterprises, Indore. Vs. PCIT-2, Indore. ITA No. 339/Ind/2023 – AY 2015-16 Page 17 of 23 interest of revenue merely for the reason that the AO has not discussed those issues in the assessment-order or in other words not written his assessment-order as a perfectionist. In our considered view, the writing of assessment-order is a task of AO and the same is neither controlled nor helped by the assessee. In fact, the assessee has no hand or mind in writing the assessment-order. Being so, we are afraid to accept the pleading of Ld. DR that the assessment-order could be said to be erroneous-cum-prejudicial for that reason. We are consciously aware of the decision taken by Hon’ble ITAT, Mumbai in Reliance Payment Solutions Ltd. Vs. Pr. CIT (2022) 136 taxmann.com 277 where the same view was upheld: “9. Clearly, therefore, as long as the action of the Assessing Officer cannot be said to be lacking bonafides, his action in accepting an explanation of the assessee cannot be faulted merely because it could have been lawful to make mere detailed inquiries or because he did not write specific reasons of accepting the explanation. As for learned PCIT's observations regarding accepting the explanation "without appropriate evidence", there is nothing to question the bonafides of the Assessing Officer or to elaborate as to what should have been 'appropriate' evidence. The fact remains that the specific issue raised, in the revision order was specifically looked into, detailed submissions were made and these submissions were duly accepted by the Assessing Officer. Merely because the Assessing Officer did not write specific reasons for accepting the explanation of the assessee cannot be reason enough to invoke powers under section 263, and non-mentioning of these reasons do not render the assessment order "erroneous and prejudicial to the interest of the revenue". [Emphasis supplied] 19. Regarding introduction of Explanation 2 to section 263, as claimed by Ld. PCIT in his order, we only need to submit that it is judicially well-settled in several decisions that the said Explanation does not give unfettered power to the PCIT to assume revisional-jurisdiction to revise every order of the M/s. Abhinav Enterprises, Indore. Vs. PCIT-2, Indore. ITA No. 339/Ind/2023 – AY 2015-16 Page 18 of 23 Assessing Officer to re-examine the issues already examined during assessment-proceeding. It is held that the intention of legislature behind introduction of Explanation 2 could not have been to enable the PCIT to find fault with each and every assessment-order in unlimited terms, since such an interpretation would lead to unending litigation and there would not be any point of finality of assessment-proceeding done by Ld. AO. 20. In the case of M/s Pramukh Realty, Junagadh, ITA No. 93/Rjt/2022 dated 30.06.2022, the Rajkot Bench of this Tribunal has extensively dealt a case where the AO raised queries during assessment- proceeding and the assessee filed details/documents. After a thorough analysis, the it was held that in such circumstances, revision u/s 263 cannot be done. The relevant paragraphs of the decision are below: “5. The learned AR before us filed a paper book running from pages 1 to 157 and contended that all the necessary details about the advances received from the parties, sales shown in the financial statement and details of the service tax returns were filed during the assessment proceedings. The learned AR further contended that the assessment was framed by the AO after considering the necessary details and verification and application of mind. The learned AR in support of his contention drew our attention on pages 151 to 153 of the paper book where the copy of the notice under section 142(1) of the Act was placed. Likewise, the learned AR also drew our attention on pages 154 to 157 of the paper book where the reply of the assessee in response to the notice issued under section 142(1) of the Act was placed. Thus, the learned AR contended that there cannot be said that the assessment order is erroneous and causing prejudice to the interest of Revenue in the given facts and circumstances on account non-verification. 6. On the contrary, the learned DR before us contended that reconciliation of the amount shown in the service tax return and financial statement was not available before the AO during the assessment proceedings. Accordingly the learned DR vehemently supported the order of the learned PCIT. 7. We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the present case relates whether the assessment order has been passed by AO without making inquiries or M/s. Abhinav Enterprises, Indore. Vs. PCIT-2, Indore. ITA No. 339/Ind/2023 – AY 2015-16 Page 19 of 23 verification with respect to the difference in the figures as discussed above and hence the assessment is erroneous insofar prejudicial to the interest of the Revenue. Thus, requiring revision by Pr. CIT u/s 263 of the Act. 7.1 An inquiry made by the Assessing Officer, considered inadequate by the Commissioner of Income Tax, cannot make the order of the Assessing Officer erroneous. In our view, the order can be erroneous if the Assessing Officer fails to apply the law rightly on the facts of the case. As far as adequacy of inquiry is considered, there is no law which provides the extent of inquiries to be made by the Assessing Officer. It is Assessing Officer’s prerogative to make inquiry to the extent he feels proper. The Commissioner of Income Tax by invoking revisionary powers under section 263 of the Act cannot impose his own understanding of the extent of inquiry. There were a number of judgments by various Hon’ble High Courts in this regard. 