Appeal Details
Counselvise Citation
[2020] 111 COUNSELVISE.COM (IT) 2323 (ITAT-INDORE)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
2 year(s) 10 month(s) 9 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
20-03-2020
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
DB
Next Hearing Date
07-01-2020
Assessment Year
2012-2013
Appeal Filed On
11-05-2017
Judgement Text
[ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] , , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.355/IND/2017 ASSESSMENT YEAR: 2012-13 M/S BHANDARI HOSPITAL A ND RESEARCH CENTRE, GF- 21 & 22, OPP. MEGHDOOT GARDEN, VIJAY NAGAR, INDORE / VS. PR. C IT - ( I ) INDORE ( APPELLANT ) ( REVENUE ) P.A. NO. AADFB8151A APPELLANT BY SHRI SUMIT NEMA SR. ADVOCATE RESPONDENT BY SHRI S.S. MANTRI, CIT - DR DATE OF HEARING: 07.01.2020 DATE OF PRONOUNCEMENT: 20.03.2020 / O R D E R PER KUL BHARAT, J.M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER O F THE PR.CIT-I, INDORE DATED 30.03.2017 FOR THE A.Y. 2 012-13. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 2 1. THE ORDER U/S 263 DATED 30.03.2017 IS ILLEGAL, VOID AND WITHOUT JURISDICTION: 1.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE ORDER DATED 30.3.2017 PASSED BY THE COMMISSIONER OF INCOM E-TAX (CIT), U/S 263 OF THE INCOME-TAX ACT, 1961 ('THE ACT') SETTING ASIDE THE ASSESSMENT FRAMED U/S 143(3) OF THE ACT AS ERRONEOUS AND PREJU DICIAL TO THE INTEREST OF THE REVENUE IS WITHOUT JURISDICTION, BAD IN LAW AND VOID AB-INITIO. 1.2 THAT THE AO HAVING ALLOWED THE CLAIMS OF THE AS SESSEE AFTER MAKING DUE AND SPECIFIC ENQUIRIES AND FINDING A REASONABLE VIEW ON THE ISSUES, THE ORDER OF ASSESSMENT DATED 24.3.2015 CANNOT BE R EGARDED AS ERRONEOUS IN AS MUCH AS PREJUDICIAL TO THE INTEREST OF REVENUE MERELY BECAUSE LD. CIT HELD A DIFFERENT OPINION ON THE SCO PE OF SUCH ENQUIRIES. 1.3 THAT LD. CIT ALSO FAILED TO APPRECIATE THAT, U/ S 263 OF THE ACT, AN ORDER OF ASSESSMENT CANNOT BE SET-ASIDE TO AO TO SI MPLY TO MAKE FURTHER ENQUIRIES AND THEREAFTER PASS FRESH ORDER OF ASSESS MENT. THEREFORE, AND AS SUCH, IMPUGNED ORDER AND DIRECTIONS ISSUED U/S 2 63 ARE UNTENABLE, CONTRARY TO LAW UNSUSTAINABLE. 1.4 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. COMMISSIONER HAS ERRED IN TREATING THE ASSESSMENT O RDER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE ON A N ISSUE WHICH HAS BEEN CONSIDERED, EXAMINED AND INVESTIGATED UPON DURING T HE ASSESSMENT BOTH BY THE ASSESSING OFFICER AND ALSO BY THE JCIT WHILE GIVING HIS DIRECTIONS U/S 144A- 2. NO JUSTIFICATION EITHER IN LAW OR ON FACTS AND THE GROSS ILLGALITY DONE BY THE LD. CIT IN SETTING ASID E THE ORDER DATED 24/3/2015 PASSED BY THE JCIT U/S 144A. 2.1 THAT THE LD. CIT HAS SIMPLY SET-ASIDE THE ORDER DATED 24/3/2015 PASSED U/S 144A BY THE JCIT WITHOUT EVEN POINTING O UT ANY ERROR IN THE SAID ORDER. SINCE THERE WAS NO ERROR POINTED OUT IN THE ORDER U/S 144A THEREFORE THE SAME COULD NOT HAVE BEEN SET-ASIDE U/ S263. 2.2 THAT THE ORDER PASSED U/S 144A WAS BASED ON LON GSTANDING JUDICIAL MATRIX AND THE LEGAL PRINCIPLE DERIVED FROM AN ORDE R OF SUPREME COURT AND THUS WITHOUT POINTING OUT HOW THE SAID ORDER U/ S 144A IS ERRONEOUS THE SAME COULD NOT HAVE BEEN REVISED U/S263. 3 NO ERROR IN THE ORDER OF THE AO IN ALLOWING TELESCOPING OF UNDISCLOSED CASH RECEIPTS OF RS. 6,21,25,115 FROM UNDISCLOSED HUNDI LOANS AND HENCE NO JUSTIFICATION EITHER IN LAW OR ON FACTS IN PASSI NG ORDER U/S 263 ON THIS ISSUE: 31 THE AO AND JCIT HAVE MERELY FOLLOWED ACCEPTED PR INCIPLES OF TAXATION IN NOT MAKING ADDITION OF BOTH INCOME AND I NVESTMENT AND THUS NO ERROR COULD BE ATTRIBUTED TO SUCH AN APPROA CH. MERELY BECAUSE MORE REVENUE CAN BE FETCHED BY ADDING BOTH INCOME A S WELL AS INVESTMENT CANNOT BE A GROUND TO TERM THE ORDER AS E RRONEOUS. [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 3 4 NO ERROR IN THE ORDER OF THE AO IN ALLOWING DEDUCTION U/S 35AC OF RS. 8 CRORE AND HENCE NO JUSTIFICATION EITHER IN LAW OR ON FACTS IN PASSING ORDER U/S 263 ON THIS ISSUE: 41 THE DEDUCTION U/S 35AC WAS ALLOWED BY THE AO AFT ER CALLING A COMMISSION U/S 131(1)(D) FROM DDIT(INV)- JAIPUR AND AFTER OBTAINING ALL THE INFORMATION AND DOCUMENTS PERTAINING TO THE D ONEE TRUST AND AFTER VERIFYING THE GENUINENESS OF THE SAID DONATION AND SUCH AN ORDER CANNOT BE TERMED AS ERRONEOUS AND THUS THIS ISSUE C OULD NOT HAVE BEEN REVISED U/S 263. 5 NO JUSTIFICATION EITHER IN LAW OR IN FACTS IN EXERCISING JURISIDCTION U/S 263 IN RESPECT OF THE FOLLOWING ITEMS SINCE THERE WAS NO ERROR IN THE ORDER OF THE ASSESSING OFFICER AND THE ORDER IN RESPECT OF THESE ITEMS WAS PASSED AFTER DUE AND SUFFICIENT ENQUIRY :- (I) REDUCTION OF RS. 223,76,985 & RS. 7470 ALLOWED BY THE AO FROM SURRENDERED CASH RECEIPTS. (II) HUNDI LOANS OF RS. 10,43,41,885 RECEIVED BACK BY THE ASSESSEE DURING THE RELEVANT FINANCIAL YEAR. (III) YEAR WISE INVESTMENT MADE BY THE ASSESSEE. (IV) THE ANGIOGRAPHY RECEIPTS OF RS. 1,96,900/- (V) TO DRAW PROFIT AND LOSS FOR THE SURVEY PERIOD AND THAT FOR THE BALANCE PERIOD SEPARATELY. (VI) DEPRECIATION CLAIMED @40% ON PET CT SCAN MACHI NE (VII) THE TDS ON SALARIES PAID TO THE DOCTORS. 2. THE EFFECTIVE GROUND IN THIS APPEAL IS AGAINST THE LEGALITY AND JUSTIFICATION OF THE ORDER DATED 30.03.201 7 OF INVOKING THE PROVISIONS OF U/S 263 OF THE INCOME TA X ACT, 1961 HEREINAFTER REFER TO AS THE ACT, THEREBY REVISIN G THE ASSESSMENT ORDER. [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 4 3. BY WAY OF THIS PRESENT APPEAL ASSESSEE HAS CHALLENGED CORRECTNESS AND LEGALITY OF THE IMPUGNED ORDER PASSED U/S 263 OF THE ACT. 4. THE FACTS GIVING RISE TO PRESENT APPEAL ARE THAT A SUR VEY OPERATION U/S 133A OF THE ACT WAS CARRIED OUT AT THE BUSINESS PREMISES OF M/S BHANDARI HOSPITAL & RESEARCH CENTRE ON 23.09.2011. DURING THE COURSE OF SURVEY UNDISCLOSED INCOME AMOUNTING TO RS.31,24,41,685/- WAS SURRENDERED BY THE ASSESSEE THROUGH ITS PARTNERS UNDE R DIFFERENT HEADS. OUT OF THE SURRENDERED AMOUNT OF RS.31,24,41,685/-, THE AMOUNT OF RS.23,61,18,930/- W AS SURRENDERED IN THE HANDS OF THE ASSESSEE FIRM UNDER VARIOUS HEADS AS DETAILS BELOW: SR. NO. NAME OF THE ASSESSEE SURRENDERED AMOUNT (IN RS.) HEADS 1 M/S BHANDARI HOSPITAL & RESEARCH CENTRE ( AS PER STATEMENT DATED 24.09.11 OF PARTNER SHRI VINOD BHANDARI ON ACCOUNT OF HUNDITES 16,65,00,000/- ON ACCOUNT OF HUNDIES [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 5 2 M/S BHANDARI HOSPITAL & RESEARCH CENTRE (AS PER STATEMENT DATED 24.09.11 OF PARTNER SHRI VINOD BHANDARI) 6,45,02,010/- ON ACCOUNT OF SUPPRESSED HOSPITAL RECEIPTS 3 M/S BHANDARI HOSPITAL & RESEARCH CENTRE (AS PER STATEMENT DATED 24.09.11 OF PARTNER SHRI VINOD BHANDARI) 51,16,920/- ON ACCOUNT OF BOGUS UNSECURED LOANS 2.2 SUBSEQUENTLY, THE ASSESSEE VIDE AFFIDAVIT DATED 23.01.2012 REALIZED THE MISTAKE COMMITTED WHILE MAKING STATEME NT DURING THE COURSE OF SURVEY. THE ASSESSEE STATED THAT IN R ESPECT OF UNACCOUNTED RECEIPTS AS PER LP-02 TOTALING TO RS.6, 21,25,115/- (I.E. RS.6,45,02,010/- -RS.23,69,425/-) DUE TO MENT AL STRESS AND LACK OF REST HE FORGOT TO BRING TO THE NOTICE O F THE AUTHORIZED OFFICER THAT UNACCOUNTED RECEIPTS AS PER LP-02 WERE UTILIZED IN MAKING THE HUNDI LOANS AND THEREFORE TO THE EXTENT OF UNACCOUNTED RECEIPTS THE HUNDI LOANS ARE EXPLAINED TO BE GIVEN OUT OF THIS FUND AS PER FLOW OF UNDISCLOSED RECEIPT AND HUNDI LOANS GIVEN AND ONLY BALANCE AMOUNT OF RS.104374885 /- (166500000-62125115) SHOULD BE CONSIDERED AS UNEXPL AINED. IT IS STATED THAT THESE DOCUMENTS WERE FOUND AT THE TI ME OF SURVEY & ARE PART OF IMPOUNDED DOCUMENTS. 2.3 WITH REGARD TO REVISED UNACCOUNTED RECEIPTS OF RS.6,21,25,115/- THE ASSESSEE CLAIMED IN AFFIDAVIT DATED 23.01.2012 THAT THERE ARE ENTRIES REGARDING DISCOUN T ALLOWED OF RS.23,69,425/- AND PETTY CASH EXPENSES OF RS.7470/- AND THEREFORE CORRECT AMOUNT OF UNACCOUNTED RECEIPTS IS STATED TO BE RS.6,21,25,115/- RATHER THAN RS.6,45,02,010/- AS SU RRENDERED DURING THE COURSE OF SURVEY AS PER DOCUMENTS PLACED ON RECORDS WHICH WERE FOUND AT THE TIME OF SURVEY. 2.4 THE ASSESSEE FIRM HAS THUS REVISED THE TOTAL DI SCLOSURE OF SURRENDERED INCOME TO RS.17,16,16,920/- AS AGAINST THE SURRENDERED UNDISCLOSED INCOME OF RS.23,69,425/- MA DE DURING THE COURSE OF SURVEY PROCEEDINGS IN RESPECTIVE HEAD AS UNDER: [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 6 SR. NO. NAME OF ASSESSEE SURRENDERED MADE DURING THE SURVEY REVISED DISCLOSURE AS PER AFFIDAVIT (RS.) 1 M/S BHANDARI HOSPITAL & RESEARCH CENTRE (AS PER STATEMENT DATED 24.09.11 OF PARTNER SHRI VINOD BHANDARI) 16,65,00,000/- 10,43,74,885/- 2 M/S BHANDARI HOSPITAL & RESEARCH CENTRE (AS PER STATEMENT DATED 24.09.11 OF PARTNER SHRI VINOD BHANDARI- ON ACCOUNT OF SUPPRESSED RECEIPTS) 6,45,02,010/- 6,21,25,115/- 3 M/S BHANDARI HOSPITAL & RESEARCH CENTRE (AS PER STATEMENT DATED 24.09.11 OF PARTNER SHRI VINOD BHANDARI- ON ACCOUNT OF BOGUS UNSECURED LOANS) 51,16,920/- 51,16,920/- 5. THEREAFTER THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT U/S 143(3) WAS COMPLETED ON 24.03.2015 THEREBY THE ASSESSING OFFICER ASSESSED INCOME AT RS.1,02,63,070/- FOR THE YEAR UNDER APPEAL. SUBSEQUENTL Y, LD. PR. CIT AFTER EXAMINING OF RECORDS ISSUED A SHOW C AUSE NOTICE DATED 15.01.2015 U/S 263 OF THE ACT CALLING UP ON ASSESSEE AS TO WHY THE ASSESSMENT SO FRAMED SHOULD NOT [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 7 BE REVISED. THE RELEVANT CONTENTS OF THE NOTICE DATED 15.03.2017 WHICH IS REPRODUCED BY THE LD. PR. CIT I N HIS ORDER ARE AS UNDER: 3. THE RELEVANT PORTION OF THE SHOW CAUSE NOTICE U/S 2 63 IS REPRODUCED AS UNDER :- A. DURING THE SURVEY ON 24.09.201 SURRENDER OF IN COME WAS MADE AS UNDER :- (A) CASH RECEPTION PER LP-02 6,45,02,010/- (B) UNSECURED CREDIT U/S 41(1) 51,16,920/- (C) LOANS AGAINST HUNDI 16,65,00,000/- ' TOTAL 23,61,18,930/- THEN BY FILING AN AFFIDAVIT ON 19.01.2012, THE ASSE SSEE HAS REVISED CASH RECEIPTS TO RS. 6,21,25,1151- AND CLAIMED TELESCOPI NG OF THIS AMOUNT AGAINST HUNDI LOANS. SO THE AMOUNT OFFERED WAS (A) CASH RECEIPTS RS. 6,21,25,115/- (B) SURVEY CREDITS ULS 41(1) RS. 51,16,9201- (C) UNEXPLAINED HUNDI LOANS RS. 10,43,21,885/- 'B. FROM THE RECORD, IT IS SEEN THAT WHILE PASSING THE ORDER U/S 144A, THE JCIT HAS ALLOWED THE TELESCOPING OF FUNDS OF RS. 6, 21,25,1151- AGAINST FOR INVESTMENT IN HUNDI LOANS BASED ON AFFIDAVIT FILED AFTER 4 MONTHS. FURTHER THE LETTER OF THE THEN A.O. DATED 23.02.2012, WHICH IS A REBUTTAL OF CONTENTIONS MADE IN THE AFFIDAVIT HAS NOT BEEN TAKE N IN TO CONSIDERATION. THE TELESCOPING OF UNACCOUNTED INCOME TO HUNDI LOAN S HAS NOT BEEN EXAMINED PROPERLY. MOREOVER, NO ENQUIRY HAS BEEN MA DE IN RESPECT OF RECEIPT OF FUNDS FROM REPAYMENT OF HUNDI LOANS. C. NO INDEPENDENT VERIFICATION OF ITEMS DUE TO WH ICH AMOUNT SURRENDERED RS. 6,45,02,0101- WAS REDUCED TO RS. 6, 21,25,115 WAS CARRIED OUT. D. THE ASSESSEE HAS CLAIMED TO HAVE REALIZED THE HU NDI LOANS OF RS. 10,43,41,885/- IN SEPTEMBER TO NOVEMBER 2011 AND TH EN GIVEN THE FUNDS TO GEETANJALI HOSPITAL OF RS 8 CRORES IN FEBRUARY/ MARCH 2012 AND CLAIMED DEDUCTION U/S 35 AC OF IT ACT. THE A,O. HAS . NOT EXAMINED AS TO WHETHER THE HUNDI LOANS WAS REALLY RECEIVED BACK BY THE ASSESSEE DURING THE CURRENT YEAR AND NO ENQUIRY AND INVESTIGATION I N THIS WAS CARRIED OUT REGARDING IDENTITY AND SOURCE OF THE SAIS FUNDS FRO M THESE PARTIES. E. FURTHER, THE A.O. HAS NOT EXAMINED WHETHER THE U NACCOUNTED FUNDS GENERATED BY THE ASSESSEE CAN BE UTILIZED TO CLAIM DEDUCTION U/S 35 AC OF [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 8 LT. ACT. THE SOURCE OF UNACCOUNTED FUNDS ALSO NEED EXAMINATION AS ONE OF THE PARTNERS, SHRI VINOD BHANDARI WAS INVOLVED IN V YAPAM CASE. F. THE A.O. HAS NOT EXAMINED YEAR WISE INVESTMENT MADE BY THE ASSESSEE. G. ON PERUSAL OF IMPOUNDED MATERIAL, IT IS FOUND TH AT TRANSACTION RECORDED IN PAGE NO. 8 OF LP-02 RELATING TO ANGIOGRAPHY RECE IPTS AMOUNTING TO RS 1,96,9001- HAS NOT BEEN CONSIDERED IN UNACCOUNTED R ECEIPTS OFFERED FOR TAXATION. THIS ISSUE NEEDS FURTHER EXAMINATION. H. ON PERUSAL OF ASSESSMENT RECORDS, IT SEEN THAT T HE RETURNED INCOME IS FOR A.Y. 2012- 13 IS 94,31,692/- WHEREAS PROFIT BEF ORE TAX BEFORE PARTNERS REMUNERATION IS AS PER P& L ACCOUNT IS RS. 3,64,88, 334/-. IT MAY BE NOTED THAT THE ABOVE PROFIT INCLUDES UNDISCLOSED INCOME S URRENDERED DURING THE SURVEY AT RS. 17,17,49,505/- & DEDUCTION OF RS. 8 C R. CLAIMED U/S 35AC . THE ASSESSEE INCLUDED THE UNDISCLOSED INCOME SURREN DERED UNDER VARIOUS HEADS TOTALING TO RS. 17,17,49,505 1- IN THE P& L ACCOUNT ITSELF THEREBY CREATING MISLEADING PICTURE OF INCREASE IN THE NET PROFIT AS COMPARED TO THE LAST YEARS. IF THE SURRENDERED INCOME AS WELL AS TH E DEDUCTION CLAIMED U/S 35 AC ARE EXCLUDED THE BOOK RESULTS WOULD SHOW A NE T LOSS OF RS 5,52,61,171 1- ON THE TOTAL RECEIPTS OF 20,39,86,31 1/- . THE PICTURE FOR LAST 3 YEARS EMERGING THERE FROM IS AS UNDER :- A.Y. 2010-11 2011-12 2012-13 2012-13 INCLUDING EXCLUDING INCOME INCOME SURRENDERED IN SURRENDERED IN SURVEY SURVEY TOTAL RE CEI 7,26,93,557/- 10,58,25,873/- 37,57,35,816/ - 203986311/- (A) OTHER IN CO 13,94,454/- 26,15,512/- 1,72,96,872/- 1,72,96,872/- (B) TOTAL EXPENSES 5,16,21,278/- 10,08,49,216/- 31,24,58,762/ - 23,24,58,762/- (EXCLUDING RS. 8CR.) DEPRECIATION C ) 1,15,11,494/- 2,11,23,096/- 4,40,85,592/- 4,40,85,592/- PROFIT BEFORE 1,09,55,23 8/ - (1,35,30,926/- 3,64,88,3341- (5,52,61,171/- REMUNERATION ) ) AND INTERE ST TO THE PARTNERS PROFIT AFTER 2,10,72,27 8/ - 49,76,658/- 6,32,77,054/- (2,84,72,451/- [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 9 EXCLUDING OTHER ) INCOME & DEPRECIATION (O)={A-B+C} PROFIT RATIO (D/A) 28.99 % 4.70% 16.84 % (13.95 %) IT CAN THUS BE SEEN THAT AFTER EXCLUDING THE SURREN DERED INCOME THERE IS NET LOSS IN THE YEAR UNDER QUESTION AND THE PROFITABILI TY DECLARED IS NOT COMMENSURATE WITH WHAT HAS BEEN IN THE EARLIER YEAR S. ACCORDINGLY A DISTORTED PICTURE OF ACCOUNTS HAS BEEN PRESENTED. T O UNEARTH THE MANIPULATION IN THE BOOK RESULTS, THE AO SHOULD HAV E ASKED THE ASSESSEE TO PREPARE BALANCE SHEET AND P&L A/C AS ON DATE OF SURVEY AND THEN REMAINING PART OF THE YEAR SEPARATELY. I. THE HUNDI LOAN STANDING AS ON DATE OF SURVEY AMO UNTING TO RS. 16,66,32,585/- (REVISED FIGURE AFTER TELESCOPING) A RE IN FACT ITEM OF BALANCE SHEET AND THE SAME REPRESENTS ASSETS OF THE ASSESSE E AS ON THE DATE OF SURVEY AND CLEARLY REFLECTS UNDISCLOSED INCOME OF T HE ASSESSEE IN THE FORM OF UNEXPLAINED INVESTMENTS. THE SAME COULD NOT BE P ART OF P&L ACCOUNT AND NO INCOME BASED DEDUCTIONS UNDER CHAPTER IV 'D' CAN BE CLAIMED AGAINST IT. THE AO SHOULD HAVE ASKED THE ASSESSEE HOW THESE HUN DIS WERE REALIZED AND FORMED PART OF INCOME AND EXPENDITURE ACCOUNT A S BUSINESS RECEIPTS AGAINST WHICH MANY EXPENSES HAVE BEEN CLAIMED. BY I NCLUDING THE SAME IN THE P& L A/C THE ASSESSEE HAS CREATED A DISTORTE D PICTURE.. J. IF SURRENDERED INCOME IS EXCLUDED WHICH IS UNEXPLAI NED INVESTMENT AND CREDITS U/S 69 AND 68 RESPECTIVELY, THERE IS NE T BUSINESS LOSS AMOUNTING TO RS 5,52,61,171/- - AND HENCE, THE ASSESSEE DID NOT HAVE ANY POSITIVE BUSINESS INCOME SO AS TO CLAIM DEDUCTION U /S 35AC AT RS 8 CRORES. THE VERY TRANSACTION OF GIVING RS 8 CRORES ULS 35AC TO SOME PRIVATE MEDICAL UNIVERSITY WHICH IS THE SAME LINE O F BUSINESS I.E. RUNNING A MEDICAL AND DENTAL COLLEGE IS HIGHLY DOUBTFUL TRANS ACTION MORE SO WHEN THE ENTIRE AMOUNT HAS BEEN GIVEN AFTER THE DATE OF SURVEY. AT THE ONE HAND ASSESSEE IS INCURRING INTEREST EXPENSES RUNNING IN TO CRORES OF RUPEES ON VARIOUS LOANS AND RUNNING THE HOSPITAL ON LOANS TAK EN FROM BANKS AND VARIOUS OTHER PERSONS INCLUDING FAMILY MEMBERS, GIV ING AWAY RS.8 CRORES ON CHARITY IS BEYOND ALL HUMAN PROBABILITIES. IT CL EARLY SEEMS TO BE PLOY TO REDUCE TAXABILITY ON SURRENDERED INCOME. THE ISSUE NEEDS EXAMINATION FROM ABOVE ANGLE. K. THE DEPRECIATION ON PET CT SCAN AT RS.1,61,00,26 2/- HAS BEEN CLAIMED AT HIGHER RATE OF 40% INSTEAD OF 15% WHICH HAS BEEN ALLOWED BY THE AO WITHOUT ANY ENQUIRY. [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 10 L. THE AO HAS ALLOWED SALARY PAID AMOUNTING TO RS.4 ,75,90,791/- WITHOUT VERIFYING WHETHER TDS AS PER PROVISIONS OF THE INCO ME TAX WAS MADE OR NOT. 7. IN RESPONSE THERETO, THE ASSESSEE FILED ITS OBJEC TIONS AGAINST INVOKING THE PROVISIONS IN THE FORM OF WRITTE N SUBMISSIONS THE LD. AUTHORISED REPRESENTATIVE HAD ALSO MADE ORAL ARGUMENTS AGAINST INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT LD. PR. CIT. HOWEVER, LD. PR . CIT WAS NOT SATISFIED WITH THE SUBMISSIONS AND PROCEEDED TO R EVISE THE ASSESSMENT ORDER. HENCE, THE LD. PR. CIT SET ASID E THE ORIGINAL ORDER PASSED BY THE ASSESSING OFFICER BY OBS ERVING AS UNDER: 20. ON PERUSAL OF RECORD, IT IS CLEAR THAT THE ENQU IRY AND INVESTIGATION WHICH WERE REQUIRED HAD NOT EXAMINED PROPERLY BY T HE ASSESSING OFFICER. IN THIS REGARD, EXPLANATION-2 OF THE SECTION 263 I S PRODUCED AS UNDER :- 'FOR THE PURPOSE OF THIS SECTION, IT IS HEREBY DECL ARED THAT AN ORDER PASSED BY THE ASSESSING OFFICER SHALL BE DEEMED TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE RE VENUE, IF, IN THE OPINION OF THE PRINCIPAL COMMISSIONER OR COMMISSIONER (A) THE ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VER IFICATION WHICH SHOULD HAVE BEEN MADE, (B) THE ORDER IS PASSED ALLOWING ANY RELIEF WITHOUT IN QUIRIES INTO THE CLAIM. (C) THE ORDER HAS NOT BEEN MADE IN ACCORDANCE WITH ANY ORDER, DIRECTION OR INSTRUCTION ISSUED BY THE BOARD UNDER SECTION 119. I) [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 11 THE ABOVE EXPLANATION IS C1ARIFICATORY IN NATURE. E VEN BEFORE IT, THE ORDERS MADE WITHOUT PROPER ENQUIRY WAS LIABLE TO BE REVISED U/S 263 OF LT. ACT. FURTHER THIS EXPLANATION EXISTS AS ON DATE ON WHICH PROCEEDINGS U/S 263 HAVE BEEN UNDERTAKEN AND IS EXISTING LAW AS ON DATE. SO IT IS APPLICABLE TO PRESENT PROCEEDINGS. IT IS IMMATERIAL THAT ORDER WAS PASSED U/S 143(3) EARLIER TO 01-04-2015. AS DISCUSSED, THE PROPER ENQUIRY HAS NOT BEEN MADE WHICH OUGHT TO HAVE BEEN MADE BY AO AND AD DID NOT APPLY MIND TO RELEVA NT ISSUES MAKING THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO T HE INTEREST OF REVENUE. IN FACT SIMILAR CIRCUMSTANCES REGARDING RE PAYMENT OF HUNDI LOANS ADDITION MADE IN SIMILAR CASE OF DR. VINOD BH ANDARI HAS ALREADY BEEN CONFIRMED BY CIT(A). THE ORDER PASSED U/S 143 (3) BY AO AND ORDER OF JCIT U/S 144A DATED 24.03.2015 ARE HELD TO BE ER RONEOUS AND PREJUDICIAL TO INTEREST OF REVENUE U/S 263 OF THE I .T. ACT AND ARE SET ASIDE ACCORDINGLY. 8. NOW THE ASSESSEE HAS CHALLENGED THE ORDER OF THE LD . PR. CIT BEFORE THIS TRIBUNAL. BOTH THE PARTIES HAVE FILED RESPECTIVE WRITTEN SUBMISSIONS. LD. AR OF THE PARTIE S HAS ARGUED AT LENGTH. SUBMISSIONS OF THE ASSESSEE 1. IN PARA 1 OF CITS 263 ORDER DATED 30.3.2017 IT HAS BEEN STATED : IT IS SEEN THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E ON ACCOUNT OF FAILURE OF THE ASSESSING OFFICER IN MAKING NECES SARY ENQUIRIES AND IT BEING NOT AS PER PROVISIONS OF THE ACT. THUS THE TWIN REASONS ASCRIBED ARE : A) FAILURE OF THE ASSESSING OFFICER IN MAKING NECESSAR Y ENQUIRIES B) IT BEING NOT AS PER PROVISIONS OF THE ACT. [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 12 A. WHETHER THERE IS FAILURE ON THE PART OF THE AO IN M AKING NECESSARY ENQUIRIES : I. AO ISSUED SUMMONS U/S 131 DATED 23/12/2013 (PG 82 & 83 OF PAPER BOOK) WHEREIN CATEGORICALLY THE AO HAS SOUGHT BOOKS OF ACCOUNTS, ACCOUNTING OF TAX EFFECT OF SURVEY OPERAT IONS IN THE BOOKS, ANY SIGNIFICANT CHANGE IN EXPENDITURE, AFFIDAVIT IN RET RACTION OF ADMISSION MADE DURING SURVEY IS AN ATTEMPT OF AVOID INCIDENCE OF TAXATION. II. REPLY IN RESPONSE TO SUMMONS U/S 131 WAS FILED BY THE ASSESSEE ON 3.1.2014 (PAGE 84-106 OF PAPER BOOK) AND IT WAS SUBMITTED THAT OUT OF SURRENDERED AMOUNT OF RS. 23,37,49,505 ONLY AN AMOUNT OF RS. 6,20,00,000 HAS NOT BEEN OFFERED FOR TAX AS THE SAM E HAS BEEN CLAIMED AS TELESCOPING AGAINST HUNDI LOANS. IT WAS SUBMITTE D THAT THE INCOME FROM HOSPITAL RECEIPTS HAS BEEN USED TO MAKE HUNDIS AND SINCE INCOME OF RS. 6,21,32,585 IS ALREADY OFFERED FOR TA X AS UNDISCLOSED RECEIPTS AND SINCE THE SAME INCOME WHICH HAS BEEN U SED TO MAKE HUNDIS THEREFORE HUNDIS OF RS. 6,21,32,585 CANNOT BE TAXED AGAIN AND THUS THE SURRENDERED HUNDIS HAVE BEEN REDUCED BY R S. 6,21,32,585. THE LEDGER ACCOUNTS OF ALL THE HUNDIS AND THEIR RE ALISATION WERE FILED WITH THE LETTER DATED 3.1.2014. III. THE ASSESSEE FURTHER SUBMITTED A COMPARISON CHART O F EXPENSES FOR THREE YEARS (PG 86 TO 90 OF PAPER BOOK) EXPLAINING ALL EXPENSES AS % OF GROSS RECEIPTS AND GIVING DETAILED NOTES IN CASE S OF VARIATIONS. IV. THE ASSESSEE ALSO FILED THE DETAILS OF DONATION GIV EN TO GITANJALI UNIVERSITY TRUST WHICH WAS CLAIMED U/S 35AC. THE RE LEVANT FORMS NO. 58A PRESCRIBED UNDER RULE 11-O WERE DULY FILED (PAGES 101- 106 OF PAPER BOOK) V. IT WAS ALSO INFORMED THAT THE FACTUM OF RECOVERY OF HUNDI LOANS AND THEIR CONSEQUENT DEPOSIT IN THE BANK ACCOUNT WAS DU LY INFORMED TO THE AO VIDE LETTER DATED 9 TH APRIL 2012 (PAGE 107 OF PAPER BOOK). THE UNDISCLOSED RECEIPTS OF HOSPITAL WHICH WAS USED TO ADVANCE LOAN AGAINST HUNDIS ALONG WITH NAMES OF THE HUNDI DEBTO RS WAS DULY FILED (PAGE 93 TO 96 OF PAPER BOOK) VI. FOLLOWING ORDER SHEET QUERY WAS GIVEN BY THE AO ON 3/1/2014 : [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 13 VII. ON 8/1/2014 THE CASE WAS THEREAFTER TRANSFERRED TO ANOTHER AO U/S 127 WHO THEN ISSUED NOTICE U/S 142(1) ON 29/7/2014. (COPY OF THIS NOTICE IS ON PAGES 108-109 OF THE PAPER BOOK) . THIS WAS A COMPREHENSIVE NOTICE REQUIRING COMPLIANCE OF VARIOU S ISSUES. VIII. REPLY WAS FILED BY THE ASSESSEE ON 12.8.2014 (PLACED ON PAGE 110- 116 OF THE APPER BOOK) WITH ALL RELEVANT INFORMATION RUNNING INTO ANNEXURE OF 938 PAGES. IX. ON 15/1/2015 ANOTHER NOTICE U/S 142(1) WAS ISSUED B Y THE AO (PG 117 OF THE PAPER BOOK) REQUIRING THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNTS AND OTHER RELATED DOCUMENTS, REGISTERS VOU CHERS ETC. [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 14 X. IN REPLY FILED ON 22/1/2015 (PAGE 118 OF THE PAPER BOOK) THE ASSESSEE FILED BOOKS OF ACCOUNTS IN CD. ALL OTHER C OMPLIANCES EXCEPT VOUCHERS AND REGISTERS WERE ALSO FILED- 36 PAGES IN TOTAL . FOR VOUCHERS AND REGISTERS 1 WEEKS TIME WAS SOUGHT. XI. THE ASSESSEE FILED REPLY DATE 29/1/2015 IN CONTINUA TION TO THE EARLIER REPLY ( PAGE 154- 155 OF PAPER BOOK) WHEREIN HARD COPIES OF BOOKS OF ACCOUNTS AND CONFIRMATIONS OF LOANS AND RE CONCILIATION OF 26AS WAS FILED. TOTAL 109 PAGES WERE FILED ALONGWITH THI S REPLY. XII. ON 29/1/2015 FOLLOWING ORDER SHEET QUERY WAS RAISED BY THE AO : [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 15 [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 16 XIII ) REPLY WAS FILED BY THE ASSESSEE ON 3/2/2015 (PG 261- 264 OF THE PAPER BOOK) WHEREIN ALL THE DETAILS WERE DULY FILED. THE ANNEXURE TO THIS REPLY (PG 265-266 OF THE PAPER BOOK) SHOWED HUNDI LOANS OF RRS. 6,20,00,000 WERE MADE UTILIZING THE UNACCOUNTED HOSPITAL RECEIPTS. FORMS NO. 58A ISSUED UNDER RULE 11-O OF INCOME TAX RULES ISSUED BY M/S GITANJALI UNIVERSITY WERE PLACED ON RECORD (PAGE 267- 272 OF THE PAPER BOOK). THESE FORMS SHOWED THE MANNER OF UTILIZATION OF THE CUMULATIVE DONATIONS RECEIVED BY THE UNIVERSITY AS WELL AS THE DONATION RECEIVED FROM THE ASSESSEE AND THE UTILIZA TION AS PER THE APPROVAL OF NATIONAL COMMITTEE U/S 35AC. THE IT RETURN OF M/S GITANJALI UNIVERSITY FOR AY 20 11-12 WAS PLACED (ON PAGE NO. 273-282 OF THE PAPER BOOK) WITH THE AUDITED FINAL ACCOUNTS. THE PAN CARD OF THE SAID UNIVERSITY (ON PAGE 282 OF THE PAPER BOOK) WAS PLACED ON RECORD. THE CERTIFICATE OF RECEIPT OF DONATION ISSUED BY THE SAID UNIVERSITY (ON PAGE 284 OF THE PAPER BOOK) WAS ALSO PLACED. THE BANK STATEMENT OF THE SAID UNIVERS ITY (ON PAGE 285- 286 OF THE PAPER BOOK ) WAS ALSO PLACED ON RECORD. A LETTER DATED 12.1.2012 ISSUED BY THE SAID UNIVERSITY REQUESTING FOR DONATION AND ACKNOWLEDGEMENT THEREOF (ON PAGE 287-288 OF THE PAPER BOOK) WAS ALSO PLACED ON RECORD. THE IT CERTIFICATE ISSUED BY GOVERNMENT OF INDIA MINISTRY OF FINANCE ON 16.6.2011 IN FAVOUR OF GITAN JALI UNIVERSITY AUTHORIZING RECEIPT OF DONATIONS U/S 35AC (ON PAGE 290-293 OF PAPER BOOK) WAS ALSO FILED. NOTIFICATION DATED 14.6.2011 ISSUE D BY GOI MINISTRY OF FINANCE U/S 35AC (PAGE 297 OF THE PAPER BOOK) WAS ALSO PLACED ON RECORD. XIV. ON 18/2/2015 REPLY WAS FILED (PAGE 551-552 OF THE PAPER BOOK) BY THE ASSESSEE EXPLAINING THE REASONS FOR PAYING DONATION TO GITANJAI UNIVERSITY TRUST. XV. COPIES OF LEDGER ACCOUNTS OF DOCTORS VISITING FEE P AID, OPERATION THEATRE EXPENSES, OPEN HEART EXPENSES, DRUG AND MED ICINE EXPENSES WERE DULY FILED (PAGES 300-536 OF PAPER BOOK) WITH VOUCHERS THEREOF . THE DOCTORS VISIT FEE ACCOUNT SHOWS THE FEE AND T HE TDS DEDUCTED THEREON. THE DETAILS OF TDS DEPOSITED WAS DULY FILE D (PAGE 115-116 OF THE PAPER BOOK). IT WAS CATEGORICALLY INFORMED TO THE AO THAT DETAILS ARE ENCLOSED AT PG NO. 750-764 OF THE SAID REPLY AND COPY OF FORM 26AS IS ENCLOSED. ( BOTTOM OF PAGE 115 REVERSE SIDE OF PAPER BOOK). [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 17 XVI. DETAILS OF ALL ADDITIONS TO FIXED ASSETS WAS GIVEN TO THE AO (PG. 112-113 REVERSE SIDE OF PAPER BOOF) AND VOUCHERS WERE FILED. XVII. A COMMISSION U/S 131(1)(D) WAS ISSUED BY THE AO TO DDIT (INV)-1, UDAIPUR TO INVESTIGATE THE DONE M/S GEETAN GAJI TRUST. THE SAID INFORMATION WAS RECEIVED BY THE AO FROM DDIT(INV)-J AIPUR ON 11/2/2015 WITH THE NECESSARY DOCUMENTS AND NO ADVER SE REPORT WAS GIVEN BY THE DDIT(INV)-JAIPUR (PAGE 21 OF THE ASSESSMENT ORDER ) . THIS WAS THEN VERIFIED BY THE AO. XVIII. SUBSEQUENTLY ON 17/3/2015 THE ASSESSEE FILED AN APP LICATION (PAGE 538 TO 540 OF PAPER BOOK) BEFORE THE JCIT U/S 144A REGARDING THE SET-OFF OF UNDISCLOSED RECEIPTS FROM HUNDI LOAN S AND THE DONATION OF 35AC. WITH THIS APPLICATION CASH BOOK SHOWING THE RECEIPTS OF RS. 6.20 CRORES AND EVIDENCES OF PAYMENT OF EXPENDITURE U/S 35AC WERE ALSO FILED. XIX. ON 19/3/2015 DURING THE COURSE OF HEARING BEFORE TH E JCIT DETAILED SUBMISSIONS WERE FILED SHOWING JUSTIFICATI ON FOR SET-OFF OF RECEIPTS OF RS. 6,21,32,585 AGAINST HUNDI LOANS. CO PIES OF LEDGER OF 41 HUNDI PERSONS, INTEREST EARNED LEDGER AND COPIES OF HUNDIES WERE DULY FILED (PAGE 573 TO 660 OF PAPER BOOK). XX. DURING THE COURSE OF FILING REPLY ON 19/3/2015 THE DETAILS OF FIR (PAGE 553 REVERSE SIDE) FILED AGAINST DR. BHANDARI WERE DULY EXPLAINED TO THE AO. COPIES OF FIR FILED AGAINST DR . BHANDARI WAS ALSO FILED (PAGE 556-557 OF PAPER BOOK) . XXI. THE JCIT VIDE ITS ORDER DATED 24/3/2015 DIRECTED TH E AO TO GRANT SET-OFF OF UNDISCLOSED RECEIPTS FROM HUNDLI L OANS AS THE SAME IS MANDATED BY SUPREME COURT IN 123 ITR 457(SC) AND OT HER DECISIONS. IN RESPECT OF DEDUCTION U/S 35AC THE JCIT DIRECTED THE AO TO ALLOW THE DEDUCTION IF THE ASSESSEE FOLLOWS THE CONDITIONS AS PROVIDED IN THE INCOME-TAX ACT. (PAGE 17 TO 20 OF THE ASSESSMENT ORDER) XXII. THE AO PASSED THE ORDER U/S 143(3) FOLLOWING THE DI RECTIONS OF JCIT AND THE DOCUMENTS ON RECORD AND ALLOWED SET-OF F OF RS. 62125115 FROM THE HUNDI LOANS AND ALSO ALLOWED DEDUCTION U/S 35AC OF RS 8 CRORE. [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 18 XXIII. IN THESE CIRCUMSTANCES THE ORDER PASSED U/S 143(3) WAS AFTER DUE ENQUIRY, VERIFICATION AND BASED ON APPLICABLE D ECISIONS AND DIRECTION OF JCIT U/S 144A. THE REASON FOR REDUCING THE ADDITION FROM 6,45,02,010 TO RS. 6,21,25,115 WAS ALSO CONSIDERED BY THE JCIT ( PAGE 91 OF THE PAPER BOOK IS THE SEIZED PAPER SHOWING TH E UNDISCLOSED RECEIPTS AND EXPENSES THEREFROM) SUCH AN ORDER CANNOT BE SAID TO BE ERRONEOUS OR PREJUDICIAL TO THE INTER EST OF REVENUE MERELY BECAUSE THE CIT WAS ENQUIRY TO BE FURTHER CONDUCTED AS PER HIS WISES AND HIS SATISFACTION. B. WHETHER THE ORDER OF THE AO AND JCIT WAS NOT IN ACC ORDANCE WITH LAW. ? 