7.2 Delhi High Court in the case of CIT Vs. Sunbeam Auto 332 ITR 167 (Del.), made a distinction between lack of inquiry and inadequate inquiry. The Hon’ble court held that where the AO has made inquiry prior to the completion of assessment, the same cannot be set aside u/s 263 of the Act on the ground of inadequate inquiry. The relevant observation of Hon’ble Delhi High Court reads as under: “12. ..... There are judgments galore laying down the principle 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 revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction 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 under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of “lack of inquiry”, that such a course of action would be open. ——— From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting 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. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Income-tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That M/s. Abhinav Enterprises, Indore. Vs. PCIT-2, Indore. ITA No. 339/Ind/2023 – AY 2015-16 Page 20 of 23 would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasi-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 conclusion. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. 15. Thus, even the Commissioner conceded the position that the Assessing Officer made the inquiries, elicited replies and thereafter passed the assessment order. The grievance of the Commissioner was that the Assessing Officer should have made further inquires rather than accepting the explanation. Therefore, it cannot be said that it is a case of ‘lack of inquiry’.” 7.3 The Hon’ble Bombay High Court in case of Gabriel India Ltd. [1993] 203 ITR 108 (Bom), discussed the law on this aspect in length in the following manner: “The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will 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 must in other spheres of human activity. 7.4 The Mumbai ITAT in the case of Sh. Narayan Tatu Rane Vs. ITO, I.T.A. No. 2690/2691/Mum/2016, dt. 06.05.2016 examined the scope of enquiry under Explanation 2(a) to section 263 in the following words:- “20. Further clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provision shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. CIT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO vis-à-vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying our enquiries or verification, which a reasonable and prudent officer would have carried out or not. It does not authorise or M/s. Abhinav Enterprises, Indore. Vs. PCIT-2, Indore. ITA No. 339/Ind/2023 – AY 2015-16 Page 21 of 23 give unfettered powers to the Ld Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made. In our view, it is the responsibility of the Ld Pr. CIT to show that the enquiries or verification conducted by the AO was not in accordance with the enquries or verification that would have been carried out by a prudent officer. Hence, in our view, the question as to whether the amendment brought in by way of Explanation 2(a) shall have retrospective or prospective application shall not be relevant.” 7.5 The Hon’ble Supreme Court in recent case of Principal Commissioner of Income-tax 2 v. Shree Gayatri Associates*[2019] 106 taxmann.com 31 (SC), held that where Pr. CIT passed a revised order after making addition to assessee's income under section 69A in respect of on-money receipts, however, said order was set aside by Tribunal holding that AO had made detailed enquiries in respect of such on-money receipts and said view was also confirmed by High Court, SLP filed against decision of High Court was liable to be dismissed. The facts of this case were that pursuant to search proceedings, assessee filed its return declaring certain unaccounted income. The Assessing Officer completed assessment by making addition of said amount to assessee's income. The Principal Commissioner passed a revised order under section 263 on ground that Assessing Officer had failed to carry out proper inquiries with respect to assessee's on money receipt. In appeal, the Tribunal took a view that Assessing Officer had carried out detailed inquiries which included assessee's on-money transactions and Tribunal, thus, set aside the revised order passed by Commissioner. The Hon’ble High Court upheld Tribunal's order. The Hon’ble Supreme Court while dismissing the SLP filed by the Department held as under:- “We have heard learned counsel for the Revenue and perused the documents on record. In particular, the Tribunal has in the impugned judgment referred to the detailed correspondence between Assessing Officer and the assessee during the course of assessment proceedings to come to a conclusion that the Assessing Officer had carried out detailed inquiries which includes assessee's on-money transactions. It was on account of these findings that the Tribunal was prompted to reverse the order of revision. No question of law arises. Tax Appeal is dismissed”. 