1. DUE VERIFICATION WAS DONE AS IS EVIDENT FROM THE SE QUENCE EXTRACTED IN POINT A ABOVE. 2. THE REDUCTION OF 6,45,02,010 BY 23,76,985 WAS EVID ENT FROM THE SEIZED PAGE (PLACED ON PAGE 93 OF PAPER BOOK) ITSELF WHICH CONTAINED BOTH DEBIT AND CREDIT ENTRIES AND THUS TH E DEBIT OF RS. 23,76,985 ON THAT PAGE WAS REDUCED FROM THE CREDIT OF 6,45,02,010 AND THE NET FIGURE OF RS. 6,21, 25,115 WAS OFFERED FOR TAXATION. THIS ASPECT WAS DULY CONSIDERED BY THE JCIT IN HIS ORDER . 3. THE REDUCTION OF HUNDI AMOUNT FROM RS. 16,65,00,000 TO 10,43,21,885 WAS ALLOWED BY THE AO AND JCIT AFTER C ONSIDERING THAT UNACCOUNTED RECEIPTS OF RS 6,21,25,115 SEPARATELY O FFERED FOR TAX WAS ALLOWABLE AS SET-OFF AS BOTH INCOME AND INVESTMENT COULD NOT BE ADDED. THIS WAS DONE BY THE JCIT AFTER CONSIDERING THE JUD ICIAL PRONOUNCEMENTS. 4. DEDUCTION U/S 35AC BY WAY OF DONATION TO GITANJALI TRUST WAS EVIDENCED BY CERTIFICATE/FORM/NOTIFICATION/IT RETUR N/CONFIRMATION AND INDEPENDENT ENQUIRY U/S 131(1)(D) BY THE AO. 5. JCIT AND THE AO WERE MADE AWARE OF FIR AGAINST DR. BHANDARI AND THE FACTUM OF VYAPAM CASE INVOLVING RS. 50 LACS ALL EGED ON-MONEY. THIS DID NOT IN ANY MANNER COVERS THE CASE OF THE P RESENT COMPANY AND DR. BHANDARIS CASE WAS BEING ASSESSED SEPARATELY. THE CIT DID NOT MENTION OR ENQUIRE AS TO HOW THIS VYAPAM CASE PREJU DICES THE INTEREST OF REVENUE IN CASE OF ASSESSMENT OF PVT. LTD. COMPA NY WHICH IS QUITE DISTINCT AND SEPARATE FROM AN INDIVIDUAL. [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 19 6. THE INCOME SURRENDERED DURING THE SURVEY OF RS.17.1 7 CRORES WAS SEPARATELY DISCLOSED AS INCOME DISCLOSED DURING S URVEY PROCEEDINGS U/S133(A) UNDER SUB-HEAD B OF THE SCHEDULE H TO T HE AUDITED PROFIT AND LOSS ACCOUNT (PG. 78 OF PAPER BOOK) , DISTINGUISHED AND SEPARATED FROM INCOME FROM HOSPITALISATION UNDER SUB-HEAD A. THE AO HAD ON HIS RECORD THE ENTIRE COPY OF BALANCE SHEET AND PROFIT AND LOS S ACCOUNT WITH SCHEDULES AND NOTES THEREON. THE AO HAD MADE DETAILED EXAMINA TION OF BOOKS OF ACCOUNTS AND HAD DONE A COMPARATIVE ANALYSIS OF THR EE YEARS. FURTHER IN RESPONSE TO THE AOS SUMMONS U/S 131 THE ASSESSEE H AD SUBMITTED ON 3/1/2014 , (COPY ENCLOSED AS PAGE NO 86-90 OF PAPER BOOK) COMPARATIVE FIGURES OF A.Y. 2012-13 OF EACH EXPENSE HEAD FORMING PART OF DIRECT EXPENSES AND FINANCE /INTEREST EXPENSE AN D OTHER EXPENSES AS COMPARED TO EXPENSES UNDER THE SAME HEADS IN PRE VIOUS 2 YEARS. DETAILED NOTES ON VARIATIONS WERE EXPLAINED. THE AO AFTER SUCH A DETAILED EXAMINATION FOUND THE MATTER OF VARIATION OF BUSINESS PROFIT AS PERCENTAGE OF BUSINESS RECEIPTS FOR THE A.Y.2012-13 AS SATISFACTORILY EXPLAINED. THERE IS ONE MORE ELEMENT TO THIS. THE CIT WHILE CO MPUTING THE RATIOS TAKEN OUT THE TOTAL RECEIPTS THE SURRENDERED HOSPIT AL RECEIPTS OF RS.6.21 CRORES SURRENDERED AS CURRENT YEAR INCOME DURING SU RVEY. THIS INCOME WAS ACKNOWLEDGED ON THE BASIS OF DOCUMENTS SEIZED A S BUSINESS INCOME / RECEIPTS FOR THE CURRENT YEAR AND SHOULD H AVE BEEN ADDED TO THE HOSPITAL RECEIPTS FOR COMPUTING THE RATIOS. IF THIS INCOME IS CONSIDERED AS PART OF THE TOTAL HOSPITAL RECEIPTS T HEN THE POSITION WOULD BE AS UNDER:- A.Y. 2010-11 2011- 12 2012-13 INCLUDING ;, INCOME SURRENDERED IN SURVEY 2012-13, AFTER EXCLUDING SURRENDERED INCOME OTHER THAN SURRENDERED HOSPITAL RECEIPTS IN THE TOTAL RECEIPTS) TOTAL RECEIPTS (A) 7,26,93,557 1,05,82,587 37,57,35,816 26,61,18,896 OTHER INCOME (B) 13,94,454 26,15,512 1,72,96,872 1,72,96,872 TOTAL EXPENSES 5,16,21,278 10,08,49,216 31,24,58,762 23,24,58,762 DEPRECIATION (C) 1,15,11,494 2,11,23,096 4,40,85,592 4,40,85,592 PROFIT BEFORE REMUNERATION AND 1,09,55,238 -1,35,30,926 3,64,88,334 68,71,414 [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 20 INTEREST TO THE PARTNERS PROFIT AFTER EXCLUDING OTHER INCOME & DEPRECIATION (D)={A-B+C} 2,10,72,278 49,76,658 6,32,77,054 3,36,60,134 PROFIT RATIO (D/A) 28.99% 4.70% 16.84% 12.65% CONSEQUENTLY THE PROFIT RATIO IS POSITIVE AND IS BE TTER THAN THE IMMEDIATELY PRECEDING YEAR. 7. THE DEPRECATION ON PET CTSCAN AT RS. 1,61,00,262/- HAS BEEN RIGHTLY CLAIMED AT HIGHER RATE OF 40% INSTEAD OF 15 % PET C.T. SCAN IS A DIAGONASTIC EQUIPMENT USED FOR D IAGONASIS OF CANCER IN BODIES OF PATIENTS BY USING NON -INVASIVE SCANNI NG TECHNIQUES. THE CLAIM IS JUSTIFIED IN VIEW OF FOLLOWING. 1. THE PET CT SCAN MACHINE IS NOTHING BUT AN ADVANCE T YPE OF SPECT GAMMA CAMERA SPECIFIED IN SUB CLAUSE (F) OF CLAUSE 3(XIA) OF NEW APPENDIX I TO RULE 5 OF THE INCOME TAX ACT 1961. PLEASE REFER TO THE DEFINITION OF SPECT GAMMA CAMERA AND P ET SCANNER AS PER WIKIPEDIA EXTRACTED BELOW. IMAGING TECHNIQUES [ EDIT ] SPECT (SINGLE PHOTON EMISSION COMPUTED TOMOGRAPHY) IMAGI NG, AS USED IN NUCLEAR CARDIAC STRESS TESTING , IS PERFORMED USING GAMMA CAMERAS. USUALLY ONE, TWO OR THREE DETECTORS OR HEADS, ARE SLOWLY ROTATED AROUND THE PATIENT'S TORSO. MULTI-HEADED GAMMA CAMERAS CAN ALSO BE USED FOR POSITRON EMISSION TOMOGRAPHY (PET) SCANNING, PROVIDED THAT THEIR HARDWARE AND SOFTWARE CAN BE CONFIGURED TO DETECT 'COINCIDEN CES' (NEAR SIMULTANEOUS EVENTS ON 2 DIFFERENT HEADS). GAMMA CA MERA PET IS MARKEDLY INFERIOR TO PET IMAGING WITH A PURPOSE DES IGNED PET SCANNER, AS THE SCINTILLATOR CRYSTAL HAS POOR SENSI TIVITY FOR THE HIGH- ENERGY ANNIHILATION PHOTONS, AND THE DETECTOR AREA IS SIGNIFICANTLY SMALLER. HOWEVER, GIVEN THE LOW COST OF A GAMMA CAM ERA AND ITS ADDITIONAL FLEXIBILITY COMPARED TO A DEDICATED PET SCANNER, THIS TECHNIQUE IS USEFUL WHERE THE EXPENSE AND RESOURCE IMPLICATIONS OF A PET SCANNER CANNOT BE JUSTIFIED. [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 21 FURTHER PLEASE REFER REFERENCE HELD ACIT VS. BHARAT SCANS P LTD. (2014) 39 CCH 0272 CHENTRIB (2014) 31 ITR (TRIB) 0103 (CHENNAI), (2014) 65 SOT 0138 (CHENNAI) ((URO) HELD, NATURE AND USE OF PET/CT SCAN SHOWS THAT IT NOT ONLY HELPS IN DETECTING CANCER BUT ALSO IN TREATING CANCER BY MAKING A PROPER ASSESSMENT OF CONDITION OF PATIENT AND THUS A VERY MEDICAL EQUIPMENTPET/CT SCAN WAS ENTITLED FOR HIGHER RATE OF DEPRECIATION AT 40 PERCENTORDER OF CIT(A) WAS UPHELD THE AO HAD DULY TAKEN AND EXAMINED THE FIXED ASSET CHART AS WELL DEPRECIATION THEREON AS IS EVIDENT FROM THE QUERY L ETTER DATED 29/7/2014 (PG 108) AND DETAILS FILED BY THE ASSESSE E. MOREOVER THE CIT DID NOT RECORD ANY CATEGORICAL FINDING THE THE DEPRECIATION IS 15% AND NOT 40% WHICH IS A PREREQUISITE TO SEND THE MAT TER BACK TO THE AO. JUDICIAL PRECEDENTS RELIED UPON BY THE ASSESSEE TO SHOW THAT THE ORDER U/S 263 DESERVES TO BE QUASHED.: RELIANCE IS PLACED ON THE FOLLOWING DECISIONS (COPI ES BEING FILED):- A. CADILA PHARMACUTICALS LTD. V. PCIT (ITA NO. 1190/AHD/2015 (PLACED ON PG 1 TO 10 OF PAPER BOOK OF DECISIONS) B. MADHUSUDHAN INDUSTRIES LTD. V. CIT AHD-II (ITA NO. 853/AHD/2013 PLACED ON PG 13 TO 22 OF PAPER BOOK OF DECISIONS) C. (2017) 30 ITJ 335 (MP) PCIT V. NARAYAN BALMUKUND DU BEY (PLACED AT PAGE NO. 23 TO 35 OF PAPER BOOK OF DECIS IONS) D. (2013) 357 ITR 388( DELHI) DIT V. JYOTI FOUNDATION (PLACED AT PAGE NO. 36 TO 43 OF PAPER BOOK OF DECIS IONS) E. (2004) 270 ITR 157 (MP) CIT V. MAHROTRA BROS (PLACED AT PAGE NO. 43 TO 44 OF PAPER BOOK OF DECIS IONS) F. (2010) 344 ITR 554 (DELHI) CIT V. INTERNATIONAL TRA VEL HOUSE (PLACED AT PAGE NO. 45 TO 51 OF PAPER BOOK OF DECIS IONS) G. (2012) 343 ITR 329 (DELHI) ITO V. DG HOUSING PROJEC TS LTD. (PLACED AT PAGE NO. 52 TO 59 OF PAPER BOOK OF DECIS IONS) H. M/S AMIRA PURE FOODS PVT. LTD. V. PCIT [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 22 (ITA NO. 451/DEL/2017 PLACED AT PG 60-96 ) I. NARAYAN TATU RANE V. ITO (ITA NO. 2690/MUM/2016 PLACED AT PG 97-117) OTHER DECISIONS RELIED UPON- COPIES NOT BEING FILED A. CIT V/S. SOFTWARE CONSULTANTS 341 ITR 240 (DEL.) B. CIT V/S. ANIL CORPORATION 213 TAXMANN 19 C. CIT V/S. SUNBEAM AUTO LTD. 332 ITR 167 (DEL.) D. CIT V/S. MAKAL SUTA COTTON CO. P. LTD. 275 ITR 5 4(M.P) E. CIT V/S R.K. CONSTRUCTION CO., 313 ITR 65 (GUJ.) F. CIT V/S MAX INDIA, 295 ITR 282 (SC) G. CIT V/S RATLAM COAL ASH CO., 171 ITR 141 (M.P) H. CIT V/S ARVIND JEWELLERS, 259 ITR 502 (GUJ.) I. CIT V/S VODAFONE ESSAR SOUTH LTD, 212 TAXMANN 18 4 (DEL.) J. CIT V/S SHRI GOVINDRAM SEKSARIYA CAHRITY TRUST, 166 ITR 580 (M.P) K. HARI IRON TRADING CO. V/S CIT, 263 ITR 437 (P&H) L. CIT V/S HARI SINGH & ASSOCIATES, 267 CTR 442 (RA J.) M. 335 ITR 83, CIT VS. ANIL KUMAR SHARMA (DELHI), M. 341 ITR 537 (DELHI), CIT VS. VIKAS POLYMERS O. 343 ITR 342, CIT VS. HERO AUTO LTD. (DELHI H.C.), P. 111 ITR 326, J.P. SRIVASTAVA & SONS VS. CIT, (AL LHD. H.C) Q. 320 ITR 674, CIT VS. ASHISH RAJPAL (DELHI H.C.). AT R. 323 ITR 632, CIT VS. DESIGN AND AUTOMATION ENGINEERS (BOMBAY) P. LTD. (BOMBAY H.C.), OF S. 323 ITR 206, CIT VS. DEVELOPMENT CREDIT BANK LTD . T. 243 ITR 83, MALABAR INDUSTRIAL CO. LTD. VS. CIT, (SUPREME COURT) U. 203 ITR 108 CIT VS. GABRIEL INDIA LTD., (BOMBAY H.C.) ELABORATING ON THE AFORESAID DECISIONS : 4.1 ON THE QUESTION REGARDING EXAMINATION OF VALIDI TY OF ISSUANCE OF NOTICE, ASSUMPTION OF JURISDICTION AND PASSING OF I MPUGNED ORDER U/S 263 OF THE ACT, THE APPELLANT IS PLACING RELIAN CE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MALABAR IND USTRIES CO. VS. CIT (243 ITR 83) AND SUBMITS THAT AS PER 263 OF THE ACT IT IS CLEAR THAT THE PRE REQUISITE TO EXERCISE OF JURISDICTION BY THE COMMISSIONER IS THAT THE ORDER OF THE AO, IN QUESTION, IS ERRONE OUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND THE COMMISSIONER HAS TO BE SATISFIED WITH TWIN CONDITIONS, NAMELY, (I) T HE ORDER SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) PREJUDICIAL TO TH E INTEREST OF THE REVENUE. THE APPELLANT FURTHER SUBMITS THAT WHEN TH E ASSESSING [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 23 OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN L AW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE AO HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER D OES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDIC IAL TO THE INTEREST OF THE REVENUE UNLESS THE VIEW TAKEN BY THE AO IS U NSUSTAINABLE IN LAW AND THE SAME IS FOUND TO BE PASSED WITHOUT APPL ICATION OF MIND. 4.2 FURTHER, PLACING RELIANCE ON THE DECISION OF T HE HONBLE GUJRAT HIGH COURT IN THE CASE OF CIT VS. ARVIND JEWELLERS (259 ITR 502) THE APPELLANT SUBMITS THAT WHERE THE RELEVANT MATERIAL WAS ON RECORD WHICH WAS DULY CONSIDERED BY THE AO AND A REASONABL E AND SUSTAINABLE VIEW WAS TAKEN THEN MERELY BECAUSE DIFF ERENT VIEW CAN BE TAKEN, SHOULD NOT HAVE BEEN THE BASIS FOR INVOKI NG THE REVISIONARY POWERS UNDER THE SECTION 263 OF THE ACT . THE APPELLANT FURTHER CONTENDS THAT WHEN A REGULAR ASSESSMENT IS MADE U/S 143(3) OF THE ACT, A PRESUMPTION MUST BE DRAWN THAT THE ORDER HAS BEEN PASSED UPON AN APPLICATION OF MIND AND THE COM MISSIONER HAS TO REBUT SUCH PRESUMPTION WITH THE SUPPORT OF SOME COGENT MATERIAL TO SHOW THAT THE AO HAD NOT APPLIED HIS MIND WHILE PASSING THE ASSESSMENT ORDER. THAT WHERE THE AO ADOPTS ONE OF T HE COURSES PERMISSIBLE IN LAW OR WHERE TWO VIEWS ARE POSSIBLE AND THE AO HAS TAKEN ONE OF THE POSSIBLE VIEWS THEN THE COMMISSION ER CANNOT EXERCISE HIS POWERS UNDER SECTION 263 OF THE ACT TO DIFFER WITH THE VIEW TAKEN BY THE AO, EVEN IF THERE HAS BEEN A LOSS OF REVENUE. 4.3 THE APPELLANT CONTENDS THAT ALL THE FACTS WERE SUBMITTED BEFORE THE AO REPLYING TO THE QUERIES OF THE AO DURING ASS ESSMENT PROCEEDING AND THE AO ADJUDICATED HIS QUERIES AFTER CONSIDERING THE EXPLANATION, REPLIES AND DOCUMENTS. HENCE, THE AO H AD MADE A DETAILED INQUIRY ABOUT THE ISSUES WHICH THE CIT NOW WANTS TO RE- EXAMINE. FURTHER THE AO ALSO SOUGHT GUIDANCE FROM T HE ADDITIONAL COMMISSIONER U/S 144A BEFORE ALLOWING THE CLAIM OF SET-OFF TO THE ASSESSEE. THAT IN THE LIGHT OF ABOVE EXERCISE AND D ETAILED ENQUIRY CONDUCTED BY THE AO PRIOR TO ALLOWING THE SET-OFF A ND DEDUCTION TO THE ASSESSEE, THE LD. CIT WAS NOT CORRECT IN HOLDIN G THAT THE AO PASSED ASSESSMENT ORDER WITHOUT MAKING PROPER ENQUI RY AND WITHOUT APPLICATION OF MIND AND THE SAME WAS ERRONE OUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 4.4. PLACING RELIANCE ON THE DECISION OF HONBLE G AUHATI HIGH COURT IN THE CASE OF BONGAIGAON REFINERY AND PETRO CHEMIC ALS LTD. VS. UNION OF INDIA (287 ITR 120) , THE APPELLANT SUBMITS THAT THE ERROR IN THE ORDER OF THE ASSESSING OFFICER AND RESULTANT PR EJUDICE TO THE INTEREST OF REVENUE ARE TWIN FACTORS TO COEXIST FOR CONFERRING AUTHORITY ON THE COMMISSIONER TO INVOKE POWERS U/S 263 OF THE ACT. [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 24 MERELY ENTERTAINING A DIFFERENT VIEW FROM THE ONE A DOPTED BY THE AO, WHICH IS PLAUSIBLE AND REASONABLE, WOULD NOT CLOTHE THE COMMISSIONER WITH POWER TO REVISE OR INTERFERE U/S 263 OF THE ACT. FURTHER, PLACING RELIANCE ON THE DECISION OF HONBL E BOMBAY HIGH COURT IN THE CASE OF CIT VS. GABRIEL INDIA LTD. (20 3 ITR 108) , THE APPELLANT SUBMITS THAT IF THE AO, WHILE FRAMING ASS ESSMENT IN ACCORDANCE WITH LAW, MAKES CERTAIN ASSESSMENT, THEN THE SAME CANNOT BE BRANDED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW, BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, I.E. THE COMMISSIONER, THE ORDER SHOULD HAVE BEEN WRITTEN MO RE ELABORATELY, AS THE SECTION 263 OF THE ACT DOES NOT ALLOW SUBSTI TUTION OF THE ORDER OF THE AO FOR THAT OF THE COMMISSIONER. RELIANCE IS ALSO PLACED ON THE RATIO OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. MAX INDIA LTD. (295 ITR 282) WHEREIN IT WAS HELD THAT SINCE DIFFERENT VIEWS EXISTED ON THE DAY WHEN THE COMMISS IONER PASSED THE ORDER AND THE MECHANICS OF THAT SECTION HAD BEC OME SO COMPLICATED OVER THE YEARS, THE SUBSEQUENT AMENDMEN T OF SECTION 80 HHC OF THE ACT, EVEN THOUGH RETROSPECTIVE, WOULD NOT BE ATTRACTED. IN THIS CASE HONBLE APEX COURT, REFERRI NG AND REITERATING THE RATIO LAID DOWN IN ITS EARLIER ORDER IN THE CAS E OF MALABAR INDUSTRIES LTD. (243 ITR 83) , HAS HELD THAT WHERE TWO VIEWS ARE POSSIBLE AND THE AO HAS TAKEN ONE VIEW IN THE ASSES SMENT ORDER WITH WHICH THE COMMISSIONER DOES NOT AGREE, THEN TH E SAME CANNOT BE TERMED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF REVENUE UNLESS THE VIEW TAKEN BY THE AO IS UNSUSTA INABLE IN LAW. 4.5 THE APPELLANT FURTHER RELIES ON THE JUDGMENT O F HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DLF LTD. (2013) 3 50 ITR 555 (DELHI) , DECISION OF HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF SPECTRA SHARES AND SCRIPS PVT. LTD. (2013) 354 ITR 35(AP) AND DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. J.L. MORRISON (INDIA) LTD. (2014) 366 ITR 593 (CAL.) AND SUBMITTED THAT THERE SHOULD BE AN ESSENTIAL ELEMENT OF UNSUSTAINA BILITY IN THE ORDER OF THE AO, AND NOT MERE PREJUDICIAL TO THE IN TEREST OF THE REVENUE OR A MERE ERRONEOUS VIEW, WHICH CAN BE REVI SED U/S 263 OF THE ACT. 92. 4.6 THE APPELLANT RELIES ON THE DECISION OF HONBLE HIGH COURT OF DELHI IN THE CASE OF GLOBUS INFOCUM LTD. VS. CIT 36 9 ITR 14 (DELHI) AND SUBMITTED THAT UNDER SECTION 263 OF THE ACT, TH E COMMISSIONER SHOULD TAKE A FINAL DECISION AND NOT MERELY SET ASI DE THE ASSESSMENT ORDER TO BE MADE AFRESH DE NOVO AND REMA NDING THE MATTER FOR FRESH EXAMINATION IS NOT PERMISSIBLE AS THE COMMISSIONER MUST REACH TO A CONCLUSION AND FINDING THAT FINAL F INDING IN ASSESSMENT ORDER WAS ERRONEOUS AND INCORRECT. [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 25 4.7 THE APPELLANT SUBMITS THAT PERUSAL OF THE ASSE SSMENT ORDER, PAPER BOOK AND THE NOTE-SHEET OF THE ASSESSMENT PRO CEEDINGS WOULD SHOW THAT THE AO HAS RAISED SEVERAL QUERIES BY WAY OF NOTE SHEET ENTRIES AND NOTICES. THE ASSESSEE SUBMITTED VARIOUS RELEVANT DOCUMENTS. IT IS ALSO PERTINENT TO MENTION THAT THE AO ADJUDICATED THE ISSUE OF QUERIES AND REPLIES IN REGARD TO SAID CLAIM BY PASSING A DETAILED ORDER. FURTHER THE NOTE SHEET ENTRIES CLEA RLY SHOWS THE DELIBERATIONS BETWEEN THE AO AND THE ASSESSEE COMPA NY ON ALL THE ISSUES AND ADJUDICATION BY THE AO WHICH WAS FURTHER GUIDED BY ORDER U/S 144A. THUS BY NO STRETCH OF IMAGINATION T HIS CAN BE TERMED AS A CASE OF LACK OF INQUIRY OR EVEN INADEQU ATE INQUIRY. 4.8 IN THE CASE OF CIT VS. GABRIEL INDIA LTD. (203 ITR 108), THE HONBLE BOMBAY HIGH COURT HAS HELD THAT THE POWER U /S 263 (1) OF THE ACT IS IN THE NATURE OF SUPERVISORY JURISDICTIO N AND CAN BE EXERCISED ONLY IF THE CIRCUMSTANCES MUST EXIST TO E NABLE THE COMMISSIONER TO EXERCISE POWER OF REVISION SUBSECTI ON (1) OF SECTION 263 OF THE ACT VIZ. (I) THE ORDER SHOULD BE ERRONEO US; AND (II) BY VIRTUE OF THE ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. SPEAKING FOR HONBLE BOMBAY HIGH COURT, TH EIR LORDSHIPS HELD THAT AN ORDER CANNOT BE TERMED AS ERRONEOUS UN LESS IT IS NOT IN ACCORDANCE WITH LAW AND IF THE AO, ACTING IN ACCORD ANCE WITH LAW MAKES CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDE D AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE, ACCOR DING TO CIT, THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY . THEIR LORDSHIPS FURTHER WENT ON TO HOLD THAT THERE MUST B E SOME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT THE TAX WHICH WAS LAWFULLY ELIGIBLE HAS NOT BEEN IMPOSED. 4.9. IN THE PRESENT CASE, THE AO HAS RAISED A NUMB ER OF QUERIES REGARDING THE ISSUES NOW SOUGHT TO BE REVISED BY TH E CIT WHICH WERE REPLIED BY THE ASSESSEE THROUGH DETAILED SUBMI SSIONS SUPPORTED BY RELEVANT DOCUMENTS AND OTHER EVIDENCE COUPLED WITH LEGAL PROPOSITIONS AND DECISIONS. IT IS ALSO PERTIN ENT TO NOTE THAT THE AO HAS PASSED A DETAILED ORDER / NOTE SHEET ENTRY WHILE DEALING AND ADJUDICATION THE ISSUES. THERE MUST BE SOME PRI MA FACIE MATERIAL ON THE RECORD TO SHOW THAT THE ORDER IS UN SUSTAINABLE IN LAW AND THE TAX WHICH WAS LEGALLY ELIGIBLE HAS NOT BEEN IMPOSED. THE PRESENT CASE IS NEITHER A CASE OF NO ENQUIRY NOR IS A CASE WHERE THE AO, FAILED TO MAKE NECESSARY ENQUIRY AND THE AS SESSMENT ORDER WAS PASSED AFTER MAKING DETAILED INQUIRY AND APPLIC ATION OF MIND. 4.10 THE APPELLANT ALSO RELIES ON THE RATIO OF THE DECISION OF HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. DLF LTD. (2013) 350 ITR 555 (DELHI) AND SUBMITS THAT IT IS NOT MERE PREJUDICE TO THE R EVENUE OR A MERE ERRONEOUS VIEW WHICH CAN BE REVISED U/S 2 63 OF THE ACT [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 26 BUT ALSO THERE SHOULD BE THE ELEMENT OF UNSUSTAINA BILITY IN THE ORDER OF THE ASSESSING OFFICER, WHICH EMPOWERS THE COMMISSIONER TO ISSUE NOTICE AND TO PROCEED TO PASS AN APPROPRIATE ORDER. THAT HONBLE HIGH COURT HAS HELD AS UNDER (AT PAGE 562) : IN THIS CASE, THE RECORD REVEALS THAT THE ASSESSIN G OFFICER HAD ISSUED NOTICE, AND HELD PROCEEDINGS ON SEVERAL DATE S (OF HEARING) BEFORE PROCEEDING TO FRAME THE ASSESSMENT. HE ADDED NEARLY RS. 2 CRORES TO THE INCOME AT THAT TIME. THE COMMISSIONER TOOK THE VIEW THAT THE ASSESSMENT ORDER DISCLOSED AN ERROR, IN TH AT THE DEDUCTION UNDER SECTION14 A HAD NOT BEEN MADE. NOW, WHILE THE STATUTORY DIRECTION TO THE ASSESSING OFFICER TO CALCULATE, PR OPORTIONATELY, THE EXPENDITURE WHICH AN ASSESSEE MAY INCUR TO OBTAIN T HE DIVIDEND INCOME, FOR PURPOSES OF DISALLOWANCE, CANNOT BE LOS T SIGHT OF, EQUALLY, SUCH A REQUIREMENT HAS TO BE VIEWED IN THE CONTEXT AND CIRCUMSTANCES OF EACH GIVEN CASE. IN THE PRESENT CA SE, IT WAS REPEATEDLY EMPHASIZED THAT THE ASSESSEES DIVIDEND INCOME WAS CONFINED TO WHAT IT RECEIVED FROM INVESTMENT MADE I N A SISTER CONCERN, AND THAT ONLY ONE DIVIDEND WARRANT WAS REC EIVED. THESE FACTS, IN THE OPINION OF THIS COURT, WERE MATERIAL, AND HAD BEEN GIVEN WEIGHTAGE BY THE TRIBUNAL IN ITS IMPUGNED ORDER. TH ERE IS NO DISPUTE THAT THE INVESTMENT TO THE SISTER CONCERN, WAS NOT QUESTIONED; EVEN THE COMMISSIONER HAS NOT SOUGHT TO UNDERMINE THIS A SPECT. EQUALLY, THERE IS NO MATERIAL TO SAY THAT APART FROM THAT SI NGLE DIVIDEND WARRANT, ANY OTHER DIVIDEND INCOME WAS RECEIVED. FU RTHERMORE, THERE IS NOTHING ON RECORD TO SAY THAT THE ASSESSEE HAD TO EXPEND EFFORT, OR SPECIALLY ALLOCATE RESOURCES TO KEEP TRA CK OF ITS INVESTMENTS, ESPECIALLY DIVIDEND YIELDING ONES. IN THESE CIRCUMS TANCES, IT CAN BE SAID THAT WHETHER THE DEDUCTION UNDER SECTION 14A W AS WARRANTED, WAS A DEBATABLE FACT. IN ANY EVENT, EVEN IF IT WERE NOT DEBATABLE, THE ERROR BY THE ASSESSING OFFICER IS NOT UNSUSTAINABL E. POSSIBLY HE COULD HAVE TAKEN ANOTHER VIEW; YET, THAT HE DID NOT DO SO, WOULD NOT RENDER HIS OPINION AN UNSUSTAINABLE ONE, WARRANTING EXERCISE OF SECTION 263. 4.11. THE APPELLANT IS ALSO PLACING RELIANCE ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF ARVIND JE WELLERS (259 ITR 502) WHEREIN IT WAS HELD THUS : HELD, THAT THE FINDING OF FACT BY THE TRIBUNAL WAS THAT THE ASSESSEE HAD PRODUCED RELEVANT MATERIAL AND OFFERED EXPLANAT IONS IN PURSUANCE OF THE NOTICES ISSUED UNDER SECTION 142(1 ) AS WELL AS SECTION 143(2) OF THE ACT AND AFTER CONSIDERING THE MATERIAL AND EXPLANATIONS, THE INCOME-TAX OFFICER HAD COME TO A DEFINITE CONCLUSION. SINCE THE MATERIAL WAS THERE ON RECORD AND THE SAID MATERIAL WAS CONSIDERED BY THE INCOME-TAX OFFICER A ND A PARTICULAR VIEW WAS TAKEN, THE MERE FACT THAT DIFFERENT VIEW C AN BE TAKEN [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 27 SHOULD NOT BE THE BASIS FOR AN ACTION UNDER SECTION 263. THE ORDER OF REVISION WAS NOT JUSTIFIED. HENCE, AS PER THE PREPOSITION AND RATIO LAID DOWN B Y HONBLE GUJARAT HIGH COURT IS THAT WHEN THE ASSESSEE HAD PR ODUCED RELEVANT MATERIAL AND OFFERED EXPLANATION IN PURSUA NCE OF NOTICES U/S 143(2) AND 142(1) OF THE ACT AND AFTER CONSIDER ING THE MATERIAL AND EXPLANATIONS, THE AO HAD COME TO A DEFINITE CON CLUSION. THEIR LORDSHIP FURTHER HELD THAT IN THIS SITUATION, SINCE THE MATERIAL WAS THERE ON RECORD AND THE SAID MATERIAL WAS CONSIDERE D BY THE AO AND A PARTICULAR VIEW WAS TAKEN, THE MERE FACT THAT A D IFFERENT VIEW CAN BE TAKEN SHOULD NOT BE THE BASIS FOR A VALID ACTION U/S 263 OF THE ACT AND THEREFORE, DISMISSING THE APPEAL OF THE REVENUE THE HONBLE HIGH COURT HELD THAT THE ORDER U/S 263 OF THE ACT WAS NO T JUSTIFIED AND VALID. 4.12. THE APPELLANT ALSO RELIES ON THE PREPOSITION LAID BY HIGH COURT OF ALLAHABAD IN THE JUDGMENT PASSED IN THE CASE OF CIT VS. SHIV PRASAD (2011) 12 TAXMANN. COM 118 (ALL.) AND SUBMITS THAT THE PROCEEDINGS U/S 263 OF THE ACT CAN ONLY BE TAKEN IN CASE IF THE ASSESSMENT ORDER IS FOUND TO BE ERRONEOUS AND PREJU DICIAL TO THE INTEREST OF THE REVENUE AND IF ONE CONDITION DOES N OT EXIST THE REVISIONAL POWERS U/S 263 CAN NOT BE EXERCISED. THE APPELLANT FURTHER SUBMITS THAT AS PER RATIO OF THE JUDGMENT O F HONBLE HIGH COURT OF ALLAHABAD IN THE CASE OF CIT VS. GOYAL PRI VATE FAMILY SPECIFIC TRUST (1988) 171 ITR 698 (ALL.) IN ABSENCE OF SPECIFIC FINDINGS THAT THE ASSESSMENT ORDER WAS ERRONEOUS THE CANCELL ATION OF ASSESSMENT WAS NOT JUSTIFIED. 4.13. IT IS FURTHER CONTENDED THAT THERE WAS NO FIN DING OR ADJUDICATION BY THE COMMISSIONER AND HIS OBSERVATIO NS WERE BASED ON MERE SUSPICION AND UNCERTAIN. THE APPELLANT RELI ES ON THE DECISION OF HONBLE HIGH COURT DELHI IN THE CASE OF GLOBUS INFOCOM LTD. VS. CIT (369 ITR 14) WHEREIN IT WAS HELD THUS : THUS, IN CASES OF WRONG OPINION OR FINDING ON MER ITS, THE CIT HAS TO COME TO THE CONCLUSION AND HIMSELF DECIDE THAT THE ORDER IS ERRONEOUS, BY CONDUCTING NECESSARY ENQUIRY, IF REQU IRED AND NECESSARY, BEFORE THE ORDER UNDER SECTION 263 IS PA SSED. IN SUCH CASES, THE ORDER OF THE ASSESSING OFFICER WILL BE E RRONEOUS BECAUSE THE ORDER PASSED IS NOT SUSTAINABLE IN LAW AND THE SAID FINDING MUST BE RECORDED. CIT CANNOT REMAND THE MATTER TO THE AS SESSING OFFICER TO DECIDE WHETHER THE FINDINGS RECORDED ARE ERRONEO US. IN CASES WHERE THERE IS INADEQUATE ENQUIRY BUT NOT LACK OF E NQUIRY, AGAIN THE CIT MUST GIVE AND RECORD A FINDING THAT THE ORDER/I NQUIRY MADE IS ERRONEOUS. THIS CAN HAPPEN IF AN ENQUIRY AND VERIFI CATION IS CONDUCTED BY THE CIT AND HE IS ABLE TO ESTABLISH AN D SHOW THE ERROR OR MISTAKE MADE BY THE ASSESSING OFFICER, MAKING TH E ORDER [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 28 UNSUSTAINABLE IN LAW. IN SOME CASES POSSIBLY THOUGH RARELY, THE CIT CAN ALSO SHOW AND ESTABLISH THAT THE FACTS ON RECOR D OR INFERENCES DRAWN FROM FACTS ON RECORD PER SE JUSTIFIED AND MAN DATED FURTHER ENQUIRY OR INVESTIGATION BUT THE ASSESSING OFFICER HAD ERRONEOUSLY NOT UNDERTAKEN THE SAME. HOWEVER, THE SAID FINDING MUST BE CLEAR, UNAMBIGUOUS AND NOT DEBATABLE. THE MATTER CANNOT BE REMITTED FOR A FRESH DECISION TO THE ASSESSING OFFICER TO CONDUC T FURTHER ENQUIRIES WITHOUT A FINDING THAT THE ORDER IS ERRONEOUS. FIND ING THAT THE ORDER IS ERRONEOUS IS A CONDITION OR REQUIREMENT WHICH MU ST BE SATISFIED FOR EXERCISE OF JURISDICTION UNDER SECTION 263 OF T HE ACT. IN SUCH MATTERS, TO REMAND THE MATTER/ISSUE TO THE ASSESSIN G OFFICER WOULD IMPLY AND MEAN THE CIT HAS NOT EXAMINED AND DECIDED WHETHER OR NOT THE ORDER IS ERRONEOUS BUT HAS DIRECTED THE ASS ESSING OFFICER TO DECIDE THE ASPECT/QUESTION. 17. THIS DISTINCTION MUST BE KEPT IN MIND BY THE CI T WHILE EXERCISING JURISDICTION UNDER SECTION 263 OF THE ACT AND IN TH E ABSENCE OF THE FINDING THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, EXERCISE OF JURISDICTION UNDER THE SAID SE CTION IS NOT SUSTAINABLE. IN MOST CASES OF ALLEGED INADEQUATE I NVESTIGATION, IT WILL BE DIFFICULT TO HOLD THAT THE ORDER OF THE ASS ESSING OFFICER, WHO HAD CONDUCTED ENQUIRIES AND HAD ACTED AS AN INVESTI GATOR, IS ERRONEOUS, WITHOUT CIT CONDUCTING VERIFICATION/INQU IRY. THE ORDER OF THE ASSESSING OFFICER MAY BE OR MAY NOT BE WRONG. C IT CANNOT DIRECT RECONSIDERATION ON THIS GROUND BUT ONLY WHEN THE OR DER IS ERRONEOUS. AN ORDER OF REMIT CANNOT BE PASSED BY THE CIT TO AS K THE ASSESSING OFFICER TO DECIDE WHETHER THE ORDER WAS ERRONEOUS. THIS IS NOT PERMISSIBLE. AN ORDER IS NOT ERRONEOUS, UNLESS THE CIT HOLD AND RECORDS REASONS WHY IT IS ERRONEOUS. AN ORDER WILL NOT BECOME ERRONEOUS BECAUSE ON REMIT, THE ASSESSING OFFICER M AY DECIDE THAT THE ORDER IS ERRONEOUS. THEREFORE CIT MUST AFTER RE CORDING REASONS HOLD THAT THE ORDER IS ERRONEOUS. THE JURISDICTIONA L PRECONDITION STIPULATED IS THAT THE CIT MUST COME TO THE CONCLUS ION THAT THE ORDER IS ERRONEOUS AND IS UNSUSTAINABLE IN LAW. WE MAY NO TICE THAT THE MATERIAL WHICH THE CIT CAN RELY INCLUDES NOT ONLY T HE RECORD AS IT STANDS AT THE TIME WHEN THE ORDER IN QUESTION WAS P ASSED BY THE ASSESSING OFFICER BUT ALSO THE RECORD AS IT STANDS AT THE TIME OF EXAMINATION BY THE CIT [SEE CIT VS. SHREE MANJUNATH ESWARE PACKING PRODUCTS, 231 ITR 53 (SC)]. NOTHING BARS/PR OHIBITS THE CIT FROM COLLECTING AND RELYING UPON NEW/ADDITIONAL MAT ERIAL/EVIDENCE TO SHOW AND STATE THAT THE ORDER OF THE ASSESSING O FFICER IS ERRONEOUS. 18. IT IS IN THIS CONTEXT THAT THE SUPREME COURT IN MALABAR INDUSTRIAL CO. LTD. VS. COMMISSIONER OF INCOME TAX, (2000) 243 ITR 83 (SC), HAD OBSERVED THAT THE PHRASE PREJUDICIAL TO THE IN TEREST OF REVENUE [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 29 HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORD ER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSE QUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF REVENUE. THUS, WHEN THE ASSESSING OFFIC ER HAD ADOPTED ONE OF THE COURSES PERMISSIBLE AND AVAILABLE TO HIM , AND THIS HAS RESULTED IN LOSS TO REVENUE; OR TWO VIEWS WERE POSS IBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE CIT MAY NOT AGREE; THE SAID ORDERS CANNOT BE TREATED AS AN ERRO NEOUS ORDER PREJUDICIAL TO THE INTEREST OF REVENUE UNLESS THE V IEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. IN SUCH MATTERS, THE CIT MUST GIVE A FINDING THAT THE VIEW TAKEN BY THE ASSE SSING OFFICER IS UNSUSTAINABLE IN LAW AND, THEREFORE, THE ORDER IS E RRONEOUS. HE MUST ALSO SHOW THAT PREJUDICE IS CAUSED TO THE INTEREST OF THE REVENUE. 4.14 THE APPELLANT ALSO RELIES ON THE JUDGMENT OF R AJASTHAN HIGH COURT IN THE CASE OF CIT VS. DEEPAK REAL STATE DEVE LOPERS (I) P. LTD. (2014) 367 ITR 377 (RAJ.) AND SUBMITS THAT WHERE THE COMMISSIONER DID NEITHER REJECT THE DOCUMENTS OR RECORDS TO BE I RRELEVANT, NOR LACKING IN THEIR PROBATIVE WORTH AND HE SIMPLY REMA NDED THE MATTER TO THE ASSESSING OFFICER OBSERVING THAT THESE OUGHT OUT TO HAVE BEEN LAID BEFORE THE AO AND SHOULD BE EXAMINED AT THE TI ME OF ASSESSMENT THEN IT WAS HELD THAT THE ORDER OF REVIS ION U/S 263 OF THE ACT WAS NOT VALID. 4.15. THE APPELLANT FURTHER RELIES ON THE DECISION OF HIGH COURT OF DELHI IN THE CASE OF CIT VS. HOTZ INDUSTRIES LTD. ( 2014) 49 TAXMANN. COM.267 (DELHI) AND CONTENDS THAT ONCE INQUIRIES WERE CONDUCTED AND A DECISION WAS RECORDED BY THE AO, IT CANNOT BE SAID THAT IT WAS A CASE OF NO INQUIRY AND THE COMMISSIONER MUST RE ACH TO A FINDING THAT THE FINDING RECORDED BY THE AO WAS ERRONEOUS, NOT BECAUSE NO INQUIRIES WERE CONDUCTED, BUT BECAUSE FINAL CONCLUS ION IN THE ASSESSMENT ORDER WAS WRONG AND UNTENABLE OR UNSUSTA INABLE IN LAW. THE RELEVANT OPERATIVE PARA OF THIS ORDER IS R EADS AS FOLLOWS : COMMISSIONER IN THE ORDER UNDER SECTION 263 DID NO T GO INTO THE SAID QUESTION ON MERITS, BUT OBSERVED THAT THE ASS ESSING OFFICER IT APPEARS AD NOT CAUSED ANY INQUIRIES OR INVESTIGATI ON, BUT ACCEPTED THE CONTENTION OF THE ASSESSEE. COMMISSIONER OBSERV ED, THEREFORE, MEANINGFUL INQUIRY SHOULD BE CONDUCTED. THIS DOES NOT MEET THE REQUIREMENT THAT THE DECISION OF THE ASSESSING OFFI CER SHOULD BE ERRONEOUS. ONCE INQUIRIES WERE CONDUCTED AND A DECI SION WAS REACHED BY THE ASSESSING OFFICER, IT CANNOT BE SAID THAT IT WAS A CASE OF NO INQUIRY. IN SUCH CASES, THE COMMISSIONER MUST REACH A FINDING THAT THE FINDING OF THE ASSESSING OFFICER W AS ERRONEOUS, NOT BECAUSE NO INQUIRIES WERE CONDUCTED, BUT BECAUSE TH E FINAL FINDING WAS WRONG AND UNTENABLE. 1. CONCLUSION/PRAYER : [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 30 IN VIEW OF THE AFORESAID SUBMISSIONS ON FACTS AND I N LAW, IT IS SUBMITTED THE VIEW TAKEN BY THE AO, WHILE GRANTING PASSING THE ASSESSMENT ORDER TOOK A REASONABLE AND PLAUSIBLE VI EW WHICH CANNOT BE HELD AS LEGALLY UNSUSTAINABLE AND NOT IN ACCORDANCE WITH LAW AND ALSO BEING PASSED WITHOUT APPLICATION OF MI ND. IT IS THUS PRAYED THAT THE IMPUGNED NOTICE AND ORDE R OF LD. CIT IS NOT VALID AND VOID AB INITIO. IT IS PRAYED THAT ON THREADBARE ANALYSIS OF OPERATI VE PART OF THE IMPUGNED ORDER, AS DISCUSSED HEREIN ABOVE, THIS HON BLE TRIBUNAL BE PLEASED TO HOLD THAT THE LD. CIT HAS NOT CONCLUSIVE LY DECIDED THE ISSUE WITH A CONCLUSION IN ONE WAY OR THE OTHER AND HAS LEFT IT MIDWAY, WHICH COVERS THIS CASE IN FAVOUR OF THE ASS ESSEE BY THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF GLOBUS INFOCUM LTD. VS. CIT (369 ITR 14). IN VIEW OF THE FACTS OF THE CASE AND THE RELEVANT P ROVISIONS OF THE ACT, THIS HONBLE TRIBUNAL BE PLEASED TO HOLD THAT THE A SSUMPTION OF JURISDICTION TO ISSUE NOTICE TO THE ASSESSEE U/S 26 3 OF THE ACT (SUPRA) AND TO SET ASIDE THE ASSESSMENT ORDER AND I N SETTING ASIDE THE ORDER U/S 144A, BY PASSING THE IMPUGNED ORDER U /S 263 OF THE ACT WAS NOT VALID AND THE SAME WAS VOID AB INITIO. HENCE, THE NOTICE ISSUED BY THE LD. CIT U/S 263 OF THE ACT, IMPUGNED ORDER WITHOUT ANY CONCLUSIVE FINDINGS, SETTING ASIDE AND REVISING THE ASSESSMENT ORDER TO BE REFRAMED DE NOVO AND SETTING ASIDE THE ORDER U/S 144A AND ALL SUBSEQUENT PROCEEDINGS CONDUCTED AND ORDERS , IF ANY, PASSED IN PURSUANCE THERETO DESERVE TO BE QUASHED. CASE LAWS: IN THE CASE OF CADILA PHARMACEUTICALS LTD V PR CIT. AHMEDABAD HON'BLE TRIBUNAL AHEMEDABAD BENCH HELD THAT: PARA 4.1. IN THE LIGHT OF AFOREMENTIONED JUDICIAL PRONOUNCEME NT, IT CAN BE INFERRED THAT THE ASSESSMENT ORDER IS NOT ERRONEOUS. MOREOVER, IT IS UNDISPUTED FACT THAT THE ASSESSING OFFICER RAISED A SPECIFIC QUERY AND REACHED TO A CONCLUSION THAT METHOD ADOPTED BY THE ASSESSEE HAS NOT CAUSED ANY PREJUDICIAL TO THE REVE NUE SINCE THERE IS NO UNDERSTATEMENT OF CLOSING STOCK. THIS CONCLUSION OF A.O IS NOT ABSURD OR ERRONEOUS. THEREFORE, THE EXERCISE OF JURISDICTION ULS.263 OF THE ACT BY ID. PRO CIT FAILS. THE HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS . CIT REPORTED AT (2000) 243 ITR 83 (SC) HAS HELD THAT THE CIT HAS TO BE SATISFIED OF T WIN CONDITIONS, NAMELY, (I) THE ORDER OF THE A A SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS P REJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT, IF THE ORDER OF THE ITO IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOU S BUT IS PREJUDICIAL TO THE REVENUE, [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 31 RECOURSE CANNOT BE HAD TO S.263(1). PARA 4.2. IT IS NOT POINTED OUT BY THE ID. PR.CIT AS TO WHAT PREJUDICE HAS CAUSED TO THE REVENUE. IN THE ABSENCE OF SPECIFIC FINDING BY THE ITA NO.11901AHD12015 CADILA PHARMACEUTICALS LTD. VS. PR.CIT ASST. YEAR- 2009-10 - 10 -LD.PR.CIT, WE CANNOT CONFIRM HIS ORDER REVISING THE ASSESSMENT ORDER. THEREFORE, IN OUR CONSIDERED VIEW TWIN CONDITIONS AS LAID DOWN IN SECTION 263 OF THE ACT, I. E. ORDER BEING ERRONEOUS SO FAR IT IS PREJUDICIAL TO THE INTEREST OF REVENUE ARE NOT SATISFIED. UNDER THESE FACTS, WE AR E UNABLE TO SUSTAIN THE FINDINGS OF ID. PRO CIT, SAME ARE HEREBY QUASHED. THEREFORE, TH E IMPUGNED ORDER IS SET ASIDE AND QUASHED. THUS, GROU NDS RAISED IN THE APPEAL ARE ALLOWED. IN THE CASE OF MADHUSUDAN INDUSTRIES LTD. V. CIT AH MEDABAD-II HON'BLE TRIBUNAL AHMEDABAD BENCH HAS HELD THAT 6.1. WE FIND THAT LD.CIT HAS NOT CONSIDERED THESE S UBMISSIONS OF THE ASSESSEE AND HAS NOT ADVERTED TO THE SAME. IT IS A SETTLED PROPOSITI ON OF LAW THAT PROVISIONS OF SECTION 263 OF THE ACT CAN BE INVOKED BY THE COMMISSIONER IF H E FOUND FROM THE RECORDS THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL I TA NO.853/AHD/2013 MADHUSUDAN INDUSTRIES LTD. VS. CIT-II ASST.YEAR - 2008-09 TO T HE INTEREST OF THE REVENUE. IN THE PRESENT CASE, THE ASSESSEE HAS EXPLAINED TO THE LD. CIT THAT THE ASSESSEE-COMPANY HAS BEEN CONTINUOUSLY TREATING THE INTEREST INCOME AS ' INCOME FROM BUSINESS'. IT WAS ALSO SUBMITTED ON THIS ASPECT THAT THE AO HAS MADE ENQUI RY AND IN RESPONSE TO THE QUERY OF THE AO, A DETAILED REPLY WAS SUBMITTED AND THE AO O N THE BASIS OF REPLY TREATED AS THE 'INTEREST INCOME' AS 'BUSINESS INCOME' AS HAS BEEN DONE IN EARLIER YEARS. THIS FACT IS BORNE OUT OF THE RECORDS THAT THE REPLY WAS SUBMITT ED BY THE ASSESSEE- COMPANY SUBMITTING THEREIN THE DETAILS OF LOANS AND ADVANCE S AND INTEREST INCOME RECEIVED FROM SUCH LOANS AND ADVANCES TREATED AS BUSINESS IN COME OF THE COMPANY. THE CIT HAS NOT APPLIED HIS MIND ON THE SUBMISSIONS MADE BY THE ASSESSEE-COMPANY. THE HON'BLE APEX COURT IN THE CASE OF CIT VS. M/S.EXCEL INDUSTRIES LTD . HAS FOLLOWED THE DECISION OF THE PRIVY COUNSEL REPORTED AT 1926 AC 1 55 (PC IN THE CASE OF HOYSTEAD VS. COMMISSIONER OF TAXATION, WHEREIN IT WAS HELD A S UNDER:- 'PARTIES ARE NOT PERMITTED TO BEGIN FRESH LITIGATIO N BECAUSE OF NEW VIEWS THEY MAY ENTERTAIN OF THE LAW OF THE CASE, OR NEW VERSIONS W HICH THEY PRESENT AS TO WHAT SHOULD BE A PROPER APPREHENSION BY THE COURT OF THE LEGAL RESULT EITHER OF THE CONSTRUCTION OF THE DOCUMENTS OR THE WEIGHT OF CERTAIN CIRCUMSTANCE S. IF THIS WERE PERMITTED, LITIGATION WOULD HAVE NO END, EXCEPT WHEN LEGAL ING ENUITY IS EXHAUSTED. IT IS A PRINCIPLE OF LAW THAT THIS CANNOT BE PERMITTED AND THERE IS ABUNDANT AUTHORITY REITERATING THAT PRINCIPLE. THIRDLY, THE SAME PRINC IPLE, NAMELY, THAT OF SETTING TO REST RIGHTS OF LITIGANTS, APPLIES TO THE CASE WHERE A PO INT, FUNDAMENTAL TO THE DECISION, TAKEN OR ASSUMED BY THE PLAINTIFF AND TRAVERSABLE B Y THE DEFENDANT, HAS NOT BEEN TRAVERSED. IN THAT CASE ALSO A DEFENDANT IS BOUND B Y THE JUDGMENT, ALTHOUGH IT MAY BE TRUE ENOUGH THAT SUBSEQUENT LIGHT OR INGENUITY MIGH T SUGGEST SOME TRAVERSE WHICH HAD NOT BEEN TAKEN.' [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 32 6.2. IN THE PRESENT CASE, THE REVENUE HAS BEEN ACCE PTING THE CLAIM OF THE ASSESSEE, THE INCOME EARNED BY WAY OF INTEREST INCOME AS A BUSINE SS INCOME. IT IS NOT STATED BY THE LD.CIT AS TO HOW THE STAND TAKEN BY THE REVENUE FOR EARLIER YEARS WAS NOT CORRECT AND THE AO TAKING A CONSISTENT VIEW AND ORDER SO PASSED WAS ERRONEOUS. WE FIND THAT LD.CIT HAS NOT EXERCISED HIS JURISDICTION U/S.263 O F THE ACT IN ACCORDANCE WITH THE SETTLED PRINCIPLE OF LAW. LD.CIT HAS FAILED TO ITA NO.853/AHD/2013 MADHUSUDAN INDUSTRIES LTD. VS. CIT-II ASST.YEAR - 2008-09 CONS IDER THE SUBMISSIONS OF THE ASSESSEE ON BOTH THE ASPECTS AND HAS MERELY BASED I TS ORDER ON THE BASIS THAT THE AO HAS NOT MADE ANY ENQUIRY. HOWEVER, IT IS TRANSPIRED FROM THE RECORDS THAT THE AO HAS, IN FACT, MADE ENQUIRY AND ISSUED QUESTIONNAIRE TO T HE ASSESSEE AND IN RESPONSE TO THE QUESTIONNAIRE, THE ASSESSEE HAS SUBMITTED THAT THE INTEREST INCOME HAS BEEN TREATED AS 'BUSINESS INCOME' THROUGH OUT WHICH WAS ACCEPTED BY THE AO. THE HON'BLE DELHI HIGH COURT IN THE CASE OF ITO VS. D.G. HOUSING PROJECTS LTD .(SUPRA) EXAMINED THE ENTIRE LAW ON THIS ISSUE, WHEREIN THE HON'BLE HIGH COURT HAS HELD 'A DISTINCTION MUST BE DRAWN IN THE CASES WHERE THE AO DOES NOT CONDUCT AN ENQUIRY; AS LACK OF ENQUIRY BY ITSELF RENDERS THE ORDER BEING ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF THE REVENUE AND CASES WHERE THE ASSESSING OFFICER CONDU CTS ENQUIRY BUT FINDING RECORDED IS ERRONEOUS AND WHICH IS ALSO PREJUDICIAL TO THE I NTEREST OF THE REVENUE. IN LATTER CASES, THE CIT HAS TO EXAMINE THE ORDER OF THE ASSE SSING OFFICER ON MERITS OR THE DECISION TAKEN BY THE ASSESSING OFFICER ON MERITS A ND THEN HOLD AND FORM AN OPINION ON MERITS THAT THE ORDER PASSED BY THE ASSESSING OF FICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THE SECOND SET O F CASES, CIT CANNOT DIRECT THE ASSESSING OFFICER TO CONDUCT FURTHER ENQUIRY TO VER IFY AND FIND OUT WHETHER THE ORDER PASSED IS ERRONEOUS OR NOT'. SIMILAR VIEW HAS BEEN EXPRESSED BY THE HON'BLE DELHI HIGH COURT IN A RECENT DECISION RENDERED IN THE CAS E OF DIRECTOR OF INCOME-TAX VS. JYOTI FOUNDATION REPORTED AT (2013) 357 ITR 388 (DELHI). THE HON'BL E APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT (200) 243 ITR 83 (SC) HAS HELD THAT THE CIT HAS TO BE SATISFIED OF TWIN CONDITIONS, NAM ELY, (I) THE ORDER OF THE AO SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDIC IAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT, IF THE ORDER OF THE ITO IS E RRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIA L TO THE REVENUE, RECOURSE CANNOT BE HAD TO S. 263(1) . IN THE PRESENT CASE, THE REVENUE HAS FAILED TO DE MONSTRATE THAT THESE TWO CONDITIONS ARE ITA NO.853/AHD/2013 MADHUSUDAN I NDUSTRIES LTD. VS. CIT-II ASST.YEAR - 2008-09 SATISFIED. THEREFORE, IN OUR CO NSIDERED VIEW, THERE WAS NO OCCASION TO INVOKE THE PROVISIONS OF SECTION 263 OF THE ACT. THE LD.CIT IS NOT JUSTIFIED IN EXERCISING REVISONARY JURISDICTION UNDER THE FAC TS AND CIRCUMSTANCES OF THE PRESENT CASE. THE CASE LAWS RELIED UPON BY THE REVENUE WOUL D NOT APPLY ON THE FACTS OF THE PRESENT CASE. AS IN THIS CASE, THE ASSESSEE HAS BEE N CONSISTENTLY CLAIMING THE INCOME EARNED BY WAY OF INTEREST AS BUSINESS INCOME, THE A O HAS MADE ENQUIRY BY WAY OF QUESTIONNAIRE AND ASSESSEE HAS GIVEN REPLY THEREOF. THE AO HAS APPLIED HIS MIND UNDER THE FACTS AND CIRCUMSTANCES, THEREFORE THE AS SESSMENT ORDER IS NOT VITIATED ON THE GROUND THAT THE ORDER IS ERRONEOUS AND PREJUDIC IAL TO THE INTERESTS OF THE REVENUE, [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 33 BECAUSE NO ENQUIRY HAS BEEN DONE. THEREFORE, THE IM PUGNED ORDER IS HEREBY QUASHED BEING UNJUSTIFIED. IN THE CASE OF PR. CIT VS. NARAYAN BALMUKUND DUBEY (2017) 30 ITJ 335(MP) HON'BLE JURISDICTIONAL HIGH C OURT HELD THAT PARA 7. THE AFORESAID FINDING OF FACTS ARRIVED AT B YE' ESTABLISHES THAT THERE IS A PROPER ENQUIRY CONDUCTED ASSESSING OFFICER AND IT IS NOT A CASE WHERE NO ENQUIRY A CONDUCTED BY THE ASSESSING OFFICER. NO T ONLY THIS, THE ASSESSEE HAS FURNISHED ALL THE REQUISITE INFORMATIO N TO THE INCOME TAX OFFICER AND CONSIDERING ALL THE FACTS, THE ASSESSME NT WAS COMPLETED. I) PARA 8. THIS COURT IN THE CASE OF COMMISSIONER, INCOME TAX VS. RATLAM COAL ASH CO., REPORTED IN 171 ITR 141 OF MADHYA PRA DESH IN PARAGRAPH NOS.2 AND 3 HAS HELD AS UNDER:- 2. THE MATERIAL FAC TS GIVING RISE TO THIS REFERENCE, BRIEFLY, ARE AS FOLLOWS: A ON EXAMINATION OF THE INCOME-TAX RECORD OF THE ASSESSEE, THE COMMISSIONER OF INCOME-TAX FOU ND THAT IN THE RETURN FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 1976- 77, THE ASSESSEE HAD SHOWN A TOTAL INCOME OF RS. 26,324. THE COMMISSIONE R OF INCOME-TAX NOTED THAT AS AGAINST THE INCOME SHOWN IN THE RETURN, THE INCOME TAX OFFICER FRAMED AN ASSESSMENT ON A TOTAL INCOME OF RS. 35,000 JUST TWO DAYS AFTER THE RETURN WAS FILED, WITHOUT ASCERTAINING AS TO HOW THE AMOUNT OF TOTAL INCOME WAS ARRIVED AT. THE COMMISSIONER OF INCOME-TAX CONSIDERED THAT AS THE INCOME-TAX OFFICER FAILED TO MAKE PROPER ENQUIRY BOTH AS REGARDS THE RECEIPT OF RS. 73,500 AND THE EXPENSES OF RS. 44,873 SHOWN BY THE ASSESSEE, THE ORDER PASSED BY THE INCOME-TAX OFFICER WAS PREJUDIC IAL TO THE INTERESTS OF THE REVENUE. THE COMMISSIONER OF INCOME-TAX ACCORDINGLY ISSUED A NOTICE TO THE ASSESSEE UNDER SEC 'ON 263 0 (HEREINAFTER REFERRED TO ASSESSEE APP EARED BEFORE THE COMMISSIONER A ~E ED THA THE ORDER OF THE INCO E- ~ E ELD 0 BE ERRONEOUS AND REJU . . - E TERES S OF THE REVENUE AS TO CONFER ' TISAIC 'ON ON HE COMMISSIONER OF INCOME-TAX TO PASS AN ORDER UNDER SECTION 263 OF THE ACT. IT WAS CONTENDED THAT ALL THE DETAILS WERE FURNISHED AND THE RELEVANT DOCUMENTS WERE PRODUCED BY THE ASSESSEE AT THE TIME OF ASSESSMENT, THAT THE BOOKS OF ACCOUNT WERE ALSO PRODUCED AND THAT THE INCOME TAX OFFICER HAD PASSED THE ORDER OF ASSESSMENT AFTER PROPER ENQUIRY AND AFTER APPLICATION OF HIS MIND. THE COMMISSIONER OF INCOME TAX, AFTER TAKING INTO CONSIDERATION THE EXPLANATION OF THE ASSESSEE, HELD THAT THE INCOME-TAX OFFICER HAD FRAMED THE ASSESSMENT IN A HURRY, WITHOUT ANY PROPER ENQUIRY AND AS SUCH IT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE COMMISSIONER OF INCOME-TAX, THEREFORE, SET ASIDE THE ORDER PASSED BY THE INCOME-TAX OFFICER AND DIRECTED THE I NCOME-TAX OFFICER TO MAKE A FRESH ASSESSMENT ACCORDING TO LAW. AGGRIEVED BY THE ORDER PASSED BY THE COMMISSIO NER OF INCOME- TAX, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE TR IBUNAL. THE TRIBUNAL HELD THAT THE COMMISSIONER OF INCOME-TAX, IN HIS ORDER, HAD FAILED TO SPECIFY AS TO HOW THE ORDER PASSED BY THE INCOME-TAX OFFICER COULD BE HELD TO BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE TRIBUNAL FURTHER HELD THAT THE PROCEEDINGS UNDER SE CTION 263 OF THE ACT COULD NOT BE HELD TO HAVE BEEN RIGHTLY INITIATED. THE TRIBUNAL, THEREFOR E, ALLOWED THE APPEAL PREFERRED BY THE [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 34 ASSESSEE. AGGRIEVED BY THE ORDER PASSED BY THE TRIB UNAL, THE REVENUE SUBMITTED AN APPLICATION FOR MAKING A REFERENCE BUT THAT APPLICATION WAS REJECTED. THE RE VENUE THEREUPON SUBMITTED AN APPLICATION UNDER SECTION 256(2) OF THE ACT BEFORE THIS COURT WHICH WAS ALLOWED. THAT IS HOW THE AFORESAID QUESTION OF LAW HAS BEEN REFERRED TO THIS COURT FOR ITS OPINION. 3. HAVING HEARD LEARNED COUNSEL FOR THE PARTIES, WE HAVE COME TO THE CONCLUSION THAT THIS REFERENCE MUST BE ANSWERED IN THE AFFIRMATIVE AND I N FAVOUR OF THE ASSESSEE. IT IS WELL SETTLED THAT WHERE THE INCOME-TAX OFFICER MADE THE ASSESSMENT IN UNDUE HURRY, ACCEPTING WHAT THE ASSESSEE STATED IN THE RETURN WITHOUT MAKI NG ANY ENQUIRIES, IN THE CIRCUMSTANCES OF THE CASE, THE COMMISSIONER WOULD BE JUSTIFIED IN HO LDING THE ORDER OF THE INCOME-TAX OFFICER TO BE ERRONEOUS. IN THE INSTANT CASE, HOWE VER, TRIBUNAL HAS FOUND THAT THE ASSESSEE HAD FURNISHED ALL THE REQUISITE INFORMATI ON AND THAT THE INCOME TAX OFFICER CONSIDERING ALL THE FACTS HAD COMPLETED THE ASSESSM ENT. THE TRIBUNAL FURTHER HELD THAT IN THE CIRCUMSTANCES OF THE CASE, IT COULD NOT BE HELD THAT THE INCOME TAX OFFICER HAD MADE THE ASSESSMENT WITHOUT MAKING PROPER ENQUIRIES. IN VIEW OF THESE FINDING FINDINGS, THE TRIBUNAL, IN OUR OPINION, WAS JUSTIFIED IN LAW IN REVERSING THE ORDER PASSED BY T HE COMMISSIONER IN THE CASE OF DIRECTOR OF INCOME TAX V JYOTI FOUND ATION [(2013) 357 ITR 355 (DELHI)] HON'BLE COURT HELD THAT PARA 5. IN THE PRESENT CASE, INQUIRIES WERE CERTAINLY CONDU CTED BY THE ASSESSING OFFICER. IT IS NOT A CASE OF NO INQUIRY. THE ORDER UNDER SECTION 263 ITSELF RECO RDS THAT THE DIRECTOR FELT THAT THE INQUIRIES WERE NOT SUFFI CIENT AND FURTHER INQUIRIES OR DETAILS SHOULD HAVE BEEN CALLED. HOWEVER, IN SUCH CASES, AS OBSERVED IN THE CASE OF DG HOUSING PROJECTS LIMITED (SUPRA), THE INQUIRY SHOUL D HAVE BEEN CONDUCTED BY THE COMMISSIONER OR DIRECTOR HIMSELF TO RECORD THE FINDING THAT THE ASS ESSMENT ORDER WAS ERRONEOUS. HE SHOULD NOT HAVE SET ASIDE THE ORD ER AN DIRECTED THE ASSESSING OFFICER TO CONDUCT THE SAID INQUIRY. II) IN THE CASE OF COMMISSIONER OF INCOME TAX V RATLAM COAL ASH CO J(1988) 171 ITR 141 (M.P)] HON'BLE JURISDICTIONAL HIGH COURT HELD THAT PARA3. HAVING HEARD THE LEARNED COUNSEL FOR THE PARTIES, W E HAVE COME TO THE CONCLUSION THAT THIS REFERENCE MUST BE ANSWERED IN THE AFFIRMATIVE AND IN FAVOUR OF THE ASSESSEE. IT IS WELL SETTLED THAT WHERE THE ITO MADE THE ASSESSMENT IN UNDER HURRY, ACCEPTING WHAT THE ASSESSEE STATED IN THE RETURN WI THOUT MAKING ANY ENQUIRIES IN THE CIRCUMSTANCES OF THE CASE, THE COMMISSIONER WOULD B E JUSTIFIED IN HOLDING THE ORDER OF THE ITO TO THE ERRONEOUS. IN THE INSTANT CASE, H OWEVER, THE TRIBUNAL HAS FOUND THAT THE ASSESSEE HAD FURNISHED ALL THE REQUISITE INFORM ATION AND THAT THE ITO CONSIDERING ALL THE FACTS AND COMPLETED THE ASSESSMENT. THE TRI BUNAL FURTHER HELD THAT IN THE CIRCUMSTANCES OF THE CASE, IT COULD NOT BE HELD THA T THE ITO HAD MADE ASSESSMENT WITHOUT MAKING PROPER ENQUIRIES. IN VIEW OF THESE F INDING, THE TRIBUNAL IN OUR OPINION, WAS JUSTIFIED IN LAW IN REVERSING THE ORDE R PASSED BY THE COMMISSIONER. [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 35 IN THE CASE OF COMMISSIONER OF INCOME TAX VS. MEHRO TRA BROTHERS (2004) 270 ITR 157 (MP) HON'BLE JURISDICTIONAL HIGH COURT HELD THA T PARA WE HAVE CONSIDERED THE CITATIONS RELIED ON BY BOTH THE PARTIES AND CONCLUDED THAT WHEN THE ASSESSEE HAS FURNISHED REQUISITE INFO RMATION AND THE INCOME-TAX OFFICER HAS .CONSIDERED THE RECORDS BEFORE HIM AND COMPLETE D THE ASSESSMENT AFTER CONSIDERING THE EVIDENCE FILED AND AFTER HIS SATISF ACTION ABOUT THE GENUINENESS OF CASH CREDITS, THE ORDER OF REVISION UNDER SECTION 263 ON VAGUE GROUND THAT THE ASSESSING OFFICER DID NOT MAKE PROPER ENQUIRY IS NOT VALID ( CIT V. RATLAM COAL ASH CO . [1988] 171 ITR 141 (MP)). THE ASSESSEE FURNISHED GIR/PAN N UMBER, ADDRESS, CONFIRMATION FROM THE CREDITORS, THE ASSESSEE HAS DISCHARGED THE BURDEN TO PROVE THE GENUINENESS OF PARTIES AND TRANSACTION IN ADDITION TO THE CAPAC ITY SATISFACTORILY AS SUCH THERE IS NO GROUND FOR ADDITION (ADDL. CIT V. HANUMAN AGARWAL [1985] 151 ITR 150 (PATNA)). IN THIS REGARD THE DEPARTMENT ALSO HAS NOT BROUGHT ANY MATERIAL TO DISPROVE THE GENUINENESS OF THE PARTIES, CAPACITY OF THE LENDERS AND TRANSACTIONS ON THE BASIS OF COGENT FACTS ON RECORD. THE HON'BLE SUPREME COURT I N THE CASE OF CIT V. ORISSA CORPORATION P. LTD . [1986] 159 ITR 78 (HEADNOTE) : 'HELD, THAT IN THI S CASE THE RESPONDENT HAD GIVEN THE NAMES AND ADDRESSES OF THE ALLEGED CREDITORS. IT WAS IN THE KNOWLEDGE OF THE REVENUE THAT THE SAID CREDITORS WE RE INCOME-TAX ASSESSEES. THEIR INDEX NUMBERS WERE IN THE FILE OF THE REVENUE. THE REVENUE APART FROM ISSUING NOTICES UNDER SECTION 131 AT THE INSTANCE OF THE RESPONDENT, DID NOT PURSUE THE MATTER FURTHER. THE REVENUE DID NOT EXAMINE THE SOURCE OF INCOME OF THE SAID ALLEGED CREDITORS TO FIND OUT WHETHER THEY WERE CREDIT WORT HY. THERE WAS NO EFFORT MADE TO PURSUE THE SO CALLED ALLEGED CREDITORS. IN THOSE CI RCUMSTANCES, THE RESPONDENT COULD NOT DO ANYTHING FURTHER. IN THE PREMISES, IF THE TR IBUNAL CAME TO THE CONCLUSION THAT THE RESPONDENT HAD DISCHARGED THE BURDEN THAT LAY O N IT, THEN IT COULD NOT BE SAID THAT SUCH A CONCLUSION WAS UNREASONABLE OR PERVERSE OR B ASED ON NO EVIDENCE.' IN THE CASE OF COMMISSIONER OF INCOME TAX , DELHI V S. INTERNATIONAL TRAVEL HOUSE LTD. HON'BLE COURT HELD THAT PARA 19. IF THE OBTAINING FACTUAL MATRIX IS FESTED ON THE ANVIL OF THE AFORESAID PRONOUNCEMENT OF LAW. IT IS QUITE CLEAR THAT THE CO MMISSIONER HAS REALLY MADE AN EFFORT TO CAUSE A ROUTINE INQUIRY WITH REGARD TO TH E MATTER THAT HAD ALREADY BEEN CONCLUDED. THE COMMISSIONER, AS IT APPEARS, HAS THO UGHT THAT HE HAS THE AUTHORITY TO BEGIN A FRESH LITIGATION BECAUSE OF THE VIEW ENTERT AINED BY HIM. THE AFORESAID INEXHAUSTIBLE APPROACH IS NOT PERMISSIBLE. HE AS RE QUIRED TO ARRIVE AT A DEFINITE CONCLUSION BUT HE HAD NOT DONE SO. IN THE CASE OF INCOME TAX OFFICER V. D.G. HOUSING P ROJECTS LTD. (2012) 343 ITR 329 (DELHI) HON'BLE COURT HELD THAT . IN THE PRESENT CASE, THE FINDINGS RECORDED BY THE TRIBUNAL ARE CORRECT AS THE CIT HAS NOT GONE INTO AND HAS NOT GIVEN ANY REASON FOR OBSE RVING THAT THE ORDER PASSED BY THE [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 36 ASSESSING OFFICER WAS ERRONEOUS. THE FINDING RECORD ED BY THE CIT IS THAT 'ORDER PASSED BY THE ASSESSING OFFICER MAY BE ERRONEOUS'. THE CIT HAD DOUBTS ABOUT THE VALUATION AND SALE CONSIDERATION RECEIVED BUT THE C IT SHOULD HAVE EXAMINED THE SAID ASPECT HIMSELF AND GIVEN A FINDING THAT THE ORDER P ASSED BY THE ASSESSING OFFICER WAS ERRONEOUS. HE CAME TO THE CONCLUSION AND FINDING TH AT THE ASSESSING OFFICER HAD EXAMINED THE SAID ASPECT AND ACCEPTED THE RESPONDEN TS COMPUTATION FIGURES BUT HE HAD RESERVATIONS. THE CIT IN THE ORDER HAS RECORDED THAT THE CONSIDERATION RECEIVABLE WAS EXAMINED BY THE ASSESSING OFFICER BUT WAS NOT P ROPERLY EXAMINED AND THEREFORE THE ASSESSMENT ORDER IS 'ERRONEOUS'. THE SAID FINDI NG WILL BE CORRECT, IF THE CIT HAD EXAMINED AND VERIFIED THE SAID TRANSACTION HIMSELF AND GIVEN A FINDING ON MERITS. AS HELD ABOVE, A DISTINCTION MUST BE DRAWN IN THE CASE S WHERE THE ASSESSING OFFICER DOES NOT CONDUCT AN ENQUIRY; AS LACK OF ENQUIRY BY ITSEL F RENDERS THE ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND CASES WHERE THE ASSESSING OFFICER CONDUCTS ENQUIRY BUT FINDING RECORDED IS ERRONEOUS AND WHICH IS ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN LATTER CASES, THE C IT HAS TO EXAMINE THE ORDER OF THE ASSESSING OFFICER ON MERITS OR THE DECISION TAKEN B Y THE ASSESSING OFFICER ON MERITS AND THEN HOLD AND FORM AN OPINION ON MERITS THAT TH E ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF THE REVENUE. IN THE SECOND SET OF CASES, CIT CANNOT DIRECT THE ASSESSING OFFICER TO C ONDUCT FURTHER ENQUIRY TO VERIFY AND FIND OUT WHETHER THE ORDER PASSED IS ERRONEOUS OR N OT. M/S AMIRA PURE FOODS PVT. LTD. V PR. CIT CENTRAL GURGAON HON'BLE TRIBUNAL HELD THAT THE LD PCIT HAS NOT REFERRED TO EXPLANATION 2 OF SECTION 263 OF THE ACT WHICH HAS BEEN INSERTED WITH EFFECT FROM 01.06.2015 HOWEVER W E AGREE WITH THE FINDING OF THE COORDINATE BENCH IN THE CASE OF NARAYAN TATU RANE ( SUPRA), WHEREIN IT HAS BEEN HELD THAT EXPLANATION CANNOT SAID TO HAVE OVERRIDDEN THE LAW AS INTERPRETED BY THE VARIOUS HIGH COURTS, WHERE THE HIGH COURTS HAVE HELD THAT B EFORE REACHING A CONCLUSION THAT THE ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, THE COMMISSIONER HIMSELF HAS TO UNDERTAKE SOME ENQUIRY TO ESTABLISH THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. IN THE CASE OF NARAYAN RANE A DOUBT IS ALSO EXPRESSED REGARDING THE APPLIC ABILITY OF EXPLANATION 2, WHICH WAS INSERTED BY FINANCE ACT 2015 W.E.F. 01.06.2015, THE BENCH ALSO OBSERVED TH AT IF THE EXPLANATION IS INTERPRETED TO HAVE OVERRIDDEN T HE LAW AS LAID DOWN BY VARIOUS HIGH COURTS, THEN THE SAME WOULD EMPOWER THE PR. CI T TO FIND FAULT WITH EACH AND EVERY ASSESSMENT ORDER AND ALSO TO FORCE THE AO TO CONDUCT ENQUIRIES IN THE MANNER PREFERRED BY THE PR. CIT, THUS PREJUDICING ITA NO. 3205/DEL/2017 THE MIND OF THE AO, HOWEVER, THE INTENTION OF THE LEGISLATURE BEHIN D THE EXPLANATION COULD NOT HAVE BEEN SO AS THE SAME WOULD LEAD TO UNENDING LITIGATI ON AND NO FINALITY IN THE LEGAL PROCEEDINGS. IN THE CASE OF M/S NARAYAN TATU RANE VS. ITO WARD 27 (1)(1) MUMBAI HON'BLE TRIBUNAL HELD THAT [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 37 THE LAW INTERPRETED BY THE HIGH COURTS MAKES IT CLE AR THAT THE LD PR. CIT, BEFORE HOLDING AN ORDER TO BE ERRONEOUS, SHOULD HAV E CONDUCTED NECESSARY ENQUIRIES OR VERIFICATION IN ORDER TO SHOW THAT THE FINDING GIVEN BY THE ASSESSING OFFICER IS ERRONEOUS, THE LD PR. CIT SHOU LD HAVE SHOWN THAT THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE IN LAW. IN TH E INSTANT CASE, THE LD PR. CIT HAS FAILED TO DO SO AND HAS SIMPLY EXPRESSE D THE VIEW THAT THE ASSESSING OFFICER SHOULD HAVE CONDUCTED ENQUIRY IN A PARTICULAR MANNER AS DESIRED BY HIM. SUCH A COURSE OF ACTION OF THE LD P R. CIT IS NOT IN ACCORDANCE WITH THE MANDATE OF THE PROVISIONS OF SE C. 263 OF THE ACT. THE LD PR. CIT HAS TAKEN SUPPORT OF THE NEWLY INSERTED EXPLANATION 2(A) TO SEC. 263 OF THE ACT. EVEN THOUGH THERE IS A DOUBT AS TO WHETHER THE SAID EXPLANATION, WHICH WAS INSERTED BY FINANCE ACT 2015 W.E.F. 1.4.2015, WOULD BE APPLICABLE TO THE YEAR UNDER CONSIDERATION , YET WE ARE OF THE VIEW THAT THE SAID EXPLANATION CANNOT BE SAID TO HA VE OVER RIDDEN THE LAW INTERPRETED BY HONBLE DELHI HIGH COURT, REFERRED A BOVE. IF THAT BE THE CASE, THEN THE LD PR. CIT CAN FIND FAULT WITH EACH AND EV ERY ASSESSMENT ORDER, WITHOUT CONDUCTING ANY ENQUIRY OR VERIFICATION IN O RDER TO ESTABLISH THAT THE ASSESSMENT ORDER IS NOT SUSTAINABLE IN LAW AND ORDE R FOR REVISION. HE CAN ALSO FORCE THE AO TO CONDUCT THE ENQUIRIES IN THE MANNER PREFERRED BY LD PR. CIT, THUS PREJUDICING THE INDEPENDENT APPLICATI ON OF MIND OF THE AO. DEFINITELY, THAT COULD NOT BE THE INTENTION OF THE LEGISLATURE IN INSERTING EXPLANATION 2 TO SEC. 263 OF THE ACT, SINCE IT WOUL D LEAD TO UNENDING LITIGATIONS AND THERE WOULD NOT BE ANY POINT OF FIN ALITY IN THE LEGAL PROCEEDINGS. THE HONBLE SUPREME COURT HAS HELD IN THE CASE OF PARASHURAM POTTERY WORKS CO. LTD VS. ITO (1977)(106 ITR 1) THAT THERE MUST BE A POINT OF FINALITY IN ALL LEGAL PROCEEDING S AND THE STALE ISSUES SHOULD NOT BE REACTIVATED BEYOND A PARTICULAR STAGE AND THE 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. 20. FURTHER CLAUSE (A) OF EXPLANATION STATES THAT A N ORDER SHALL BE DEEMED TO BE ERRONEOUS, IF IT HAS BEEN PASSED WITHOUT MAKI NG ENQUIRIES OR VERIFICATION, WHICH SHOULD HAVE BEEN MADE. IN OUR C ONSIDERED VIEW, THIS PROVISION SHALL APPLY, IF THE ORDER HAS BEEN PASSED WITHOUT MAKING ENQUIRIES OR VERIFICATION WHICH A REASONABLE AND PR UDENT OFFICER SHALL HAVE CARRIED OUT IN SUCH CASES, WHICH MEANS THAT THE OPI NION FORMED BY LD PR. CIT CANNOT BE TAKEN AS FINAL ONE, WITHOUT SCRUTINIS ING THE NATURE OF ENQUIRY OR VERIFICATION CARRIED OUT BY THE AO VIS--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 O R VERIFICATION, WHICH A REASONABLE AND PRUDENT OFFICER WOULD HAVE CARRIED O UT OR NOT. IT DOES NOT AUTHORISE OR GIVE UNFETTERED POWERS TO THE LD PR. C IT TO REVISE EACH AND EVERY ORDER, IF IN HIS OPINION, THE SAME HAS BEEN P ASSED WITHOUT MAKING ENQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MA DE. IN OUR VIEW, IT IS [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 38 THE RESPONSIBILITY OF THE LD PR. CIT TO SHOW THAT T HE ENQUIRIES OR VERIFICATION CONDUCTED BY THE AO WAS NOT IN ACCORDANCE WITH THE ENQUIRIES OR VERIFICATION THAT WOULD HAVE BEEN CARRIED OUT BY A PRUDENT OFFICER. HENCE, IN OUR VIEW, THE QUESTION AS TO WHETHER THE AMENDM ENT BROUGHT IN BY WAY OF EXPLANATION 2(A) SHALL HAVE RETROSPECTIVE OR PRO SPECTIVE APPLICATION SHALL NOT BE RELEVANT. SUBMISSIONS OF THE REVENUE THE ASSESSMENT, IN THIS CASE WAS COMPLETED U/S 143( 3) OF LT. ACT 1961, ON 24/03/2015 AND THE DIRECTION OF JCIT U/S L44A OF IT ACT ARE AL SO DATED 24.03.2015. THE CIT-I, INDORE, ON PERUSAL OF RECORD HAD CONSIDERED THE ASSESSMENT SO PASSED BY A.O. AS ERRONEOUS AND PREJU DICIAL TO THE INTEREST OF REVENUE AS THE A.O. HAS FAILED TO CARRY OUT NECE SSARY AND REQUIRED INQUIRIES. THE BASIS ON WHICH THE ASSESSMENT HAS BEEN FOUND ER RONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. (L) IN A SURVEY CONDUCTED BY THE DEPARTMENT UNDER S ECTION 133 A OF IT ACT, 1961, THE APPELLANT HAD MADE DISCLOSURE OF RS. 23.6 1 WHICH WAS REDUCED TO 17.40 CRORES AS PER AFFIDAVIT FILED ON 19.01.201 2 WHICH IS FILED AFTER 4 MONTHS OF SURVEY DATE. THIS REVISION WAS ALLOWED WI THOUT CONDUCTING PROPER INQUIRES AND WITHOUT APPLICATION OF MIND. (2) THE DEDUCTION CLAIMED U/S 35AC OF IT ACT WAS A CCEPTED WITHOUT CONDUCTING REQUIRED INQUIRIES AS CAN BE SEEN FROM THE ASSESSME NT ORDER. (3) THE A.O. HAS FAILED TO APPRECIATE AND EXAMINE T HE FACT THAT ONE OF THE PARTNER, SH. VINOD BHANDARI, HAS BEEN MAIN ACCUSED IN VYAPAM SCAM AND THERE ARE ALLEGATION OF EARNING OF CRORES OF RUPEES IN THE SCAM. THEREFORE, IT WAS IMPERATIVE AND MANDATED ON THE PART OF A.O. TO EXAMINE THE SOURCE OF UNACCOUNTED FOUNDS UTILIZED TO CLAIM DEDUCTION U/S 35 AC OF IT ACT 1961. (4) THE A.O. HAD FAILED EVEN TO CONSIDER AND EXAMIN E THE DOCUMENTS IMPOUNDED DURING SURVEY U/S 133A OF IT ACT WHICH IS EVIDENT FROM THE FACT THAT AN AMOUNT OF RS. 1,96,900/- ON ACCOUNT OF ANGIOGRAPHY WAS NOT AT ALL TAKEN IN TO ACCOUNT WHILE PASSING THE ORDER. (5) THE A.O. HAS FAILED TO MAKE ANALYSIS OF YEAR WI SE INVESTMENT. FURTHER THE A.O. HAS FAILED TO NOTE AND BRING ON RECORD THA T AFTER THE SURRENDERED INCOME AND DEDUCTION U/S 35AC ARE EXCLUDED, THERE W ILL BE NET LOSS OF 5.52 CRORES AS ANALYZED B CIT AT PAGE 2 OF ORDER U/S 263 OF IT ACT. THE GROSS MANIPULATION IN THE PROFITS AFTER AND BEFORE SURVEY WAS LOST SIGHT BY A.O. WHICH NECESSITATED CIT -1 TO INVOKE SECTION 26 3 OF IT ACT. (6) I REQUEST HON'BLE MEMBERS TO TAKE NOTE OF QUERI ES RAISED AT 1 TO K OF SHOW CAUSE WHICH MANDATED THE A.O. TO CONDUCT PROPER INQ UIRIES BEFORE [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 39 COMPLETING THE ASSESSMENT ORDER. (7) IT IS ALSO BORNE OUT OF RECORD THAT THE A.O. HA S SIMPLY ACCEPTED THE REPLY OF APPELLANT DATED 23.02.2012 WITHOUT VERIFYING AND FURTHER EXAMINING THE CONTENTIONS RAISED THEREIN. (8) THE REBUTTAL OF A.O. OF THE CONTENTS OF AFFIDAV ITS DATED 19.01.2012 RETRACTING THE PART OF SURRENDERED INCOME NEEDS ATT ENTION OF HON'BLE MEMBERS WHICH IS DULY REPRODUCED BY CIT-L AT PAGE N O 12 (PARA 7.2) OF ORDER U/S 263 OF IT ACT, WHICH MAKES THE ASSESSMENT ORDER AS SELF CONTRADICTORY. THE A.O. HAS LOGICALLY AND THROUGH C OGENT REASONS REBUTTED THE PLEA FOR RETRACTION. BUT IN ASSESSMENT ORDER, N O SUCH FINDINGS PLACE. (9) THE A.O. AND JCIT HAVE FAILED TO EXAMINE WHETHE R THE HUNDI LOANS OF RS. 10.43 CRORES WAS REALLY RECEIVED BY THE APPELLA NT DURING CURRENT YEAR. I REQUEST HON'BLE BENCH TO KINDLY TAKE NOTE OF CIT' S FINDING AT PARA 9 (PAGE 15) OF THE ORDER U/S 263 OF IT ACT, BESIDES DETAILED DISCUSSION AT PAGE 16 TO 21 OF THE ORDER. IN VIEW OF ABOVE FACTS BROUGHT OUT IN THE ORDER U/S 263 OF CIT AND FURTHER DETAILED ANALYSIS AND REBUTTAL OF REPLIES OF APPELL ANT, IT IS MORE THAN EVIDENT THAT ASSESSMENT ORDER DATED 24.03.2015 AND DIRECTIONS OF JCIT U/S 144A DATED 24.03.2015 WERE BASED ON NO INQUIRIE S, INADEQUATE INQUIRIES AND NON APPLICATION OF MIND ON THE PART O F BOTH JCIT AND A.O. THE REQUIRED INQUIRIES ARE MANDATED UPON THE A.O. B EFORE THE ASSESSMENT IS FINALIZED AND CLAIMS OF APPELLANTS ARE ADMITTED. THE ASSESSMENT ORDER HAS TO CONTAIN CLEARLY THE FINDINGS OF INQUIRIES. A NUMBER OF DECISIONS OF HON'BLE APEX COURT, HIGH C OURT, AND TRIBUNALS HAVE BEEN RELIED UPON AND THE COPIES OF DECISIONS H AVE BEEN FILED WITH THE HON'BLE BENCH, WHICH SUPPORT THE VIEW OF THE DEPART MENT THAT LACK OF INQUIRY, INADEQUATE INQUIRY, ADMISSION OF CLAIM WIT HOUT SUPPORTING MATERIAL AND NO DISCUSSION IN THE ASSESSMENT ORDER ARE SUFFICIENT AND GOOD REASONS FOR INVOKING SECTION 263 OF IT ACT 196 1 BY THE CIT. THE LIST OF CASES ALONG WITH THE GIST OF DECISIONS REPLIED UPON ARE H EREBY FILED. S. REPORTED CASE LAW NO. 1 MALABAR INDUSTRIAL CO. LTD. VIS COMMISSIONER OF INCOME TAX 243 ITR 83 (SC) 2. SMT. TARADEVI AGGRAWAL VIS COMMISSIONER OF INCO ME TAX 88 ITR 323 (SC) 3 RAMPYARIDEVI SARAOGI VIS COMMISSIONER OF INCOME TAX 67 ITR 84 (SC) COMMISSIONER OF INCOME TAX VIS NAGESH KNITWEARS PVT . LTD 345 ITR 135 4 (DELHI HC) [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 40 5 GEE VEE ENTERPRISES VIS ADDL. COMMISSIONER OF IN COME TAX 99 ITR 375 (DELHI HC) 6 BHUSHAN STEEL LTD. VIS ASSTT. COMMISSIONER OF IN COME TAX IT AT A ~ENCH DELHI COMMISSIONER OF INCOME-TAX V.DEEPAK KUMAR GARG 29 9 ITR 435 (MADHYA 7. PRADESH) COMMISSIONER OF INCOME-TAX V. MAHAVAR TRADERS 220 ITR 167 (MADHYA 8. PRADESH) 9. SMT. RENU GUPTA V. COMMISSIONER OF INCOME-TAX 301 ITR 45 (RAJASTHAN) 10. PT. LASHKARI RAM V. COMMISSIONER OF INCOME-TAX 27 2 ITR 309 (ALLAHABAD) 11 COMMISSIONER OF INCOME-TAX, PATIALA V. HIMACH AL PRADESH 186 TAXMAN 105 (HIMACHAL . FINANCIAL CORPN. PRADESH) COMMISSIONER OF INCOME TAX V/S PRAFULLA C.PANT AND DHARAM 176 TAXMAN 184 12 VEER JJ (UTTRAKHAND) MOFUSSIL WAREHOUSE & TRADING CO. LTD.V/S COMMISSIONER OF 238 ITR 867 (MADRAS) 13 INCOME TAX 14 DURGALAL & CO. VIS COMMISSIONER OF INCOME TAX 220 ITR 456 (D ELHI) 15 COMMISSIONER OF INCOME TAX VIS ACTIVE TRADERS (P) L TD. 214 ITR583 (CALCUTTA) 16 ADD1.COMMISSIONER OF INCOME TAX VIS MUKUR CORPORATI ON III ITR 312 (GUJARAT) 2. FURTHER RELIANCE IS HERE BY PLACED OR FOLLOWIN G DECISIONS OF SUPREME COURT, HIGH COURTS AND TRIBUNAL, THE LIST AND GIST OF DECI SIONS ARE SUBMITTED NOW. 1 CIT V/S AMITABH BACHAN CIVIL APPEAL NO. 5009 OF 2016 2 CIT V/S BHAGWAN DAS 272 ITR 367 (ALLAHABAD) 3 SHUBHLAKSHMI VANIJYA (P) LTD. V/S CIT-1 172 TTJ 721 (KALKATA) 4 JUBLEE COMMOTRADE [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 41 5 NOVAPAN INDIA LTD. VS COLLECTOR OF CENTRAL 3556 OF 1984 ( SC) EXCISE 6 RAJMANDIR ESTATES PVT. LTD. VS PCIT -III GA NO 509 OF2016 (HC) KALKATA 7 (1)P.G. INFRASTRUCTURE & SERVICE PVT. LTD. ITA NO 607 TO 609 (INDORE) (2) S.N. VIJAYWARGIYA (3) PEOPLE'S INTERNATIONAL SERVICE P. LTD. BHOPAL 8 M/S CROMPTON GREAVES VIS CIT -6 MUMBAI IT AT C BENCH MUMBAI NOTE: THE CASE LAWS AT SERIAL NO. 5 AND 8 HAVE BEEN RELIE D UPON FOR INVOKING EXCEPTION/EXEMPTION AND RETROSPECTIVE APPL ICATION OF EXPLANATION 2 TO SECTION 263 OF IT ACT 1961. 3. IN THE CASE OF MALABAR INDUSTRIAL CO. LTD., HON'BLE SUPREME COURT (243 ITR 83- SC) HELD THAT WHERE A.O. HAD ACCEPTED THE ENTRY IN THE STATEMENT OF ACCOUNT IN THE ABSENCE OF SUPPORTING M ATERIAL, WITHOUT MAKING ANY INQUIRY, THE EXERCISE OF JURISDICTION BY CIT UNDER SECTION 263(1) WAS JUSTIFIED. IN THIS CASE THE DAMAGES RECE IVED BY THE APPELLATE IN LIEU OF AGRICULTURE INCOME WAS WRONGLY ALLOWED BY T HE A.O. AS AGRICULTURAL INCOME WHEN THE SAME WAS FINALLY TREATED AS INCOME FROM OTHER SOURCE. THE OPERATIVE PART OF DECISION IS AS UNDER. IN THE INSTANT CASE, THE COMMISSIONER NOTED THAT TH E ITO PASSED THE ORDER OF NIL ASSESSMENT WITHOUT APPLICATION OF MIND . INDEED, THE HIGH COURT RECORDED THE FINDING THAT THE ITO FAILED TO A PPLY HIS MIND TO THE CASE IN ALL PERSPECTIVE AND THE ORDER PASSED BY HIM WAS ERRONEOUS. IT APPEARED THAT THE RESOLUTION PASSED BY THE BOARD OF THE APPELLANT- COMPANY WAS NOT PLACED BEFORE THE ASSESSING OFFICER . THUS, THERE WAS NO MATERIAL TO SUPPORT THE CLAIM OF THE APPELLA NT THAT THE SAID AMOUNT REPRESENTED COMPENSATION FOR LOSS AGRICULTUR AL INCOME. HE ACCEPTED THE ENTRY IN THE STATEMENT OF THE ACCOUNT FILED BY THE APPELLANT IN THE ABSENCE OF ANY SUPPORTING MATERIAL AND WITHOUT MAKING ANY INQUIRY. ON THESE FACTS THE CONCLUSION T HAT THE ORDER OF THE ITO WAS ERRONEOUS WAS IRRESISTIBLE. THEREFORE, THE HIGH COURT HAD RIGHTLY HELD THAT THE EXERCISE OF THE JURISDICTION BY THE COMMISSIONER UNDER SECTION 263(1) WAS JUSTIFIED. IT WAS SHOWN AT ANY STAGE OF THE PROCEEDINGS THAT T HE AMOUNT IN QUESTION WAS FIXED OR QUANTIFIED AS LOSS OF AGRICULTURAL INCOME AND, ADMITTEDLY, IT WAS NOT SO FOUND BY THE TRIBUNAL. THE FURTHER QUESTION WHETHER IT WOULD BE AGRICULTURAL INCOME WITHIN THE MEANING OF SECTION 2 (IA) DID NOT ARISE FOR CONSIDERATION. IT WAS EVIDENT FROM THE ORDER OF THE HIGH COURT THAT THE FINDINGS RECORDED BY THE TR IBUNAL THAT THE [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 42 APPELLANT STOPPED AGRICULTURAL OPERATION IN NOVEMBE R 1982 AND THE RECEIPT UNDER CONSIDERATION DID NOT RELATE TO ANY A GRICULTURAL OPERATION CARRIED ON BY THE APPELLANT, WERE NOT QUESTIONED BE FORE IT THOUGHT THE HIGH COURT WAS NOT CORRECT IN HOLDING THAT THE AMOU NT WAS PAID FOR BREACH OF CONTRACT AS INDEED IT WAS PAID IN MODIFIC ATION/RELAXATION OF THE TERMS OF THE CONTRACT, IT WAS TO BE HELD THAT T HE HIGH COURT WAS JUSTIFIED IN CONCLUDING THAT THE SAID AMOUNT WAS A TAXABLE RECEIPT UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. 4. IN A RECENT DECISION OF HON 'BLE APEX COURT IN T HE CASE SHRI AMITABH BACHAN, (CIVIL APPEAL NO.5009 OF 2016 [ARISING OUT OF S.L.P.(C) NO.11621 OF 2009]) WHILE DEALING WITH ISSUE OF REQU IREMENT OF ISSUING SPECIFIC NOTICE U/S 263 OF LT. ACT, HAS COMPREHENSI VELY DEALT WITH THIS ISSUE OF 'LACK OF INQUIRY' AND 'INADEQUATE INQUIRY' BY THE A.O. AND HELD THAT CIT WAS PERFECTLY JUSTIFIED IN INVOKING SECTIO N 263 OF INCOME TAX ACT WHEN A.O. HAD DROPPED THE INQUIRIES ONCE THE ADDITI ONAL EXPENSES CLAIMED IN THE REVISED ROI WERE WITHDRAWN DESPITE I SSUE OF NOTICE U/S 69C OF INCOME TAX ACT. IT WAS CONTENDED ON BEHALF O F MR. BACHAN THAT THE A.O. HAD TAKEN THE POSSIBLE VIEW AND CIT WAS NOT SU PPOSED TO SUBSTITUTE HIS VIEW PARTICULARLY IN VIEW OF THE FACTS THAT THE ADDITIONAL EXPENSES CLAIMED THROUGH REVISED ROI WERE WITHDRAWN. IT WAS HELD BY THE HON'BLE/ APEX COURT THAT MAKING CLAIM AND SUBSEQUENTLY WITHD RAWING THE SAME GIVES RISE TO NECESSITY OF FURTHER INQUIRY . IN THE INSTANT CASE UNDER CONSIDERATION, THE A.O. HAS OMITTED TO TAKE NOTE OF VITAL FACTS LIKE ABNORMAL INCREASE IN SELL PRICE OF LAND, AGRICULTURE ACTIVIT Y, AGRICULTURAL INCOME, NATURE OF BUSINESS AND LEGALITY OF MAINTAINING TWO PORTFOLIOS AND ALLOWED THE EXEMPTION CLAIMED BY THE APPELLANT WITHOUT APPL ICATION OF MIND. THE GIST OF DECISION OF HON'BLE SUPREME COURT IN THE CA SE OF SHRI AMITABH BACHAN IS AS UNDER:- THERE CAN BE NO DOUBT THAT SO LONG AS THE VIEW TAKE N BY THE ASSESSING OFFICER IS A POSSIBLE VIEW THE SAME OUGHT NOT TO BE INTERFERED WITH BY THE COMMISSIONER UNDER SECTION 263 OF THE ACT MERELY ON THE GROUND THAT THERE IS ANOTHER POSSIBLE VIEW OF THE MATTER. PERMITTING EXERCISE OF REVISIONAL POWER IN A SITUATION WHERE TWO VIEWS ARE P OSSIBLE WOULD REALLY AMOUNT TO CONFERRING SOME KIND OF AN APPELLA TE POWER IN THE REVISIONAL AUTHORITY. THIS IS A COURSE OF ACTION TH AT MUST BE DESISTED FROM. HOWEVER, THE ABOVE IS NOT THE SITUATION IN TH E PRESENT CASE IN VIEW OF THE REASONS STATED BY THE LEARNED CIT ON THE 3 (2000) 243 ITR 83 (SC) 4 (2007) 295 ITR 282 (SC) 22 BASIS OF WHICH THE SAID AUTHORITY FELT THAT THE MATTER NEEDED FURTHER INVESTIGATION, A VIEW WITH WHICH WE WHOLLY AGREE. MAKING A CLAIM WHICH WOULD PRIMA FACI E DISCLOSE THAT THE EXPENSES IN RESPECT OF WHICH DEDUCTION HAS BEEN CLAIMED HAS BEEN INCURRED AND THEREAFTER ABANDONING/WITHDRAWING THE SAME GIVES RISE TO THE NECESSITY OF FURTHER ENQUIRY IN THE INTEREST OF THE REVENUE. THE NOTICE ISSUED UNDER SECTION 69-C OF THE ACT COULD NOT HAVE BEEN SIMPLY DROPPED [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 43 ON THE GROUND THAT THE CLAIM HAS BEEN WITHDRAWN. WE , THEREFORE, ARE OF THE OPINION THAT THE LEARNED CIT WAS PERFECTLY JUSTIFIED IN COMING TO HIS CONCLUSIONS INSOFAR AS THE ISSUE NO. (III) IS CONCE RNED AND IN PASSING THE IMPUGNED ORDER ON THAT BASIS. THE LEARNED TRIBUNAL AS WELL AS THE HIGH COURT, THEREFORE, OUGHT NOT TO HAVE INTERFERED WITH THE SAID CONCLUSION. IN THE LIGHT OF THE DISCUSSIONS THAT HAVE PRECEDED AND FOR THE REASONS ALLUDED WE ARE OF THE OPINION THAT THE PRESENT IS A FIT CASE FOR EXERCISE OF THE SUO MOTU REVISIONAL POWERS OF THE LEARNED CLT UNDER SECTION 263 OF THE ACT. THE ORDER OF THE LEARNED CLT., THEREFORE, IS RESTORED AND THOSE OF THE LEARNED TRIBUNAL DATED 28TH AUGUST, 2007 AND TH E HIGH 23 COURT DATED 7TH AUGUST, 2008 ARE SET ASIDE. THE APPEAL OF THE REVENUE IS ALLOWED. 5. IN THE CASE OF RAMPYARI DEVI SARAOGI, HON'BLE SUPREME COURT, (67 ITR 84 SC) HELD THAT CIT WAS JUSTIFIED IN INVOKING SECTION 263 OF LT. ACT 1961 AS THE ITO HAD ACCEPTED THE INITIAL CAPITAL. O RNAMENTS AND PRESENTS RECEIVED AT THE TIME OF MARRIAGE AND OTHER GIFTS FR OM FATHER-IN-LAW WITHOUT MAKING ANY INQUIRY. FURTHER IT WAS HELD THAT IT WAS NOT NECESSARY TO FURTHER DETAIL THE REASONS GIVEN BY THE CIT BECAUSE ON THE FACTS OF RECORD, THE ORDERS WERE PREJUDICIAL TO THE INTEREST OF REVE NUE. THE DECISION OF HON'BLE HIGH COURT DISMISSING THE WP FILED BY THE A SSESSEE AGAINST THE ORDER OF CIT WAS DISMISSED. THE RELEVANT PART OF DE CISION IS AS UNDER.- THE HIGH COURT WAS RIGHT IN OVERRULING THE CONTENTI ON OF THE ASSESSEE. THE ORDER OF THE COMMISSIONER WAS A DETAILED ORDER. THE RE WAS NO DOUBT THAT HE DID MENTION SOME FACTS WHICH WERE NOT INDICATED OR COMMUNICATED TO THE ASSESSEE AND WHICH THE ASSESSEE HAD HAD NO OPPO RTUNITY OF MEETING. THE HIGH COURT WAS RIGHT IN HOLDING THAT ALL THIS M ATERIAL WAS SUPPORTING MATERIAL AND DID NOT CONSTITUTE THE BASIS GROUNDS O N WHICH THE ORDERS UNDER SECTION 33B WERE PASSED BY THE COMMISSIONER. THERE WAS AMPLE MATERIAL TO SHOW THAT THE ITO MADE THE ASSESSMENTS IN UNDUE HURRY. THE ASSESSEE WAS A NEW ASSESSEE AND FILED VOLUNTARY RET URNS IN RESPECT OF A NUMBER OF YEARS, I.E. .FROM ASSESSMENT YEARS 1952-53 TO 1960-61. THE RETURN FOR THE ASSESSMENT YEAR 1953-54 WAS UNDATED. THE RETURNS FOR THE ASSESSMENT YEARS 1952-53 AND 1957-58 WAS DATED 21.0 3.1961 , AND THOSE FOR THE ASSESSMENT YEARS 1958-59 TO 1960-61, WERE DATED 26.04.1961. ON 21.03.1961, THE ASSESSEE MADE A DECL ARATION GIVING THE FACTS REGARDING INITIAL CAPITAL, THE ORNAMENTS AND PRESENTS RECEIVED AT THE TIME OF MARRIAGE, OTHER GIFTS RECEIVED FROM HER FAT HER-IN-LAW, ETC., WHICH SHOULD HAVE ANY ITO ON HIS GUARD. BUT THE ITO WITHO UT MAKING ANY ENQUIRIES TO SATISFY HIMSELF PASSED THE ASSESSMENT ORDER ON30.03.1961, FOR ASSESSMENT YEARS 1952-53 TO 1957-58, AND ON 26. 04.1961, FOR THE ASSESSMENT YEARS 1958-59 TO 1960- 61. NO BANK ACCOU NT OR ANY PROPER BOOKS OF ACCOUNT WERE MAINTAINED BY THE ASSESSEE OR PRODUCED BEFORE THE [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 44 ITO. A SHORT STEREOTYPED ASSESSMENT ORDER WAS MADE FOR EACH ASSESSMENT YEAR. PROFIT FROM SPECULATION WAS SHOWN AS RS. 3,085 AND INTEREST RS. 600, AND RS. 500 WAS ADDED FOR WANT OF BOOKS OF ACCOUNT AND EVIDENCE. NO EVIDENCE WHATSOEVER WAS PRODUCED I N RESPECT OF THE MONEY-TENDING BUSINESS DONE AND INTEREST INCOME SHO WN TO HAVE BEEN RECEIVED BY THE ASSESSEE. NO NAMES WERE GIVEN AS TO T HE PARTIES TO WHOM THE LOANS WERE ADVANCED, WITH AMOUNTS AND RATE OF INTEREST AND AS TO WHEN THE INTEREST INCOME WAS RECEIVED. IT WAS NOT NECESSARY TO FURTHER DETAIL THE REASONS G IVEN BY THE COMMISSIONER BECAUSE ON THE FACE OF THE RECORD THE O RDERS WERE PREJUDICIAL TO INTEREST OF THE REVENUE, AND EVEN IF T HE FACTS WHICH THE COMMISSIONER INTRODUCED REGARDING THE ENQUIRIES MADE BY HIM HAD BEEN INDICATED TO THE ASSESSEE, THE RESULT WOULD HAV E BEEN THE SAME. THE ASSESSEE, HAD NOT IN ANY WAY SUFFERED FROM THE FAILURE OF THE COMMISSIONER TO INDICATE THE RESULTS OF THE ENQUIRIES. MOREOVER, THE ASSESSEE WOULD HAVE FULL OPPORTUNITY OF SHOWING TO THE ITO WHETHER HE HAD JURISDICTION OR NOT AND WHETHER THE INCOME AS SESSED IN THE ASSESSMENT ORDERS WHICH WERE ORIGINALLY PASSED WAS CO RRECT OR NOT. THE APPEAL WAS LIABLE TO BE DISMISSED AND DECISION OF HIGH COURT WAS TO BE AFFIRMED. 6. THE JURISDICTIONAL MP HIGH COURT, IN THE CASE OF MAHAVER TRADER, (220 ITR 167 MADHYA PRADESH) WHILE SETTING ASIDE THE ORDER OF IT AT HELD THAT ITO HAD NOT EXAMINED THE ISSUE OF ALLOWABILITY OF DEDUCTION US 80HH AND 80J IN THE LIGHT OF CONDITIONS LAID DOWN FOR GR ANT OF RELIEF UNDER SAID SECTIONS. FURTHER, IT WAS OBSERVED BY THE HON'BLE C OURT THAT THE TRIBUNAL INSTEAD OF APPROACHING THE MATTER IN THE PROPER PER SPECTIVE HAD ON THEIR OWN STARTED MAKING ENQUIRIES AND FOUND THAT ORDER P ASSED BY A.A. WAS CORRECT WHICH WAS NOT WARRANTED AT ALL. THE OPERATI VE PART OF DECISION IS REPRODUCED HERE UNDER:- TRIBUNAL, INSTEAD OF APPROACHING THE MATTER IN THE PROPER PERSPECTIVE, HAVE ON THEIR OWN STARTED MAKING ENQUIRIES AND FOUND THAT THE ORDER PASSED BY THE INCOME-TAX OFFICER IS CORRECT THIS APPR OACH OF THE TRIBUNAL WAS NOT WARRANTED AT ALL, AFTER GOING THROUG H THE ORDER OF THE INCOME-TAX OFFICER, IT APPEARS THAT THE INCOME-TAX OF FICER HAS NOT EXAMINED THE MATTER IN THE LIGHT OF THE CONDITIONS L AID DOWN FOR GRANT OF RELIEF UNDER SECTIONS 80HH AND 8 OJ. CERTAIN CONDITIONS HAVE BEEN LAID DOWN IN BOTH THE SECTIONS AND THE INCOME-TAX OFF ICER SHOULD HAVE EXAMINED THE ASSESSEE ON-THE BASIS OF THE CONDITIONS AND THEREAFTER RECORDED THE FINDING WHETHER THEY ARE ENTITLED TO TH E BENEFIT OF SECTION 80HH OR 80J. BUT, INSTEAD OF THIS, THE INCOME-TAX O FFICER ONLY PROCEEDED TO ASSESS THE LIABILITY OF THE ASSESSEE AND THAT WAS NOT THE CORRECT APPROACH. THE INCOME-TAX OFFICER SHOULD HAVE EXAMINED THE MATTER IN THE LIGHT OF THE CONDITIONS MENTIONED IN BO TH THE SECTIONS BEFORE GRANTING RELIEF. WE ARE OF THE OPINION THAT TH E COMMISSIONER OF [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 45 INCOME-TAX HAS NOT GIVEN ANY FINDING, BUT ONLY REMA NDED THE CASE BACK TO THE INCOME-TAX OFFICER FOR REASSESSMENT AFTE R COMPLYING WITH THE CONDITIONS LAID DOWN FOR GRANT OF BENEFIT UNDER SECTIONS 80HH AND 80J. THEREFORE, THE FINDING RECORDED BY THE TRIBUNA L APPEARS TO BE NOT CORRECT BECAUSE ALL THE MATERIALS WHICH OUGHT TO HAVE BEEN UTILISED BY THE INCOME TAX OFFICER WERE NOT THERE AND IT IS NOT U NDERSTANDABLE THAT HOW THE TRIBUNAL HAVE ON . THEIR OWN, ASSESSED THE SITUATION. THEREFORE, WE ARE OF THE OPINION THAT THE VIEW TAKEN BY THE TRIBUNAL IS NOT CORRECT AND WE ANSWER THE AFORESAID QUESTION IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. THE INCOME-TAX OF FICER MAY EXAMINE THE MATTER AFRESH IN THE LIGHT OF THE DECISION OF THE COMMISSIONER OF INCOME-TAX WITHOUT TAKING NOTICE OF AN Y ADVERSE OBSERVATIONS, IF ANY, MADE BY THE COMMISSIONER OF IN COME-TAX. SIMILARLY, HON'BLE JURISDICTIONAL MP HIGH COURT IN THE CASE OF DEEPAK KUMA GARG (299 ITR 435 MADHYA PRADESH) UPHELD THE ORDER OF CIT PASSED UNDER SECTION 263 OF INCOME TAX ACT, 1961, FOR THE REASON S THAT THE A.O. HAD DONE SEMBLANCE OF INQUIRY THAT TOO IN SNAP SHOD MAN NER AND ACCEPTED THE VERSION OF ASSESSEE WITHOUT PROPER INQUIRY CAUSING LOSS OF SUBSTANTIAL TAXABLE INCOME. THE GIST OF DECISION IS REPRODUCED AS UNDER:- IN THE CASE IN HAND, AFTER HEARING THE AUTHORISED R EPRESENTATIVE, THE COMMISSIONER HAS RECORDED A CLEAR FINDING THAT THE OR DER OF THE ASSESSING OFFICER WAS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. FROM THE ORDER OF THE ASSESSING OFF ICER, IT IS CLEAR THAT FOR WANT OF TIME, THE ASSESSING OFFICER HAD DONE ONL Y A SEMBLANCE OF ENQUIRY AND THAT TOO, IN A VERY SLIPSHOD MANNER, AS IS CLEAR FROM THE POST SCRIPT IN THE ORDER OF THE ASSESSING OFFICER. T HE ASSESSING OFFICER ACCEPTED THE VERSION OF THE ASSESSEE WITHOUT PROPER ENQUIRY AND AS A RESULT A SUBSTANTIAL AMOUNT OF TAXABLE INCOME WAS NO T BROUGHT TO TAX. IN SUCH A CASE THE ASSESSMENT ORDER WOULD BE ERRONE OUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE BECAUSE L AW ENJOINS UPON THE ASSESSING OFFICER TO MAKE THE ASSESSMENT ORDER BRINGING ALL TAXABLE INCOME TO TAX. THE ENQUIRY HELD IN A PERFUN CTORY MANNER COULD NOT BE SAID TO BE A PROPER ENQUIRY BEFORE PASSING T HE ASSESSMENT ORDER. THIS CANNOT BE A GROUND TO SHUT OUT THE JURIS DICTION OF THE COMMISSIONER OF INCOME-TAX THAT AN ADEQUATE ENQUIRY WAS CONDUCTED BY THE ASSESSING OFFICER. WE MAY CLARIFY THAT THE O RDER OF THE COMMISSIONER OF IN COME-TAX IS IN TWO PARTS. PART ON E CONSISTS OF REASONS FOR ISSUING THE SHOW-CAUSE NOTICE, AND THE L ATER PART DEALS WITH FINDINGS RECORDED BY THE COMMISSIONER AFTER AFF ORDING OPPORTUNITY OF HEARING TO THE ASSESSEE. AS STATED ABOVE, THE CO MMISSIONER OF INCOME-TAX HAS RECORDED A CATEGORICAL FINDING THAT T HE ORDER OF THE ASSESSING OFFICER FOR WANT OF ADEQUATE ENQUIRY, WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND AFTER SETTING ASIDE THE [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 46 ASSESSMENT ORDER, REMANDED THE MATTER TO THE ASSESS ING OFFICER FOR FRESH ASSESSMENT ON THE MERITS. THE COMMISSIONER OF I NCOME-TAX ALSO DIRECTED THE ASSESSING OFFICER TO OBSERVE RULES OF N ATURAL JUSTICE AND TO PROVIDE OPPORTUNITY OF HEARING TO THE ASSESSEE BEFOR E MAKING FRESH ASSESSMENT ORDER ON THE MERITS. THIS ADEQUATELY SAF EGUARDS THE INTEREST OF THE ASSESSEE AND WOULD CAUSE NO PREJUDIC E. IT SEEMS THAT THE INCOME-TAX APPELLATE TRIBUNAL WAS CARRIED AWAY BY THE FIRST PART OF THE ORDER OF THE COMMISSIONER OF INCOME-TAX AS A RE SULT THE LATER PART OF THE ORDER ESCAPED FROM THE NOTICE OF THE TRIBUNAL AND THE INCOME-TAX APPELLATE TRIBUNAL BRANDED THE ORDER OF THE COMMISSIO NER OF INCOME- TAX AS BASED UPON PROBABILITIES, SURMISES AND CONJECT URES. 8. IN A RECENT DECISION, IN THE CASE OF RAJMANDIR E STATE PVT. LTD., HON'BLE KOLKATA HIGH COURT, (GA NO. 509 OF 2016 WITH ITAT N O. 113 OF 2016) HAD UPHELD THE ORDER OF CIT PASSED U/S 263 OF INCOME TA X ACT. IN THIS CASE, THE AO HAD PASSED THE ASSESSMENT ORDER U/S 143(3) R EAD WITH SECTION 148 OF INCOME TAX ACT 1961. THERE WAS A HUGE INCREA SE IN SHARE CAPITAL BY WAY OF SHARE PREMIUM. THE AO HAD CALLED FOR VARI OUS DETAILS PERTAINING TO INCREASE IN SHARE CAPITAL AND RESERVE AND SURPLUSES ON ACCOUNT OF ISSUE OF 7,92,737 SHARES OF RS. 10 EACH AT A PREMIUM OF RS. 390-. THE AO HAD ALSO CONDUCTED THE ENQUIRIES FROM SHARE SUBSCRIBERS U/S 133(6) OF INCOME TAX ACT 1961 AND MOST OF THE 39 AP PLICANTS RESPONDED AND THE APPELLANT HAD EVEN FILED COMPLETE DETAILS A ND SOURCES OF THESE COMPANIES FOR MAKING SHARE SUBSCRIPTION. HOWEVER TH E CIT HAD INVOKED THE SECTION 263 OF INCOME TAX ACT 1961 FOR THE REAS ONS THAT THE AO HAD NOT CONDUCTED THE REQUISITE ENQUIRY AND HAD NOT APP LIED MIND. THEREFORE THE ORDER OF AO WAS CONSIDERED AS ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF REVENUE. THE HON'BLE TRIBUNAL CONFIRMED THE VIEW OF CIT IN SETTING ASIDE THE ORDER OF AO. THE APPELLANT PREFE RRED IN APPEAL BEFORE. HON'BLE KOLKATA HIGH COURT WHEREIN THE FOLLOWING QU ESTION WERE FOUND ARISING IN THE APPEAL. (A) WHETHER IN THE LIGHT OF THE VIEWS EXPRESSED IN THE CASE OF LOVELY EXPORTS (SUPRA) & STELLER INVESTMENT (SUPRA) THE ORDER UNDER SECTION 263 DIRECTING FURTHER INVESTIGATION IS LEGAL? (B) WHETHER THE ORDER PASSED BY THE ASSESSING OFFIC ER UNDER SECTION 143(3) /147 OF THE INCOME TAX ACT IS ERRONEOUS AND ALSO PR EJUDICIAL TO THE INTEREST OF THE REVENUE? BOTH THE ABOVE MENTIONED QUESTION WERE ANSWERED IN AFFIRMATIVE BY HON'BLE COURT AND HELD AS UNDER:- ' THE ASSESSEE WITH AN AUTHORISED SHARE CAPITAL OF &.1.36 CRORES RAISED NEARLY A SUM OF RS.32 CRORES ON ACCOUNT OF P REMIUM AND CHOSE NOT TO GO IN FOR INCREASE OF AUTHORISED SHARE CAPITA L MERELY TO AVOID PAYMENT OF STATUTORY FEES IS AN IMPORTANT POINTER N ECESSITATING INVESTIGATION. MONEY ALLEGEDLY RECEIVED ON ACCOUNT OF S HARE APPLICATION [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 47 CAN BE ROPED IN UNDER SECTION 68 OF THE INCOME TAX ACT IF THE SOURCE OF THE RECEIPT IS NOT SATISFACTORILY ESTABLISHED BY THE A SSESSEE. REFERENCE IN THIS REGARD MAY BE MADE TO THE JUDGMENT IN THE CAS E OF SUMATI DAYAL -VS- CIT (SUPRA) WHEREIN THEIR LORDSHIPS HELD THAT ANY SUM 'FOUND CREDITED IN THE BOOKS OF THE ASSESSEE FOR AN Y PREVIOUS YEAR, THE SAME MAY BE CHARGED TO INCOME TAX .... '. WE ARE UN ABLE TO ACCEPT THE SUBMISSION THAT ANY FURTHER INVESTIGATION IS FUTILE 'B ECAUSE THE MONEY WAS RECEIVED ON CAPITAL ACCOUNT: THE SPECIAL BENCH IN THE CASE OF SOPHIA FINANCE LTD. (SUPRA) OPINED THAT 'THE USE OF THE WORDS 'ANY SUM FOUND CREDITED IN THE BOOKS' IN SECTION 68 INDICATES THAT THE SAID SECTION IS VERY WIDELY WORDED AND AN INCOME-TAX OFFICER IS NO T PRECLUDED FROM MAKING AN ENQUIRY AS TO THE TRUE NATURE AND SOURCE THEREOF EVEN IF THE SAME IS CREDITED AS RECEIPT OF SHARE APPLICATION MONEY . MERE FACT THAT THE PAYMENT WAS RECEIVED BY CHEQUE OR THAT THE APPLIC ANTS WERE COMPANIES, BORNE ON THE FILE OF REGISTRAR OF COMPANI ES WERE HELD TO BE NEUTRAL FACTS AND DID NOT PROVE THAT THE TRANSACTION WAS GENUINE AS WAS HELD IN THE CASE OF CIT -VS- NOVA PROMOTERS AND FINLEASE (P) LTD. (SUPRA). SIMILAR VIEWS WERE EXPRESSED BY THIS COURT IN THE CASE OF CIT - VS- PRECISION FINANCE PVT. LTD. (SUPRA). WE NEED NOT DECIDE IN THIS CASE AS TO WHETHER THE PROVISO TO SECTION 68 OF THE INCOME TAX ACT IS RETROSPECTIVE IN NATURE. TO THAT EXTENT THE QUESTIO N IS KEPT OPEN. WE MAY HOWEVER POINT OUT THAT THE SPECIAL BENCH OF DELH I HIGH COURT IN THE CASE OF SOPHIA FINANCE LTD. (SUPRA) HELD THAT 'T HE ITO MAY EVEN BE JUSTIFIED IN TRYING TO ASCERTAIN THE SOURCE OF DEPOS ITOR'. THEREFORE, THE SUBMISSION THAT THE SOURCE OF SOURCE IS NOT A RELEVAN T ENQUIRY DOES NOT APPEAR TO BE CORRECT.. WE FIND NO SUBSTANCE IN THE SUBMISSION THAT THE EXERCISE OF POWER UNDER SECTION 263 BY THE COMMISSIONER WAS AN ACT OF REACTIVATING STALE ISSUES. IN THE CASE OF GABRIEL I NDIA LTD. (SUPRA) THE CIT WAS UNABLE TO POINT OUT ANY ERROR IN THE EXPLANA TION FURNISHED BY THE ASSESSEE. WHEREAS IN THE PRESENT CASE WE HAVE T ABULATED THE EVIDENCE WHICH WAS BEFORE THE ASSESSING OFFICER WHICH SHOULD HAVE PROVOKED HIM TO MAKE FURTHER INVESTIGATION. THE ASSE SSING OFFICER DID NOT ATTACH ANY IMPORTANCE TO THAT ASPECT OF THE MAT TER AS DISCUSSED ABOVE BY US. THE JUDGMENT IN THE CASE OF LEISURE WE AR EXPORTS PVT. LTD. (SUPRA) RELIED UPON BY MR. PODDAR HAS NO APPLICAB ILITY BECAUSE THE EVIDENCE FURNISHED BY THE ASSESSEE IN THIS CASE DOE S SUGGEST A COVER UP. WE ALSO HAVE HELD PRIMA FACIE THAT NEITHER THE T RANSACTION APPEARS TO BE GENUINE NOR ARE THE APPLICANTS OF SHARE ARE CRE DITWORTHY. II.THE JUDGMENT IN THE CASE OF OMAR SALARY MOHAMED SAI T (SUPRA) CITED BY MR. PODDAR HAS NO APPLICATION FOR REASONS ALREADY DISCUSSED. IT IS NOT TRUE THAT THE COMMISSIONER IN THIS CASE HAS MERE LY ON THE BASIS OF SUSPICION HELD THAT THIS WAS OR COULD BE A CASE OF MONEY LAUNDERING. WE AS A MATTER OF FACT HAVE DISCUSSED THIS ISSUE IN GREAT DETAIL AND [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 48 NEED NOT REITERATE THE SAME. THE ORDER PASSED BY TH E COMMISSIONER IS BY NO MEANS AN ACT OF SUBSTITUTING HIS OWN VIEWS TO TH AT OF THE ASSESSING OFFICER. IT IS TRUE THAT THE ASSESSING OFFIC ER HAD REQUISITIONED THE NECESSARY DETAILS BY HIS NOTICE U/S.142(1) BUT H E THEREAFTER DID NOT APPLY HIS MIND THERETO. THE JUDGMENT IN THE CASE OF J. L. MORRISON (INDIA) LTD. HAS NO MANNER OF APPLICATION BECAUSE IN T HAT CASE THE QUESTION ESSENTIALLY WAS WHETHER THE RECEIPT WAS OF A CAPITAL OR REVENUE NATURE. THE FACTS AND CIRCUMSTANCES WERE NO T IN DISPUTE. MOREOVER THE VIEW TAKEN BY THE ASSESSING OFFICER WAS NOT SHOWN NOR WAS HELD BY THE COURT TO BE AN ERRONEOUS VIEW. WHERE AS IN THIS CASE WE HAVE DEMONSTRATED IN SOME DETAIL AS TO WHY IS THE ORDER OF THE ASSESSING OFFICER ERRONEOUS AND PREJUDICIAL TO THE REV ENUE. ' 9. THE HIGH COURT OF ALLAHABAD, IN THE CASE OF BHAG WAN DAS (272 ITR 367- ALLAHABAD) HAS HELD THAT WHERE THE A.O. HAS NOT EXAMINED THE AGRICULTURAL INCOME AND ITS EXEMPTION, THE ORDER HA S BEEN PASSED WITHOUT APPLICATION OF MIND AND WHEN THERE WAS NO DISCUSSION OF RELEVANT ISSUE IN THE ASSESSMENT ORDER, THE CIT WAS HELD JUSTIFIED IN SETTING ASIDE THE ORDER OF A.O. FOR GRANTING EXEMPTION TO THE ASSESSEE WITHOUT APPLICATION OF MIND. IT WAS HELD AS UNDER:- HAVING HEARD THE LEARNED COUNSEL FOR THE REVENUE, WE FIND THAT IN THE ASSESSMENT ORDER, THERE IS NO DISCUSSION REGARDING T HE QUESTION AS TO WHETHER THE AMOUNT OF INCOME SHOWN BY THE ASSESSEE WHICH IS BEING CLAIMED TO BE EXEMPT HAS ACTUALLY BEEN EARNED BY HIM OR NOT AND, FURTHER, WHETHER THE ENTIRE AMOUNT OF INCOME FROM AG RICULTURE AND POULTRY FARMING IS EXEMPT FROM TAX. THE COMMISSIONER OF INCOME-TAX HAS RIGHTLY INITIATED PROCEEDINGS UNDER SECTION 263 OF THE ACT AS EXEMPTION HAS BEEN GRANTED WITHOUT ANY APPLICATION OF MIND. THE APEX COURT IN THE CASE OF MALABAR INDUS TRIAL CO. LT D. (SUPRA) WHILE INTERPRETING SECTION 263 OF THE ACT HELD AS FOLLOWS I=- 'A BARE READING OF THIS PROVISION MAKES IT CLEAR THAT THE PREREQUISITE TO THE EXERCISE OF JURISDICTION BY THE COMMISSIONER SUO MOTO UNDER IT, IS THAT THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE COMM ISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT-I F THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IFIT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REV ENUE RECOURSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT. THERE CAN BE NO DOUBT THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED B Y THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN I NCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 49 CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PR INCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND.' {EMPHASIS SUPPLIED] (P. 87) THUS AN ORDER, WHICH HAS BEEN PASSED WITHOUT APPLIC ATION OF MIND, WILL ALSO FALL UNDER THE EXPRESSION ERRONEOUS AND PREJUD ICIAL TO THE INTEREST OF REVENUE. SINCE THE INCOME TAX OFFICER HAS GRANTED E XEMPTION TO THE ASSESSEE IN RESPECT OF INCOME FROM AGRICULTURE AND POULTRY FARMING WITHOUT ANY DISCUSSION AND WITHOUT ANY APPLICATION OF MIND, RESPECTFULLY FOLLOWING THE AFORESAID DECISION, WE ARE OF THE OPI NION THAT THE TRIBUNAL HAD COMMITTED ERROR IN HOLDING THAT THE ASSESSMENT ORDERING SO FAR AS IT GRANT ED EXEMPTION TO INCOME FROM AGRICULTURE AND P OULTRY FARMING WAS NOT ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REV ENUE. WE, THEREFORE, ANSWER THE QUESTION REFERRED TO US IN THE NEGATIVE, I.E., IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. SINCE NOBODY HAS PUT IN APPEARANCE ON BEHALF OF THE ASSESSEE, THERE SHALL BE NO ORDER AS TO COSTS. 10. IN CASE OF BHUSHAN STEEL, HON'BLE ITAT A BENCH DELHI, (ITA NO 1641 TO 1646IDELJ2014) OBSERVED THAT CIT WAS WITHIN HI P OWERS TO SET ASIDE THE ORDER OF A.O. WHERE, THE A.O. HAD ALLOWED THE E XPENSES DEBITED TO P & L ACCOUNT WITHOUT PROPER INQUIRIES ALTHOUGH DURING THE COURSE OF SEARCH IN BHUSHAN GROUP AND SURVEY IN OTHER CASES, IT WAS NOTICED THAT BHUSHAN GROUP HAS BEEN INFLATING EXPENSES AND VARIOUS PARTI ES WERE USED FOR THE SAID PURPOSE. IT HAS BEEN HELD AS UNDER:- IN VIEW OF FOREGOING DISCUSSIONS, WE ARE INCLINED T O HOLD THAT THE PRESENT CASE IS SQUARELY COVERED IN FAVOUR OF THE REVENUE B Y THE DECISIONS OF HON 'BLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF GEE VEE ENTERPRISES VS ACIT (SUPRA) AND CIT VS NAGESH KNITWEARS P. LTD. (S UPRA) AS IN THE PRESENT CASE, THE AO DID NOT RAISE ANY QUERY OR MAKE ANY IN QUIRY PERTAINING TO THE CLAIM OF EXPENSES SUBMITTED BY THE ASSESSEE IN ITS BOOKS AND STATEMENTS OF ACCOUNTS SUBMITTED ALONG WITH RETURN AND THIS IS A CLEAR CASE OF 'LACK OF INQUIRY'. WE MAY ALSO POINT OUT THAT IF THE AO FAIL S TO CONDUCT THE SAID INVESTIGATION, HE COMMITS THE ERROR AND THE WORD 'E RRONEOUS' INCLUDES FAILURE TO MAKE INQUIRY. IN SUCH CASES, THE ORDER B ECOMES ERRONEOUS BECAUSE NECESSARY INQUIRY OR VERIFICATION HAS NOT B EEN MADE AND NOT BECAUSE A WRONG ORDER HAS BEEN PASSED ON MERITS. WE FURTHER HOLD THAT IF FROM THE DETAILED INVESTIGATION CONDUCTED BY ITA NO . 1641 TO 1646IDELL2014 AY: 2006-07 TO 2010-11 THE INVESTIGAT ION WING OF THE DEPARTMENT, IT IS REVEALED THAT THE BOGUS EXPENSES HAVE BEEN CLAIMED BY THE ASSESSEE WITH THE INTENTION TO REDUCE ITS TAX L IABILITY, THEN THE ORDER IS ALSO PREJUDICIAL TO THE INTEREST OF REVENUE. THE AR GUMENT OF THE LD. COUNSEL OF THE ASSESSEE ABOUT REVENUE NEUTRALITY I S NOT APPLICABLE TO THE FACTS AN CIRCUMSTANCES OF THE PRESENT CASE. IN THE CASE OF ITO VS CH. ATCHAIAH (1996) 218ITR 239(SC), SPEAKING FOR HON'BLE APEX COURT THEIR LORDSHIPS HELD AS FOLLOWST- 'IN OUR OPINION, THE [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 50 CONTENTION URGED BY DR. GAURI SHANKAR MERITS ACCEPTA NCE. WE ARE OF THE OPINION THAT UNDER THE PRESENT ACT, THE INCOME TAX OFFICER HAS NO OPTION LIKE THE ONE HE HAD UNDER THE 1922 ACT. HE CAN, AND HE MUST, TAX THE RIGHT PERSON AND THE RIGHT PERSON ALONE. BY 'RIGHT PERSON', WE MEAN THE PERSON WHO IS LIABLE TO BE TAXED, ACCORDING T O LAW, WITH RESPECT TO A PARTICULAR INCOME. THE EXPRESSION 'WRO NG PERSON' IS OBVIOUSLY USED AS THE OPPOSITE OF THE EXPRESSION 'RIG HT PERSON'. MERELY BECAUSE A WRONG PERSON IS TAXED WITH RESPECT TO A P ARTICULAR INCOME, THE ASSESSING OFFICER IS NOT PRECLUDED FROM TAXING TH E RIGHT PERSON WITH RESPECT TO THAT INCOME. THIS BHUSHAN STEEL LTD., NEW DELHI VS ASSESSEE ON 30 MARCH, 2015 INDIAN KANOON - HTTP://INDIANKANOON.ORG/DOCL164679238/11 IS SO IRRESPECTIVE OF THE FACT WHICH COURSE IS MORE BENEFICIAL TO THE REVENUE. I N OUR OPINION, THE LANGUAGE OF THE RELEVANT PROVISIONS OF THE PRESENT AC T IS QUITE CLEAR AND UNAMBIGUOUS. SECTION 183 SHOWS THAT WHERE PARLIAMENT INTENDED TO PROVIDE AN OPTION, IT PROVIDED SO EXPRESSLY. WHERE A PERSON IS TAXED WRONGFULLY, HE IS NO DOUBT ENTITLED TO BE RELIEVED OF IT IN ACCORDANCE WITH LAW, BUT THAT IS A DIFFERENT MATTER ALTOGETHER. THE PERSON LAWFULLY LIABLE TO BE TAXED CAN CLAIM NO IMMUNITY BECAUSE THE A SSESSING OFFICER (INCOME TAX OFFICER) HAS TAXED THE SAID INCOME IN THE HANDS OF ANOTHER PERSON CONTRARY TO LAW.' ITA NO. 1641 TO 16461DEL12014 AY: 2006-07 TO 2010-11. THEREFORE, IT IS WELL-SETTLED PRINCIPLE THAT THE REVE NUE AUTHORITIES ARE DUTY BOUND TO TAX RIGHT PERSON AND RIGHT PERSON ALONE . BY 'RIGHT PERSON' IS MEANT THE PERSON WHO IS LIABLE TO BE TAXED , ACCORDING TO LAW, WITH RESPECT TO A PARTICULAR INCOME. THE MEANING OF ' WRONG PERSON' IS OBVIOUSLY USED AS THE OPPOSITE OF THE EXPRESSION 'RIG HT PERSON'. IN OUR HUMBLE UNDERSTANDING, THE RATIO OF THIS DECISION CLARIF IES THAT MERELY BECAUSE OF A . . WRONG PERSON IS TAXED WITH RESPECT TO A PARTICULAR IN COME, THE AO IS NOT PRECLUDED FROM TAXING THE RIGHT PERSON WITH RESPECT TO THAT INCOME . SAME IS THE CASE HERE WHEN ASSESSEE COMPANY MADE A BOGUS CLAIM OF EX PENDITURE THEN THE ASSESSEE CANNOT AVAIL IMMUNITY FROM TAX LIABILITY BY STATING THAT THE IMPUGNED AMOUNT OF EXPENDITURE CLAIM HAS BEEN T AXED IN THE HANDS OF RESPECTIVE PAYEE COMPANIES 11. IN A LANDMARK DECISION IN THE CASE OF SUBHLAKSHMI VANIJYA (P) LTD. B BENCH OF KALKATA ITAT. (60 TAXMANN.COM 60 (KOLKATA - TRIB.), THE DECISION OF CIT IN SETTING ASIDE THE ORDER OF A.O. WAS UPHELD. IN THIS CASE, THE APPELLANT ISSUED FRESH SHARE CAPITAL OF 14.72 L AKHS AT A PREMIUM OF7.21 CRORES. THE A.O. OBTAINED ALL THE REQUIRED D OCUMENTS AND ISSUED NOTICES TO 8 SUBSCRIBES OUT OF 21 U/S 133(6) OF IT ACT 1961 AND ON THE BASIS OF DETAILS FILED AND CONFIRMATIONS RECEIVED F ROM SUBSCRIBERS, THE A.O. [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 51 PROCEEDED TO ACCEPT THE EXPLANATION OF ASSESSEE AND COMPLETED THE ASSESSMENT WITH NOMINAL ADDITION OF RS. 28,049/- . THE CIT INVOKED THE SECTION 263 OF IT ACT 1961 AND SET ASIDE THE ORDER FOR THE REASONS THAT PROPER ENQUIRY WAS NOT CARRIED OUT BY THE A.O. AND DIRECTED THE A.O. TO MAKE FRESH ASSESSMENT AFTER CONDUCTING INDEPENDENT, DETAILED AND COMPLETE INQUIRIES OF SUBSCRIPTION AND SHARE PREMIU M. THE HON'BLE IT AT CONFIRMED THE DECISION OF CIT WITH THE OBSERVATION THAT 'INADEQUATE INQUIRY' FALLS IN THE CATEGORY OF 'NO INQUIRY' WHICH RESULTS IN TO MAKING THE ORDER US ERRONEOUS AND PREJUDICIAL TO THE INTER EST OF REVENUE. THE RELEVANT PART OF DECISION IS AS UNDER:- 'WHETHER THE ENQUIRY CONDUCTED BY THE ASSESSING OFF ICER IN SUCH CASES CAN BE AS A PROPER ENQUIRY? ' THOUGH THE ASSESSING OFFICER ISSUED NOTICES UNDER S ECTION133(6) BUT IT FAILED TO COMPREHEND THE RATIONALE OR LOGIC BEHIND ISSUING SHARES AT SUCH A HIGH PREMIUM, NOR TO EXAMINE ANY OF THE DIRECTORS O F THE COMPANIES WHICH WERE SUBSCRIBERS TO SHARE CAPITAL IT IS HIGHLY IMPR OBABLE FOR ANY PERSON HAVING SOUND MIND TO PURCHASE AT ARM'S LENGTH THE S HARES OF A PRIVATE LIMITED COMPANY, HARDLY HAVING ANY WORTH, WITH FACE VALUE OF RS.10 AT A PREMIUM OF RS.190. THIS MERE FACT SHOULD HAVE BEEN CORNERSTONE FOR THE ASSESSING OFFICER TO EMBARK UPON FURTHER ENQUIRY TO UNEARTH THE TRUTH. THE GENUINENESS OF TRANSACTIONS OF ISSUE OF SHARE AT SU CH HEFTY PREMIUM IN THIS BACKGROUND OF THE MATTER WAS UNDER DARK CLOUD AND I T SKIPPED THE ATTENTION OF THE ASSESSING OFFICER. [PARA 17.C.J UPON ANALYSIS OF THE BUSINESS MODEL OF THE ASSESSEE IT WAS NOTED THAT SHAREHOLDER COMPANIES OF ONE COMPANY BECOME INVESTE D COMPANIES OF OTHER COMPANIES AND IN TURN, SUCH LATER COMPANY, WH OSE SHARES ARE PURCHASED, FURTHER INVEST IN THE SHARES OF OTHER CO MPANIES, SO ON AND SO FORTH. THIS IS A STRIKING EXAMPLE OF CIRCULATION OF CAPITAL FROM ONE COMPANY TO ANOTHER AND THE ROTATION IS CONTINUING IN ALL TH E COMPANIES UNDER CONSIDERATION. IT CANNOT BE A SHEER COINCIDENCE THA T HUNDREDS OF COMPANIES BROUGHT INTO EXISTENCE, HAVING LINK WITH EACH OTHER AND NONE OF THEM DOING ANY WORTHWHILE BUSINESS ACTIVITY, COME T OGETHER TO ISSUE SHARES AT SUCH A HUGE PREMIUM. AT BEST, THIS ARGUME NT COULD HAVE BEEN TAKEN INTO CONSIDERATION IF THESE COMPANIES HAD ISS UED SHARES TO ITS RELATED COMPANIES AT PREMIUM AND INVESTED THE PROCE EDS IN SOME OTHER BUSINESS ACTIVITY AND NOT PURCHASING THE SHARES OF OTHER RELATED COMPANIES THROUGH SUCH A CIRCULAR ROUTE. THIS SHOWS THAT THE TRANSACTIONS OF ISSUING SHARES AT A PREMIUM TO RELATED COMPANIES AND THEN PURCHASING THE SHARES OF OTHER RELATED COMPANIES AT A HUGE MAR KET PRICE AND NONE OF THE COMPANIES HAS ANY WORTHWHILE BUSINESS ACTIVITY, WHEN CONSIDERED ON AN OVERALL BASIS, IS NOTHING BUT A SMOKESCREEN. [PA RA 17.] THERE REMAINS NO DOUBT WHATSOEVER THAT IN THE GIVEN CIRCUMSTANCES, THE ASSESSING OFFICER CONDUCTED HALF-BAKED ENQUIRY IGNORING VITAL ASPECTS WHICH WERE [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 52 REQUIRED TO BE EXAMINED. IF A COMPANY RECENTLY INCO RPORATED WITHOUT CARRYING OUT ANY WORTHWHILE BUSINESS ACTIVITY ISSUE S SHARES WITH FACE VALUE OF RS.10 AT A PREMIUM OF RS.190, THE IMMEDIAT E CONCERN OF THE ASSESSING OFFICER OUGHT TO HAVE BEEN TO FIND OUT AS TO WHETHER THE RECEIPT OF SUCH A PREMIUM WAS JUSTIFIED AND WHETHER THE PAR AMETERS OF SECTION 68 STOOD COMPLIED WITH. IN THE INSTANT CASE, THE ASSES SING OFFICER MERELY ISSUED NOTICES UNDER SECTION 133(6) TO SOME OF THE SHAREHOLDERS WHOSE REPLIES, INDICATING THAT THEY OVERTLY PURCHASED THE SHARES AT RS.200 EACH, WERE KEPT ON RECORD. PUTTING A LID AT THE MATTER AT THAT STAGE ONLY, 'THE ASSESSING OFFICER DID NOT CONSIDER IT PRUDENT TO EXA MINE SUCH SHAREHOLDERS AS TO THEIR CAPACITY AND GENUINENESS O F THE TRANSACTIONS. CONFRONTED WITH SUCH PECULIAR AND HAIR-RAISING CIRC UMSTANCES, THE ASSESSING OFFICER SHOULD HAVE GOT ALERTED AND DUG TH E MATTER DEEP FOR UNEARTHING THE REALITY OF THE TRANSACTION. UNFORTUNA TELY, NOTHING OF THIS SORT WAS DONE BY HIM. IT IS A PERFECT CITATION FOR A COMPLETE NON- APPLICATION OF MIND BY THE ASSESSING OFFICER AND OF PA SSING THE ASSESSMENT ORDER IN UNDUE HASTE. [PARA 17.H.J THUS, THERE CAN BE NO ESCAPE FROM AN AXIOMATIC CONCL USION THAT IN ALL THESE CASES THE ENQUIRY CONDUCTED BY THE ASSESSING OFFICER'S IS EXCEEDINGLY INADEQUATE AND HENCE FALL IN THE CATEGORY OF 'NO ENQUIRY' CONDUCTED BY THE ASSESSING OFFICER, WHAT TO TALK OF CHARACTERING IT AS AN 'INADEQUATE ENQUIRY'. THE HIGHLY INADEQUATE ENQU IRY CONDUCTED BY THE ASSESSING OFFICER RESULTING IN DRAWING INCORREC T ASSUMPTION OF FACTS, MAKES THE ORDERS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. [PARA 17.I.J WHETHER COMMISSIONER CAN SET ASIDE THE ASSESSMENT O RDER AND DIRECT THE ASSESSING OFFICER TO CONDUCT A THOROUGH ENQUIRY, TH EREBY INTERFERING WITH THE JURISDICTION OF THE ASSESSING OFFICER CONFERRED ON HIM IN TERMS OF SECTIONS 142(1) AND 143(2) OF THE ACT? A CAREFUL PERUSAL OF THE PROVISIONS OF SECTION 142(1)/143(2) UNVEILS THAT IT IS THE PREROGATIVE OF THE ASSESSING OFFICER TO REQUIRE THE I NFORMATION 'ON SUCH POINTS OR MATTERS' AS HE MAY REQUIRE. ORDINARILY IT I S NOT POSSIBLE FOR THE ASSESSING OFFICER TO INQUIRE INTO EACH AND EVERY ENT RY RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. HE HAS TO EXERCIS E HIS ACUMEN IN EXTRACTING OUT THE RELEVANT POINTS OR MATTERS ON WHIC H HE WANTS TO CONCENTRATE. BUT, WHAT IS IMPORTANT IN THIS REGARD IS THAT THE OPERATION OF SECTION 142(1)/143(2) COMES TO AN END WHEN AN ASSESSMENT IS COMPLETED AFTER EXAMINING SUCH POINT OR MATTERS WHIC H THE ASSESSING OFFICER FEELS TO INQUIRE BEFORE FINALIZING THE ASSESS MENT IT IS ONLY THEREAFTER THAT THE REVISIONAL POWERS OF THE COMMISSI ONER UNDER SECTION 263 CAN COME INTO PLAY FOR ASCERTAINING IF THE ASSESSING OFFICER EXAMINED ALL THE RELEVANT POINTS, WHICH OUGHT TO HAVE BEEN EXAMINED. IF THE COMMISSIONER, ON EXAMINATION OF RECORDS OF AS SESSMENT, COMES [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 53 TO THE CONCLUSION THAT THE ASSESSING OFFICER FAILED TO ENQUIRE INTO CERTAIN OTHER RELEVANT ASPECTS WHICH, IN FACT, NECESSITATED T HOROUGH INVESTIGATION, THEN HE HAS ALL THE POWER TO REVISE THE ASSESSMENT ORDER. IN THE INSTANT CASE, THE ASSESSMENT ALREADY STANDS FINALIZED AND NOW THE COMMISSIONER IS EXAMINING WHETHER THE ASSESSING OFFICER PROPERLY EXAMINED THE FACTS OF THE CASE. IN SUCH CIRCUMSTANC ES, IT IS IMPERMISSIBLE TO HAVE A RECOURSE TO THE PROVISIONS OF SECTIONS 142(1) AND 143(2) FOR DEMOLISHING THE ORDER UNDER SECTION 263. [PARA 18.B.J WHETHER INADEQUATE INQUIRY CONDUCTED BY THE ASSESSI NG OFFICER EMPOWERS THE COMMISSIONER TO REVISE THE ASSESSMENT ORDER? IT IS IMPERATIVE FOR THE ASSESSING OFFICER TO CONDUCT ENQUIRY TO SATISFY HIMSELF ABOUT THE GENUINENESS OF TRANSACTIONS. SCOPE OF THE TERM 'ENQUIRY' CAN BE DIVERSE IN DIFFERENT CIRCUMSTANCES. THERE CANNOT BE STRAITJACKET FORMULA TO POSITIVELY CONCLUDE AS TO CON DUCTING OR NON- CONDUCTING OF 'ENQUIRY' BY THE ASSESSING OFFICER. IT DEPENDS ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. WHERE THE FACTS ARE JUST ORDINARY AND PRIMA FACIE THERE IS NOTHING UNTOWARD THE RECORDED TRANSACTION, IN SUCH CIRCUMSTANCES, THE OBTAINING OF THE DOCUMENTS AND T HE APPLICATION OF 'KIND THEREON, WITHOUT A FURTHER OUTSIDE ENQUIRY, M AY MEAN THAT THE ASSESSING OFFICER DID CONDUCT ENQUIRY, LEAVING THE QUESTION OPEN AS TO WHETHER IT WAS A PROPER OR AN IMPROPER ENQUIRY. BUT , WHERE THE FACTUAL SCENARIO OF A CASE PRIMA FACIE INDICATES ABNORMALIT IES AND CRY FOR LOOKING DEEP INTO IT, THEN A MERE COLLECTION OF DOC UMENTS CANNOT BE HELD AS CONDUCTING ENQUIRY, LEAVE ASIDE, ADEQUATE OR INA DEQUATE. IN SUCH LATER CASES, ONLY WHEN THE ASSESSING OFFICER, AFTER COLLECTION OF THE INITIAL DOCUMENTS, EMBARKS UPON FURTHER INVESTIGATIO N, THAT IT CAN BE SAID THAT HE INITIATED ENQUIRY. WHERE THE FACTS OF A PARTICULAR TRANSACTION CRY HOARSE ABOUT ITS NON-GENUINENESS AN D EVEN A CASUAL LOOK AT SUCH FACTS, PRIMA FACIE, DIVULGES FOUL PLAY, THEN THE ALARM BELL MUST RING IN THE MIND OF THE ASSESSING OFFICER FOR MAKING FURTHER EXAMINATION. COLLECTION OF PAPERS ON RECORD IN SUCH CIRCUMSTANCES CANNOT BE CONSTRUED AS CONDUCTING A PROPER ENQUIRY. IF IN SUCH CIRCUMSTANCES, THE ASSESSING OFFICER SIMPLY GATHERS DOCUMENTS AND KEEPS THEM ON RECORD, THEN SUCH NOMINAL ENQUIRY FAL LS WITHIN THE OVERALL CATEGORY OF' NO ENQUIRY' BECAUSE OF THE INAC TION ON THE PART OF THE ASSESSING OFFICER TO READ A WRITING ON THE WALL [PARA 19.A.} THUS, THE INSTANT CASE IS A GLARING EXAMPLE OF NOT MAKING RELEVANT ENQUIRY, WHICH AMOUNTS TO 'NO ENQUIRY' AND HENCE IT BECOMES A CASE OF NON-APPLICATION OF MIND BY THE ASSESSING OFFICER. [P ARA 19.E.} IF THE ASSESSING OFFICER HAS TAKEN A POSSIBLE VIEW, CAN STILL THE REVISION BE ORDERED? WHERE THE ASSESSING OFFICER FAILS TO CONDUCT AN ENQU IRY OR PROPER [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 54 ENQUIRY, WHICH IS CALLED FOR IN THE GIVEN CIRCUMSTA NCES, THE COMMISSIONER IS EMPOWERED TO SET ASIDE THE ASSESSME NT ORDER BY TREATING IT AS ERRONEOUS AND PREJUDICIAL TO THE INT ERESTS OF THE REVENUE. IN SUCH CIRCUMSTANCES, THE ASSESSING OFFICER CAN'T B E SAID TO HAVE TAKEN A POSSIBLE VIEW AND IT IS NOT FURTHER REQUIRE D ON THE PART OF THE COMMISSIONER TO EXPRESSLY SHOW WHERE THE ASSESSMENT ORDER WENT WRONG. THE VERY FACT THAT NO ENQUIRY WAS CONDUCTED OR NO PROPER ENQUIRY WAS CONDUCTED IN THE REQUIRED CIRCUMSTANCES , IS SUFFICIENT IN ITSELF TO INVOKE THE PROVISIONS OF SECT ION 263. [PARA 21.G.1 FROM AN OVERVIEW OF THE ABOVE DISCUSSED JUDGMENTS, IT IS CRYSTAL CLEAR THAT WHERE THE AO FAILS TO CONDUCT AN ENQUIRY OR PROPER ENQUIRY, WHICH IS CALLED FOR IN THE GIVEN CIRCUMSTANCES, THE CIT IS EMPOWERED TO SET ASIDE THE ASSESSMENT ORDER BY TREATING IT AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IN SUCH CIRCUMSTANCES, IT IS NOT FURTHER REQUIRED ON THE PART OF THE CIT TO EXPR ESSLY SHOW WHERE THE ASSESSMENT ORDER WENT WRONG. THE VERY FACT THAT NO ENQUIRY WAS CONDUCTED OR NO PROPER ENQUIRY WAS CONDUCTED IN THE REQUIRED CIRCUMSTANCES, IS SUFFICIENT IN ITSELF TO INVOKE TH E PROVISIONS OF SECTION 263. WE, THEREFORE, ANSWER ALL THE FIVE ASPECTS DISCUSSED ABOVE BY HOLDING THAT : I) THE ENQUIRY CONDUCTED BY THE AO IN SUCH C ASES CAN'T BE CONSTRUED AS A PROPER ENQUIRY; II) CIT U/S 263 CAN SET ASIDE THE ASSESSMENT ORDER AND DIRECT THE AO TO CONDUCT A THO ROUGH ENQUIRY, NOTWITHSTANDING THE JURISDICTION OF THE AO IN MAKIN G ENQUIRIES ON THE ISSUES OR MATTERS AS HE CONSIDERS FIT IN TERMS OF S ECTION 142(1) AND 143(2) OF THE ACT, WHICH IS RELEVANT ONLY UP TO THE COMPLE TION OF ASSESSMENT; III) INADEQUATE INQUIRY CONDUCTED BY THE AO IN THE GIVEN CIRCUMSTANCES IS' AS GOOD AS NO ENQUIRY AND AS SUCH THE CIT WAS EMPOWERED TO REVISE THE ASSESSMENT ORDE R; IVY THE ORDER OF THE CIT IS NOT BASED ON IRRELEVANT CONSIDERATIONS A ND FURTHER IN THE PRESENT CIRCUMSTANCES, HE WAS NOT OBLIGED TO POSITIVELY IND ICATE THE DEFICIENCIES IN THE ASSESSMENT ORDER ON MERITS ON THE QUESTION OF I SSUE OF SHARE CAPITAL AT A HUGE PREMIUM; V) THE AO IN THE GIVEN CIRCUMSTANCE S CAN'T BE SAID TO HAVE TAKEN A POSSIBLE VIEW AS THE REVISION IS SOUGHT TO BE DONE ON THE PREMISE THAT THE AO DID NOT MAKE ENQUIRY THEREBY RENDERING THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE ON THAT SCORE ITSELF. 12. IN A RECENT DECISION OF D. BENCH OF KALKATA IT AT IN THE CASE OF JUBILEE COMMITRADE (P) LTD. KALKATA (ITA TO 1179FKAU2016), THE HON'BLE BENCH HAS CONFIRMED THE ORDER OF CIT SETTIN G ASIDE THE ORDER OF A.O. IN THIS CASE, THE HON'BLE BENCH HAS RELIED UPO N THE ORDER OF B- BENCH OF KALKATA IT AT IN THE CASE OF SUBHLAKSHMI VANIJYA (P) LTD. THE CIT HAD INVOKED THE SECTION 263 OF IT ACT-1961 FOR THE REAS ONS THAT THE A. O. HAD [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 55 FAILED TO EXAMINE THE CAPACITY OF SUBSCRIBES OF SHA RES CAPITAL ALTHOUGH MOST OF THE DETAILS AND CONFIRMATIONS WERE DULY CAL LED FOR AND FILED. IT WAS HELD BY THE BENCH:- WE HAVE CONSIDERED HIS SUBMISSIONS AND ARE OF THE V IEW THAT AS WAS DONE IN THE SIMILAR GROUP OF CASES WHICH WAS CONSIDERED BY THIS TRIBUNAL AND IN WHICH THE LEAD ORDER WAS PASSED IN THE CASE OF SUBH LAKSHIMI VANIJAY PVT. LTD. (SUPRA), THE CIT OUGHT TO HAVE SET ASIDE THE ORDER OF AO AND DIRECT THE AO TO MAKE FRESH ENQUIRY WITH REGARD TO THE REC EIPT OF SHARE CAPITAL AND SHARE PREMIUM BY THE ASSESSEE DURING THE PREVIO US YEAR. AS RIGHTLY POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE, SI NCE THE PROCEEDINGS U/S 263 OF THE ACT WERE CONCLUDED EX-PARTE, THE ASSESSE E HAD NO OCCASION TO PLACE MATERIAL TO SATISFACTORILY EXPLAIN THE RECEIP T OF SHARE CAPITAL AND SHARE PREMIUM BY THE ASSESSEE. THERE WAS HOWEVER NO MATERIAL ON THE BASIS OF WHICH THE CIT COULD HAVE COME TO THE CONCL USION THAT THE RECEIPT OF SHARE CAPITAL AND SHARE PREMIUM WAS NOT SATISFACTOR ILY EXPLAINED BY THE ASSESSEE. AS RIGHTLY CONTENDED BY THE LD. COUNSEL F OR THE ASSESSEE, THE CIT OUGHT TO HAVE SET ASIDE THE ORDER OF THE AO AND DIRECTED THE AO TO CONDUCT FRESH ENQUIRY ON THE LINES INDICATED IN THE ORDER OF THIS TRIBUNAL IN THE CASE OF SUBHLAKSHMI VANIJYA PVT LTD. (SUPRA). W E THEREFORE MODIFY THE ORDER OF CIT AND DIRECT THE AD TO MAKE FRESH ENQUIR Y WITH REGARD TO THE RECEIPT OF SHARE CAPITAL AND SHARE PREMIUM DURING T HE PREVIOUS YEAR AFTER AFFORDING ASSESSEE OPPORTUNITY OF BEING HEARD. WITH THESE OBSERVATIONS THE APPEAL OF THE ASSESSEE IS TREATED AS PARTLY ALL OWED. 13. THE JURISDICTIONAL INDORE BENCH OF ITAT, IN A RECENT DECISION DATED 21.11.2016, IN THE CASES OF (1) P.G. INFRASTRUCTURE & SERVICE PVT. LTD. BHOPAL, (2) S.N. VIJAYWARGIYA, BHOPAL, (3) PEOPLE'S INTERNATIONAL SERVICES P. LTD., BHOPAL, (ITA NO. 607 TO 609/IND/2016) HAS CONFIRMED THE ORDER OF PCIT, BHOPAL PASSED UNDER SECTION 263 OF INCOME TAX ACT. 1961 ON THE GROUND THAT THE A.O. HAS NOT BEEN IN A POSITION TO CONDUCT PROPER INQUIRY. ALTHOUGH IN THESE CASES, THE JURISD ICTION OF THE CASES WERE TRANSFERRED TO THE ASSESSING OFFICER AT THE FAG END OF THE YEAR DUE TO UNPLEASANT EVENT OF CBI RAID ON THE EARLIER ASSESSI NG OFFICER. HOWEVER THE BASIC PRINCIPAL WHICH HAS BEEN CONFIRMED BY THE BEN CH WAS LACK OF INQUIRY AND INADEQUATE INQUIRY CONDUCTED BY THE ASSESSING O FFICER. THEREFORE, THESE DECISION ARE APPLICABLE ON THE PRESENT CASE A LSO. THIS HON'BLE BENCH HAS ALSO PLACED RELIANCE ON ALMOST ALL THE CASE LAW S RELIED UPON BY US IN THIS CASE. THE OPERATIVE PART OF ORDER OF THIS HON' BLE BENCH IS REPRODUCED HERE UNDER:- WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS OF THE P ARTIES. WE FIND THAT IN SIMILAR TYPE OF CASES IN ITA NOS. 467/IND120 16, 27/IND12016, 341/INDL2016 ETC. ETC. THIS BENCH OF THE TRIBUNAL VI DE ITS ORDER DATED 14TH JULY, 2016 HAS HELD AS UNDER :- '5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL AVAILABLE [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 56 ON RECORD AND KEEPING IN VIEW THE PECULIAR FACTS AND CIRCUMSTANCES OF THESE CASES, WE ARE OF THE CONSIDERED VIEW THAT IN S HORT TIME FROM 29.03.2014 TO 30.03.2014, IT WAS PRACTICALLY IMPOSSIBL E FOR THE ASSESSING OFFICER TO HAVE EXAMINED THE RETURNS OF TH E ASSESSEE VIS-A- VIS THE DETAILS AND PARTICULARS FILED IN SUPPORT OF TH E RETURNS AND FORM AN OPINION AND FRAME A DETAILED ASSESSMENT ORDER ON THE ISSUES IN THE RETURNS OF INCOME. THEREFORE, WE HAVE NO HESITATION IN ACCEPTING THE ARGUMENTS OF THE LD. DEPARTMENTAL REPRESENTATIVE AND UPHOLDING THE PRESENT ORDERS PASSED U/S 263 OF THE INCOME-TAX ACT, 1961, BY THE COMMISSIONER OF INCOME-TAX. THUS GROUNDS OF APPEAL IN ALL THE APPEALS UNDER CONSIDERATION ARE DISMISSED.' RESPECTFULLY FOLL OWING THE ABOVE DECISIONS, WE ARE OF THE VIEW THAT THERE WAS NO OCCA SION FOR THE ASSESSING OFFICER TO MAKE ANY INQUIRY AND THE ASSESS ING OFFICER ACCEPTED THE RETURN WITHOUT PROPER INQUIRY AS A RES ULT OF WHICH SUBSTANTIAL AMOUNT OF TAXABLE INCOME WAS NOT BROUGHT TO TAX. WE ALSO HOLD THAT NO RULE OF UNIVERSAL APPLICATION CAN BE LA ID DOWN OR EXERCISE OF REVISIONAL ORDERS U/S 263 0 THE ACT. IT WILL DEPEND ON THE FACTS OF EACH AND EVERY CASE BUT THE COMMISSIONER OF INCOME T AX MUST BE SATISFIED OF EXISTENCE OF TWIN CONDITIONS THAT THE ORD ER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. WE ALSO GET SUPPORT FROM THE FOLLOWING JUDGMENTS :- (I) RAM PYARI DEVI SARAOGI VS. CIT; 67ITR 84(SC) (II) CIT VS. SESHASAYEE PAPER & BOARDS LTD.; 242ITR 490 (MAD.) (III) CIT VS. BHAGWANDAS; 272 ITR 367 (ALL) PG INFRASTRUCTURE ITA NOS. 607,608 & 609IINDL201615 (IV) PRATAP FOOTWEAR VS. ACIT; (2003) SOT 638 (JABALPUR)(TRI) (V) CIT VS. AMITABH BACHAN (SUPRA); CIVIL APPEAL NO.5009 0/2016 (SC) WE FURTHER FIND THAT THE HON 'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. CIT VS. DEEPAK KUMAR GARG; 299 ITR 435 HAS CATEGORICALLY HELD AS UNDER :- 'HELD, THAT FROM THE ORDER OF THE ASSESSING OFFICER, IT WAS CLEAR THAT FOR WANT OF TIME, THE ASSESSING OFFICER HAD DONE ONLY A S EMBLANCE OF ENQUIRY AND THAT TOO, IN A VERY SLIP-SHOD MANNER. TH E ASSESSING OFFICER ACCEPTED THE VERSION OF THE ASSESSEE WITHOUT PROPER ENQUIRY AND AS A RESULT A SUBSTANTIAL AMOUNT OF TAXABLE INCOME WAS NO T BROUGHT TO TAX. THE COMMISSIONER OF INCOME TAX HAD RECORDED A CATEGO RICAL FINDING THAT THE ORDER OF THE ASSESSING OFFICER FOR WANT OF ADEQUATE ENQUIRY WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND AFTER SETTING ASIDE THE ASSESSMENT ORDER, REMANDED THE MA TTER TO THE ASSESSING OFFICER FOR FRESH ASSESSMENT ON THE MERITS. THE LEARNED CIT ALSO DIRECTED THE ASSESSING OFFICER TO OBSERVE THE RULES OF NATURAL JUSTICE AND TO PROVIDE OPPORTUNITY OF HEARING TO THE A SSESSEE BEFORE MAKING A FRESH ASSESSMENT ORDER ON THE MERITS. THIS WOULD ADEQUATELY [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 57 SAFEGUARD THE INTEREST OF THE ASSESSEE AND WOULD CA USE NO PREJUDICE. THE ORDER OF REVISION WAS VALID. ' THUS, RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT OF TH E HON'BLE JURISDICTIONAL HIGH COURT, THESE APPEALS OF THE ASSESSEE ARE DISMISSED.' 14. RELIANCE IF ALSO PLACED HEREBY ON EXPLANATION-2 TO SECTION 263 OF IT ACT 1961 INSERTED BY FINANCE ACT 2015 W.E.F. 01.06.2015 CONSIDERING THE SAME AS HAVING RETROSPECTIVE EFFECT. IT IS A SETTLED RUL E OF CONSTRUCTION THAT EVERY STATUE IS PRIMA FACIE PROSPECTIVE UNLESS IT IS EXPR ESSLY OR BY NECESSARY IMPLICATION MADE TO HAVE RETROSPECTIVE OPERATION. O RDINARILY THE COURT ARE REQUIRED TO GATHER THE INTENTION OF THE LEGISLATURE FROM THE OVERT LANGUAGE OF THE PROVISION AS TO WHETHER IT HAS BEEN MADE PROSPE CTIVE OR RETROSPECTIVE, AND IF RETROSPECTIVE, THEN FROM WHICH DATE. HOWEVER , SOME TIMES WHAT HAPPENS IS THAT THE SUBSTANTIVE PROVISION, AS ORIGI NALLY ENACTED OR LATER AMENDED, FAILS TO CLARIFY THE INTENTION OF THE LEGI SLATURE. IN SUCH A SITUATION IF SUBSEQUENTLY SOME AMENDMENT IS CARRIED OUT TO CL ARIFY THE REAL INTENT, SUCH AMENDMENT HAS TO BE CONSIDERED AS RETROSPECTIV E FROM THE DATE WHEN THE EARLIER PROVISION WAS MADE EFFECTIVE. SUCH CLARIFICATORY OR EXPLANATORY AMENDMENT IS DECLARATORY. AS THE LATER AMENDMENT CLARIFIES THE REAL INTENT AND DECLARES THE POSITION AS WAS OR IGINALLY INTENDED, IT TAKES RETROACTIVE EFFECT FROM THE DATE WHEN THE ORI GINAL PROVISION WAS MADE EFFECTIVE. NORMALLY SUCH CLARIFICATORY AMENDME NT IS MADE RETROSPECTIVELY EFFECTIVE FROM THE EARLIER DATE. IT MAY ALSO HAPPEN THAT THE CLARIFICATORY OR EXPLANATORY PROVISION INTRODUCED L ATER TO DEPICT THE REAL INTENTION OF THE LEGISLATURE IS NOT SPECIFICALLY MA DE RETROSPECTIVE BY THE STATUTE. NOTWITHSTANDING THE FACT THAT SUCH AMENDME NT TO THE SUBSTANTIVE PROVISION HAS BEEN GIVEN PROSPECTIVE EFFECT, THE JU DICIAL OR QUASI JUDICIAL AUTHORITIES, ON A CHALLENGE MADE TO IT, CAN JUSTIFI ABLY HOLD SUCH AMENDMENT TO BE RETROSPECTIVE. THE JUSTIFICATION BE HIND GIVING RETROSPECTIVE EFFECT TO SUCH AMENDMENT IS TO APPLY THE REAL INTENTION OF THE LEGISLATURE FROM THE DATE SUCH PROVISION WAS INITIA LLY INTRODUCED. THE INTENTION OF THE LEGISLATURE WHILE INTRODUCING THE PROVISION IS GATHERED, INTER ALIA, FROM THE FINANCE BILL, MEMORANDUM EXPLA INING THE PROVISION OF THE FINANCE BILL ETC. RELIANCE IS PLACED ON THE DEC ISION OF 'B' BENCH OF HON'BLE ITAT KOLKATA IN THE CASE OF SHUBHLAKSHMI VA NIJYA PVT. LTD. 60 TAXMANN.COM 60 WHEREIN HON'BLE ITAT, WHILE EXAMININ G THE RETROSPECTIVE APPLICABILITY OF PROVISO TO SECTION 68 OF IT ACT 19 61 HAS BEAUTIFULLY ANALYZED THE ISSUE OF APPLICABILITY OF AMENDMENTS A ND LAID DOWN THE ABOVE PRINCIPLES WHILE EXAMINING THE ISSUE. THEREFO RE IT IS IMPERATIVE TO EXAMINE THE APPLICABILITY OF EXPLANATION 2 TO SECTI ON 263 OF IT ACT 1961 IN THE LIGHT OF PRINCIPAL LAID DOWN IN THE DECISION AS DISCUSSED SUPRA. THE EXISTING PROVISIONS OF THE ACT AFTER THE INSERTION OF EXPLANATION 2 STANDS AS UNDER: 'ES+-REVISION BY THE [PRINCIPAL COMMISSIONER OR] CO MMISSIONER [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 58 (1) THE [PRINCIPAL COMMISSIONER OR] COMMISSIONER MA Y CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT , AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE [ASSESSING] OF FICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE RE VENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTE R MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SU CH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLING THE ASSESSM ENT AND DIRECTING A FRESH ASSESSMENT [EXPLANATION L.-FOR THE REMOVAL OF DOUBTS, IT IS HE REBY DECLARED THAT, FOR THE PURPOSES OF THIS SUB-SECTION,- (A) AN ORDER PASSED [ON OR BEFORE OR AFTER THE 1ST DAY OF JUNE, 1988J BY THE ASSESSING OFFICER SHALL INCLUDE- (I) AN ORDER OF ASSESSMENT MADE BY THE ASSISTANT COMMIS SIONER 2 [OR DEPUTY COMMISSIONER] OR THE INCOME-TAX OFFICER ON T HE BASIS OF THE DIRECTIONS ISSUED BY THE [JOINT] COMMISSIONER UNDER SECTION 144A; (U) AN ORDER MADE BY THE [JOINT} COMMISSIONER IN EX ERCISE OF THE POWERS OR IN THE PERFORMANCE OF THE FUNCTIONS OF AN ASSESSING OFFICER CONFERRED ON, OR ASSIGNED TO, HIM UNDER THE ORDERS OR DIRECTIONS ISS UED BY THE BOARD OR BY THE [PRINCIPAL CHIEF COMMISSIONER OR] CHIEF COMMISS IONER OR [PRINCIPAL DIRECTOR GENERAL OR] DIRECTOR GENERAL OR [PRINCIPAL COMMISSIONER OR] COMMISSIONER AUTHORISED BY THE BOARD IN THIS BEHALF UNDER SECTION 120; (B) 'RECORD' [SHALL INCLUDE AND SHALL BE DEEMED ALW AYS TO HAVE INCLUDED] ALL RECORDS RELATING TO ANY PROCEEDING UNDER THIS A CT AVAILABLE AT THE TIME OF EXAMINATION BY THE [PRINCIPAL COMMISSIONER OR] C OMMISSIONER; (C) WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTION AND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT MATTER OF AN Y APPEAL [FILED ON OR BEFORE OR AFTER THE 1ST DAY OF JUNE, 1988J, THE POW ERS OF THE [PRINCIPAL COMMISSIONER OR] COMMISSIONER UNDER THIS SUB-SECTIO N SHALL EXTEND [AND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED] TO SUCH MA TTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN SUE APPEAL.] [EXPLANATION 2.-FOR THE PURPOSES OF THIS SECTION, I T IS HEREBY DECLARED THAT AN ORDER PASSED BY THE ASSESSING OFFICER SHALL BE D EEMED TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, IF, IN THE OPINION OF THE PRINCIPAL COMMISSIONER OR COMMISSIONER,- (A) THE ORDER IS PASSED WITHOUT MAKING INQUIRIES O R VERIFICATION WHICH SHOULD HAVE BEEN MADE; (B) THE ORDER IS PASSED ALLOWING ANY RELIEF WITHOUT INQUIRING INTO THE CLAIM; (C) THE ORDER HAS NOT BEEN MADE IN ACCORDANCE WITH ANY OR-DER, DIRECTION OR INSTRUCTION ISSUED BY THE BOARD UNDER SECTION 119; OR [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 59 (D) THE ORDER HAS NOT BEEN PASSED IN ACCORDANCE WIT H ANY DECISION WHICH IS PREJUDICIAL TO THE ASSESSEE, RENDERED BY THE JUR ISDICTIONAL HIGH COURT OR SUPREME COURT IN THE CASE OF THE ASSESSEE OR ANY OT HER PERSON. [(2) NO ORDER SHALL BE MADE UNDER SUB-SECTION (1) A FTER THE EXPIRY OF TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH T HE ORDER SOUGHT TO BE REVISED WAS PASSED.] (3) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECTI ON (2), AN ORDER IN REVISION UNDER THIS SECTION MAY BE PASSED AT ANY TI ME IN THE CASE OF AN ORDER WHICH HAS BEEN PASSED IN CONSEQUENCE OF, OR T O GIVE EFFECT TO, ANY FINDING OR DIRECTION CONTAINED IN AN ORDER OF THE A PPELLATE TRIBUNAL, [NATIONAL TAX TRIBUNAL.] THE HIGH COURT OR THE SUPR EME COURT. EXPLANATION.-IN COMPUTING THE PERIOD OF LIMITATION FOR THE PURPOSES OF SUB- SECTION (2), THE TIME TAKEN IN GIVING AN OPPORTUNIT Y TO THE ASSESSEE TO BE REHEARD UNDER THE PROVISO TO SECTION 129 AND ANY PERIOD DURING WHICH ANY PROCEEDING UNDER THIS SECTION IS STAYED BY AN O RDER OR INJUNCTION OF ANY COURT SHALL BE EXCLUDED. ' THE EXPLANATION 2 HAS BEEN INSERTED IN SECTION 263 W.E.F. FROM 1ST JUNE, 2015 BY FINANCE BILL 2015 TO DECLARE THE LAW WHICH READS AS UNDER:- ' [EXPLANATION 2.-FOR THE PURPOSES OF THIS SECTION, IT IS HEREBY DECLARED THAT AN ORDER PASSED BY THE ASSESSING OFFICER SHALL BE DEEMED TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, IF, IN THE OPINION OF THE PRINCIPAL COMMISSIONER OR COMMISSIONER,- (A) THE ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE; (B) THE ORDER IS PASSED ALLOWING ANY RELIEF WITHOUT INQUIRING INTO THE CLAIM; (C) THE ORDER HAS NOT BEEN MADE IN ACCORDANCE WITH ANY ORDER, DIRECTION OR INSTRUCTION ISSUED BY THE BOARD UNDER SECTION 119; OR (D) THE ORDER HAS NOT BEEN PASSED IN ACCORDANCE WIT H ANY DECISION WHICH IS PREJUDICIAL TO THE ASSESSEE, RENDERED BY THE JUR ISDICTIONAL HIGH COURT OR SUPREME COURT IN THE CASE OF THE ASSESSEE OR ANY OT HER PERSON. IT IS PROFITABLE AT THIS STAGE TO REFER TO THE MEMO RANDUM TO FINANCE BILL 2015 AND NOTES TO CLAUSES TO FINANCE BILL, 2015 WHI CH ARE AS UNDER: FURTHER, IT IS ESSENTIAL TO REFER TO THE MEMORANDUM TO FINANCE BILL 2015 AND NOTES TO CLAUSE SO AS TO UNDERSTAND THE REAL INTENT ION OF THE LEGISLATURE IN INSERTING EXPLANATION 2 TO SECTION 263 OF IT ACT 19 61 WHICH IS REPRODUCED HERE UNDER FOR READY REFERENCE: 'MEMORANDUM TO FINANCE BILL 2015 'THE EXISTING PROVISIONS CONTAINED IN SUB-SECTION ( 1) OF SECTION 263 OF THE INCOME TAX ACT PROVIDES THAT IF THE PRINCIPAL COMMI SSIONER OR [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 60 COMMISSIONER CONSIDERS THAT ANY ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BE ING HEARD AND AFTER MAKING AN ENQUIRY PASS AN ORDER MODIFYING THE ASSES SMENT MADE BY THE ASSESSING OFFICER OR CANCELLING THE ASSESSMENT AND DIRECTING FRESH ASSESSMENT. THE INTERPRETATION OF EXPRESSION 'ERRONEOUS IN SO F AR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE' HAS BEEN A CONTENTIOU S ONE. IN ORDER TO PROVIDE CLARITY ON THE ISSUE IT IS PROPOSED TO PROV IDE THAT AN ORDER PASSED BY THE ASSESSING OFFICER SHALL BE DEEMED TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE RE VENUE, IF, IN THE OPINION OF THE PRINCIPAL COMMISSIONER OR COMMISSIONER,- (A) THE ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH, SHOULD HAVE BEEN MADE; (B) THE ORDER IS PASSED ALLOWING ANY RELIEF WITHOUT INQUIRING INTO THE CLAIM; (C) THE ORDER HAS NOT BEEN MADE IN ACCORDANCE WITH ANY ORDER, DIRECTION OR' INSTRUCTION ISSUED BY THE BOARD UNDER SECTION 119; OR (D) THE ORDER HAS NOT BEEN PASSED IN ACCORDANCE WIT H ANY DECISION, PREJUDICIAL TO THE ASSESSEE, RENDERED BY THE JURISD ICTIONAL HIGH COURT OR SUPREME COURT IN THE CASE OF THE ASSESSEE OR ANY OT HER PERSON. ' THIS AMENDMENT WILL TAKE EFFECT FROM 1ST DAY OF JUNE, 2015.' 'NOTES ON CLAUSES FINANCE BILL 2015 - CLAUSE 65 OF THE BILL SEEKS TO AMEND SECTION 263 OF THE INCOME-TAX ACT RELATING TO REVISION OF ORDERS PREJUDICIAL TO REVEN UE. THE EXISTING PROVISIONS CONTAINED IN SUB-SECTION (1 ) OF SECTION 263.PROVIDE THAT IF THE PRINCIPAL COMMISSIONER OR COMMISSIONER CONSIDERS THAT ANY ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE, HE MAY, AFT ER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAKING OR CAUS ING TO BE MADE AN ENQUIRY, AS HE DEEMS NECESSARY, PASS AN ORDER MODIF YING THE ASSESSMENT MADE BY THE ASSESSING OFFICER OR CANCELLING THE ASS ESSMENT AND DIRECTING FRESH ASSESSMENT. IT IS PROPOSED TO AMEND SUB-SECTION (1) OF THE AFOR ESAID SECTION TO INSERT AN EXPLANATION SO AS TO PROVIDE THAT AN ORDER PASSED B Y THE ASSESSING OFFICER SHALL BE DEEMED TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, IF, IN THE OPINION OF THE PRINCIPAL COMMISSIONER OR COMMISSIONER,- (A) THE ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH, SHOULD HAVE BEEN MADE; (B) THE ORDER IS PASSED ALLOWING ANY RELIEF WITHOUT INQUIRING INTO THE CLAIM; (C) THE ORDER HAS NOT BEEN MADE IN ACCORDANCE WITH ANY ORDER, DIRECTION OR INSTRUCTION ISSUED BY THE BOARD UNDER SECTION 119; OR (D) THE ORDER HAS NOT BEEN PASSED IN ACCORDANCE WIT H ANY DECISION WHICH [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 61 IS PREJUDICIAL TO THE ASSESSEE, RENDERED BY THE JUR ISDICTIONAL HIGH COURT OR SUPREME COURT IN THE CASE OF THE ASSESSEE OR ANY OT HER PERSON. THIS AMENDMENT WILL TAKE EFFECT FROM 1ST JUNE, 2015.' THE PLAIN READING OF EXISTING PROVISIONS OF SECTION 263 OF IT ACT 1961, THE MEMORANDUM TO FINANCE BILL 2015 AND NOTES ON CLAUSE S OF FINANCE BILL 2015 AS REPRODUCED ABOVE MAKES IT EVIDENT BEYOND DO UBT THAT SAID EXPLANATION 2 TO SECTION 263 OF IT ACT 1961 WAS BRO UGHT IN JUST AS CLARIFICATORY OR EXPLANATORY TO THE ORIGINAL INTENT OF SECTION 263 OF IT ACT 1961. THE INTENTION OF LEGISLATURE HAS BEEN TO EXPL AIN AND CLARIFY THE ORIGINALLY ENACTED STATUE SO AS TO DECLARE THE POSI TION AS WAS ORIGINALLY INTENDED. THE LANGUAGE OF THE EXPLANATION 2 STARTS AS 'FOR THE PURPOSE OF THIS SECTION, IT IS HERE BY DECLARED THAT THE ORDER BY WHICH GOES TO PROVE THAT THE RELEVANT INSERTION OF EXPLANATION HA S BEEN DECLARATORY. THEREFORE, TAKING SUPPORT FROM DECISIO N OF HON'BLE B BENCH OF IT AT KOLKATA ON THE PRINCIPLES OF APPLICABILITY OF AMENDMENTS IN THE CASE OF SHUBHLAKSHI VANIJYA PVT. LTD., AS DISCUSSE D SUPRA, THE INSERTION OF EXPLANATION 2 TO SECTION 263 OF IT ACT 1961 HAS TO BE CONSIDERED AS HAVING RETROSPECTIVE EFFECT. THEREFORE, IT WAS MAND ATED ON THE PART OF ASSESSING OFFICER NOT TO PASS THE ASSESSMENT ORDER WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MA DE AND ALLOW THE RELIEF WITHOUT INQUIRING INTO THE CLAIM WHICH IN TH E INSTANT CASE, THE AO HAS OMITTED TO FOLLOW THE EXPRESS PROVISIONS OF THE ACT. FURTHER RELIANCE CAN BE PLACED ON THE DECISION OF HON'BLE C BENCH OF ITAT MUMBAI IN THE CASE OF M/S CROMPTON AND GREAVES LTD. IN ITA NO. 1994/MUM/2013 AND ITA NO. 2836/MUM/2014 DATED 01.02.2016 WHEREIN AFTER EXAMINING THE ISSUE OF APPLICABILITY OF INSERTION O F EXPLANATION 2 TO SECTION 263 OF IT ACT 1961 IN DETAIL, IT HAS BEEN H ELD THAT SUCH INSERTION OF EXPLANATION 2 HAS BEEN DECLARATORY AND CLARIFICA TORY IN NATURE TO PROVIDE CLARITY TO THE EXISTING PROVISION. THEREFOR E, HELD THAT THE ORDER PASSED BY AO SHALL BE LIABLE TO BE REVISED BY THE P R. CIT/CIT IF THE AO HAS NOT FOLLOWED THE TERMS OF EXPLANATION 2 (A) AND (B) OF SECTION 263(1) OF IT ACT 1961. THE RELEVANT PART OF DECISION OF HO N'BLE BENCH IS REPRODUCED HERE UNDER: NOW, AS CAN BE SEEN ABOVE, THE AMENDMENT TO SECTION 263 OF THE ACT BY INSERTION OF EXPLANATION 2 TO SECTION 263 OF THE ACT IS DECLARAT ORY & CLARIFICATORY IN NATURE AND IS INSERTED TO PROVIDE CLARITY ON THE IS SUE AS TO WHICH ORDERS PASSED BY THE AO SHALL CONSTITUTE ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF REVENUE ,IT IS , INTER-ALIA, PROVIDED THAT IF TH E ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VERIFICATIONS BY AO WHICH, SHOU LD HAVE BEEN MADE OR THE ORDER IS PASSED ALLOWING ANY RELIEF WITHOUT INQ UIRING INTO THE CLAIM; THE ORDER SHALL BE DEEMED TO BE ERRONEOUS AND PREJUDICI AL TO THE INTEREST OF REVENUE. THE HON'BLE SUPREME COURT IN THE CASE OF M ALABAR INDUSTRIAL COMPANY LIMITED V. CIT (2000)109 TAXMAN 66 (SC) HEL D THAT IF THE AO HAS [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 62 ACCEPTED THE ENTRY IN THE STATEMENT OF ACCOUNT FILE D BY THE TAXPAYER WITHOUT MAKING ENQUIRY, THE SAID ORDER OF THE AO SH ALL BE DEEMED TO BE ERRONEOUS IN SO JAR AS IT IS PREJUDICIAL TO THE INT EREST OF THE REVENUE. IN OUR CONSIDERED OPINION, THE FACTS OF THE CASE OF THE AS SESSEE COMPANY ARE SIMILAR TO THE FACTS IN THE CASE OF MALABAR INDUSTR IAL CO. LIMITED(SUPRA) WHEREBY NO ENQUIRY/VERIFICATION IS MADE BY THE AD WHATSOEVER WI TH RESPECT TO CLAIM OF DEDUCTION OF RS. 17.72 CRORES WITH RESPECT TO THE PROVISIONS FOR WARRANTY, EXCISE DUTY, SALES TAX AND LIQUIDATED DAMAGES. MOREOVER, NOW EXPLANATION 2 TO SECTION 263 OF THE ACT IS INSERTED IN THE STATUTE WHICH IS DECLARATORY AND CLARA FICATORY IN NATURE TO DECLARE THE LAW AND PROVIDE CLARITY ON THE ISSUE W HEREBY IF THE A.D. FAILED TO MAKE ANY ENQUIRY OR NECESSARY _ VERIFICATIO N WHICH SHOULD HAVE BEEN MADE, THE ORDER BECOMES ERRONEOUS IN SO F AR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. A PROVISO ADDE D FROM 01-04-1988 TO SECTION 43B OF THE ACT FROM 01-04-1984 CAME UP FOR CONSIDERATION IN ALLIED MOTORS PRIVATE LIMITED V. CIT (1997) 91 TAXMAN 205(SC) BEFORE HON'BLE SUPREME COURT AND IT WAS GIVEN RETROSPECTIVE EFFECT FROM THE INCEPTION OF THE SECTION ON THE REASONING THAT THE PR OVISO WAS ADDED TO REMEDY HTTP://WWW.ITATONLINE.ORG 18 ITA 1994MUM/13 & ITA 28361MUM/14 UNINTENDED CONSEQUENCES AND SUPPLY AN O BVIOUS OMISSION SO THAT THE SECTION MAY BE GIVEN A REASONAB LE INTERPRETATION AND THAT IN FACT THE AMENDMENT TO INSERT THE PROVIS O WOULD NOT SERVE ITS OBJECT UNLESS IT IS CONSTRUED AS RETROSPECTIVE. IN CI T V. PODAR CEMENT PVT. LIMITED (1997) 92 TAXMAN 541(SC) , THE HON'BLE SUPREME COURT HELD THAT AMENDMENT INTRODUCED BY THE FINANCE ACT,1 987 IN SO FAR THE RELATED TO SECTION 27(III), (IIIA) AND (IIIB) WHICH REDEFIN ED THE EXPRESSION 'OWNER OF HOUSE PROPERTY', IN RESPECT OF WHICH THERE WAS A SHARP DIVERGENCE OF OPINION AMONGST THE HIGH COURTS, WAS CLARIFICATORY AND DECLARATORY IN NATURE AND CONSEQUENTLY RETROSPECTIVE . SIMILARLY, IN BRIJ MOHAN DAS LAXMAN DAS V. CIT (1997) 90 TAXMAN 41(SC), EXPLANATION 2 ADDED TO SECTION 40 OF THE ACT WAS HELD TO BE DECLA RATORY IN NATURE AND , THEREFORE , RETROSPECTIVE.(REFERENCE PAGE 569- 570,PRINCIPLES OF STATUTORY INTERPRETATION BY JUSTICE G.P.SINGH ,13TH ED.). IN OUR CONSIDERED VIEW, THE CIT HAS RIGHTLY INVOKED THE PR OVISIONS OF SECTION 263 OF THE ACT AS THE A.D. FAILED TO MAKE PROPER ENQUIRY , EXAMINATION AND VERIFICATIONS AS WARRANTED FOR THE PROPER COMPL ETION OF THE ASSESSMENT, WITH RESPECT TO CLAIM OF DEDUCTION OF R S.17. 72 CRORES WITH RESPECT TO THE PROVISIONS FOR WARRANTY, EXCISE DUTY, SALES TAX AND LIQUIDATED DAMAGES. REGARDING THE CONTENTIONS OF THE A SSESSEE COMPANY THAT THE CIT SHOULD HAVE SET ASIDE THE ORDE RS PASSED BY THE AD AFTER GIVING APPEAL EFFECT TO THE ORDERS OF THE T RIBUNAL IN THE FIRST ROUND HAS TO BE REJECTED AS THE BASIC FACTS REMAINS THAT THE AD HAS NOT MADE ANY ENQUIRY, EXAMINATION OR VERIFICATION OF THE CLAIM OF THE ASSESSEE COMPANY WITH RESPECT TO CLAIM OF DEDUCTION OF PROVISION OF RS [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 63 17.72 CRORES WITH RESPECT TO PROVISIONS FOR WARRANTY, SALE S TAX, EXCISE DUTY AND LIQUIDATED DAMAGES, THE ORDER OF THE TRIBUN AL WOULD HAVE ADJUDICATED ISSUES ARISING OUT OF THE ORDERS OF THE AUTHORITIES BELOW WHEREBY THE FACTS STILL REMAINS THAT THE AD HAS NOT MADE ANY ENQUIRY, EXAMINATION OR VERIFICATION OF THE CLAIM OF THE ASS ESSEE COMPANY WITH RESPECT TO CLAIM OF DEDUCTION OF PROVISION OF RS 17 .72 CRORES WITH RESPECT TO PROVISIONS FOR WARRANTY, SALES TAX, EXCISE DUTY AND LIQUIDATED DAMAGES. THE ORDER OF THE TRIBUNAL IN THE FIRST ROUND OF LIT IGATION HAS NOT BEEN INCIDENTALLY ENCLOSED BY THE ASSESSEE COMPANY IN TH E DOCUMENTS/PAPER BOOK FILED WITH THE TRIBUNAL. IT IS AN ESTABLISHED PRINCIPLE UNDER THE ACT THAT PROVISIONS AND CONTINGENT EXPENSES ARE NOT ALL OWED AS DEDUCTION WHILE COMPUTING THE INCOME OF THE ASSESSEE. IT IS O NLY AN ASCERTAINED LIABILITY WHICH HAS CRYSTALLIZED DURING THE YEAR AN D WHICH IS WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE COMPANY, IS ALLOWED AS DEDUCTION WHILE COMPUTING INCOME UNDE R THE ACT THE A. D. WAS UNDER DUTY TO MAKE NECESSARY AND PROPER ENQUIRY , EXAMINATION AND VERIFICATION'S WITH RESPECT TO PROVISIONS OF RS. 17 .72 CRORES WITH RESPECT TO THE CLAIM OF DEDUCTION OF THE ASSESSEE COMPANY FOR PROVISIONS FOR LIQUIDITY DAMAGES, WARRANTY, SALES TAX AND EXCISE DUTY, WHILE ON PERUSAL OF THE ASSESSMENT ORDERS U/S 143(3) OF THE ACT DATED 28.12 .2010 AND OTHER DOCUMENTS FILED BEFORE US, WE HAVE OBSERVED THAT TH E AD HAS NOT MADE ANY ENQUIRY WHATSOEVER WITH RESPECT TO THE CLAIM OF DEDUCTION OF EXPENSES OF RS.17.72 CRORES TOWARDS PROVISION FOR WARRANTY, SALES TAX AND EXCISE DUTY AND LIQUIDATED DAMAGES CLAIMED BY THE ASSESSEE COMPANY WHILE COMPUTING THE INCOME OF THE ASSESSEE COMPANY AND TH E CLAIM OF THE ASSESSEE COMPANY WAS ACCEPTED WITHOUT ANY INQUIRY, EXAMINATION OR VERIFICATION WHATSOEVER BY THE AD AND IN THE ABSENC E THEREOF OF ENQUIRY, EXAMINATION AND VERIFICATION OF THE CLAIM OF THE AS SSESEE COMPANY FOR DEDUCTION OF PROVISIONS FOR WARRANTY, SALES TAX AND EXCISE DUTY AND LIQUIDATED DAMAGES AMOUNTING TO RS.17.72 CRORES, WE FIND NO INFIRMITY IN THE ORDER DATED 06.02.2013 OF THE CIT PASSED U/S 26 3 OF THE ACT SETTING ASIDE THE ASSESSMENT ORDER DATED 28.12.10 PASSED U/ S 143(3) OF THE ACT AS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTERE ST OF THE REVENUE AND DIRECTING THE AD TO ASSESS THE INCOME OF THE ASSESS EE COMPANY AFTER MAKING NECESSARY ENQUIRIES, EXAMINATION AND VERIFIC ATIONS, WHICH ORDER OF THE CIT DATED 06.02.2013 , WE UPHOLD. WE ORDER ACCO RDINGLY. ' 7. THE REVENUE HAS ALSO FILED REPORT DATED 12.04.2018 WHICH IS REPRODUCED AS UNDER : [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 64 SUB: - APPELLATE PROCEEDINGS IN THE CASE OF M/S BHANDARI HOSPITAL AND RESEARCH CENTRE, VIJAY NAGAR, INDORE, ITA NO. 355II ND/2017 FOR A.Y. 2012-13 AGAINST THE ORDER U/S 263 OF THE INCOME TAX ACT, 1961 - REG- VIDE LETTER DATED 09.03.2018 FROM THE % PCIT-L, INDORE, A REPORT WAS CALLED FOR IN THE CASE OF M/S BHANDARI HOSPITAL AND RESEARCH CENTRE FOR AY 2012-13. AS DIRECTED THE REPORT IN THE CASE OF M /S BHANDARI HOSPITAL AND RESEARCH CENTRE (AADFB8L5LA) FOR A Y 2012-13 IS SUBMITTED AS UNDER:- 2. THE ASSESSEE IS FIRM RUNNING HOSPITAL AND RESEAR CH CENTRE FILED THE RETURN OF INCOME FOR AY 2012-13 ON 13/09/2012 DECLARING TOTAL INCOME AT RS. 94,31,692/-. THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT THROU GH CASS AND ASSESSMENT WAS COMPLETED ON 24/03/2015 BY MAKING THE FOLLOWING ADDITIONS TO THE RETURNED INCOME:- 1. DISALLOWANCE OF OPEN HEART AND OPERATION THEATER EXPENSES:- 5,10,543/- 2. DISALLOWANCE IN PATHOLOGY EXPENSES: RS. 3,20,835 /- IT IS TO BE STATED THAT A SURVEY OPERATION U/S 133A OF THE INCOME TAX ACT, 1961 WAS CONDUCTED AT THE BUSINESS PREMISE OF THE ASSESSEE ON 23/09/2011 AND AS A RESULT AN AMOUNT OF RS. 23,61,18,930/- WAS SURRENDERED IN THE HAND OF THE ASSESSEE AS FOLLOWS: - SR. NO. NAME OF THE ASSESSEE SURRENDERED AMOUNT (IN RS.) HEADS 1 M/S BHANDARI HOSPITAL & RESEARCH CENTRE ( AS PER STATEMENT DATED 24.09.11 OF PARTNER SHRI VINOD BHANDARI ON ACCOUNT OF HUNDITES 16,65,00,000/- ON ACCOUNT OF HUNDIES 2 M/S BHANDARI HOSPITAL & RESEARCH CENTRE (AS PER STATEMENT DATED 24.09.11 OF PARTNER SHRI VINOD BHANDARI) 6,45,02,010/- ON ACCOUNT OF SUPPRESSED HOSPITAL RECEIPTS 3 M/S BHANDARI HOSPITAL & RESEARCH CENTRE (AS PER STATEMENT DATED 24.09.11 OF PARTNER SHRI VINOD BHANDARI) 51,16,920/- ON ACCOUNT OF BOGUS UNSECURED LOANS 3. SUBSEQUENTLY AS PER AFFIDAVIT DATED 23/0112012 T HE ASSESSEE HAS [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 65 EXPLAINED THAT THE UNACCOUNTED RECEIPTS AMOUNTING T O RS. 6,21,25,115/- AS PER LPI 02 WHERE UTILIZED IN MAKING THE HUNDI LO ANS AND REMAINING AMOUNT OF HUNDI LOANS RS. 10,43,74,8851- SHOULD BE CONSIDERED AS UNEXPLAINED. ASSESSEE ALSO STATED THAT THESE ARE EN TRIES REGARDING DISCOUNT ALLOWED OF RS. 23,69,425/- AND PETTY CASH EXPENSES OF RS. 7,470/- AND THEREFORE CORRECT AMOUNT OF UNACCOUNTED RECEIPT IS RS. 6,21,25,115/- . THUS THE SURRENDERED INCOME WAS REV ISED TO RS 17,16,16,920/-. IT WAS ALSO OBSERVED DURING ASSESSM ENT PROCEEDINGS THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 35AC AMOUNTI NG TO RS. 8 CRORE. THE ASSESSEE . ON 17.03.2015, HAS MADE REQUEST BEFO RE THE JCIT, RANGE- 3, INDORE TO ISSUE DIRECTIONS U/S 144A. THE JOINT C OMMISSIONER INCOME TAX, RANGE-3, INDORE HAS ISSUED DIRECTIONS U/S 144A VIDE ORDER DATED 24.03.2015. IN THE LIGHT OF DIRECTIONS GIVEN U/S 14 4A, SET OFF OF RS. 6,21,25,115/- AGAINST THE UNACCOUNTED HUNDI LOANS A MOUNTING TO RS. 16,65,00,000/- WAS ALLOWED. THE DONATION TO GEETANJ ALI HOSPITAL MADE BY THE ASSESSEE AMOUNTING TO RS. 8 CRORE ALLOWED TO TH E ASSESSEE AND THE INCOME WAS ASSESSED AT RS. 1,02,63,070/-. 4. SINCE, THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE ON ACCOUNT OF FAILURE ON THE PART OF ASSESSING OFFICER IN MAKING NECESSARY ENQUIRIES, THE ORDER OF ASSESSING OFFICER U/S 143(3) DATED 24.03.2015 WAS SET-ASIDE AND HELD TO BE ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND THE AO WAS DIREC TED TO PASS THE FRESH ASSESSMENT ORDER AFTER MAKING PROPER ENQUIRIES ON T HE RELEVANT ISSUE DISCUSSED IN ORDER U/S 263 AFTER AFFORDING SUFFICIE NT OPPORTUNITY TO THE ASSESSEE. 5. VIDE ORDER DATED 30.03.2017 THE LD. PRO CIT-I, INDORE HAS DIRECTED TO MAKE PROPER INVESTIGATION & ENQUIRY IN THE FOLLOWING ISSUE. 1. TELESCOPING OF UNDISCLOSED HOSPITAL RECEIPT OF RS. 6,21,25,115/- AGAINST HUNDI LOANS GIVEN OF RS. 16,65,00,000/-. 2. REDUCTION OF SURRENDERED AMOUNT BY RS. 23,76,985/- ON ACCOUNT OF DISCOUNT AND RS. 7,470/- BEING PETTY CASH EXPENSE. 3. ENQUIRY RELATED TO RECOVERING OF HUNDI LOANS AMOUNT ING TO RS. 16.65 CRORES. 4. UTILIZATION OF UNACCOUNTED FUNDS TO CLAIM DEDUCTION U/S 35AC AMOUNTING TO RS. 8 CRORE. 5. YEAR WISE INVESTMENT MADE BY THE ASSESSEE. 6. ANGIOGRAPHY RECEIPTS OF RS. 1,96,900/- NOT CONSIDERED IN UNACCOUNTED RECEIPTS, 7. EXAMINATION OF PROFIT RATIO FOR THREE YEARS AND DRA WING OF PROFIT & LOSS ACCOUNT AND BALANCE SHEET AS ON DATE OF SURVEY AND FOR THE LATER PERIOD. [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 66 8. GENUINENESS OF THE TRANSACTION OF DONATION OF RS. 8 CRORE TO GEETANJALI MEDICAL UNIVERSITY. 9. DEPRECIATION CLAIMED FOR PET SCAN IN HIGHER RATE @ 40%. 10. TDS DEDUCTION ON SALARY PAYMENTS AMOUNTING TO R S. 4,75,90,7911-. 6. TELESCOPING OF UNDISCLOSED HOSPIT AL RECEIPTS : THE UNDISCLOSED HOSPITAL RECEIPT OF RS. 6,21,25,115/- WAS ALLOWED TO BE TELESCOPED AGAINST THE HUNDI LOANS GIVEN BY THE ASS ESSEE AMOUNTING TO RS. 16,65,00,000/-. THIS SET OFF WAS ALLOWED TO THE ASSESSEE WITHOUT PR OPER VERIFICATION AND EXAMINATION AND HOW THE HOSPITAL R ECEIPTS SURRENDERED DURING THE COURSE OF SURVEY WAS USED FOR ONWARD LEN DING FOR LOANS GIVEN ON HUNDI WITH DATE-WISE RECEIPTS AND PAYMENTS. THE ASSESSEE HAS SIMPLY STATED THAT THE UNACCOUNTED RECEIPT OF RS. 6.45 CRO RE WAS UTILIZED IN MAKING THE HUNDI LOANS WITHOUT ANY BASIS OR WITHOUT ANY PROPER SUPPORTING DOCUMENTS AND IT IS ONLY AN AFTER THOUGH T OF THE ASSESSEE TO REDUCE THE TAX BURDEN AND AVOID PAYING TAXES. THESE FACTORS WERE NOT TAKEN INTO CONSIDERATION DURING ASSESSMENT AND FURT HER ENQUIRIES WERE NOT MADE WHICH RENDER THE ASSESSMENT ORDER ERRONEOUS AN D PREJUDICIAL TO THE INTEREST OF THE REVENUE. 7.REDUCTION OF SURRENDERED UNDISCLOSED HOSPITAL REC EIPTS TO RS. 6,21,25,115/-: THE ASSESSEE CLAIMED REDUCTION FROM THE SURRENDERED UNDISCLOSED HOSPITAL RECEIPTS UNDER TWO HEADS NAMELY: 1. DISCOUNT ALLOWED- RS. 23,76,9851- 2. PETTY CASH EXPENSES- RS. 7,4701- THE CREDITS & DEBITS ENTRIES ARE RECORDED IN TRIAL BALANCE IMPOUN DED DURING SURVEY PROCEEDINGS IN PAGE NO. 96 OF LPI-2 O F THE SEIZED DOCUMENTS. THE INDEPENDENT VERIFICATION OF THE ABOV E TWO ENTRIES WERE NOT MADE DURING THE ASSESSMENT PROCEEDINGS FOR THE DISC OUNT ALLOWED AND PETTY CASH ENTRY WHICH RENDER THE ORDER ERRONEOUS A ND PREJUDICIAL TO THE INTEREST OF REVENUE. 8.ENQUIRY RELATED TO RECOVERING OF HUNDI LOANS AMOU NTING TO RS. 16.65 CRORES: THE ASSESSEE HAS SURRENDERED AN AMOUNT OF RS. 16.65 CRORES ON ACCOUNT OF HUNDI LOANS BUT DURING THE ASSESSMENT PROCEEDING S, THE DETAILS OF RECEIVING BACK OF HUNDI LOANS BY THE ASSESSEE DURIN G THE CURRENT YEAR WAS NOT EXAMINED WITH PARTY WISE DETAILS, NAME, ADDRESS AND PAN, DATE OF RECEIVING BACK OF THE LOAN, IDENTITY, GENUINENESS A ND SOURCES OF THE PARTIES FROM WHOM FUNDS WERE RECEIVED WERE NOT VERIFIED. THE ASSESSEE HAS SIMPLY EXPLAINED THAT IT HAD RECOV ERED THE ENTIRE HUNDI LOANS AMOUNTING TO RS. 16.65 CRORE DURING THE YEAR. NO VERIFICATION WAS MADE REGARDING CASH RECEIPTS IN THE CASH BOOK FROM VARIOUS HUNDI LOAN [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 67 PARTIES AND THE ASSESSEE'S CLAIM OF DEPOSITING THE CASH IN THE BANK ACCOUNTS FROM THE CASH BALANCE IN THE CASH BOOK WHI CH WAS ALSO NOT VERIFIED WITH DATE OF DEPOSIT AND DUE DATE OF MATUR ITY OF THE HUNDI LOANS. IT IS TO BE MENTIONED HERE THAT IN THE CASE OF SHRI VI NOD BHANDARI FOR AY 2012-13, THE LD. CIT(A) HAS CONFIRMED THE ADDITION MADE ULS 68 AMOUNTING TO RS. 7,34,79,097/- AS UNEXPLAINED CASH RECEIPT ON ACCOUNT OF CASH DEPOSITS MADE IN THE BANK ACCOUNT WHICH THE ASSESSE E CLAIMED THAT THESE ARE THE AMOUNTS RECOVERED FROM HUNDI LOAN PARTIES D EPOSITED IN THE BANK ACCOUNTS OUT OF CASH BALANCE AVAILABLE IN THE CASH BOOK. IN THE CASE OF PRESENT ASSESSEE M/S BHANDARI HOSPITAL & RESEARCH CENTRE, THE DETAILS OF RECOVERY OF HUNDI LOANS WAS NOT PROP ERLY VERIFIED WITH CASH BOOK AND THEIR IDENTITY & GENUINENESS OF THE TRANSACTION WAS NOT ESTABLISHED. THE ASSESSEE WAS NOT ASKED TO PRODUCE THE PARTIES FOR VERIFICATION. THE SOURCES OF CASH DEPOSITS IN THE B ANK ACCOUNTS WERE NOT ENQUIRED AND HENCE IT REMAINS UNEXPLAINED. MERE STA TING THAT THE HUNDI LOANS OF RS. 16.65 CRORES RECOVERED DURING THE YEAR CANNOT BE CONCLUSIVE EVIDENCE. THE HUNDI LOAN PARTIES, DUE DATE OF MATUR ITY OF HUNDIS (AS PER HUNDIES IMPOUNDED) AND DATE OF DEPOSIT ALONG WITH I NTEREST FROM PARTIES IS GIVEN IN TABLE BELOW: S.NO. NAME AMOUNT INTEREST DUE DATE OF INRS. DATE DEPOSIT 1 SURENDRA SINGH 4500000 201945 17-10-11 17-03- 12 2 MAHENDRA KUMAR NARENDRA 4500000 236342 03-09-11 03-03- 12 KUMAR 3 VIJA Y CHANDRA CHOUHAN 5000000 262600 30-09-11 30-03- 12 4 JITENDRA PATEL 2500000 112190 24-10-11 24-03- 12 5 KLSHAN 5000000 224384 08-10-11 08-03- 12 6 VLRENDRA KUMAR 5000000 300822 22-08-11 28-03- 12 7 KAILASH CHOUDHARY 5000000 224384 05-10-11 05-03- 12 8 PRAKASH SINGHAL 3000000 22932 28-09-11 28-09- 11 9 AMIT AGRAWAL 5000000 224384 03-10-11 03-03- 12 10 KLSHAN LAL MAL VIY A 4500000 201945 05-10-11 05-03- 12 11 PRAKASH MAL V ANI 4500000 201945 10-10-11 10-03- 12 12 ROHIT JAIN 4000000 240658 16-08-11 16-03- 12 13 PRABHA GANDHI 3500000 64726 17-08-11 30-09- 11 14 PINKL CHABRA 4000000 179506 06-10-11 06-03- 12 15 RAM CHAND SHARMA 4000000 60164 01-08-11 30-09- 11 16 VIKASJAIN 6000000 269260 05-10-11 05-03- 12 17 SHEKHAR SHARMA 25000 00 112190 15-10-11 15-03- 12 18 PRAMILA CHOUDHARY 3000000 33288 16-09-11 30-09- 11 19 SOMCHANDJI 2000000 89753 01-10- 11 01-03- 12 [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 68 20 ABHISHEK SONI 5000000 224384 05-10- 11 05-03- 12 21 NIRAJ PRAJAPA TI 5000000 113425 25-07- 11 25-09- 11 22 JAYANTBAIS 5000000 38219 27-09- 11 27-09- 11 23 RITESH MANGW ANI 5000000 224384 04-10- 11 04-03- 12 24 SHY AM RAJPOOT 4500000 201945 08-10- 11 08-03- 12 25 MAHENDRA KUMAR 4000000 90740 28-07- 11 28-09- 11 26 JAG MOHAN MALVIY A 2000000 89753 04-10- 11 04-03- 12 27 RAMNARAYAN GUPTA 2000000 89753 02-10- 11 02-03- 12 28 SUSHILA PARMAR 2500000 131300 02-09- 11 02-03- 12 29 RISHABH JAIN 4500000 236342 13-09- 11 13-03- 12 30 NEMICHAND JAIN 5000000 75 205 18-09- 11 18-10- 11 31 RAMDA Y AL BANERIY A 4000000 90740 19-08- 11 19-10- 11 32 VINOD RAMNANI 2500000 37603 23-09- 11 23-10- 11 . 33 RAM MANOHAR MORYA 6000000 269260 03-10- 11 03-03- 12 34 MOHAN GUPTA 5000000 36986 01-10- 11 01-10- 11 35 SUNIL SHARMA 4500000 33288 01-10- 11 01-10- 11 36 RAMPRASAD BANV ARILAL 3000000 45863 30-08- 11 30-09- 11 37 SURESH CHAND NEMI CHAND 2500000 38219 27-08- 11 27-09- 11 38 ANAND KUMAR 4000000 60165 23-09- 11 23-10- 11 39 AJA Y MANOHAR DAS 4000000 121315 29-08- 11 29-11- 11 40 SATISH SHAH 2500000 168904 11-07- 11 11-03- 12 41 RAMESH KHANDEL WAL 6500000 341384 30-09- 11 30-03- 12 TOTAL 166500000 6022594 FROM THE ABOVE TABLE, IT IS VERY CLEAR THAT THE MAN Y OF THE HUNDIES HAVE MATURED BEFORE THE DATE OF DEPOSIT AND THE ASSESSEE HAS SHOWN INFLOW OF CASH IN CASH BOOK AS LOAN REPAYMENT FROM VARIOUS PA RTIES AND FURTHER DEPOSIT IN THE BANK ACCOUNT. MOST OF THE DEPOSIT IN THE CASH BOOK ARE REFLECTING IN THE MONTH OF FEBRUARY TO MARCH HOWEVE R AS PER THE IMPOUNDED HUNDI COPIES, THE DUE DATES ARE TWO TO TH REE MONTHS FROM THE DATE OF SURVEY. THE ABOVE ANALYSIS AND VERIFICATION WERE NOT DONE DURING THE ASSESSMENT PROCEEDINGS WHICH RENDER THE ORDER E RRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE SINCE T HE IDENTITY & GENUINENESS OF THE TRANSACTION OF RECOVERED HUNDI L OANS WERE NOT PROVED AND VERIFIED. 9.UTILIZATION OF UNACCOUNTED FUNDS TO CLAIM DEDUCTI ON U/S 35AC AMOUNTING TO RS. 8 CRORE: THE ASSESSEE DURING THE YEAR HAS CLAIMED A DEDUCTIO N AMOUNTING TO RS. 8 CRORE U/S 35AC OWING TO DONATION MADE TO M/S GEETANJALI UNIVERSITY TRUST. THE ASPECT THAT WHETHER THE UNACCOUNTED FUND S GENERATED BY THE ASSESSEE CAN BE UTILISED FOR CLAIMING DEDUCTION U/S 35AC WAS NOT EXAMINED DURING THE ASSESSMENT PROCEEDINGS. THE ISS UE OF DEDUCTION [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 69 U/S 35AC WAS ALLOWED WITHOUT PROPER VERIFICATION OF THE SOURCE OF THE FUNDS BY SIMPLY ACCEPTING THE ASSESSEE'S REPLY SINC E THE RECOVERY OF HUNDI LOANS IS ITSELF UNDER QUESTION AND THE SOURCE IS NOT VERIFIABLE AND THE REPLY WAS ACCEPTED WITHOUT PROPER INVESTIGATION AND EXTERNAL ENQUIRES. IT IS ALSO TO BE NOTED THAT ONE OF THE PA RTNERS WAS UNDER PROBE IN VYAPAM CASE AND THE CO-ORDINATION WITH OTHER INV ESTIGATION AGENCIES WAS NOT DONE AND WHETHER THE SAID AMOUNT REPRESENTS UNACCOUNTED FUNDS WERE NOT EXAMINED WHICH RENDER THE ORDER ERRO NEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 10. YEAR-WISE INVESTMENTS- THE VERIFICATION RELATED TO YEAR WISE ACCRETION OF THE INVESTMENT WAS NOT MADE IN THE ASSESSMENT PR OCEEDINGS AND DETAILED ENQUIRIES WERE NOT MADE REGARDING THIS ISS UE AND THE INVESTMENTS MADE BY THE ASSESSEE WERE ACCEPTED WITH OUT FURTHER VERIFICATION L1.A.NGIOGRAPHY RECEIPTS OF RS.L,96,900/- AN AMOUNT OF RS.L,96,900/- RECORDED III PAGE NO. 8 OF LP-02 RELATING TO ANGIOGRAPHY RECEIPTS WAS NOT CONSIDERED IN UNACCOUN TED RECEIPTS OFFERED FOR TAXATION WHICH WAS NOT VERIFIED INDIVID UAL ENTRY WISE DURING THE ASSESSMENT PROCEEDINGS. 12,EXAMINATION OF PROFIT RATIO- IN THE RETURN OF INCOME FOR A.Y. 2012-13 THE ASSESS EE HAS SHOWN INCOME OF RS.94,31,692/- AND PROFIT BEFORE TAX AND REMUNERATION TO PARTNERS IS RS.3,64,88,334/. WHICH INCLUDES SURRENDERED INCOME OF RS.17, 17,49,505/ AND DEDUCTION U/S 35AC OF RS.8 CR. CLAIMED. WHEN BOTH ARE EXCLUDED, THE RESULT WOULD SHOW A NET LOSS OF RS.5,52,61,171/- AND HENCE THE ASSESSEE HAS SHOWN A DISTORTED PICTURE OF PROFIT. THE MANIPULATION IN THE BOOKS OF ACCOUNTS WERE NOT EXAMINED DURING THE ASSESSMENT PROCEEDINGS BY VERIF YING THE GENUINENESS OF EXPENSES CLAIMED AGAINST THE INCOME AND PREPARING THE PROFIT & LOSS ACCOUNT AND BALANCE SHEET ON THE DATE OF SURVEY AND FOR THE LATER PERIOD. THE HUNDI LOANS OF RS.L6.65 CR. O N THE DATE OF SURVEY ARE PART OF BALANCE SHEET ITEM AND IT IS CLEARLY RE FLECTING THE UNEXPLAINED INVESTMENTS AND THE ASPECT OF HOW THE S AME COULD FORM PART OF P&L A/C AND AGAINST WHICH MANY EXPENSES WER E CLAIMED WERE NOT VERIFIED DURING THE ASSESSMENT PROCEEDINGS AND THE ASSESSEE HAS CHEATED A DISTORTED PICTURE OF THE P&L ACCOUNT AND THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E SINCE THE CONSOLIDATED P&L ACCOUNT AND BALANCE SHEET WILL NOT GIVE REAL STATE OF AFFAIRS OF THE ASSESSEE AND INVESTIGATION IN TO THI S ISSUE WAS NOT MADE. 13.GENUINENESS OF DONATION MADE OF RS.8 CR. IN THE ABOVE PARA, DETAILED DISCUSSION ABOUT THE DI STORTED PICTURE OF THE P&L ACCOUNT OF THE ASSESSEE WAS GIVEN AND CLAIMING OF EXPENSES WERE DISCUSSED IN DETAIL. HENCE, THERE IS A NET LOSS OF RS.5,62,61,171/- AFTER [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 70 EXCLUDING SURRENDERED INCOME. HENCE, WITHOUT PROFIT , CLAIM OF DEDUCTION U/S 35AC IS INADMISSIBLE AND THIS ASPECT OF ENQUIRY WAS NOT CONDUCTED DURING THE ASSESSMENT PROCEEDINGS. THE HUNDI LOANS WAS SHOWN AS INCOME FROM BUSINESS BY THE ASSESSEE HOWEVER THEY A RE UNEXPLAINED INVESTMENTS. THE ISSUE WAS NOT IN DETAIL VERIFIED A ND TO DETERMINE CORRECT INCOME OF THE ASSESSEE,' THE CREDITS IN THE BANK AC COUNT AND SOURCES THEREOF SHOULD BE VERIFIED. THE TRANSACTION OFRS.8 CR. GIVEN AS DONATION IS DOUBTFUL SINCE THE AMOUNTS WERE TRANSFERRED AFTER T HE DATE OF SURVEY AND THE ASSESSEE IS INCURRING INTEREST EXPENDITURE AND HAVING LOAN LIABILITIES BUT DONATING A HUGE AMOUNT ON CHARITY OFRS.8CR. IS NOTHING BUT A WAY OF THE ASSESSEE TO AVOID TAX LIABILITY ON SURRENDERED INCOME AND HENCE THE TRANSACTION OF RS.8 CR. NEEDS DEEP VERIFICATION TO ASCERTAIN THE GENUINENESS AND HENCE THE ORDER IS ERRONEOUS AND PR EJUDICIAL TO THE INTEREST OF THE REVENUE. 14.DEPRECIATION ON PET CT SCAN THE ASSESSEE DURING THE YEAR HAS CLAIMED DEPRECIATI ON ON PET CT SCAN AMOUNTING TO RS.L,61,00,262/- FOR A.Y. 2012-13 AT T HE RATE OF 40% BUT THE ALLOWABLE RATE IS 15% WHICH IS NOT VERIFIED DURING ASSESSMENT REGARDING THE NATURE OF MACHINE, USES AND ITS ELIGIBLE RATE O F DEPRECIATION. 15.TDS DEDUCTION ON SALARY OF RS. 4,75,90,791/- THE SPECIFIC ENQUIRY RELATED TO DETAILS OF TDS DEDU CTION MADE BY THE ASSESSEE FOR SALARY PAYMENT OF RS. 4,75,90,791/- WA S NOT MADE BY CALLING FOR EMPLOYEE LIST, SALARY PAID MONTH WISE A ND THE RELATED TDS DEDUCTIONS WHICH RENDER THE ASSESSMENT ORDER ERRONE OUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HENCE, IN VIEW OF THE ABOVE, THE ORDER U/S 143(3) PASSED BY THE ASSESSING OFFICER IS ERRONEOUS SINCE THE ENQUIRIES REQUIRED IN THE ABOVE DISCUSSED ISSUES WERE NOT MADE AND AS PER PROVISION S OF SECTION 263, THE LD. PRO CIT CAN DIRECT FOR FRESH ASSESSMENT IF THE ORDER WAS PASSED WITHOUT MAKING INQUIRIES OR VERIFICATION, SINCE THE ORDER UNDER CONSIDERATION WAS PASSED WITHOUT ENQUIRY AND INVEST IGATION WHICH WERE REQUIRED TO BE MADE, THE LD. PRO CIT IS RIGHT IN SE TTING ASIDE THE ASSESSMENT ORDER AND DIRECTING FOR FRESH ASSESSMENT . 8. THE REVENUE HAS FILED REPORTS ON 27.12.2018 SUB: _ APPELLATE PROCEEDINGS IN THE CASE OF MIS BHANDARI H OSPITAL AND RESEARCH CENTRE, IJA 'AGAR, INDORE, ITA O. 355IIND/2017 FOR A.Y. 2012-13 AGAINS T THE ORDER S 263 OF THE INCOME TAX ACT, 1961 - REG- [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 71 VIDE LETTER DATED 09.03.2018 FROM THE 0/0 PCIT-L, INDORE, A REPORT WAS CALLED FOR IN THE CASE OF M/S BHANDARI HOSPITAL AND RESEARCH CENTRE FOR A Y 2 012-13. AS DIRECTED THE REPORT IN THE CASE OF M/S BHANDARI HOSPITAL AND RESEARCH CENTRE (AADFB8151A) FOR AY 2012-13 IS SUBMITTED AS UNDER.- 2. THE ASSESSEE IS FIRM RUNNING HOSPITAL AND RESEAR CH CENTRE FILED THE RETURN OF INCOME FOR A Y 2012-1 3 ON 13/09/2012 DECLARING TOTAL INCOME AT RS. 94,31,692/-. THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT THROUGH CASS AND ASSESSMENT WAS COMPLETED ON 24/0312015 BY MAKING THE FOLLOWING ADDITIONS TO THE RETURNED INCOME> 1. DISALLOWANCE OF OPEN HEART AND OPERATION THEATER EXPENSES:- 5,10,543/- 2. DISALLOWANCE IN PATHOLOGY EXPENSES: RS. 3,20,835/- IT IS TO BE STATED THAT A SURVEY OPERATION U/S 133A OF THE INCOME TAX ACT, 1961 WAS CONDUCTED AT THE BUSINESS PREMISE OF THE ASSESSEE ON 23/09/2011 AND AS A RESULT AN AMOUNT OF RS. 23,61,18,9301- WAS SURRENDERED IN THE HAND OF THE ASSESSEE AS FOLLOWS: SR. NO. NAME OF THE ASSESSEE SURRENDERED AMOUNT (IN RS.) HEADS 1 M/S BHANDARI HOSPITAL & RESEARCH CENTRE ( AS PER STATEMENT DATED 24.09.11 OF PARTNER SHRI VINOD BHANDARI ON ACCOUNT OF HUNDITES 16,65,00,000/- ON ACCOUNT OF HUNDIES 2 M/S BHANDARI HOSPITAL & RESEARCH CENTRE (AS PER STATEMENT DATED 24.09.11 OF PARTNER SHRI VINOD BHANDARI) 6,45,02,010/- ON ACCOUNT OF SUPPRESSED HOSPITAL RECEIPTS 3 M/S BHANDARI HOSPITAL & RESEARCH CENTRE (AS PER STATEMENT DATED 24.09.11 OF PARTNER SHRI VINOD BHANDARI) 51,16,920/- ON ACCOUNT OF BOGUS UNSECURED LOANS 3. SUBSEQUENTLY AS PER AFFIDAVIT DATED 23/0112012 T HE ASSESSEE HAS EXPLAINED THAT THE UNACCOUNTED RECEIPTS AMOUNTING T O RS. 6,21,25,115/- [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 72 AS PER LPI 02 WHERE UTILIZED IN MAKING THE HUNDI LO ANS AND REMAINING AMOUNT OF HUNDI LOANS RS. 10,43,74,8851- SHOULD BE CONSIDERED AS UNEXPLAINED. ASSESSEE ALSO STATED THAT THESE ARE EN TRIES REGARDING DISCOUNT ALLOWED OF RS. 23,69,425/- AND PETTY CASH EXPENSES OF RS. 7,470/- AND THEREFORE CORRECT AMOUNT OF UNACCOUNTED RECEIPT IS RS. 6,21,25,115/- . THUS THE SURRENDERED INCOME WAS REV ISED TO RS 17,16,16,920/-. IT WAS ALSO OBSERVED DURING ASSESSM ENT PROCEEDINGS THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 35AC AMOUNTI NG TO RS. 8 CRORE. THE ASSESSEE . ON 17.03.2015, HAS MADE REQUEST BEFO RE THE JCIT, RANGE- 3, INDORE TO ISSUE DIRECTIONS U/S 144A. THE JOINT C OMMISSIONER INCOME TAX, RANGE-3, INDORE HAS ISSUED DIRECTIONS U/S 144A VIDE ORDER DATED 24.03.2015. IN THE LIGHT OF DIRECTIONS GIVEN U/S 14 4A, SET OFF OF RS. 6,21,25,115/- AGAINST THE UNACCOUNTED HUNDI LOANS A MOUNTING TO RS. 16,65,00,000/- WAS ALLOWED. THE DONATION TO GEETANJ ALI HOSPITAL MADE BY THE ASSESSEE AMOUNTING TO RS. 8 CRORE ALLOWED TO TH E ASSESSEE AND THE INCOME WAS ASSESSED AT RS. 1,02,63,070/-. 4. SINCE, THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE ON ACCOUNT OF FAILURE ON THE PART OF ASSESSING OFFICER IN MAKING NECESSARY ENQUIRIES, THE ORDER OF ASSESSING OFFICER U/S 143(3) DATED 24.03.2015 WAS SET-ASIDE AND HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND THE AO WAS DIRECTED TO PASS THE FRESH A SSESSMENT ORDER AFTER MAKING PROPER ENQUIRIES ON THE RELEVANT ISSUE DISCUSSED IN ORDER U/S 263 AFTER AFFORDING SUFFICIENT OPPORTUNITY TO THE A SSESSEE. 5. VIDE ORDER DATED 30.03.2017 THE LD. PRO CIT-I, INDORE HAS DIRECTED TO MAKE PROPER INVESTIGATION & ENQUIRY IN THE FOLLOWING ISSUE. TELESCOPING OF UNDISCLOSED HOSPITAL RECEIPT OF RS. 6,21,25,115/- AGAINST HUNDI LOANS GIVEN OF RS. 16,65,00,000/-. 5. REDUCTION OF SURRENDERED AMOUNT BY RS. 23,76,985/- ON ACCOUNT OF DISCOUNT AND RS. 7,470/- BEING PETTY CASH EXPENSE. 6. ENQUIRY RELATED TO RECOVERING OF HUNDI LOANS AMOUNT ING TO RS. 16.65 CRORES. 7. UTILIZATION OF UNACCOUNTED FUNDS TO CLAIM DEDUCTION U/S 35AC AMOUNTING TO RS. 8 CRORE. 10. YEAR WISE INVESTMENT MADE BY THE ASSESSEE. 11. ANGIOGRAPHY RECEIPTS OF RS. 1,96,900/- NOT CONSIDERED IN UNACCOUNTED RECEIPTS, 12. EXAMINATION OF PROFIT RATIO FOR THREE YEARS AND DRA WING OF PROFIT & LOSS ACCOUNT AND BALANCE SHEET AS ON DATE OF SURVEY AND FOR THE LATER PERIOD. 13. GENUINENESS OF THE TRANSACTION OF DONATION OF RS. 8 CRORE TO GEETANJALI MEDICAL UNIVERSITY. 14. DEPRECIATION CLAIMED FOR PET SCAN IN HIGHER RATE @ 40%. 10. TDS DEDUCTION ON SALARY PAYMENTS AMOUNTING TO [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 73 RS.4,75,90,791/-. 6. TELESCOPING OF UNDISCLOSED HOSPITAL RECEIPTS : THE UNDISCLOSED HOSPITAL RECEIPT OF RS. 6,21,25,115/- WAS ALLOWED TO BE TELESCOPED AGAINST THE HUNDI LOANS GIVEN BY THE ASS ESSEE AMOUNTING TO RS. 16,65,00,000/-. THIS SET OFF WAS ALLOWED TO THE ASSESSEE WITHOUT PR OPER VERIFICATION AND EXAMINATION AND HOW THE HOSPITAL R ECEIPTS SURRENDERED DURING THE COURSE OF SURVEY WAS USED FOR ONWARD LEN DING FOR LOANS GIVEN ON HUNDI WITH DATE-WISE RECEIPTS AND PAYMENTS. THE ASSESSEE HAS SIMPLY STATED THAT THE UNACCOUNTED RECEIPT OF RS. 6.45 CRO RE WAS UTILIZED IN MAKING THE HUNDI LOANS WITHOUT ANY BASIS OR WITHOUT ANY PROPER SUPPORTING DOCUMENTS AND IT IS ONLY AN AFTER THOUGH T OF THE ASSESSEE TO REDUCE THE TAX BURDEN AND AVOID PAYING TAXES. THESE FACTORS WERE NOT TAKEN INTO CONSIDERATION DURING ASSESSMENT AND FURT HER ENQUIRIES WERE NOT MADE WHICH RENDER THE ASSESSMENT ORDER ERRONEOUS AN D PREJUDICIAL TO THE INTEREST OF THE REVENUE. 7.REDUCTION OF SURRENDERED UNDISCLOSED HOSPITAL REC EIPTS TO RS. 6,21,25,115/-: THE ASSESSEE CLAIMED REDUCTION FROM THE SURRENDERED UNDISCLOSED HOSPITAL RECEIPTS UNDER TWO HEADS NAMELY: 1. DISCOUNT ALLOWED- RS. 23,76,985/- 2. PETTY CASH EXPENSES- RS. 7,470/- THE CREDITS & DEBITS ENTRIES ARE RECORDED IN TRIAL BALANCE IMPOUN DED DURING SURVEY PROCEEDINGS IN PAGE NO. 96 OF LPI-2 O F THE SEIZED DOCUMENTS. THE INDEPENDENT VERIFICATION OF THE ABOV E TWO ENTRIES WERE NOT MADE DURING THE ASSESSMENT PROCEEDINGS FOR THE DISC OUNT ALLOWED AND PETTY CASH ENTRY WHICH RENDER THE ORDER ERRONEOUS A ND PREJUDICIAL TO THE INTEREST OF REVENUE. 8.ENQUIRY RELATED TO RECOVERING OF HUNDI LOANS AMOU NTING TO RS. 16.65 CRORES: THE ASSESSEE HAS SURRENDERED AN AMOUNT OF RS. 16.65 CRORES ON ACCOUNT OF HUNDI LOANS BUT DURING THE ASSESSMENT PROCEEDING S, THE DETAILS OF RECEIVING BACK OF HUNDI LOANS BY THE ASSESSEE DURIN G THE CURRENT YEAR WAS NOT EXAMINED WITH PARTY WISE DETAILS, NAME, ADDRESS AND PAN, DATE OF RECEIVING BACK OF THE LOAN, IDENTITY, GENUINENESS A ND SOURCES OF THE PARTIES FROM WHOM FUNDS WERE RECEIVED WERE NOT VERIFIED. THE ASSESSEE HAS SIMPLY EXPLAINED THAT IT HAD RECOV ERED THE ENTIRE HUNDI LOANS AMOUNTING TO RS. 16.65 CRORE DURING THE YEAR. NO VERIFICATION WAS MADE REGARDING CASH RECEIPTS IN THE CASH BOOK FROM VARIOUS HUNDI LOAN PARTIES AND THE ASSESSEE'S CLAIM OF DEPOSITING THE CASH IN THE BANK ACCOUNTS FROM THE CASH BALANCE IN THE CASH BOOK WHI CH WAS ALSO NOT VERIFIED WITH DATE OF DEPOSIT AND DUE DATE OF MATUR ITY OF THE HUNDI LOANS. IT IS TO BE MENTIONED HERE THAT IN THE CASE OF SHRI VI NOD BHANDARI FOR AY 2012-13, THE LD. CIT(A) HAS CONFIRMED THE ADDITION MADE U/S 68 [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 74 AMOUNTING TO RS. 7,34,79,097/- AS UNEXPLAINED CASH RECEIPT ON ACCOUNT OF CASH DEPOSITS MADE IN THE BANK ACCOUNT WHICH THE AS SESSEE CLAIMED THAT THESE ARE THE AMOUNTS RECOVERED FROM HUNDI LOAN PAR TIES DEPOSITED IN THE BANK ACCOUNTS OUT OF CASH BALANCE AVAILABLE IN THE CASH BOOK. IN THE CASE OF PRESENT ASSESSEE M/S BHANDARI HOSPITAL & RESEARCH CENTRE, THE DETAILS OF RECOVERY OF HUNDI LOANS WAS NOT PROP ERLY VERIFIED WITH CASH BOOK AND THEIR IDENTITY & GENUINENESS OF THE TRANSACTION WAS NOT ESTABLISHED. THE ASSESSEE WAS NOT ASKED TO PRODUCE THE PARTIES FOR VERIFICATION. THE SOURCES OF CASH DEPOSITS IN THE B ANK ACCOUNTS WERE NOT ENQUIRED AND HENCE IT REMAINS UNEXPLAINED. MERE STA TING THAT THE HUNDI LOANS OF RS. 16.65 CRORES RECOVERED DURING THE YEAR CANNOT BE CONCLUSIVE EVIDENCE. THE HUNDI LOAN PARTIES, DUE DATE OF MATUR ITY OF HUNDIS (AS PER HUNDIES IMPOUNDED) AND DATE OF DEPOSIT ALONG WITH I NTEREST FROM PARTIES IS GIVEN IN TABLE BELOW: S.NO. NAME AMOUNT INTEREST DUE DATE OF INRS. DATE DEPOSIT 1 SURENDRA SINGH 4500000 201945 17-10-11 17-03- 12 2 MAHENDRA KUMAR NARENDRA 4500000 236342 03-09-11 03-03- 12 KUMAR 3 VIJA Y CHANDRA CHOUHAN 5000000 262600 30-09-11 30-03- 12 4 JITENDRA PATEL 2500000 112190 24-10-11 24-03- 12 5 KLSHAN 5000000 224384 08-10-11 08-03- 12 6 VLRENDRA KUMAR 5000000 300822 22-08-11 28-03- 12 7 KAILASH CHOUDHARY 5000000 224384 05-10-11 05-03- 12 8 PRAKASH SINGHAL 3000000 22932 28-09-11 28-09- 11 9 AMIT AGRAWAL 5000000 224384 03-10-11 03-03- 12 10 KLSHAN LAL MAL VIY A 4500000 201945 05-10-11 05-03- 12 11 PRAKASH MAL V ANI 4500000 201945 10-10-11 10-03- 12 12 ROHIT JAIN 4000000 240658 16-08-11 16-03- 12 13 PRABHA GANDHI 3500000 64726 17-08-11 30-09- 11 14 PINKL CHABRA 4000000 179506 06-10-11 06-03- 12 15 RAM CHAND SHARMA 4000000 60164 01-08-11 30-09- 11 16 VIKASJAIN 6000000 269260 05-10-11 05-03- 12 17 SHEKHAR SHARMA 2500000 112190 15-10-11 15-03- 12 18 PRAMILA CHOUDHARY 3000000 33288 16-09-11 30-09- 11 19 SOMCHANDJI 2000000 89753 01-10- 11 01-03- 12 20 ABHISHEK SONI 5000000 224384 05-10- 11 05-03- 12 21 NIRAJ PRAJAPA TI 5000000 113425 25-07- 11 25-09- 11 22 JAYANTBAIS 5000000 38219 27-09- 11 27-09- 11 23 RITESH MANGW ANI 5000000 224384 04-10- 11 04-03- 12 24 SHY AM RAJPOOT 4500000 201945 08-10- 11 08-03- 12 [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 75 25 MAHENDRA KUMAR 4000000 90740 28-07- 11 28-09- 11 26 JAG MOHAN MALVIY A 2000000 89753 04-10- 11 04-03- 12 27 RAMNARAYAN GUPTA 2000000 89753 02-10- 11 02-03- 12 28 SUSHILA PARMAR 2500000 131300 02-09- 11 02-03- 12 29 RISHABH JAIN 4500000 236342 13-09- 11 13-03- 12 30 NEMICHAND JAIN 5000000 75205 18-09- 11 18-10- 11 31 RAMDA Y AL BANERIY A 4000000 90740 19-08- 11 19-10- 11 32 VINOD RAMNANI 2500000 37603 23-09- 11 23-10- 11 . 33 RAM MANOHAR MORYA 6000000 269260 03-10- 11 03-03- 12 34 MOHAN GUPTA 5000000 36986 01-10- 11 01-10- 11 35 SUNIL SHARMA 4500000 33288 01-10- 11 01-10- 11 36 RAMPRASAD BANV ARILAL 3000000 45863 30-08- 11 30-09- 11 37 SURESH CHAND NEMI CHAND 2500000 38219 27-08- 11 27-09- 11 38 ANAND KUMAR 4000000 60165 23-09- 11 23-10- 11 39 AJA Y MANOHAR DAS 4000000 121315 29-08- 11 29-11- 11 40 SATISH SHAH 2500000 168904 11-07- 11 11-03- 12 41 RAMESH KHANDEL WAL 6500000 341384 30-09- 11 30-03- 12 TOTAL 166500000 6022594 FROM THE ABOVE TABLE, IT IS VERY CLEAR THAT THE MAN Y OF THE HUNDIES HAVE MATURED BEFORE THE DATE OF DEPOSIT AND THE ASSESSEE HAS SHOWN INFLOW OF CASH IN CASH BOOK AS LOAN REPAYMENT FROM VARIOUS PA RTIES AND FURTHER DEPOSIT IN THE BANK ACCOUNT. MOST OF THE DEPOSIT IN THE CASH BOOK ARE REFLECTING IN THE MONTH OF FEBRUARY TO MARCH HOWEVE R AS PER THE IMPOUNDED HUNDI COPIES, THE DUE DATES ARE TWO TO TH REE MONTHS FROM THE DATE OF SURVEY. THE ABOVE ANALYSIS AND VERIFICATION WERE NOT DONE DURING THE ASSESSMENT PROCEEDINGS WHICH RENDER THE ORDER E RRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE SINCE T HE IDENTITY & GENUINENESS OF THE TRANSACTION OF RECOVERED HUNDI L OANS WERE NOT PROVED AND VERIFIED. 9.UTILIZATION OF UNACCOUNTED FUNDS TO CLAIM DEDUCTI ON U/S 35AC AMOUNTING TO RS. 8 CRORE: THE ASSESSEE DURING THE YEAR HAS CLAIMED A DEDUCTIO N AMOUNTING TO RS. 8 CRORE U/S 35AC OWING TO DONATION MADE TO M/S GEETANJALI UNIVERSITY TRUST. THE ASPECT THAT WHETHER THE UNACCOUNTED FUND S GENERATED BY THE ASSESSEE CAN BE UTILISED FOR CLAIMING DEDUCTION U/S 35AC WAS NOT EXAMINED DURING THE ASSESSMENT PROCEEDINGS. THE ISS UE OF DEDUCTION U/S 35AC WAS ALLOWED WITHOUT PROPER VERIFICATION OF THE SOURCE OF THE FUNDS BY SIMPLY ACCEPTING THE ASSESSEE'S REPLY SINC E THE RECOVERY OF HUNDI LOANS IS ITSELF UNDER QUESTION AND THE SOURCE IS NOT VERIFIABLE AND THE REPLY WAS ACCEPTED WITHOUT PROPER INVESTIGATION AND EXTERNAL ENQUIRES. IT IS ALSO TO BE NOTED THAT ONE OF THE PA RTNERS WAS UNDER PROBE IN VYAPAM CASE AND THE CO-ORDINATION WITH OTHER INV ESTIGATION AGENCIES WAS NOT DONE AND WHETHER THE SAID AMOUNT REPRESENTS UNACCOUNTED [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 76 FUNDS WERE NOT EXAMINED WHICH RENDER THE ORDER ERRO NEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 10. YEAR-WISE INVESTMENTS- THE VERIFICATION RELATED TO YEAR WISE ACCRETION OF THE INVESTMENT WAS NOT MADE IN THE ASSESSMENT PR OCEEDINGS AND DETAILED ENQUIRIES WERE NOT MADE REGARDING THIS ISS UE AND THE INVESTMENTS MADE BY THE ASSESSSEE WERE ACCEPTED WIT HOUT FURTHER VERIFICATION L1.A.NGIOGRAPHY RECEIPTS OF RS.L,96,900/- AN AMOUNT OF RS.L,96,900/- RECORDED III PAGE NO. 8 OF LP-02 RELATING TO ANGIOGRAPHY RECEIPTS WAS NOT CONSIDERED IN UNACCOUN TED RECEIPTS OFFERED FOR TAXATION WHICH WAS NOT VERIFIED INDIVID UAL ENTRY WISE DURING THE ASSESSMENT PROCEEDINGS. 12,EXAMINATION OF PROFIT RATIO- IN THE RETURN OF INCOME FOR A.Y. 2012-13 THE ASSESS EE HAS SHOWN INCOME OF RS.94,31,692/- AND PROFIT BEFORE TAX AND REMUNERATION TO PARTNERS IS RS.3,64,88,334/. WHICH INCLUDES SURRENDERED INCOME OF RS.17, 17,49,505/ AND DEDUCTION U/S 35 AC OF RS.8 CR. CLAIMED. WHEN BOTH ARE EXCLUDED, THE RESULT WOULD SHOW A NET LOSS OF RS.5,52,61,171/- AND HENCE THE ASSESSEE HAS SHOWN A DISTORTED PICTURE OF PROFIT. THE MANIPULATION IN THE BOOKS OF ACCOUNTS WERE NOT EXAMINED DURING THE ASSESSMENT PROCEEDINGS BY VERIF YING THE GENUINENESS OF EXPENSES CLAIMED AGAINST THE INCOME AND PREPARING THE PROFIT & LOSS ACCOUNT AND BALANCE SHEET ON THE DATE OF SURVEY AND FOR THE LATER PERIOD. THE HUNDI LOANS OF RS.L6.65 CR. O N THE DATE OF SURVEY ARE PART OF BALANCE SHEET ITEM AND IT IS CLEARLY RE FLECTING THE UNEXPLAINED INVESTMENTS AND THE ASPECT OF HOW THE S AME COULD FORM PART OF P&L A/C AND AGAINST WHICH MANY EXPENSES WER E CLAIMED WERE NOT VERIFIED DURING THE ASSESSMENT PROCEEDINGS AND THE ASSESSEE HAS CHEATED A DISTORTED PICTURE OF THE P&L ACCOUNT AND THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E SINCE THE CONSOLIDATED P&L ACCOUNT AND BALANCE SHEET WILL NOT GIVE REAL STATE OF AFFAIRS OF THE ASSESSEE AND INVESTIGATION IN TO THI S ISSUE WAS NOT MADE. 13.GENUINENESS OF DONATION MADE OF RS.8 CR. IN THE ABOVE PARA, DETAILED DISCUSSION ABOUT THE DI STORTED PICTURE OF THE P&L ACCOUNT OF THE ASSESSEE WAS GIVEN AND CLAIMING OF EXPENSES WERE DISCUSSED IN DETAIL. HENCE, THERE IS A NET LOSS OFR S.5,62,61,171/- AFTER EXCLUDING SURRENDERED INCOME. HENCE, WITHOUT PROFIT , CLAIM OF DEDUCTION U/S 35AC IS INADMISSIBLE AND THIS ASPECT OF ENQUIRY WAS NOT CONDUCTED DURING THE ASSESSMENT PROCEEDINGS. THE HUNDI LOANS WAS SHOWN AS INCOME FROM BUSINESS BY THE ASSESSEE HOWEVER THEY A RE UNEXPLAINED INVESTMENTS. THE ISSUE WAS NOT IN DETAIL VERIFIED A ND TO DETERMINE CORRECT INCOME OF THE ASSESSEE,' THE CREDITS IN THE BANK AC COUNT AND SOURCES THEREOF SHOULD BE VERIFIED. THE TRANSACTION OF RS.8 CR. GIVEN AS DONATION [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 77 IS DOUBTFUL SINCE THE AMOUNTS WERE TRANSFERRED AFTE R THE DATE OF SURVEY AND THE ASSESSEE IS INCURRING INTEREST EXPENDITURE AND HAVING LOAN LIABILITIES BUT DONATING A HUGE AMOUNT ON CHARITY O FRS.8 CR. IS NOTHING BUT A WAY OF THE ASSESSEE TO AVOID TAX LIABILITY ON SUR RENDERED INCOME AND HENCE THE TRANSACTION OF RS.8 CR. NEEDS DEEP VERIFI CATION TO ASCERTAIN THE GENUINENESS AND HENCE THE ORDER IS ERRONEOUS AND PR EJUDICIAL TO THE INTEREST OF THE REVENUE. 14.DEPRECIATION ON PET CT SCAN THE ASSESSEE DURING THE YEAR HAS CLAIMED DEPRECIATI ON ON PET CT SCAN AMOUNTING TO RS.L,61,00,262/- FOR A.Y. 2012-13 AT T HE RATE OF 40% BUT THE ALLOWABLE RATE IS 15% WHICH IS NOT VERIFIED DURING ASSESSMENT REGARDING THE NATURE OF MACHINE, USES AND ITS ELIGIBLE RATE O F DEPRECIATION. L5.TDS DEDUCTION ON SALARY OF RS4,75,90,791/- THE SPECIFIC ENQUIRY RELATED TO DETAILS OF TDS DEDU CTION MADE BY THE ASSESSEE FOR SALARY PAYMENT OF RS.4,75,90,791/- WAS NOT MADE BY CALLING FOR EMPLOYEE LIST, SALARY PAID MONTH WISE A ND THE RELATED TDS DEDUCTIONS WHICH RENDER THE ASSESSMENT ORDER ERRONE OUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HENCE, IN VIEW OF THE ABOVE, THE ORDER U/S 143(3) PASSED BY THE ASSESSING OFFICER IS ERRONEOUS SINCE THE ENQUIRIES REQUIRED IN THE ABOVE DISCUSSED ISSUES WERE NOT MADE AND AS PER PROVISION S OF SECTION 263, THE LD. PRO CIT CAN DIRECT FOR FRESH ASSESSMENT IF THE ORDER WAS PASSED WITHOUT MAKING INQUIRIES OR VERIFICATION, SINCE THE ORDER UNDER CONSIDERATION WAS PASSED WITHOUT ENQUIRY AND INVEST IGATION WHICH WERE REQUIRED TO BE MADE, THE LD. PRO CIT IS RIGHT IN SE TTING ASIDE THE ASSESSMENT ORDER AND DIRECTING FOR FRESH ASSESSMENT . 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE GROUNDS OF THE PR. CI T REVISED THE ASSESSMENT ORDER AS TRANSPIRED FROM THE RECORDS ARE AS UNDER: [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 78 10. DURING THE SURVEY ON 24.09.2011 SURRENDERED INC OME WAS MADE OF RS.23,61,18,930/- UNDER CASH RECEIVED OF RS.6,45,02,010/-, UNSECURED CREDIT U/S 41(1) OF RS. 51,16,920/-, LOANS AGAINST HUNDI OF RS.16,65,00,000/.- THEREAFTER BY FILING AN AFFIDAVIT ON 19.01.2012, THE AS SESSEE HAS REVISED CASH RECEIPTS TO RS.6,21,25,115/- THEREBY THE AMOUNT OFFER WAS CASH RECEIPT OF RS.6,21,25,115/-, SU RVEY CREDITS U/S 41(1) RS.51,16,920/- AND UNEXPLAINED CRED IT HUNDI LOANS RS.10,43,21,885/-. LD. PR. CIT WAS OF THE VIEW THAT THE JCIT ALLOWED THE TELESCOPING OF FUNDS OF RS.6,21,25,115/- AGAINST INVESTMENT IN HUNDI LOANS BASE D ON AFFIDAVIT FILED AFTER 4 MONTHS. NO INDEPENDENT VERIFICATION OF ITEMS DUE TO WHICH AMOUNT SURRENDERED RS. 6,45,02,010/-- WAS REDUCED TO RS. 6,21,25,115/- WAS CARRIED OUT. THE ASSESSEE HAD CLAIMED TO HAVE REALIZED T HE HUNDI LOANS OF RS. 10,43,41,8851- IN SEPTEMBER TO NOVEMBER 2011 AND THEN GIVEN THE FUNDS TO GEETANJALI [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 79 HOSPITAL OF RS 8 CRORES IN FEBRUARY MARCH 2012 AND CLAIMED DEDUCTION U/S 35 AC OF IT ACT. THE A,O. HAS. NOT EXAMINED AS TO WHETHER THE HUNDI LOANS WAS REALLY RECEIVED BACK BY THE ASSESSEE DURING THE CURRENT YEAR AND NO ENQUIRY AND INVESTIGATION IN THIS REGARD WAS CARRIED O UT REGARDING IDENTITY AND SOURCE OF THE SAIS FUNDS. 11. FURTHER, THE A.O. DID NOT EXAMINE WHETHER THE UNACCOUNTED FUNDS GENERATED BY THE ASSESSEE CAN BE UTILIZED TO CLAIM DEDUCTION U/S 35 AC OF ACT. THE ASS ESSING OFFICER HAS NOT EXAMINED UNACCOUNTED RECEIPTS OFFERED FOR TAXATION IN RESPECT OF RECEIPTS OF RS. RS 1,96,900/ -. LD. PR. CIT OBSERVED THAT THE RETURNED INCOME OF THE ASSESSME NT YEAR 2012-13 IS RS. 94,31,692/- WHEREAS PROFIT BEFOR E TAX BEFORE PARTNERS REMUNERATION IS AS PER P & L ACCOUNT IS RS. 3,64,88,334/-. IT MAY BE NOTED THAT THE ABOVE PROFIT INCLUDED UNDISCLOSED INCOME SURRENDERED DURING THE [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 80 SURVEY AT RS. 17,17,49,505/- & DEDUCTION OF RS. 8 CR . CLAIMED U/S 35AC. THE ASSESSEE INCLUDED THE UNDISCLOS ED INCOME SURRENDERED UNDER VARIOUS HEADS TOTALING TO RS. 17,17,49,505/ - IN THE P& L ACCOUNT ITSELF THEREBY CREATING MISLEADING PICTURE OF INCREASE IN THE NET PROFIT AS COMPARATIVE TO THE LAST YEARS. IF THE SURRENDERED INCO ME AS WELL AS THE DEDUCTION CLAIMED U/S 35 AC WAS EXCLUDED THE BOOK RESULTS WOULD SHOW A NET LOSS OF RS.5,52,61,171 /- ON THE TOTAL RECEIPTS OF RS.20,39,86,311/-. THE HUNDI L OANS STANDING AS ON THE DATE OF SURVEY AMOUNTING TO RS.16,66,32,585/- ARE IN FACT ITEM OF BALANCE SHEET AND THE SAME REPRESENTS ASSETS OF THE ASSESSEE AS ON THE DATE OF SURVEY AND CLEARLY REFLECTS UNDISCLOSED INCOME OF TH E ASSESSEE IN THE FORM OF UNEXPLAINED INVESTMENTS. THE ASSESSING OFFICER SHOULD HAVE ASKED THE ASSESSEE HOW T HESE HUNDIS WERE REALIZED AND FORMED PART OF INCOME AND EXPENDITURE ACCOUNT AS BUSINESS RECEIPTS AGAINST WHICH [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 81 MANY EXPENSES HAVE BEEN CLAIMED BY INCLUDING THE SAME I N THE P & L. A/C THE ASSESSEE HAS CREATED A DISTORTED PICTURE. IF SURRENDERED INCOME IS EXCLUDED WHICH IS UNEXPLAINED INVESTMENT AND CREDITS U/S 69 AND 68 RESPECTIVELY. THERE IS NET BUSINESS LOSS AMOUNTING T O RS.5,52,61,171/- HENCE, THE ASSESSEE DID NOT HAVE ANY POSITIVE BUSINESS INCOME SO AS TO CLAIM DEDUCTION U/S 35AC AT RS.8 CRORES. THE DONATION THAT WAS GIVEN TO PRI VATE MEDICAL UNIVERSITY OF RS.8 CRORES IS HIGHLY SUSPECT ED. LD. PR. CIT HAS ALSO OBSERVED THAT HIGHER RATE OF DEPRECIAT ION IS ALLOWED WITHOUT ANY ENQUIRY ON PET CT SCAN. THE AO ALSO ALLOWED SALARY PAID AMOUNTING TO RS.4,75,90,791/- WITHOU T VERIFYING WHETHER TDS AS PER PROVISIONS OF THE INCOM E TAX WAS MADE OR NOT. 12. NOW IN THIS BACKGROUND WE NEED TO EXAMINE CORRECTNESS OF THE ACTION TAKEN BY THE LD. PR. CIT U/ S 263 [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 82 OF THE ACT. SECTION 263 EMPOWERS THE LD. PR. CIT IF ON THE EXAMINATION OF THE RECORDS OF ANY PROCEEDING UNDER THE INCOME TAX ACT AND IF HE CONSIDERS THAT ANY ORDER PASSE D THEREIN BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE MA Y AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AF TER 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 ORDER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. WE FIND THAT EXPLANATI ON 2 HAS BEEN INSERTED TO SECTION 263 OF THE ACT THAT R EADS AS UNDER: EXPLANATION 2.FOR THE PURPOSES OF THIS SECTION, IT IS HEREBY DECLARED THAT AN ORDER PASSED BY THE ASSESSING OFFICER SHALL BE DEEMED TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE, IF, IN THE OPINION OF THE PRINCIPAL COMMISSIONER OR COMMIS SIONER, (A) THE ORDER IS PASSED WITHOUT MAKING INQUIRIES O R VERIFICATION WHICH SHOULD HAVE BEEN MADE; (B) THE ORDER IS PASSED ALLOWING ANY RELIEF WITHOU T INQUIRING INTO THE CLAIM; [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 83 (C) THE ORDER HAS NOT BEEN MADE IN ACCORDANCE WITH ANY ORDER, DIRECTION OR INSTRUCTION ISSUED BY THE BOARD UNDER SECTION 119 ; OR (D) THE ORDER HAS NOT BEEN PASSED IN ACCORDANCE WI TH ANY DECISION WHICH IS PREJUDICIAL TO THE ASSESSEE, RENDERED BY T HE JURISDICTIONAL HIGH COURT OR SUPREME COURT IN THE CASE OF THE ASSESSEE OR ANY OTHER PERSON 13. THE AFORESAID EXPLANATION CAME ON THE STATUTE BOOK W.E.F. 01.06.2015 THE ISSUE BEFORE US PERTAINS TO ASSESSMENT YEAR 2012-13 HENCE THIS EXPLANATION HAVE NO APPLICATION ON THE FACTS OF THE PRESENT CASE. SO FAR THE QUESTION OF GIVING DONATION TO THE GITANJALI HOSPITAL AND RESEARCH CENTRE IS CONCERNED LD. CIT-DR CANDIDLY CONCEDED TO FACT THAT THE CONCLUSION DRAWN BY THE ASSESSING OFFICER IS BASED UPON INQUIRY CONDUCTED THRO UGH COMMISSION. HENCE ON THIS ISSUE, WE ARE OF THE VIEW, THAT IT CANNOT BE INFERRED THAT NO INQUIRY WAS MADE BY THE ASSESSING OFFICER AND HE ACCEPTED THE CONTENTION WITHO UT MAKING DUE INQUIRIES ON THIS ISSUE. FURTHER THE OBJEC TION OF LD. PR. CIT IS THAT THE INCOME DISCLOSED BY THE ASSES SEE [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 84 CANNOT BE TREATED TO BE BUSINESS INCOME AS SAME WOULD FALL UNDER THE CATEGORY DEEMED INCOME AND DEDUCTION OF EXPENDITURE UNDER CHAPTER-IV OF THE ACT WOULD NOT BE AVAILABLE. HOWEVER, WE FIND THAT THE LD. JCIT WAS CONSCIOUS OF THIS FACT WHILE PASSING THE ORDER U/S 14 4A OF THE ACT. IT IS PERTINENT TO NOTE THAT ASSESSEE HAS BE EN CLAIMING THAT HE HAD CERTAIN UNRECORDED HOSPITAL RECEIPT S WHICH HE OFFERED FOR TAXATION. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT INQUIRIES WERE MADE REGARDING GENUINENESS OF TRANSACTIONS OF DONATION TO GITANJALI HOSPITAL, UDAIPUR. NOW THE QUESTION WHETHER DEDUCTIO N OF SUCH EXPENDITURE WOULD BE AVAILABLE TO THE ASSESSEE. HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS SHAH DEVELOPERS PVT. LTD ALLOWED CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80 1B(10) IN RESPECT OF UNDISCLOSED I NCOME EARNED IN THE FORM OF OWN MONEY. LD. PR. CIT PROCE EDED ON THE BASIS THAT AT ONE HAND THE ASSEESSEE REQUIRES TO MAKE [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 85 INTEREST PAYMENT ON LOAN FROM BANKS ON THE OTHER IT I S GIVING DONATION TO OTHER ASSESSEE, IT IS HIGHLY IMPRO BABLE THAT IN SUCH A SITUATION ANY ONE WOULD GIVE DONATION. T HIS REASONING MAY BE CORRECT IN A GIVEN SITUATION BUT WHAT IS SUPPORTING EVIDENCE THAT BY DOING SO THE ASSESSEE FIR M OBTAINED BENEFIT FROM THE GITANJALI HOSPITAL. THE ASSE SSING OFFICER MADE EFFORTS THROUGH COMMISSION. IN OUR CONSIDERED VIEW THERE IS NO LACK OF ENQUIRY ON THE PAR T OF LD. A.O. LD. CIT DR DURING THE COURSE OF HEARING C ONCEDED THE FACT THAT THE ELIGIBILITY AND OTHER ISSUES RELATED TO AVAILABILITY OF DEDUCTION WAS EXAMINED BY THE LD. A.O UNDER THESE FACTS IN THE LIGHT OF THE JUDGMENT DATED 27.7.2012 OF HON'BLE BOMBAY HIGH COURT IN THE CASE O F CIT V/S SHAH BUILDERS PVT. LTD, IT APPEAL NO. 3724 OF 2 010 DEDUCTION EXPENDITURE AS MADE IN THE FORM DONATION TO INSTITUTION APPROVED BY NATIONAL COMMITTEE. [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 86 14. IF IT IS PRESUMED THAT INVESTMENT IN HUNDI WAS B OGUS IN SUCH A SITUATION THERE WAS NO MONEY AVAILABLE FOR INVESTMENT MADE BY THE ASSESSEE AS SUCH AMOUNT SURRENDERED WAS NOT AVAILABLE. THIS GOES TO PROVE THAT DONATION IS MADE OUT OF BUSINESS RECEIPTS, WHICH IS ALLOWABLE EXPENDITURE. EVEN OTHERWISE ALSO IN THE LI GHT OF JUDGMENT OF HONBLE SUPREME COURT RENDERED IN THE C ASE OF A.V. SINGHAI & CO V/S CIT 126 ITR 457 (AO) WE DO NOT FIND ANY INFIRMITY IN THE ASSESSMENT ORDER. HENCE DECISIO N OF LD. PR. AO FOR REVISING THE ASSESSMENT ORDER ON THIS GROUND IS NOT IN ACCORDANCE WITH MANDATE OF LAW. THEREFORE, SAME IS HEREBY SET ASIDE. 15. ANOTHER ISSUE ON WHICH THE LD. PR. CIT EXERCISE D POWER UNDER SECTION 263 IS REGARDING GIVING TELESCO PING BENEFIT OF RS. 6,21,25,115/- THE LD. PR. AO WAS OF T HE VIEW [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 87 THAT THE TELESCOPING OF UNACCOUNTED INCOME TO HUNDI L OANS HAS NOT BEEN EXAMINED PROPERLY. MOREOVER, NO ENQUIRY H AS BEEN MADE IN RESPECT OF RECEIPT OF FUNDS FROM REPAYM ENT OF HUNDI LOANS. NO INDEPENDENT VERIFICATION OF ITEMS DUE TO WHICH AMOUNT SURRENDERED AO. 6,45,02,010/- WAS REDUCE D TO RS. 6,21,25,115/-. FURTHER THE AO HAS NOT EXAMINED YEAR WISE INVESTMENT MADE BY THE ASSESSEE. 16. GENESIS OF THIS ISSUE IS IN THE RECOVERY OF HU NDIS AT THE PREMISES OF THE ASSESSEE AND STATEMENTS OF DR. VINOD BHANDARI ONE OF THE PARTNERS OF THE ASSESSEE FIRM RECOR DED DURING THE COURSE OF SURVEY ACTION. THE RELEVANT CON TENTS ARE REPRODUCED HEREIN FOR THE SAKE OF CLARITY: [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 88 15. [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 89 [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 90 [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 91 [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 92 17. THE AFORESAID STATEMENT WAS RETRACTED VIDE LETTER D ATED 19.01.2012 BY WAY OF AFFIDAVIT DULY NOTARIZED THE RELE VANT CONTENTS AS REPRODUCED HEREIN BELOW. 11. IN REPLY TO Q.11 OF THE SAID STATEMENT, I HAD OFFERED A SUM OF RS.6,45,02,010/- AS UNACCOUNTED RECEIPT OF THE FIRM ON THE BASIS OF COMPUTER RECORDS WHOSE COP IES WERE TAKEN BY INCOME TAX OFFICIALS AND WHOSE PHOTOCOPIES HAVE BEEN PROVIDED TO US AS SERIAL NUMBERED 96 OF LP-2. IN THIS REGARD I CLARIFY THAT THE SAME COMPUTER RECORD SHOWS THAT ACTUAL RECEIPT IS L ESS BY RS.23,76,895/- BEING DISCOUNT ALLOWED RS.23,69,425/- AND RS.7,470/- BEING PETTY CASH EXPENSES (RECORDED IN THE TRIAL BALANCE AS ADVANCE TO EMPLOYEE) THEREFORE THE CORRECT AMOUNT OF UNACCOUNT ED RECEIPTS IS RS.6,21,25,115/- AND NOT RS.6,45,02,010 /-. 11.1 THAT DURING THE COURSE OF SURVEY HUNDIS WERE FOUND AND IMPOUNDED AND THE SAME WERE OFFERED AS INCOME BY ME IN MY INDIVIDUAL CAPACITY AS WELL AS I N THE HANDS OF THE PARTNERSHIP FIRM. AT THE TIME OF S URVEY, IT REMAINED TO BE BROUGHT TO NOTICE OF THE AUTHORIZ ED OFFICE THAT UNACCOUNTED RECEIPT REFERRED TO IN EARL IER PARA WAS UTILIZED IN MAKING THE HUNDI LOANS AND THEREFORE TO THE EXTENT OF UNACCOUNTED RECEIPTS AS IN 11 ABOVE THE HUNDI LOANS ARE EXPLAINED AND ONLY BALANC E AMOUNT IS UNEXPLAINED AND IS OFFERED AS INCOME. 18. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT T HE ASSESSEE STATED IN HIS STATEMENT THAT HE WAS UNABLE TO [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 93 EXPLAIN THE SOURCE OF CASH LOAN GIVEN THROUGH HUNDIS AN D OFFERED A SUM OF RS.16,65,00,000/- AS ADDITIONAL INCOM E FOR THE A.Y. 2012-13. REVENUE HAD NO OBJECTION FOR S UCH OFFER WHEN THIS AMOUNT IS TREATED TO BE INCOME OF THE YEAR UNDER APPEAL, IT CAN SAFELY INFER THAT THIS AMOUNT WAS AVAILABLE WITH THE ASSESSEE FOR MAKING FURTHER INVESTME NTS. UNDISPUTED THE BASIS OF UNEXPLAINED INCOME IS RECOVE RY OF HUNDIS BEING ANNEXURE AS LP-06 AND LP-07 OF SURVEY PROCEDDINGS. THE HUNDIS ARE HAVING DIFFERENT DATES AND MATURITY PERIOD. AS PER LD. PR. CIT THE ASSESSING OFF ICER HAS FAILED TO MAKE NECESSARY ENQUIRY ON THIS ISSUE AND WRON GLY GAVE SET OFF THE MATURITY AMOUNT. IT IS NOT IN DISPUT E THAT TRANSACTION RELATES TO F.Y. 2011-12 RELEVANT TO THE ASSESSMENT YEAR 2012-13. IN VIEW OF THE LD. PR. CIT T HE ENQUIRIES CONDUCTED BY AO WERE NOT SUFFICIENT ON THI S ISSUE, WE FIND THAT IT IS NOT THE CASE WHERE NO ENQUIR Y WAS MADE BY THE AO DURING THE ASSESSMENT PROCEEDINGS HE [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 94 RAISED SPECIFIC ENQUIRY RELATED TO HUNDIS. IN RESPONSE THERETO THE ASSESSEE FILED WRITTEN EXPLANATION, AS PER LD. PR. CIT, THE AO OUGHT TO HAVE MADE FURTHER ENQUIRY, WH EN CERTAIN TRANSACTIONS RELATED TO ADMISSION OF STUDENTS I N MEDICAL COURSE BY THE ASSESSEE FIRM WAS SUBJECT MATTER OF CRIMINAL INVESTIGATION BY THE POLICE. 19. WE ARE OF THE CONSIDERED VIEW THAT THE CRIMINAL INVESTIGATION AND ASSESSMENT PROCEEDINGS ARE TWO DIFFER ENT AND DISTINCT PROCEEDINGS OPERATE IN ENTIRELY DIFFEREN T SPHERE OF LAW. NO TAX LIABILITY CAN BE FASTENED MERELY ON THE BASIS THAT THE TAX PAYER IS ARRAYED AS AN ACCUSED IN SOME CRIMINAL INVESTIGATION. THERE MUST BE LIVE NEXUS WITH TAXABLE INCOME AND RECOVERY MADE IN CRIMINAL INVESTIGATION. THE REVENUE HAS FILED A COPY OF CHARGE S HEET WHERE THE PARTNERS OF THE ASSESSEE FIRM IS ARRAYED AS AN ACCUSED. THERE IS NO MATERIAL SUGGESTING THE QUANTUM O F RECEIPTS WAS TRANSFERRED BY THE PARTNERS OF THE FIRM O UT OF [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 95 THE ALLEGED PROCEEDS OF CRIME. THERE OUGHT TO BE SO ME RECEIPT WHICH THE ASSESSEE COULD BE SUBJECTED TO TAX . THERE ARE THREE LIMBS OF THIS ISSUE FIRSTLY CLAIM OF THE ASS ESSEE IS THAT IT USED TO ADVANCE HUNDI LOANS OUT OF UNDISCLOSED/ OUT OF BOOKS HOSPITAL RECEIPTS, THIS IS PRECISE EXPLANATIO N OFFERED BY THE ASSESSEE IN RESPECT OF HUNDI FOUND DU RING THE COURSE OF SEARCH, SECONDLY THE ASSESSEE HAS DISCL OSED THE AMOUNT OF HUNDI LOAN AS UNDISCLOSED HOSPITAL RECEIP TS, THIRDLY OUT OF THE MATURITY AMOUNT THE ASSESSEE MADE OT HER HUNDIS AMOUNTING TO RS.6,21,25,115/- WHICH IS THE SU BJECT MATTER OF THE ISSUE. THE ASSESSEE HAS CONTENDED THAT T HE ISSUE IS SQUARELY COVERED BY THE JUDGMENT OF HON'BLE SUPREME COURT RENDERED IN THE CASE OF ANANTHRAM VEERA SINGHAIAH & CO VS. CIT 126 ITR 457 (SC) WHEREIN THE HON'BLE COURT HAS HELD AS UNDER :- THERE CAN BE NO ESCAPE FROM THE PROPOSITION THAT T HE SECRET PROFITS OR UNDISCLOSED INCOME OF AN ASSESSEE EARNED IN AN EARL IER ASSESSMENT YEAR MAY CONSTITUTE A FUND, EVEN THOUGH CONCEALED, FROM WHICH THE ASSESSEE [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 96 MAY DRAW SUBSEQUENTLY FOR MEETING EXPENDITURE OR IN TRODUCING AMOUNTS IN HIS ACCOUNT BOOKS. BUT IT IS QUITE ANOTHER THING TO SAY THAT ANY PART OF THAT FUND MUST NECESSARILY BE REGARDED AS THE SOURCE OF UNEXPLAINED EXPENDITURE INCURRED OR OF CASH CREDITS RECORDED DU RING A SUBSEQUENT ASSESSMENT YEAR. THE MERE AVAILABILITY OF SUCH A F UND CANNOT, IN ALL CASES, IMPLY THAT THE ASSESSEE HAS NOT EARNED FURTH ER SECRET PROFITS DURING THE RELEVANT ASSESSMENT YEAR. NEITHER LAW NOR HUMAN EXPERIENCE GUARANTEES THAT AN ASSESSEE WHO HAS BEEN DISHONEST IN ONE ASSESSMENT YEAR IS BOUND TO BE HONEST IN A SUBSEQUENT ASSESSME NT YEAR. IT IS A MATTER FOR CONSIDERATION BY THE TAXING AUTHORITY IN EACH CASE WHETHER THE UNEXPLAINED CASH DEFICITS AND THE CASH CREDITS CAN BE REASONABLY ATTRIBUTED TO A PRE-EXISTING FUND OF CONCEALED PROF ITS OR THEY ARE REASONABLY EXPLAINED BY REFERENCE TO CONCEALED INCOME EARNED I N THAT VERY YEAR. IN EACH CASE, THE TRUE NATURE OF THE CASH DEFICIT AND THE CASH CREDITS CAN BE REASONABLY ATTRIBUTED TO A PRE-EXISTING FUND OF CON CEALED PROFITS OR THEY ARE REASONABLY EXPLAINED BY REFERENCE TO CONCEALED INCO ME EARNED IN THAT VERY YEAR. IN EACH CASE, THE TRUE NATURE OF THE CASH DE FICIT AND THE CASH CREDIT MUST BE ASCERTAINED FROM AN OVERALL CONSIDERATION O F THE PARTICULAR FACTS AND CIRCUMSTANCES OF THE CASE. EVIDENCE MAY EXIST TO SHOW THAT RELIANCE CANNOT BE PLACED COMPLETELY ON THE AVAILABILITY OF A PREVIOUSLY EARNED UNDISCLOSED INCOME. A NUMBER OF CIRCUMSTANCES OF VI TAL SIGNIFICANCE MAY POINT TO THE CONCLUSION THAT THE CASH DEFICIT OR CA SH CREDIT CANNOT REASONABLY BE RELATED TO THE AMOUNT COVERED BY THE INTANGIBLE ADDITION BUT MUST BE REGARDED AS POINTING TO THE RECEIPT OF UNDI SCLOSED INCOME EARNED DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. IT IS OPEN TO THE REVENUE TO RELY ON ALL THE CIRCUMSTANCES POINTING TO THAT C ONCLUSION. WHAT THESE SEVERAL CIRCUMSTANCES CAN BE IS DIFFICULT TO ENUMER ATE AND INDEED, FROM THE NATURE OF THE ENQUIRY, IT IS ALMOST IMPOSSIBLE TO D O SO. [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 97 20. THEREFORE, IN THE LIGHT OF THE ABOVE JUDGMENT IT CAN BE CONCLUDED THAT THE MATURITY AMOUNT WAS AVAILABLE WITH TH E ASSESSEE FOR MAKING FURTHER INVESTMENT. IT IS NOTEWO RTHY THAT ROOT OF ADDITION IS THE RECOVERY OF HUNDIS. IN CASE IT IS PRESUMED THAT ALL THE HUNDIS SO MADE ARE BOGUS AND REFLECTS IMAGINARY FIGURE AS THE ASSESSEE FAILED TO FU RNISH CONFIRMATION FROM HUNDI HOLDERS, THEIR IDENTITY AND P AN ETC, IN SUCH EVENT ONLY AMOUNT WOULD BE TAXABLE WHAT THE ASSESSEE DEPOSITED IN ITS BANK ACCOUNT. WHEN THERE I S A MATURITY OF HUNDI AS WELL AS INVESTMENT IN HUNDIS NORM AL COROLLARY WOULD BE THAT THE AMOUNT INVESTED IS OUT OF THE MONEY RECEIVED FROM MATURITY OF HUNDIS, UNLESS ADVERS E MATERIAL IS BROUGHT ON RECORD. NO SUCH MATERIAL IS AVAILA BLE ON RECORD THE HON'BLE DELHI HIGH COURT IN THE CASE O F ITO VS. D.G. HOUSING PROJECTS IN ITA NO. 179/2011 VIDE ORDER DATED 1 ST MARCH 2012 HAS HELD AS UNDER: [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 98 17. THIS DISTINCTION MUST BE KEPT IN MIND BY THE CI T WHILE EXERCISING JURISDICTION UNDER SECTION 263 OF THE ACT AND IN THE ABSENCE OF THE FINDING THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, EXERCISE OF JURISDICTION UNDER THE SAID SECTION IS NOT SUSTAINABLE. IN MOST CASES OF ALLEGED 'INADEQUATE INVESTIGATION', IT WILL BE DIFF ICULT TO HOLD THAT THE ORDER OF THE ASSESSING OFFICER, WHO HAD CO NDUCTED ENQUIRIES AND HAD ACTED AS AN INVESTIGATOR, IS ERRO NEOUS, WITHOUT CIT CONDUCTING VERIFICATION/INQUIRY. THE OR DER OF THE ASSESSING OFFICER MAY BE OR MAY NOT BE WRONG. CIT C ANNOT DIRECT RECONSIDERATION ON THIS GROUND BUT ONLY WHEN THE ORDER IS ERRONEOUS. AN ORDER OF REMIT CANNOT BE PASSED BY THE CIT TO ASK THE ASSESSING OFFICER TO DECIDE WHETHER THE ORD ER WAS ERRONEOUS. THIS IS NOT PERMISSIBLE. AN ORDER IS NOT ERRONEOUS, UNLESS THE CIT HOLD AND RECORDS REASONS WHY IT IS E RRONEOUS. AN ORDER WILL NOT BECOME ERRONEOUS BECAUSE ON REMIT , THE ASSESSING OFFICER MAY DECIDE THAT THE ORDER IS ERRO NEOUS. THEREFORE CIT MUST AFTER RECORDING REASONS HOLD THA T THE ORDER IS ERRONEOUS. THE JURISDICTIONAL PRECONDITION STIPU LATED IS THAT THE CIT MUST COME TO THE CONCLUSION THAT THE ORDER IS ERRONEOUS AND IS UNSUSTAINABLE IN LAW. WE MAY NOTICE THAT THE MATERIAL WHICH THE CIT CAN RELY INCLUDES NOT ONLY THE RECORD AS IT STANDS AT THE TIME WHEN THE ORDER IN QUESTION WAS P ASSED BY THE ASSESSING OFFICER BUT ALSO THE RECORD AS IT STA NDS AT THE TIME OF EXAMINATION BY THE CIT [SEE CIT VS. SHREE MANJUNATHESWARE PACKING PRODUCTS , 231 ITR 53 (SC)]. NOTHING BARS/PROHIBITS THE CIT FROM COLLECTING AND RELYING UPON NEW/ADDITIONAL MATERIAL/EVIDENCE TO SHOW AND STATE THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS. 18. IT IS IN THIS CONTEXT THAT THE SUPREME COURT IN MALABAR INDUSTRIAL CO. LTD. VS. COMMISSIONER OF INCOME TAX , (2000) 243 ITR 83 (SC), HAD OBSERVED THAT THE PHRASE PREJUDIC IAL TO THE INTEREST OF REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EV ERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSI NG OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF REVENUE. THUS, WHEN THE ASSESSING OFFICER HAD ADOPTED ONE OF THE [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 99 COURSES PERMISSIBLE AND AVAILABLE TO HIM, AND THIS HAS RESULTED IN LOSS TO REVENUE; OR TWO VIEWS WERE POSS IBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE CIT MAY NOT AGREE; THE SAID ORDERS CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF REVE NUE UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAI NABLE IN LAW. IN SUCH MATTERS, THE CIT MUST GIVE A FINDING T HAT THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW AND, THEREFORE, THE ORDER IS ERRONEOUS. HE MUST ALSO SHO W THAT PREJUDICE IS CAUSED TO THE INTEREST OF THE REVENUE. 19. IN THE PRESENT CASE, THE FINDINGS RECORDED BY T HE TRIBUNAL ARE CORRECT AS THE CIT HAS NOT GONE INTO AND HAS NO T GIVEN ANY REASON FOR OBSERVING THAT THE ORDER PASSED BY THE A SSESSING OFFICER WAS ERRONEOUS. THE FINDING RECORDED BY THE CIT IS THAT 'ORDER PASSED BY THE ASSESSING OFFICER MAY BE ERRON EOUS'. THE CIT HAD DOUBTS ABOUT THE VALUATION AND SALE CONSIDE RATION RECEIVED BUT THE CIT SHOULD HAVE EXAMINED THE SAID ASPECT HIMSELF AND GIVEN A FINDING THAT THE ORDER PASSED B Y THE ASSESSING OFFICER WAS ERRONEOUS. HE CAME TO THE CON CLUSION AND FINDING THAT THE ASSESSING OFFICER HAD EXAMINED THE SAID ASPECT AND ACCEPTED THE RESPONDENTS COMPUTATION FIG URES BUT HE HAD RESERVATIONS. THE CIT IN THE ORDER HAS RECOR DED THAT THE CONSIDERATION RECEIVABLE WAS EXAMINED BY THE AS SESSING OFFICER BUT WAS NOT PROPERLY EXAMINED AND THEREFORE THE ASSESSMENT ORDER IS 'ERRONEOUS'. THE SAID FINDING W ILL BE CORRECT, IF THE CIT HAD EXAMINED AND VERIFIED THE S AID TRANSACTION HIMSELF AND GIVEN A FINDING ON MERITS. AS HELD ABOVE, A DISTINCTION MUST BE DRAWN IN THE CASES WHE RE THE ASSESSING OFFICER DOES NOT CONDUCT AN ENQUIRY; AS L ACK OF ENQUIRY BY ITSELF RENDERS THE ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND CASE S WHERE THE ASSESSING OFFICER CONDUCTS ENQUIRY BUT FINDING RECO RDED IS ERRONEOUS AND WHICH IS ALSO PREJUDICIAL TO THE INTE REST OF THE REVENUE. IN LATTER CASES, THE CIT HAS TO EXAMINE TH E ORDER OF THE ASSESSING OFFICER ON MERITS OR THE DECISION TAK EN BY THE ASSESSING OFFICER ON MERITS AND THEN HOLD AND FORM AN OPINION ON MERITS THAT THE ORDER PASSED BY THE ASSESSING OF FICER IS [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 100 ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. IN THE SECOND SET OF CASES, CIT CANNOT DIRECT THE ASSESSIN G OFFICER TO CONDUCT FURTHER ENQUIRY TO VERIFY AND FIND OUT WHET HER THE ORDER PASSED IS ERRONEOUS OR NOT. 21. FROM THE ABOVE, IT IS CLEAR THAT HON'BLE HIGH CO URT HAS CATEGORICALLY HELD WHERE THE ASSESSING OFFICER HAS M ADE ENQUIRY AND IF THE LD. PR. CIT IS NOT SATISFIED WITH S UCH ENQUIRY HE SHOULD MAKE HIMSELF ENQUIRY AND BRING CLEARLY ON RECORD AS THE FINDING OF THE ASSESSING OFFICER BEI NG ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THIS IS NOT THE CASE IN THE PRESENT CASE. THE ASSESSING OFFI CER HAS MADE NECESSARY ENQUIRY AND ISSUE WAS ALSO SCRUTINIZED BY THE JCIT WHILE PASSING ORDER U/S 144A OF THE ACT. IN OUR CONSIDERED VIEW WHEN TWO OFFICERS AT DIFFERENT STAGE EXAMINED THE ISSUE BEFORE SETTING ASIDE THESE FINDING LD. PR. CIT OUGHT TO HAVE MADE SOME ENQUIRY. BUT LD. PR. CIT IN THE PRESENT CASE SET ASIDE THE ISSUE TO THE ASSESS ING OFFICER WHICH IN OUR CONSIDERED VIEW IS CONTRARY TO RATIO LAID BY THE JUDGMENT OF HON'BLE DELHI HIGH COURT REN DERED [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 101 IN THE CASE OF ITO VS D.G. HOUSING PROJECTS (SUPRA) I S NOT MANDATE OF LAW. HENCE THE DIRECTION OF LD. PR. CIT C ANNOT BE AFFIRMED. IF IT IS PRESUMED THAT THE HUNDIS AS RECO VERED DURING THE SURVEY PROCEEDINGS WERE NOT GENUINE IN T HAT SITUATION THE AMOUNT THAT WAS REFLECTED ON SUCH HUNDIS CANNOT TO BE TAKEN AS INCOME OF THE ASSESSEE. THEREFORE THE INCIDENCE OF TAX WOULD BE ON THE UNEXPLAINED CASH DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSEE. IN THI S CASE THE AMOUNT SURRENDERED BY THE ASSESSEE IS HIGHER THAN WHAT IT WAS FOUND TO BE UNEXPLAINED CASH DEPOSITS IN I TS BANK ACCOUNT. THEREFORE THERE IS NO INFIRMITY IN THE ORDER GIVING SET OFF OF THE MATURITY AMOUNT. IT IS HOWEVE R FURTHER CLARIFIED THAT WE HAVE NOT EXPRESSED OUR VIEW REGARDING GENUINENESS OF HOSPITAL RECEIPTS BEING INVESTED IN H UNDIS AS SURRENDERED BY ONE OF THE PARTNER OF THE ASSESSEE F IRM. OUR FINDING IS PURELY BASED ON THE MATERIAL PLACED BEFO RE US. LD. PCIT HAS NOT BROUGHT ANY MATERIAL SUGGESTING T HAT [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 102 THE AMOUNTS SO SURRENDERED BY THE PARTNER OF THE FIRM IS RELATED TO PROCEED OF CRIME. 22. LD. PR. CIT HAS ALSO OBSERVED THAT THE ASSESSING OFFICER FAILED TO MAKE ENQUIRY IN RESPECT OF YEAR WISE INVESTMENT. NO MATERIAL IS PLACED BY THE ASSESSEE REGARDING THIS ISSUE. IN OUR CONSIDERED VIEW WHEN T HERE IS CLAIM OF INVESTMENT BEING MADE OUT OF UNRECORDED HOSP ITAL RECEIPTS HE OUGHT TO HAVE MADE INVESTIGATION REGARDING YEAR WISE INVESTMENT. THIS OBSERVATION OF THE LD. PR.CIT IS SUSTAINED. 23. FURTHER, ANOTHER GROUND FOR REVISING THE ORDER O F LD. PR. CIT ALLOWING HIGHER DEPRECIATION CLAIM OF THE ASSES SEE. 24. WE HAVE PERUSED RULES AND CASE LAWS AS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE. WE DO NOT FIND ANY INFIRMITY INTO THE ACTION OF THE ASSESSING OFFICER FO R GRANTING DEPRECIATION @ 40%. THEREFORE, THIS GROUND OF THE LD . PR. [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 103 CIT IS ALSO NOT SUSTAINABLE FOR AFFIRMING THE ACTION U/ S 263 OF THE ACT. 25. LASTLY, LD. PR. CIT REVISED THE ORDER ON THE G ROUND THAT THE ASSESSING OFFICER HAS ALLOWED EXPENDITURE OF SALARY AMOUNT TO RS.4,75,90,791/- WITHOUT VERIFYING WHETHER TDS AS P ER PROVISIONS OF THE INCOME TAX WAS MADE OR NOT. IT IS STATED THA T THE DETAILS OF TDS WAS DULY FILED IN SUPPORT OF THIS CONTENTION. T HE ASSESSEE DREW OUR ATTENTION TO PAPER BOOK PAGES 115-116 OF THE PA PER BOOK AND ALSO PAGES NO. 750-764, THEREFORE, IT CANNOT BE INF ERRED THAT THE ASSESSING OFFICER WAS SIMPLY ALLOWED AS NOT VERIFIE D THE TAX DEDUCTED AT SOURCE. THIS GROUND OF LD. PR. CIT IS ALSO NOT S USTAINABLE ON THE FACTS AND MATERIAL ON RECORDS. 25. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 20 .03. 2020. SD/- (MANISH BORAD) SD/- (KUL BHARAT) A CCOUNTANT MEMBER JUDICIAL MEMBER INDORE; DATED : 20/03/2020 PATEL/PS [ITA NO.355/IND/2017] [BHANDARI HOSPITAL & RESEARCH CENTRE] 104 COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUAR D FILE. BY ORDER ASSISTANT REGISTRAR, INDORE
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