7.6 The Supreme Court in the another recent case of Principal Commissioner of Income-tax-2, Meerut v. Canara Bank Securities Ltd [2020] 114 taxmann.com 545 (SC), dismissed the Revenue’s SLP holding that 263 proceedings are invalid when AO had made enquiries and taken a plausible view in law, with the following observations: “Having heard learned counsel for the parties and having perused the documents on record, we see no reason to interfere with the view of the Tribunal. The question whether the income should be taxed as business income or as arising from the other source was a debatable issue. The Assessing Officer has taken a plausible view. More importantly, if the Commissioner was of the opinion that on the available facts from record it could be conclusively held that income arose from other sources, he could and ought to have so held in the order of revision. There was simply M/s. Abhinav Enterprises, Indore. Vs. PCIT-2, Indore. ITA No. 339/Ind/2023 – AY 2015-16 Page 22 of 23 no necessity to remand the proceedings to the Assessing Officer when no further inquiries were called for or directed” 7.7 From an analysis of the above judicial precedents, the principle which emerges is that the phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an Assessing Officer adopts one of the course permissible in law and it has resulted in loss of revenue; or where two views are possible and the Assessing Officer has taken one view with which the Commissioner of Income- tax does not agree, it cannot be treated as an erroneous order causing prejudice to the interests of the Revenue unless the view taken by the Assessing Officer is unsustainable in law, or the AO has completely omitted to make any enquiry altogether or the order demonstrates non-application of mind. 7.8 Now in the facts before us, in the case of the assessee the AO during the course of assessment proceedings, made enquiries on this issue and after consideration of written submissions filed by the assessee and documents / evidence placed on record, framed the assessment under section 143(3) of the Act without making the addition of the amount as note above. This fact can be verified from the notice under section 142(1) of the Act by the AO and submission in reply of the assessee against such notice. XXX 7.9 From the above it is revealed that it is not the case that the AO has not made any enquiry. Indeed the Pr. CIT initiated proceedings under section 263 of the Act on the ground that the AO has not made enquiries or verification which should have been made in respect of cash deposited during the demonization period. It is not the case of the Pr. CIT that the Ld. AO did not apply his mind to the issue on hand or he had omitted to make enquiries altogether. In the instant set of facts, the AO had made enquiries and after consideration of materials placed on record accepted the genuineness of the claim of the assessee. 7.10 At this juncture, it is also important to note that the learned PCIT in his order passed under section 263 of the Act has made reference to the explanation 2 of section 263 of the Act. It was attempted by the learned PCIT to hold that there were certain necessary enquiries which should have been made by the AO during the assessment proceedings but not conducted by him. Therefore, on this reasoning the order of the AO is also erroneous insofar prejudicial to the interest of revenue. In this regard, we make our observation that the learned PCIT has also not specified the nature and the manner in which the enquiries which should have been conducted by the AO in the assessment proceedings. Thus, in the absence of any specific finding of the learned PCIT with respect to the enquiries which should have been made, we are not convinced by his order passed under section 263 of the Act.” M/s. Abhinav Enterprises, Indore. Vs. PCIT-2, Indore. ITA No. 339/Ind/2023 – AY 2015-16 Page 23 of 23 21. In view of above discussion and for the reasons stated therein, we are persuaded to hold that the facts of the present case do not warrant application of section 263. Therefore, the revision-order passed by Ld. PCIT is not a valid order. We, thus, quash the revision-order and restore the original assessment-order passed by AO. The assessee succeeds in this appeal. 22. Resultantly, this appeal of assessee is allowed. Order pronounced in open court on 11.03.2024. Sd/- sd/- (VIJAY PAL RAO) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक /Dated : 11.03.2024 CPU/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPYAssistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore