RPG ENTERPRISES LTD, MUMBAI V. CIT 7, MUMBAI

ITA 4115/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7562 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 23-02-2012
• Assessment Year: 1998-1999
• Appeal Filed On: 18-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJNISH DEV BURMAN
• Assessee Lawyers: DEEPAK S DAMLE
• Keywords: Depreciation; Principle of natural justice; Retrospective amendment; Non-deduction of tax; Assessment record; Prejudicial to interest
• Section: 263; 63; 28

Judgement Text

IN THE INCOME TAX APPELLATE APPELLATE APPELLATE APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER & SHRI VIJAY PAL RAO, JUDICIAL MEMBER I.T.A.NOS.4115, 4116, 4117 & 4118/MUM/2011 A.YRS.1998-99. 1999-2000, 2000-01 & 2001-02 RPG ENTERPRISES LTD., CEAT MAHAL, 463, DR. A.B.ROAD, WORLI, MUMBAI 400 030. PAN: AAACR 2870 E VS. THE INCOME TAX OFFICER 7(2)(1), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DEEPAK S. DAMLE. RESPONDENT BY : SHRI RAJNISH DEV BURMAN. DATE OF HEARING: 23-02-2012 DATE OF PRONOUNCEMENT: 21-03-2012. O R D E R PER T.R.SOOD, AM: ALL THESE APPEALS ARE DIRECTED AGAINST THE ORDERS PASSED U/S.263 WITH IDENTICAL GROUND. IN FACT, A COMMON ORDER U/S. 263 HAS BEEN PASSED FOR ALL THE FOUR YEARS, THEREFORE, WITH THE CONSENT OF THE PARTIES I.T.NO.4115/MUM/11 WAS HEARD IN DETAIL AND BOTH PAR TIES AGREED THAT CONCLUSIONS REACHED IN THIS APPEAL MAY BE APPLIED T O ALL OTHER YEARS ALSO. 2. THE GROUNDS RAISED IN I.T.NO.4115/MUM/11 ARE AS UNDER: GROUND I : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED COMMISSIONER OF INCOME TAX - 7, MUMBAI [THE CIV] ERRED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE INCOM E TAX ACT, 1961 (THE ACT) AND DIRECTING REVISION OF THE ASSESSMEN T ORDER PASSED U/S. ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 2 143 (3) OF THE ACT BY THE INCOME TAX OFFICER 7 (2 ) (1), MUMBAI (THE AC) ON THE ALLEGED GROUND THAT THE SAID ASSE SSMENT ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. 2. THE APPELLANT PRAYS THAT ORDER PASSED U/S. 263 O F THE ACT TO BE STRUCK DOWN AS NULL AND VOID AB INITIO. WITHOUT PREJUDICE TO GROUND I GROUND II 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT ERRED IN DIRECTING THE AO TO EXAMINE THE DEDUCTIBILITY OF LEGAL AND PROFESSIONAL CHARGES, AIRCRAFT EXPENSES , RENT ETC. IN THE LIGHT OF THE DIRECTIONS GIVEN BY HIM. 2. THE APPELLANT PRAYS THAT THE ORDER PASSED U/S. 2 63 OF THE ACT BE STRUCK DOWN AS NULL AND VOID AND ASSESSMENT ORDER O F THE AO BE RESTORED AND IT BE HELD THAT ON THE FACTS AND CIRCU MSTANCES, NO DISALLOWANCE OF SUCH EXPENSES IS CALLED FOR AT ALL. WITHOUT PREJUDICE TO GROUND I & II GROUND III 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT ERRED MAKING OBSERVATION THAT THE ASSESSING OFFICER HAS NOT CONSIDERED THE ISSUE OF ASSESSABILITY OF ADVANCE RECEIVED AS INCOM E. 2. THE APPELLANT PRAYS THAT THE ORDER PASSED U/S. 2 63 OF THE ACT BE STRUCK DOWN AS NULL AND VOID AND ASSESSMENT ORDER O F THE AO BE RESTORED, INTER ALIA, ON THE GROUND THAT THE QUESTI ON OF ASSESSABILITY OF ADVANCE RECEIVED AS INCOME WAS NOT EVEN A SUBJECT MATTER OF THE SHOW CAUSE NOTICE ISSUED U/S. 263 OF THE ACT. 3. AFTER HEARING BOTH THE PARTIES, WE FIND THAT UPO N EXAMINATION OF ASSESSMENT RECORDERS LD. COMMISSIONER WAS OF THE VI EW THAT THE SAID ASSESSMENTS WERE ERRONEOUS AND PREJUDICIAL TO THE I NTERESTS OF THE REVENUE BECAUSE AS PER THE ORDER OF THE TRIBUNAL TH E AO WAS REQUIRED TO EXAMINE THE GENUINENESS OF ALL EXPENSES AND PASS ASSESSMENT ORDERS IN ACCORDANCE WITH THE LAW. A SHOW CAUSE NOT ICE WAS ISSUED ACCORDINGLY IN WHICH IT WAS MAINLY STATED THAT ASSE SSMENTS HAVE BEEN MADE IN THE ROUTINE MANNER WITHOUT CALLING FOR RELE VANT DETAILS AND WITHOUT ANY VERIFICATION AND WITHOUT CONDUCTING ANY ENQUIRIES AND WITHOUT APPLICATION OF MIND. THEREFORE, THE ASSESSM ENTS MADE BY THE ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 3 AO WERE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IN RESPONSE TO THIS NOTICE, DETAILED SUBMISSIONS WERE MADE BEFORE THE LD. COMMISSIONER IN WHICH IT WAS MAINLY STRESSED THAT D URING ASSESSMENTS ALL NECESSARY ENQUIRIES HAVE BEEN CONDUCTED BY THE AO AND ALL RELEVANT DETAILS CALLED FOR WERE EXAMINED BY HIM. COPIES OF VARIOUS DETAILS PARTICULARLY OF RENT, LEGAL AND PROFESSIONAL FEES, PROFESSIONAL CONSULTANCY FEES, AIR-CRAFT EXPENSES AND COMMUNICAT ION EXPENSES WERE FURNISHED BEFORE THE LD. COMMISSIONER. IT WAS ALSO POINTED OUT THAT AO HAS EVEN MADE ENQUIRIES BY ISSUING LETTERS U/S.133[ 6] TO CERTAIN ENTITIES ON RANDOM BASIS. THEREFORE, ALL NECESSARY ENQUIRIES WERE ALREADY CONDUCTED AND ASSESSMENT ORDERS COULD NOT B E CALLED ERRONEOUS OR PREJUDICIAL TO THE INTERESTS OF THE RE VENUE. LD. COMMISSIONER WAS NOT SATISFIED WITH THESE DETAILS A ND OBSERVED THAT EXPENDITURE INCURRED UNDER THE HEAD LEGAL AND PROF ESSIONAL FEES WERE NOT PROPERLY EXAMINED BECAUSE THE NATURE OF SERVICE S AND THE PERSONS TO WHOM SUCH FEES WERE PAID WERE NOT EXAMINED. APPL ICATION U/S.40A[2] AS WELL AS WHETHER TDS WAS MADE ON SUCH CHARGES ALSO WAS NOT EXAMINED. IN RESPECT OF EXPENSES INCURRED O N AIR-CRAFT, THOUGH DETAILS OF LEASE AGENTS WERE SUBMITTED BUT THE UTIL IZATION OF THE AIR CRAFT WAS NOT VERIFIED. SIMILARLY, IT WAS SEEN THAT DETAILS IN RESPECT OF RENT WERE NOT COMPLETE AND IT WAS NOT VERIFIED WHET HER TDS HAS BEEN DEDUCTED OR NOT. ON THE BASIS OF THESE OBSERVATIONS , THE ASSESSMENT ORDERS WERE SET ASIDE AND AO WAS DIRECTED TO RECOMP UTE THE INCOME AS PER THE DIRECTIONS GIVEN IN PARAS5 AND 6 OF CITS O RDER. ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 4 4. BEFORE US LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT R.P.GOENKA GROUP/R.P.GROUP IS A LEADING BUSINESS HO USE AND CONSISTED OF MANY OPERATING COMPANIES WHICH WERE ENGAGED IN T HE BUSINESS OF GENERATION OF POWER, POWER TRANSMISSION, POWER CABL E, CARBON BLACK, ENTERTAINMENT, INFORMATION TECHNOLOGY AND PLANTATIO N ETC. ALL THESE BUSINESSES WERE BEING CARRIED ON IN SEPARATE COMPAN IES WHICH WERE BASED IN DIFFERENT PARTS OF THE COUNTRY. DURING 198 0S IT WAS FELT THAT FOR PLANNED GROWTH A CENTRALIZED PLAN WAS REQUIRED. IT WAS FURTHER FELT THAT CERTAIN CRITICAL OPERATIONAL AREAS LIKE, HUMAN RESOURCES PLANNING & TRAINING, STRATEGIC PLANNING., FINANCIAL MANAGEMENT , MANAGEMENT INFORMATION, FOREX MANAGEMENT, TAXATION & LEGAL ISS UES, QUALITY MANAGEMENT, PROJECT DEVELOPMENT AND CORPORATE GOVER NANCE ETC., WERE REQUIRED TO BE PLANNED AND CONTROLLED CENTRALL Y. IN ORDER TO ACHIEVE THIS, THE ASSESSEE COMPANY I.E. RPG ENTERPR ISES LTD. WAS INCORPORATED SO AS TO THE ABOVE CRITICAL AREAS COUL D BE CENTRALIZED. THIS WAS FURTHER REQUIRED BECAUSE CERTAIN FUNCTIONS WERE BEING DUPLICATED BY THE OPERATING COMPANIES AND IT WAS FELT THAT CER TAIN CRITICAL AREAS SHOULD BE LOOKED AFTER BY ONE COMPANY BY EMPLOYING REQUISITE MAN- POWER AND BY ENGAGING COMMON SERVICES WHICH COULD B E DISTRIBUTED TO OPERATIVE COMPANIES. THE ASSESSEE COMPANY WAS INCOR PORATED IN 1988 AND EMPLOYED VARIOUS EXPERTS IN THE FIELD OF TAXATI ON LEGAL, CORPORATE LAWS, QUALITY MANAGEMENT, HUMAN RESOURCES, AND FORE IGN EXCHANGE ETC., TO PROVIDE THE EXPERT SERVICES TO THE OPERATI NG COMPANIES. THE IDEA WAS TO USE RESOURCES OPTIMALLY AND AVOID DUPLI CATION LEADING TO ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 5 REDUCTION OF COST AND OVERHEADS. THIS COMPANY ACCOR DINGLY WAS NOT A PROFIT CENTER BUT WAS ONLY A CENTRAL ORGANIZATION. ALL R.P.GROUP COMPANIES HAD ACCESS TO RESOURCES OF THE ASSESSEE C OMPANY. THE EXPENDITURE WAS BEING INCURRED BY THIS COMPANY WAS BEING SHARED ON UTILIZATION BASIS BY THE OPERATING COMPANIES AND TH US NO PROFIT OR LOSS WAS EARNED OR INCURRED BY THE ASSESSEE COMPANY. HOW EVER, SINCE ASSESSEE COMPANY WAS A SEPARATE LEGAL ENTITY, THERE FORE, RETURNS OF INCOME WERE FILED FROM A.YRS.1989-90 ONWARDS AND SI NCE THE COMPUTATION PROVISIONS OF I.T.ACT ARE DIFFERENT FRO M NORMAL ACCOUNTING PROVISIONS, THEREFORE, SOME LOSS OR PROFIT USED TO BE DECLARED IN THE RETURN FILED BY THE ASSESSEE COMPANY. RETURNS WERE FILED UPTO A.YRS. 1997-98 BUT DEPARTMENT NEVER RAISED ANY DISPUTE WIT H REGARD TO PRINCIPAL OBJECTIVE FOR WHICH THE ASSESSEE COMPANY WAS ESTABLISHED AND ASSESSMENTS WERE FRAMED UPTO A.YRS. 1997-98 ACC ORDINGLY. 5. THE ASSESSMENT WAS TAKEN UP FOR SCRUTINY FOR A.Y 1998-99 BY DCIT CIR.5(6), MUMBAI IN MAY 2000 BY ISSUING NOTICE U/S.142[1]. AFTER CONDUCTING DETAILED ENQUIRIES AO HELD THAT ASSESSEE WAS AN INSTRUMENT OF TAX AVOIDANCE AND ASSESSEE COMPANY DID NOT SERVE ANY REAL BUSINESS OR COMMERCIAL OBJECTIVE. THE EXPENSES BOOK ED BY THE ASSESSEE COMPANY, IN FACT, PERTAINED TO THE CONTRIB UTORY COMPANIES I.E. THE OPERATIVE COMPANIES AND DECISION REGARDING ALLO WABILITY OF SUCH EXPENDITURE WAS TO BE TAKEN BY THE RESPECTIVE AOS OF SUCH OPERATIVE COMPANIES. ACCORDINGLY, IT WAS HELD THAT RECEIPTS A ND EXPENDITURE RECORDED BY THE ASSESSEE WAS FISCAL NULLITY AND A O REFUSED TO ACCEPT ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 6 ANY INCOME OR LOSS IN THE HANDS OF THE ASSESSEE COM PANY. SIMILARLY, THE REASONING ADOPTED IN A.YS. 1999-2000 TO 2002-03 WERE HELD TO BE NULLITY AND THE RETURNS WERE TREATED AS NON EST. SU BSEQUENT TO THE PASSING OF SUCH ASSESSMENT ORDERS THE AOS OF THE OPERATING/CONTRIBUTORY COMPANIES WERE RECOMMENDED T O TAKE NECESSARY ACTION FOR VERIFICATION OF EXPENDITURE IN THE HANDS OF RESPECTIVE COMPANIES. 6. AGGRIEVED BY THE ABOVE ORDER ASSESSEE FILED APPE ALS BEFORE THE CIT(A) FOR ALL THESE FOUR YEARS. THE LD. CIT(A) AFT ER EXAMINING THE VARIOUS DOCUMENTS AND EVIDENCES AS WELL AS THE APPE LLATE ORDER PASSED IN THE CASE OF CONTRIBUTORY COMPANIES OF RPG GROUP, HELD THAT ASSESSEE HAS SET UP A LARGE BUSINESS ORGANISATION B Y EMPLOYING VARIOUS PROFESSIONALS AND THIS COMPANY WAS RENDERING SERVIC ES BELONGING TO VARIOUS RPG GROUP COMPANIES, THEREFORE, THE CONCLUS ION THAT TRANSACTIONS OF THE ASSESSEE COMPANY WERE NULLITY W ERE NOT UPHELD AND LD. CIT(A) DIRECTED THE AO TO PASS DENOVO ASSESSMEN T ORDERS DETERMINING THE INCOME OR LOSS FOR EACH YEAR. 7. THE ABOVE ORDER WAS CHALLENGED BY THE DEPARTMENT BY FILING APPEALS BEFORE THE TRIBUNAL. THE ASSESSEE ALSO FILE D CROSS OBJECTIONS RAISING AN OBJECTION THAT ONCE IT WAS ACCEPTED THAT ASSESSEE COMPANY WAS GENUINELY PROVIDING SERVICES TO THE GROUP COMPA NIES HE SHOULD HAVE DIRECTED THE AO TO ACCEPT THE RETURNS INSTEAD OF DIRECTING HIM TO PASS DENOVO ASSESSMENTS. ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 7 8. DURING THE TIME WHEN APPEALS WERE PENDING BEFORE THE TRIBUNAL, AO PASSED ASSESSMENT ORDERS U/S.143[3]/25 0 FOR ALL THESE FOUR YEARS ON 28-2-06. ACCORDING TO THE LD. COUNSEL OF THE ASSESSEE THESE ORDERS WERE PASSED AFTER ISSUING NOTICES U/S. 142[1] AND AFTER MAKING DETAILED ENQUIRIES IN SEVERAL HEARINGS. SOME ADDITIONS/DISALLOWANCES WERE ALSO MADE AND ACCORDIN GLY ASSESSEE ACCEPTED THE RE-ASSESSMENTS. 9. LATER ON, REVENUES APPEALS WERE HEARD BY E BE NCH OF THE MUMBAI TRIBUNAL ON 18-2-2008. IT WAS MAINLY ARGUED BEFORE THE TRIBUNAL THAT CIT(A) HAS NOT POWER TO SET ASIDE THE ASSESSMENT. ACCORDINGLY, THE TRIBUNAL HELD THAT THE AO AS WELL AS THE CIT(A) HAD NOT ACTED IN ACCORDANCE WITH THE LAW AND, THEREFORE , ORDERS OF BOTH THE PARTIES WERE REQUIRED TO BE VACATED. THE TRIBUNAL R EMANDED THE MATTER TO THE AO TO REFRAME THE ASSESSMENTS AFTER M AKING NECESSARY ENQUIRIES AND AFTER GRANTING AN OPPORTUNITY OF BEIN G HEARD TO THE ASSESSEE. BECAUSE OF THESE FINDINGS, IT WAS FURTHER HELD THAT ASSESSEES CROSS OBJECTIONS HAD BECOME INFRUCTUOUS AND, THEREF ORE, SAME WERE DISMISSED. HOWEVER, IN THIS ORDER OF THE TRIBUNAL, TRIBUNAL FAILED TO ADJUDICATE GROUNDS NOS.2 & 3 OF THE REVENUES APPEA L ON MERITS WHEREIN REVENUE HAD CHALLENGED THE CIT(A)S ORDER F OR VACATING THE AOS FINDINGS WITH REGARD TO FISCAL NULLITY AND ACC ORDINGLY MISCELLANEOUS APPLICATIONS WERE FILED BY THE ASSESSEE WHEREIN IT WAS POINTED OUT THAT TRIBUNAL HAS NOT ADJUDICATED GROUNDS NOS.2 & 3 OF T HE REVENUES APPEAL AND GROUND NO.2 OF THE ASSESSEES CROSS OBJE CTION. VIDE ORDER ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 8 DATED 29-8-2008 ON THE MISCELLANEOUS APPLICATION TH E TRIBUNAL RECALLED ITS ORDER DATED 18-2-2008 FOR DECIDING ON MERITS GR OUNDS NOS.2 & 3 OF THE DEPARTMENTAL APPEAL AND GROUND NO.2 OF CROSS OB JECTION. 10. IN THE MEAN TIME, AO PASSED ANOTHER ASSESSMENT ORDER U/S.143[3] R.W.S254. A COPY OF THE ASSESSMENT ORDER FOR A.Y 1998-99 IS PLACED AT PAGES 164 TO 171 IN THE PAPER BOOK FOR A. Y 1998-99. DURING THE HEARING BEFORE THE TRIBUNAL IN RESPECT OF GROUN DS NOS.2 & 3 OF THE DEPARTMENTAL APPEAL AND GROUND NO.2 OF THE CROSS OB JECTION, THE FRESH ASSESSMENT ORDER PASSED U/S.143[3] R.W.S. 254 WAS B ROUGHT TO THE NOTICE OF THE TRIBUNAL AND THE TRIBUNAL AFTER CONSI DERING THIS ASSESSMENT ORDER PASSED FRESH ORDER COPY OF WHICH I S PLACED AT PAGES 161 TO 163 OF THE PAPER BOOK AND IT WAS CONCLUDED V IDE PARA-3 AS UNDER: 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY AND HAVE PERUSED THE ORDER OF ASSESSMENTS FRAMED BY THE ASSE SSING OFFICER U/S.143(3) R.W.S. 254 OF THE ACT IN ACCORDANCE WITH DIRECTIONS OF THE TRIBUNAL TO THE ASSESSING OFFICER IN THE CASE OF TH E ASSESSEE FOR THE RELEVANT ASSESSMENT YEARS TO FRAME A PROPER ASSESSM ENT IN ACCORDANCE WITH LAW AFTER MAKING THE NECESSARY ENQUIRY. WE FIN D THAT THE ASSESSING OFFICER HAS COMPLIED WITH THE DIRECTIONS OF THE TRIBUNAL AND HAS FRAMED THE ASSESSMENT DETERMINING THE TOTAL INC OME ASSESSABLE IN THE HANDS OF THE ASSESSEE FOR THE RELEVANT ASSESSME NT YEARS AND THE ASSESSEE HAS ACCEPTED THE SAME. IN THESE FACTS, WE HOLD THAT THE PRESENT APPEALS PREFERRED BY THE REVENUE AND THE CROSS OBJE CTIONS PREFERRED BY THE ASSESSEE HAVE BECOME INFRUCTUOUS AND ARE ACCORD INGLY DISMISSED. 11. THE LD. COUNSEL OF THE ASSESSEE AFTER NARRATING THE ABOVE BACKGROUND MADE THE FOLLOWING SUBMISSIONS: THAT SHOW CAUSE NOTICE ISSUED BY THE COMMISSIONER A S WELL AS THE CONSEQUENT ORDER PASSED U/S.263 WAS BAD IN LAW BECAUSE THE FINDING IN THE ORDER U/S.263 WAS CONTRARY TO TH E FINDING ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 9 RECORDED BY THE ITAT IN ITS ORDER DATED 6-2-2009. T HE MAIN ALLEGATION IN THE SHOW CAUSE NOTICE IS THAT ASSESSM ENT ORDERS PASSED ON 29-12-08 WERE WITHOUT COMPLYING WITH THE DIRECTIONS OF THE TRIBUNAL VIDE ORDER DATED 18-2-08. THE TRIBU NAL HAS ITSELF IN ITS ORDER DATED 6-2-09 HAS NOTED THAT ASSESSMENT ORDERS HAVE BEEN PASSED AFTER COMPLYING WITH THE DIRECTIONS OF THE TRIBUNAL AFTER CONDUCTING THE NECESSARY ENQUIRIES. THEREFORE , THE COMMISSIONER COULD NOT HAVE TAKEN A CONTRARY VIEW. ONCE THE DENOVO ASSESSMENTS WERE ALREADY TOUCHED UPON BY THE TRIBUNAL, THEN THE COMMISSIONER CANNOT ASSUME THE J URISDICTION TO PASS REVISIONARY ORDER. IN THIS REGARD HE RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F CIT VS. J.B. PATIL [236 ITR 469]. THE SHOW CAUSE NOTICE WAS ISSUED MERELY ON THE BASI S OF SUSPICIONS AND CONJECTURES AND THE REASONS FOR INVO KING THE JURISDICTION U/S.263 WERE NOT BASED ON ANY MATERIAL . THE MAIN REASON GIVEN IN THE SHOW CAUSE NOTICE IS THAT ASSES SMENT ORDERS WERE PASSED WITHOUT APPLICATION OF MIND IS TOTALLY WRONG AND THE COMMISSIONER HAS NOT POINTED OUT HOW THERE IS A FAI LURE ON APPLICATION OF MIND. IN THIS REGARD LD. COUNSEL OF THE ASSESSEE BY REFERRING TO VARIOUS DOCUMENTS POINTED OUT AS TO HOW VARIOUS HEARINGS HAVE TAKEN PLACE AT VARIOUS POINTS OF TIME . DURING SUCH HEARINGS ALL DETAILS CALLED FOR BY THE AO WERE FURN ISHED AND EVEN BOOKS OF ACCOUNTS ALONG WITH THE BILLS AND VOUCHERS ETC., WERE ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 10 PRODUCED BEFORE THE AO. THEREFORE, IT WAS WRONG TO CONCLUDE THAT AO HAS NOT MADE ANY ENQUIRIES BECAUSE THE SHOW CAUSE NOTICE DOES NOT POINT OUT ANY SPECIFIC INSTANCE OR MATERIAL IN RESPECT OF WHICH NO ENQUIRY HAS BEEN MADE. IT WAS SUBMITTED THAT THE FACTUAL FINDING BY THE CI T(A) WITH REGARD TO GENUINETY OF RENDERING OF SERVICES BY THE ASSESSEE TO VARIOUS RPG GROUP COMPANIES AT NO PROFIT/LOSS BASIS WAS NEVER DISTURBED BY THE TRIBUNAL AT ANY TIME. THEREFORE, T HIS FINDING COULD NOT HAVE BEEN REVERSED BY THE ORDER PASSED U/ S.263. EVEN AFTER THE ORDER OF THE TRIBUNAL PASSED ON 18-2 -08 AO ONCE AGAIN PROCEEDED TO MAKE DENOVO ASSESSMENTS FOR ALL THE FOUR YEARS AFTER ISSUING NOTICES U/S.142[1] WHICH WAS CO MPLIED WITH FROM TIME TO TIME AND EVEN IN THESE IMPUGNED ASSESS MENT PROCEEDINGS EIGHT HEARINGS WERE CONDUCTED BY THE AO . IN FACT, AO HAS CLEARLY FOUND THAT THE ASSESSEE COMPANY IS A CLOSELY HELD COMPANY BELONGING TO R P GOENKA GROUP AND IS PROVIDING SERVICES TO OTHER LICENSEE COMPANIES ON NO PROFIT/N O LOSS BASIS. THE DISCUSSION IN ASSESSMENT ORDER AT PARAS 4, 5 AN D 6 CLEARLY SHOWS THAT THE AO HAD ASKED FOR DETAILS OF VARIOUS EXPENSES AND OTHER ISSUES AND THE RELEVANT INFORMATION WAS D ULY PROVIDED BY THE ASSESSEE. IN FACT, DETAILED ENQUIRES HAVE BE EN CONDUCTED BY THE THREE SUCCESSIVE OFFICERS BY ISSUING NOTICES ON VARIOUS OCCASIONS. THE FINDING THAT THE ASSESSEE COMPANY WA S MERELY PROVIDING SERVICES TO THE RPG GROUP COMPANY IS IMPO RTANT ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 11 BECAUSE THAT WOULD AMOUNT TO ADMISSION ON THE PART OF THE AO THAT THE ASSESSEE WAS MERELY RECOVERING FROM THE CO NTRIBUTORY COMPANY ONLY SO MUCH AMOUNT WHICH HAD ACTUALLY BEEN SPENT ON PROVIDING THE SERVICES TO SUCH COMPANIES. IN OT HER WORDS, THERE WAS AN IMPLIED ADMISSION ON THE PART OF THE A O THAT ASSESSEE COMPANY WAS NOT SET UP WITH PROFIT OBJECTI VE AND THE CONTRIBUTIONS RECEIVED FROM VARIOUS COMPANIES WERE GENERATED JUST TO MEET THE ACTUAL COST INCURRED. IN FACT, THE APPELLATE ORDER RUNNING INTO 70 PAGES WHERE AO WAS ASKED TO DO DENO VO ASSESSMENTS WAS ALSO AVAILABLE WITH THE AO AND HE H AD THE BENEFIT OF THE EXPLANATION SUBMITTED BEFORE HIS PRE DECESSORS ON EARLIER TWO OCCASIONS. THE LD. COUNSEL OF THE ASSESSEE FURTHER SUBMITTED T HAT IN THE SHOW CAUSE NOTICE THE COMMISSIONER HAD MADE SWEEPIN G REMARKS THAT ENQUIRIES WERE NOT CONDUCTED AND DETAI LS WERE NOT FILED. THIS ASPECT HAS BEEN SUMMARISED ULTIMATELY I N PARAS 5.A TO 5.E IN THE ORDER PASSED U/S.263. IN PARA 5.A, FO R EXAMPLE, IT HAS BEEN STATED THAT AO HAS NOT MADE ENQUIRIES REGA RDING LEGAL AND PROFESSIONAL SERVICES. THE AO HAS NOT VERIFIED THE APPLICABILITY OF SEC.40A(2) AND WHETHER ANY TDS WAS MADE ON SUCH CHARGES. HE POINTED OUT THAT DETAILS OF LEGAL AND PROFESSIONAL CHARGES ARE FILED IN THE ASSESSMENT PR OCEEDINGS CONDUCTED ON 12-2-01 AND 10-2-06. ALL THE DOCUMENTS AND VOUCHERS WERE PRODUCED FOR VERIFICATION OF THE AO. THE NAMES ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 12 AND ADDRESSES OF THE PROFESSIONALS TO WHOM FEES WER E PAID AND DETAILS OF PAYMENTS AND SUPPORTING DOCUMENTS WERE P RODUCED BEFORE THE AO. COPIES OF THESE DETAILS HAD BEEN FUR NISHED EVEN BEFORE THE COMMISSIONER. HE SUBMITTED THAT THE INFO RMATION REGARDING PERSONS TO WHOM SEC.40A(2) WAS APPLICABLE WAS AVAILABLE IN TAX AUDIT REPORT, BUT STILL THE COMMIS SIONER MADE GENERAL REMARK WITHOUT PINPOINTING THAT IN RESPECT OF WHICH PAYMENT SEC.40A(2) WAS APPLICABLE DESPITE THE FACT THAT DETAILS WERE FILED BEFORE HIM ALSO. SIMILARLY, THE COMMISSI ONER FAILED TO APPLY HIS MIND TO THE FACT THAT ALL THE FOUR YEARS PERTAINED TO THE PERIOD MUCH BEFORE A.Y 2005-06 BECAUSE SEC.40(A)(I) WAS AMENDED BY THE FINANCE ACT, 2004 W.E.F. 1-4-2005. T HUS, IT IS CLEAR THAT PROVISION REGARDING DISALLOWANCE OF PAYM ENT U/S.40(A)(IA) WAS NOT APPLICABLE FOR A.YRS. 1998-99 TO 2001-02, WHICH HAVE BEEN TAKEN UP FOR REVISION. PARA 5.B OF REVISION ORDER DEALS WITH THE EXPENSES INCURRED FOR AIR CRAF T AND IT IS MENTIONED THAT NO ENQUIRY HAS BEEN MADE THAT WHO AR E THE PERSONS WHO HAVE USED THE AIR CRAFT. THE LD. COUNSE L OF THE ASSESSEE POINTED OUT THAT DETAILS OF EXPENSES IN RE SPECT OF AIR CRAFT WERE FURNISHED ON 7-11-2000, 20-11-2000, 3-1- 2001, 16-1- 2001 AND 26-11-2008. HE SUBMITTED THAT AO HAS SPECI FICALLY ASKED REGARDING THE UTILISATION OF AIR CRAFT BY THE DIRECTORS AND SENIOR EXECUTIVES OF THE LICENSEE COMPANY WHO HAD U NDERTAKEN THEIR TRAVEL IN CONNECTION WITH THE BUSINESS AND CO PY OF THIS ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 13 CLARIFICATION IS PLACED AT PAGE 277 OF THE PAPER BO OK. IN PARA 5.C IT HAS BEEN STATED THAT FROM THE DETAILS REGARDING RENT FILED BEFORE THE COMMISSIONER IT IS SEEN THAT DETAILS ARE NOT COMPLETE. HOWEVER, IT HAS NOT BEEN POINTED OUT IN WHAT RESPEC T SUCH DETAILS ARE NOT COMPLETE. HE POINTED OUT THAT COPY OF DETAILS OF RENT WAS FILED BEFORE THE COMMISSIONER CLEARLY SHOW S THE NAMES AND ADDRESSES OF THE PREMISES, PAN OF THE LESSOR, T HE PERSONS WHO HAD OCCUPIED SUCH PREMISES AND THE AMOUNT OF RE NT PAID. IN PARAS 5.D AND 5.E THE COMMISSIONER HAS MADE GENE RAL OBSERVATIONS. THE LD. COUNSEL POINTED OUT THAT WHAT COMMISSIONER HAS STRESSED IS THAT ENQUIRIES HAVE NO T BEEN CONDUCTED ON THE LINES SUGGESTED IN THE IMPUGNED OR DER OR ACCORDING TO THE VISION OF THE COMMISSIONER. IT HAS NOT BEEN DENIED THAT ENQUIRIES HAVE NOT BEEN CONDUCTED BY TH E AO. IT IS SETTLED POSITION OF LAW THAT LACK OF ENQUIRY MAY RE NDERS AN ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. BUT WHEN ENQUIRY HAS BEEN CONDUCTED BY THE AO WITH WHIC H CIT MAY NOT BE SATISFIED AND THE COMMISSIONER IS OF THE VIEW THAT LEFT TO HIMSELF HE WOULD HAVE CONDUCTED MORE DETAIL ED ENQUIRIES IN INVESTIGATIONS THAN CONDUCTED BY THE AO, THEN SU CH AN ORDER CANNOT BE CALLED ERRONEOUS AND PREJUDICIAL TO THE I NTERESTS OF THE REVENUE. THEREFORE, AT BEST IT IS A CASE WHERE COMM ISSIONER WAS NOT SATISFIED ABOUT THE MANNER IN WHICH ENQUIRIES W ERE CONDUCTED OR HE WAS OF THE OPINION THAT INVESTIGATI ONS SHOULD ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 14 HAVE BEEN CONDUCTED IN A PARTICULAR MANNER BY CALLI NG SOME MORE DOCUMENTS. BUT THIS SITUATION WILL NOT MAKE TH E ASSESSMENT ORDER ERRONEOUS OR PREJUDICIAL TO THE IN TERESTS OF THE REVENUE. THE COMMISSIONER IN THE GARB OF REVISION O RDER U/S.263 CANNOT DIRECT THE AO TO CONDUCT ONE MORE INNINGS FO R ROWING AND FISHING ENQUIRIES, PARTICULARLY IN A CASE WHERE ASSESSMENTS HAVE BEEN MADE IN THREE ROUNDS. IN THIS REGARD HE R ELIED ON THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CA SE OF CIT VS. V.BALLIMAL [230 ITR 695] WHEREIN IT WAS CLEARLY HEL D THAT COMMISSIONER CANNOT PASS AN ORDER U/S.263 MERELY ON THE GROUND THAT FURTHER VERIFICATION OF ACCOUNTS WAS RE QUIRED. HE ALSO REFERRED TO THE DECISION OF THE MUMBAI BENCH O F THE TRIBUNAL IN THE CASE OF MRS. KHATIZA S. OOMERBHOY [ 100 ITD 173] WHEREIN IT WAS HELD THAT PROVISIONS OF SEC.263 ARE EXTRA ORDINARY POWERS OF THE COMMISSIONER AND COMPLETE AS SESSMENT PROCEEDINGS CANNOT BE REOPENED UNLESS THERE IS SOME COGENT MATERIAL TO SHOW THAT THERE IS TOTAL NON APPLICATIO N OF MIND ON THE PART OF THE ASSESSING OFFICER OR ASSESSING OFFI CER HAS COMMITTED ANY GLARING MISTAKE OF FACTS OR LAW. HE A LSO STRONGLY RELIED ON THE ORDER OF THE HON'BLE BOMBAY HIGH COUR T IN THE CASE OF CIT VS. GABRIEL INDIA LTD. [303 ITR 108]. H E ALSO REFERRED TO THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. HINDUSTAN MARKETING AND ADVERTISING CO. LTD. [196 TAXMAN 368] THEREIN THE ORDER OF THE TRIBUNAL WAS ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 15 CONFIRMED THROUGH WHICH REVISIONARY ORDER WAS QUASH ED BY OBSERVING THAT IT WAS NOT A CASE WHERE ENQUIRIES WE RE NOT MADE BY THE AO OR RELEVANT MATERIAL WAS NOT COLLECTED BY THE AO BEFORE FRAMING THE ASSESSMENT AND THE COMMISSIONER HAD NO RIGHT TO JUDGE THE SUFFICIENCY OF THE ENQUIRY. WHILE CONCLUDING HE SUBMITTED THAT IN THE PRESENT C ASE ASSESSMENT ITSELF WAS TAKEN UP ON THREE DIFFERENT O CCASIONS AS NARRATED EARLIER AND SUFFICIENT ENQUIRIES HAVE BEEN MADE BY THE AO IN VARIOUS GROUNDS AND AT BEST IT CAN BE SAID TH AT SUCH ENQUIRIES MAY NOT BE UPTO THE KNOWN STANDARD OF THE COMMISSIONER, BUT IT CANNOT BE DENIED THAT ENQUIRIE S HAVE BEEN MADE AND ACCORDINGLY THE ASSESSMENT ORDER CANNOT BE CALLED ERRONEOUS OR PREJUDICIAL TO THE INTERESTS OF THE RE VENUE. 12. ON THE OTHER HAND, LD. DR STRONGLY SUPPORTED TH E ORDER OF THE COMMISSIONER AND SUBMITTED THAT IT IS A CLEAR CASE OF NON APPLICATION OF MIND BY THE AO AND, THEREFORE, ASSESSMENTS ARE ERRO NEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IN THI S REGARD HE STRONGLY RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT [243 ITR 83]. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS IN THE LIGHT OF THE MATERIAL ON RECORD AS WELL AS THE DECISIONS CITED B Y THE PARTIES. WE DO NOT FIND ANY FORCE IN THE ARGUMENT OF THE LD. COUNS EL OF THE ASSESSEE THAT SINCE TRIBUNAL HAS ALREADY PASSED AN ORDER WHI LE ADJUDICATION THE MISCELLANEOUS APPLICATION IN WHICH IT IS OBSERVED T HAT SINCE ASSESSING ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 16 OFFICER HAS ALREADY COMPLIED WITH THE DIRECTIONS OF THE TRIBUNAL, THEREFORE, SUCH ASSESSMENT ORDER COULD NOT HAVE POS SIBLY BEEN REVISED BECAUSE TRIBUNAL BEING SUPERIOR AUTHORITY TO THE CO MMISSIONER AND THE TRIBUNAL HAS ALREADY TOUCHED UPON SUCH ASSESSMENT . THEREFORE, COMMISSIONER HAD NO AUTHORITY TO REVISE SUCH AN ORD ER. IN FACT, LD. COUNSEL HAS NOT STRAIGHTAWAY ARGUED THAT SUCH ORDER S HAVE MERGED WITH THE APPELLATE ORDER OF THE TRIBUNAL AND THUS N OT AVAILABLE FOR REVISION AND HE HAS ONLY MADE AN INDIRECT REFERENCE TO SUCH MERGER BY REFERRING TO THE TERM TOUCHED UPON. EXPLANATION TO SEC.263(1) READS AS UNDER: ( C ) WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTION A ND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT MATTER O F ANY APPEAL [FILED ON OR BEFORE OR AFTER THE 1ST DAY OF JUNE, 1988], T HE POWERS OF THE COMMISSIONER UNDER THIS SUB-SECTION SHALL EXTEND [AND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED] TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL.] THE ABOVE CLEARLY SHOWS THAT WHERE THE ASSESSMENT O RDERS HAVE BEEN SUBJECT MATTER OF AN APPEAL, THEN SUCH ORDERS ARE N OT AVAILABLE FOR REVISION. BUT, HOWEVER, THE POWERS OF THE COMMISSIO NER WOULD EXTEND TO THE MATTER WHICH HAD NOT BEEN CONSIDERED AND DEC IDED IN THE APPEAL. THIS ISSUE HAD BEEN MADE CLEAR BY THE DECIS ION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SHRI ARBUDA MI LLS LTD. [231 ITR 50] WHEREIN THE ITO HAD MADE CERTAIN ADDITIONS AND DISALLOWANCES WHILE COMPUTING THE LOSS BUT HAD ACCEPTED, INTER AL IA, THREE ITEMS, NAMELY (I) DEDUCTION OF A SUM OF RS. 23,82,621 BY W AY OF PROVISION FOR GRATUITY; (II) DEPRECIATION ON RS. 4,21,000 WHICH W AS PAID BY THE ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 17 ASSESSEE AS CONSIDERATION FOR TRANSFER OF INSTALLED PROPERTY; AND (III) LOSS ON ACCOUNT OF DIFFERENCE IN EXCHANGE RATE WHIC H WAS REFERABLE TO THE PURCHASE OF MACHINERY, ETC., AS REVENUE EXPENDI TURE. THESE ITEMS WERE NOT SUBJECT MATTER OF APPEAL BECAUSE THE DECIS ION WAS IN FAVOUR OF THE ASSESSEE. IN THIS CASE COMMISSIONER EXERCISE D HIS POWERS IN RESPECT OF THE THREE ITEMS AND A QUESTION AROSE WHE THER OR NOT THE ORDER OF THE ITO REGARDING THESE THREE ITEMS WAS ME RGED WITH THAT OF THE COMMISSIONER (APPEALS). THE HON'BLE SUPREME COU RT HELD AS UNDER: HELD, THAT THE EXPLANATION TO SECTION 263(1) WHICH WAS SUBSTITUTED BY THE FINANCE ACT, 1988, WITH EFFECT FROM JUNE 1, 198 8, WAS AGAIN AMENDED BY THE FINANCE ACT, 1989, WITH RETROSPECTIV E EFFECT FROM JUNE 1, 1988, TO THE EFFECT THAT WHERE ANY ORDER REFERRE D TO IN THE SUB-SECTION AND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SU BJECT-MATTER OF ANY APPEAL (FILED ON OR BEFORE OR AFTER THE 1ST DAY OF JUNE, 1988), THE POWERS OF THE COMMISSIONER UNDER THE SUB-SECTION SH ALL EXTEND AND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED TO SUCH MAT TERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL. THE CON SEQUENCE OF THE AMENDMENT MADE WITH RETROSPECTIVE EFFECT IS THAT TH E POWERS UNDER SECTION 263 OF THE COMMISSIONER SHALL EXTEND AND SH ALL BE DEEMED ALWAYS TO HAVE EXTENDED TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN AN APPEAL. ACCORDINGLY, IN RESPECT O F THE AFORESAID THREE ITEMS, THE POWERS OF THE COMMISSIONER UNDER SECTION 263 SHALL EXTEND AND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED TO THEM BECAUSE THE SAME HAD NOT BEEN CONSIDERED AND DECIDED IN THE APP EAL FILED BY THE ASSESSEE. THEREFORE, THE ORDER OF ASSESSMENT PASSED BY THE INCOME-TAX OFFICER ON MARCH 31, 1978, HAD NOT MERGED WITH THAT OF THE COMMISSIONER (APPEALS), DATED DECEMBER 15, 1979, IN RESPECT OF THE THREE ITEMS IN DISPUTE SO AS TO EXCLUDE THE JURISDI CTION OF THE COMMISSIONER OF INCOME-TAX UNDER SECTION 263. THEREFORE, IT IS CLEAR THAT UNLESS AND UNTIL SAME I SSUE IS AGITATED BEFORE THE COMMISSIONER (APPEALS), THE SAME CANNOT BE HELD TO BE SUBJECT MATTER WHICH HAS MERGED WITH THE APPELLATE ORDER. I N FACT, THE LD. COUNSEL OF THE ASSESSEE HAS RELIED ON THE DECISION OF THE HON'BLE ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 18 SUPREME COURT IN THE CASE OF CIT VS. JAYANT KUMAR B . PATIL [SUPRA]. WE HAVE READ THAT JUDGMENT VERY CAREFULLY AND FIND THAT THERE IS NO MENTION OF TOUCHED UPON BY THE HON'BLE APEX COURT AND IN FACT THE HON'BLE COURT HAS FOLLOWED THE DECISION IN THE CASE OF CIT VS. SHRI ARBUDA MILLS [SUPRA] AND THE ISSUE WAS DECIDED IN F AVOUR OF THE REVENUE. 14. THE CAREFUL CONSIDERATION OF THE FACTS IN THE C ASE BEFORE US ON THE TOUCH STONE OF ABOVE LEGAL PARA METERS WOULD CL EARLY SHOW THAT ORIGINALLY AO REFUSED TO TAKE COGNIZANCE OF THE RET URNS BY HOLDING THAT ASSESSEE WAS MERELY A SHAM ARRANGEMENT FOR THE PURP OSE OF TAX ADVANTAGE IN THE HANDS OF THE SISTER CONCERNS. THE AO HELD THAT RECEIPTS AND EXPENDITURES OF THE ASSESSEE WERE A FI SCAL NULLITY AND IN TURN INFORMED THE RESPECTIVE ASSESSING OFFICERS OF THE SISTER CONCERNS WHO WERE CONTRIBUTING PAYMENTS TO THE ASSESSEE COMP ANY FOR UTILISING THE CENTRALISED SERVICES TO EXAMINE THE ALLOWABILIT Y OF SUCH EXPENDITURE IN THEIR RESPECTIVE HANDS. AGGRIEVED BY THIS ORDER , ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHO ULTIMATELY HELD THA T RECEIPTS AND EXPENDITURES OF THE ASSESSEE COMPANY CANNOT BE CALL ED A NULLITY AND, THEREFORE, AO WAS DIRECTED TO FRAME THE ASSESSMENTS AFTER MAKING ENQUIRIES. AGAINST THIS, REVENUE FILED AN APPEAL BE FORE THE TRIBUNAL AND ASSESSEE ALSO FILED CROSS OBJECTIONS. THEREFORE, TH E ISSUE BEFORE THE TRIBUNAL WAS WHETHER SUCH ARRANGEMENT WAS A NULLITY AND WHETHER THE COMMISSIONER HAVE POWERS TO SET ASIDE THE ASSESSMEN TS BACK TO THE FILE OF THE AO FOR FRAMING FRESH ASSESSMENTS. THERE FORE, IT IS CLEAR THAT ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 19 ISSUE OF ALLOWING OR NOT ALLOWING ANY PARTICULAR IT EMS WAS NEVER BEFORE THE TRIBUNAL AND IT CANNOT BE SAID THAT SUCH ISSUE HAS GOT MERGED WITH THE ORDER OF THE TRIBUNAL. PARA-3 OF THE FINAL ORDE R OF THE TRIBUNAL WHILE ADJUDICATING THE MISCELLANEOUS APPLICATION READS AS UNDER: 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY AND HAVE PERUSED THE ORDER OF ASSESSMENTS FRAMED BY THE ASSE SSING OFFICER U/S.143(3) R.W.S. 254 OF THE ACT IN ACCORDANCE WITH DIRECTIONS OF THE TRIBUNAL TO THE ASSESSING OFFICER IN THE CASE OF TH E ASSESSEE FOR THE RELEVANT ASSESSMENT YEARS TO FRAME A PROPER ASSESSM ENT IN ACCORDANCE WITH LAW AFTER MAKING THE NECESSARY ENQUIRY. WE FIN D THAT THE ASSESSING OFFICER HAS COMPLIED WITH THE DIRECTIONS OF THE TRIBUNAL AND HAS FRAMED THE ASSESSMENT DETERMINING THE TOTAL INC OME ASSESSABLE IN THE HANDS OF THE ASSESSEE FOR THE RELEVANT ASSESSME NT YEARS AND THE ASSESSEE HAS ACCEPTED THE SAME. IN THESE FACTS, WE HOLD THAT THE PRESENT APPEALS PREFERRED BY THE REVENUE AND THE CROSS OBJE CTIONS PREFERRED BY THE ASSESSEE HAVE BECOME INFRUCTUOUS AND ARE ACCORD INGLY DISMISSED. THE ABOVE ORDER ITSELF CLEARLY SHOWS THAT THE TRIBU NAL DISMISSED GROUND NOS.2 AND 3 OF THE REVENUE AND ALSO CROSS OBJECTION OF THE ASSESSEE BECAUSE AO HAD ALREADY PASSED THE ASSESSMENT ORDERS . THE TRIBUNAL NEVER GAVE ANY FINDING ON ALLOWABILITY OR NON ALLOW ABILITY OF ANY ITEM OF EXPENDITURE AND, THEREFORE, THE ISSUE REGARDING ALL OWABILITY OF ANY ITEM OF EXPENDITURE CANNOT BE SAID TO HAVE MERGED WITH T HE ORDER OF THE TRIBUNAL. 15. NOW IT IS SETTLED PRINCIPLE THAT EVERY ASSESSME NT ORDER WHICH IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE IS AVAILABLE FOR REVISION BECAUSE IF AO HAS COMMITTED A BLATANT MIST AKE, THEN REVENUE HAS NO REMEDY AND ACCORDINGLY THE ACT HAS GIVEN SUP ERVISORY POWERS TO THE COMMISSIONER TO CHECK THE ERRONEOUS ASSESSME NTS. THE HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT [SUPRA] HAS MADE THE FOLLOWING OBSERVATIONS REGARDI NG SEC.263: ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 20 A BARE READING OF SECTION 263 OF THE INCOME-TAX AC T, 1961, MAKES IT CLEAR THAT THE PREREQUISITE FOR THE EXERCISE OF JUR ISDICTION BY THE COMMISSIONER SUO MOTU UNDER IT, IS THAT THE ORDER O F THE INCOME-TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE COMMISSIONER HAS TO BE SATISFIED OF TW IN CONDITIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUG HT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERE STS OF THE REVENUE. IF ONE OF THEM IS ABSENT-IF THE ORDER OF THE INCOME-TA X OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUE-RECOURSE CANNOT B E HAD TO SECTION 263(1) OF THE ACT. THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASS ESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WI LL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLI CATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOU S. IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PR INCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE' IS NOT AN EXPRESSION OF A RT AND IS NOT DEFINED IN THE ACT. UNDERSTOOD IN ITS ORDINARY MEANING IT I S OF WIDE IMPORT AND IS NOT CONFINED TO LOSS OF TAX. THE SCHEME OF THE A CT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROVISIONS OF TH E ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO AN ERRONEOUS OR DER OF THE INCOME- TAX OFFICER, THE REVENUE IS LOSING TAX LAWFULLY PAY ABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE INTERESTS OF T HE REVENUE. THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE' HAS T O BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE A SSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER, CANNOT BE TREATED AS PREJUDICIAL TO THE IN TERESTS OF THE REVENUE, FOR EXAMPLE, WHEN AN INCOME-TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF R EVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS T AKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINAB LE IN LAW. THUS, IF AO HAS NOT APPLIED HIS MIND WHILE COMPLETI NG THE ASSESSMENT, THEN SUCH ORDER CAN BE CALLED ERRONEOUS. BUT THE HO N'BLE APEX COURT HAS VERY CLEARLY MADE A CAUTION THAT EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER BY THE AO CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. WHENEVER NO ENQUIRIES HAVE BEEN CONDUCTED WHICH ARE REQUIRED TO BE CONDUCTED BY ANY PRUDENT PERSON, THEN THE SAID ORDER CAN BE CALLED ERRONEOUS AND PRE JUDICIAL TO THE ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 21 INTERESTS OF THE REVENUE BECAUSE SAME MAY LEAD TO D ENIAL OF LEGITIMATE TAX DUE TO THE GOVERNMENT. BUT AT THE SAME TIME WHE NEVER REASONABLE ENQUIRIES HAVE BEEN MADE, THEN SUCH ORDER CANNOT BE CALLED ERRONEOUS SIMPLY BECAUSE IN THE OPINION OF THE COMMISSIONER M ORE DETAILED ENQUIRIES WERE REQUIRED BECAUSE TWO PERSONS MAY THI NK DIFFERENTLY. MOREOVER, AO MIGHT HAVE EXAMINED SO MANY ASPECTS AF TER PHYSICAL VERIFICATION OF VARIOUS DOCUMENTS AND RECORDS PRODU CED BEFORE HIM AND EVERY ASPECT MAY NOT HAVE BEEN BROUGHT IN BLACK AND WHITE IN THE ASSESSMENT ORDER. THIS SITUATION BECOMES CLEAR FROM THE OBSERVATIONS OF THE HON'BLE BOMBAY HIGH COURT IN A CELEBRATED CA SE OF CIT VS. GABRIEL INDIA LTD. [SUPRA]. IN THIS CASE, IT WAS OB SERVED AS UNDER: THE POWER OF SUO MOTU REVISION UNDER SUB-SECTION ( 1) OF SECTION 263 OF THE INCOME-TAX ACT, 1961, IS IN THE NATURE OF SU PERVISORY JURISDICTION AND CAN BE EXERCISED ONLY IF THE CIRCUMSTANCES SPEC IFIED THEREIN EXIST. TWO CIRCUMSTANCES MUST EXIST TO ENABLE THE COMMISSI ONER TO EXERCISE THE POWER OF REVISION UNDER THIS SUB-SECTION, VIZ., (I) THE ORDER SHOULD BE ERRONEOUS; AND (II) BY VIRTUE OF THE ORDER BEING ERRONEOUS PREJUDICE MUST HAVE BEEN CAUSED TO THE INTERESTS OF THE REVEN UE. AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDAN CE WITH LAW. IF AN INCOME-TAX OFFICER ACTING IN ACCORDANCE WITH LAW MA KES CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY. THIS SECTION DO ES NOT VISUALISE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE COMMISS IONER FOR THAT OF THE INCOME-TAX OFFICER, WHO PASSED THE ORDER, UNLES S THE DECISION IS HELD TO BE ERRONEOUS. CASES MAY BE VISUALISED WHERE THE INCOME-TAX OFFICER WHILE MAKING AN ASSESSMENT EXAMINES THE ACC OUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUM STANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE A CCOUNTS OR BY MAKING SOME ESTIMATES HIMSELF. THE COMMISSIONER, ON PERUSAL OF THE RECORDS, MAY BE OF THE OPINION THAT THE ESTIMATE MA DE BY THE OFFICER CONCERNED WAS ON THE LOWER SIDE AND LEFT TO THE COM MISSIONER HE WOULD HAVE ESTIMATED THE INCOME AT A HIGHER FIGURE THAN THE ONE DETERMINED BY THE INCOME-TAX OFFICER. THAT WOULD NO T VEST THE COMMISSIONER WITH POWER TO RE-EXAMINE THE ACCOUNTS AND DETERMINE THE INCOME HIMSELF AT A HIGHER FIGURE. THIS IS BECA USE THE INCOME-TAX OFFICER HAS EXERCISED THE QUASI-JUDICIAL POWER VEST ED IN HIM IN ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 22 ACCORDANCE WITH LAW AND ARRIVED AT A CONCLUSION AND SUCH A CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEEL SATISFIED WITH THE CONCLUSION. IT MAY BE SAID IN SUCH A CASE THAT IN THE OPINION OF THE COMMISSIONER THE OR DER IN QUESTION IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. BUT TH AT BY ITSELF WOULD NOT BE ENOUGH TO VEST THE COMMISSIONER WITH THE POWER O F SUO MOTU REVISION BECAUSE THE FIRST REQUIREMENT, NAMELY, THA T THE ORDER IS ERRONEOUS, IS ABSENT. SIMILARLY IF AN ORDER IS ERRO NEOUS BUT NOT PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THEN T HE POWER OF SUO MOTU REVISION CANNOT BE EXERCISED. ANY AND EVERY ERRONEO US ORDER CANNOT BE THE SUBJECT-MATTER OF REVISION BECAUSE THE SECOND R EQUIREMENT MUST BE FULFILLED. THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT TAX WHICH WAS LAWFULLY EXIGIBLE HAS NOT BEEN I MPOSED OR THAT BY THE APPLICATION OF THE RELEVANT STATUTE, ON AN INCO RRECT OR INCOMPLETE INTERPRETATION, A LESSER TAX THAN WHAT WAS JUST HAS BEEN IMPOSED. WHEN EXERCISE OF STATUTORY POWER IS DEPENDENT UPON THE E XISTENCE OF CERTAIN OBJECTIVE FACTS, THE AUTHORITY BEFORE EXERCISING SU CH POWER MUST HAVE MATERIALS ON RECORD TO SATISFY IT IN THAT REGARD. I F THE ACTION OF THE AUTHORITY IS CHALLENGED BEFORE THE COURT IT WOULD B E OPEN TO THE COURTS TO EXAMINE WHETHER THE RELEVANT OBJECTIVE FACTORS W ERE AVAILABLE FROM THE RECORDS CALLED FOR AND EXAMINED BY SUCH AUTHORI TY. FROM THE ABOVE, IT BECOMES CLEAR THAT JUDGMENT OF T HE AO CANNOT BE SUBSTITUTED BY THE JUDGMENT OF THE COMMISSIONER. IF AO HAS MADE CERTAIN ENQUIRIES AND PASSED AN ORDER WHICH IS NOT UNLAWFUL THEN SUCH ORDER CANNOT BE HELD TO BE ERRONEOUS AND PREJUDICIA L TO THE INTERESTS OF THE REVENUE. EVEN THE HON'BLE DELHI HIGH COURT IN T HE CASE OF CIT VS. HINDUSTAN MARKETING AND ADVERTISING CO. LTD. [SUPRA ], WHEREIN THE ASSESSEE WAS A MARKETING AGENT AND WAS RUNNING THE MARKETING SERVICES AND DURING A.YRS. 1983-84 AND 1984-85 ASSE SSEE WAS A WHOLE SALE DEALER FOR GPL WHO WERE MANUFACTURER OF CIGARE TTES. AS PER THE AGREEMENT GPL WAS REQUIRED TO PAY CERTAIN AMOUNT TO THE ASSESSEE OUT OF WHICH 90% WAS AGREED TO BE SPENT ON ADVERTIS INGS AND OTHER MARKETING SERVICES TO PROMOTE THE BRAND BY THE ASSE SSEE. THE AO ACCEPTED THIS ARRANGEMENT BUT THE ASSESSMENT ORDER WAS REVISED BY ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 23 THE COMMISSIONER OF I.T. U/S.263 BECAUSE IN HIS VIE W AO HAD MADE NO ADEQUATE AND DETAILED INVESTIGATIONS/ENQUIRIES IN R ESPECT OF THE MAJOR AREA OF COMPANYS OPERATIONS AND HAD NOT CAREFULLY EXAMINED THE RECEIPTS AND PAYMENTS PERTAINING TO THE ADVERTISING WORK. THE TRIBUNAL QUASHED THE REVISION ORDER BY HOLDING THAT THE AO H AD MADE PROPER ENQUIRIES. WHEN THE MATTER TRAVELLED TO THE HIGH CO URT IT WAS OBSERVED VIDE PARAS 15 & 16 AS UNDER: 15. IT IS ON THE BASIS OF THE ABOVE THAT THE TRIBU NAL CONCLUDED THAT THE TWO ASSESSMENT ORDERS MADE BY THE TWO DIFFERENT ASS ESSING OFFICERS SHOW THAT THESE ASSESSING OFFICERS WERE CONSCIOUS O F THEIR RESPONSIBILITIES AND MADE ENQUIRIES FROM THE ASSESS EE ON THE VARIOUS FACETS OF THE ASSESSMENT IN EACH YEAR AS WAS APPARE NT FROM THE CORRESPONDENCE BETWEEN THE ASSESSING OFFICERS AND T HE ASSESSEE. THUS, OPINED THE TRIBUNAL, THAT THE ITOS COLLECTED EVIDEN CE, SIFTED IT, DISCUSSED THE POINTS WITH THE REPRESENTATIVES OF TH E ASSESSEE, GOT CLARIFICATION FROM THEM AND THEREAFTER DREW CERTAIN CONCLUSIONS TO MAKE THE IMPUGNED ASSESSMENTS. THEREFORE, IT WAS NO T A CASE WHERE THE ENQUIRY WAS NOT MADE AT ALL AND THE RETURNS WER E ACCEPTED AS IT IS WITHOUT PROBING THE SAME. ON THE CONTRARY, IT WAS A CASE WHERE ENQUIRIES WERE MADE, THE MATERIAL GATHERED WAS EXAM INED AND ONLY THEN THE ASSESSMENT ORDERS WERE FRAMED. 16. WHEN WE EXAMINE THE ORDER OF THE TRIBUNAL JUXTA POSITION AND COMPARING THE ORDERS OF THE ASSESSING OFFICERS WITH THOSE OF THE COMMISSIONER UNDER SECTION 263 OF THE ACT, WE FIND THAT THE TRIBUNAL HAS RIGHTLY HELD THAT PRESENT CASE IS NOT A CASE WH ERE THE ENQUIRIES WERE NOT MADE BY THE ASSESSING OFFICER OR THE RELEVANT M ATERIAL WAS NOT COLLECTED BEFORE FRAMING ASSESSMENT ORDERS. OBSERVA TION OF THE COMMISSIONER THAT THE INCOME-TAX OFFICERS DID NOT M AKE SUFFICIENT ENQUIRIES IS TOTALLY SUBJECTIVE. IT WAS NOT A CASE OF LACK OF ENQUIRY. THE COMMISSIONER JUDGED THE SUFFICIENCY OF ENQUIRY BY S UBJECTIVE STANDARDS. IT APPEARS THAT ACCORDING TO THE COMMISS IONER, MORE ENQUIRIES SHOULD HAVE BEEN MADE. THE OBSERVATIONS O F THE COMMISSIONER WERE GENERAL IN NATURE, NAMELY, THERE WAS LACK OF PROPER ENQUIRIES OR INVESTIGATION OR COSMETIC TREATMENT WA S GIVEN BY THE ITOS. FROM THE ABOVE IT IS CLEAR THAT LACK OF ENQUIRY IS TOTALLY DIFFERENT FROM INSUFFICIENCY OF ENQUIRY BY SUBJECTIVE STANDARD. TH E MUMBAI BENCH OF THE TRIBUNAL ALSO CONSIDERED THE ISSUE OF POWERS OF REVISION U/S.263 IN ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 24 THE CASE OF MRS. KHATIZA S. OOMERBHOY V.S ITO [SUPR A]. IN THIS CASE, THE HEADNOTE READS AS UNDER: SECTION 263 OF THE INCOME-TAX ACT, 1961 - REVISION - OF ORDERS PREJUDICIAL TO INTEREST OF REVENUE - ASSESSMENT YEA RS 1997-98 AND 1998-99 - WHETHER POWERS VESTED IN COMMISSIONER UN DER SECTION 263 ARE EXTRAORDINARY POWERS AND COMPLETED ASSESSMENT P ROCEEDS CANNOT BE REOPENED UNLESS THERE IS SOME COGENT MATERIAL TO SHOW THAT THERE IS TOTAL NON-APPLICATION OF MIND ON PART OF ASSESS- OF FICER OR THAT ASSESSING OFFICER HAS COMMITTED ANY GLARING MISTAKE OF FACT OR LAW - HELD, YES - WHETHER WHERE DURING REASSESSMENT PROCE EDINGS, ASSESSING OFFICER RAISED SEVERAL QUERIES REGARD- CO MPUTATION OF INCOME UNDER HEAD CAPITAL GAINS AND IN RESPONSE A SSESSEE HAD FILED DETAILED REPLIES EXPLANATIONS SUPPORTED BY VARIOUS DOCUMENTS WHICH WERE DULY CONSIDERED BY ASSESSING OFFICER, IT COULD NOT BE ASSUMED THAT THERE WAS NON-APPLICATION OF MIND ON PART OF A SSESSING OFFICER AND, THEREFORE, COMMISSIONER WAS NOT JUSTIFIED IN I NTERFERING WITH ORDER PASSED BY ASSESSING OFFICER BY INVOKING HIS J URISDICTION UNDER SECTION 263 - HELD,YES. FROM THE ABOVE CASE LAW IT BECOMES CLEAR THAT WHENE VER THERE IS A TOTAL LACK OF ENQUIRY, SUCH ORDER CAN BE CALLED ERR ONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. BUT IF A PROPER ENQUIRY HAS BEEN MADE, WHICH MAY THOUGH LACK THE SUBJECTIVE STA NDARD OF A PARTICULAR COMMISSIONER, THEN SUCH ORDER MAY NOT BE ERRONEOUS PARTICULARLY WHEN THE COMMISSIONER HAS NOT GIVEN TH E COGENT REASONS OR MATERIAL TO SHOW THAT WHICH PARTICULAR ITEM HAS NOT BEEN VERIFIED. 16. IN FACT IN A RECENT JUDGMENT THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. LEISURE WEAR EXPORTS LTD. [341 ITR 166] HAS OBSERVED AS UNDER: SECT ION 263 OF THE INCOME-TAX ACT, 1961, WOULD NO T BE INVOKED MERELY TO CORRECT A MISTAKE OR ERROR COMMITTED BY T HE ASSESSING OFFICER UNLESS IT HAS CAUSED PREJUDICE TO THE INTER ESTS OF THE REVENUE. IF AN ORDER IS BASED ON INCORRECT ASSUMPTION OF FACTS OR ON INCORRECT APPLICATION OF LAW OR WITHOUT APPLYING THE PRINCIPL ES OF NATURAL JUSTICE AND WITHOUT APPLICATION OF MIND, IT WOULD BE TREATE D AS ERRONEOUS. THE EXPRESSION PREJUDICIAL TO THE INTERESTS OF THE REV ENUE IS OF WIDE ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 25 IMPORT AND IS NOT CONFINED TO LOSS OF TAX. IF DUE T O AN ERRONEOUS ORDER OF THE ASSESSING OFFICER THE REVENUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON, IT WOULD BE CERTAINLY PREJUDICIAL TO THE INTERESTS OF THE REVENUE. FROM THE ABOVE IT IS CLEAR THAT PROVISIONS OF SEC.2 63 CANNOT BE INVOKED MERELY TO CORRECT EVERY MISTAKE COMMITTED BY THE AO , UNLESS THE AO ON THE BASIS OF THE INCORRECT ASSUMPTION AND INCORR ECT APPLICATION OF LAW HAS PASSED SUCH ASSESSMENT ORDER. 17. NOW LET US EXAMINE THE FACTS IN THE CASE BEFORE US IN THE LIGHT OF THE ABOVE NOTED LEGAL PRINCIPLES. FIRST OF ALL IT H AS TO BE SEEN THAT THE ORIGINAL ASSESSMENT PROCEEDINGS WERE TAKEN UP AND U LTIMATELY AN ORDER WAS PASSED ON 31-3-2001 AFTER MAKING VARIOUS ENQUIR IES. BEFORE US COPY OF THE PROCEEDINGS SHEET WHICH HAS BEEN OBTAIN ED BY THE ASSESSEE THROUGH AN INSPECTION HAS BEEN FILED AT PA GES 177 TO 181 OF THE PAPER BOOK. THESE PROCEEDINGS SHEET CLEARLY SHO W THAT VARIOUS ENQUIRIES WERE CONDUCTED FROM 28-3-2000 TO 18-3-200 1 AND DETAILS OF VARIOUS EXPENSES, UNSECURED LOANS, ADVANCES, RECEIP TS, CONTRIBUTIONS, SUNDRY CREDITORS/DEBTORS, PARTICULARLY DETAILS OF T RAVELLING, RENT ETC., WERE REQUIRED TO BE SUBMITTED. ALL THESE DETAILS HA VE BEEN SUBMITTED WHICH BECOMES CLEAR FROM THE FURTHER PROCEEDINGS. T HUS, 14 HEARINGS TOOK PLACE IN WHICH VARIOUS DETAILS WERE FILED AND EVEN BOOKS OF ACCOUNTS ETC. WERE PRODUCED AND ALL THESE DETAILS M UST BE LYING WITH THE DEPARTMENT IN THE SAME ASSESSMENT FOLDER. THOUG H, OF COURSE, IN THE FIRST ROUND OF ASSESSMENT NO ORDER WAS FINALLY PASSED BUT IT WAS HELD THAT RETURNS OF THE ASSESSEE ARE NON EST AND A SSESSEE COMPANY IS ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 26 ONLY INCORPORATED FOR TAX ADVANTAGE AND TRANSACTION S ARE FISCAL NULLITY, IT CANNOT BE DENIED THAT VARIOUS DETAILS WERE FURNI SHED AND WERE ALREADY ON RECORDS OF THE AO. 18. AGAINST THIS ORDER WHEN ASSESSEE MOVED CIT(A) W HO HELD THAT ASSESSEE COMPANY WAS GENUINELY ENGAGED IN PROVIDING CENTRALISED SERVICES TO VARIOUS GROUP COMPANIES AND DIRECTED TH E AO TO MAKE DENOVO ASSESSMENTS. AGAIN, SOME ENQUIRIES WERE MADE AND ASSESSMENT WAS FINALISED. THE DETAILS OF THESE ENQU IRIES MUST BE AGAIN IN THE SAME ASSESSMENT FOLDER AND WERE AVAILABLE TO THE AO. LATER ON WHEN THE CIT(A)S ORDER WAS CHALLENGED BY THE REVEN UE, THE TRIBUNAL AGAIN PASSED AN ORDER DATED 18-2-2008 AND DIRECTED THE AO TO FRAME FRESH ASSESSMENT AFTER MAKING ENQUIRIES AND AFTER P ROVIDING OPPORTUNITY TO THE ASSESSEE. IN THIS 3 RD ROUND ALSO SOME ENQUIRIES WERE CONDUCTED ON VARIOUS DATES AS DETAILS HAVE BEEN FIL ED IN THE FORM OF THE NOTING SHEETS WHICH HAVE BEEN OBTAINED BY THE A SSESSEE AND IS PLACED AT PAGES 183 TO 184 OF THE PAPER BOOK. THESE NOTING SHEETS MAKE IT CLEAR THAT AO HAS AGAIN CONDUCTED HEARING O N EIGHT OCCASIONS STARTING FROM 24-10-08 TO 20-11-08. IN THESE HEARIN GS AGAIN DETAILS OF VARIOUS EXPENSES WERE ASKED AND WERE DULY FILED BY THE ASSESSEE. EVEN BOOKS OF ACCOUNTS WERE PRODUCED WHICH WERE VER IFIED BY THE AO. FURTHER, WE FIND THAT WHEN THE SHOW CAUSE NOTICE WA S ISSUED BY THE LD. COMMISSIONER ASSESSEE FILED A DETAILED REPLY VI DE LETTER DATED 30-3- 2011, COPY OF WHICH IS AVAILABLE AT PAGES 3 & 4 OF THE PAPER BOOK. THIS LETTER ALONG WITH ANNEXURES FURTHER CONTAINED DETAI LS OF VARIOUS ISSUES ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 27 RAISED BY THE COMMISSIONER WHICH WERE FILED BEFORE HIM ARE PLACED ON RECORD AT PAGES 5 TO 51 OF THE PAPER BOOK. THEREFOR E, IT CANNOT BE SAID THAT NO ENQUIRIES HAVE BEEN MADE AT ALL OR AO HAS M ADE THE WRONG PRESUMPTION OR APPLIED THE WRONG LAW. AT BEST IT CA N BE SAID TO BE A CASE OF INADEQUATE ENQUIRIES WHEN THE SAME IS COMPA RED WITH THE SUBJECTIVE STANDARD OF THE LD. COMMISSIONER. BUT TH AT WOULD NOT MAKE THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO T HE INTERESTS OF THE REVENUE. IT IS NOT A CASE OF MERE LACK OF ENQUIRIES . THE AO IN HIS OWN WISDOM MADE DETAILED ENQUIRIES AND HE FURTHER HAD T HE BENEFIT OF DETAILS WHICH WERE ON RECORD CALLED FOR IN THE EARL IER TWO ROUNDS OF PROCEEDINGS AND THE ASSESSMENT ORDER HAS BEEN PASSE D ACCORDINGLY. THEREFORE, WE ARE OF THE OPINION THAT ENQUIRIES HAV E ALREADY BEEN CONDUCTED BY THE AO. 19. EVEN IF WE ASSUME FOR ARGUMENT SAKE THAT AO HAS NOT CONDUCTED PROPER ENQUIRIES, BUT IN THAT CASE LD. CO MMISSIONER WAS DUTY BOUND TO POINT OUT IN THE SHOW CAUSE NOTICE OR AT LEAST IN THE REVISION ORDER AS TO HOW THE ASSESSMENT ORDER IS DE FECTIVE I.E. ERRONEOUS AND WHICH PARTICULAR ITEM OR AREA HAS NOT BEEN ENQUIRED. THE LD. COMMISSIONER HAS SUMMED UP HIS OBJECTIONS I N PARAS 5.A TO 5.E WHICH ARE AS UNDER: 5A. FOR AX. 2001-02 IT IS SEEN THAT UNDER THE HEAD LEGAL AND PROFESSIONAL FEES FROM THE DETAILS FILED IT IS NOT CLEAR AS TO WHAT ARE THE NATURE OF SERVICES RENDERED BY THE PERSONS TO W HOM SUCH CHARGES WERE PAID. NO ENQUIRY WAS CONDUCTED BY THE ASSESSIN G OFFICER TO ESTABLISH THE GENUINENESS OF THE CLAIM OR THE VERAC ITY OF THE CLAIM. NO AGREEMENT OR EVIDENCE WAS CALLED FOR BY THE ASSESSI NG OFFICER REGARDING THE SERVICES RENDERED AND WHETHER IT WAS FOR THE PURPOSE OF BUSINESS. THE ASSESSING OFFICER HAS NOT VERIFIED TH E APPLICABILITY OF ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 28 SECTION 40A(2), ALSO WHETHER ANY TDS WAS MADE ON TH E CHARGES SO PAID AND NOR WAS ASSESSMENT PARTICULARS OF SUCH PAR TIES AND THE METHOD OF HOW THE QUANTUM WAS ARRIVED AT FOR PAYMENTS TO S UCH PARTIES FOR THE SERVICES CLAIMED TO HAVE BEEN RENDERED WERE ENQUIRE D INTO BY THE ASSESSING OFFICER. 5B. UNDER THE HEAD EXPENSES INCURRED FOR AIRCRAFT THE ASSESSING OFFICER HAS RECEIVED DETAILS OF LEASE AGENTS BUT NO ENQUIRY WAS MADE INTO WHO ARE THE PERSONS WHO HAVE USED THEM EACH YE AR AND THE PURPOSE OF UTILIZATION AND NO VERIFICATION/CHECK WA S MADE OF ANY LOG BOOK OR RECORD MAINTAINED FOR THE USE OF SUCH AIRCR AFT. 5C. UNDER THE HEAD EXPENSES INCURRED FOR RENT EVE N IN THE DETAILS FILED BEFORE THE UNDERSIGNED IT IS SEEN THAT THEY ARE NOT COMPLETE IN ALL RESPECTS. DETAILS WERE NOT SOUGHT ABOUT THE TDS MAD E ON PAYMENTS MADE TO THE LESSEES AND ASSESSMENT PARTICULARS OF T HE LESSEES. 5D. THIS IS FOUND TO BE UNIFORMLY COMMON TO ALL THE FOUR ASSESSMENT YEARS A.Y. 1998-99 TO 2001-02 WHERE A COMMON QUESTI ONNAIRE AND A COMMON REPLY HAS BEEN GIVEN AND THE ASSESSMENT ORDE R DOES NOT SPEAK ABOUT THE ISSUES SPECIFICALLY REQUIRED TO BE EXAMIN ED BY THE ASSESSING OFFICER AS PER THE ITATS ORDER, AND ITS DIRECTIONS INCLUDING ENQUIRIES MADE/TO BE MADE. 5E. FOR A.Y 2000-1 IT IS SEEN THAT PAYMENT HAS BEEN MADE TO A GROUP COMPANY [RPG INDUSTRIES LTD.] OF RS.2.8 CRORES FOR LEGAL CHARGES BUT NO SPECIAL/SPECIFIC QUERY HAS BEEN RAISED ON THIS I SSUE. AGAIN THE ASSESSING OFFICER SHOULD HAVE VERIFIED WHY THE PAYM ENT UNDER THE ABOVE HEAD OF EXPENSES ARE BEING PAID TO THE SAME P ERSON [YEAR AFTER YEAR]. MERE EXISTENCE OF AN AGREEMENT OR PAYMENT BY CHEQUE IS NOT SUFFICIENT TO JUSTIFY SUCH HUGE PAYMENTS TO MANY PE RSONS EVERY YEAR. THE ASSESSING OFFICER SHOULD HAVE VERIFIED THAT THE EXPENSE WERE INCURRED FOR THE PURPOSE OF BUSINESS AND ALSO WHETH ER ANY NEW SERVICES WERE RENDERED BY SUCH PARTIES. 5A. FOR AX. 2001-02 IT IS SEEN THAT UNDER THE HEAD LEGAL AND PROFESSIONAL FEES FROM THE DETAILS FILED IT IS NOT CLEAR AS TO WHAT ARE THE NATURE OF SERVICES RENDERED BY THE PERSONS TO W HOM SUCH CHARGES WERE PAID. NO ENQUIRY WAS CONDUCTED BY THE ASSESSIN G OFFICER TO ESTABLISH THE GENUINENESS OF THE CLAIM OR THE VERAC ITY OF THE CLAIM. NO AGREEMENT OR EVIDENCE WAS CALLED FOR BY THE ASSESSI NG OFFICER REGARDING THE SERVICES RENDERED AND WHETHER IT WAS FOR THE PURPOSE OF BUSINESS. THE ASSESSING OFFICER HAS NOT VERIFIED TH E APPLICABILITY OF SECTION 40A(2), ALSO WHETHER ANY TDS WAS MADE ON TH E CHARGES SO PAID AND NOR WAS ASSESSMENT PARTICULARS OF SUCH PAR TIES AND THE METHOD OF HOW THE QUANTUM WAS ARRIVED AT FOR PAYMENTS TO S UCH PARTIES FOR THE SERVICES CLAIMED TO HAVE BEEN RENDERED WERE ENQUIRE D INTO BY THE ASSESSING OFFICER. 5B. UNDER THE HEAD EXPENSES INCURRED FOR AIRCRAFT THE ASSESSING OFFICER HAS RECEIVED DETAILS OF LEASE AGENTS BUT NO ENQUIRY WAS MADE INTO WHO ARE THE PERSONS WHO HAVE USED THEM EACH YE AR AND THE PURPOSE OF UTILIZATION AND NO VERIFICATION/CHECK WA S MADE OF ANY LOG BOOK OR RECORD MAINTAINED FOR THE USE OF SUCH AIRCR AFT. 5C. UNDER THE HEAD EXPENSES INCURRED FOR RENT EVE N IN THE DETAILS FILED BEFORE THE UNDERSIGNED IT IS SEEN THAT THEY ARE NOT COMPLETE IN ALL ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 29 RESPECTS. DETAILS WERE NOT SOUGHT ABOUT THE TDS MAD E ON PAYMENTS MADE TO THE LESSEES AND ASSESSMENT PARTICULARS OF T HE LESSEES. 5D. THIS IS FOUND TO BE UNIFORMLY COMMON TO ALL THE FOUR ASSESSMENT YEARS A.Y. 1998-99 TO 2001-02 WHERE A COMMON QUESTI ONNAIRE AND A COMMON REPLY HAS BEEN GIVEN AND THE ASSESSMENT ORDE R DOES NOT SPEAK ABOUT THE ISSUES SPECIFICALLY REQUIRED TO BE EXAMIN ED BY THE ASSESSING OFFICER AS PER THE ITATS ORDER, AND ITS DIRECTIONS INCLUDING ENQUIRIES MADE/TO BE MADE. 5E. FOR A.Y 2000-1 IT IS SEEN THAT PAYMENT HAS BEEN MADE TO A GROUP COMPANY [RPG INDUSTRIES LTD.] OF RS.2.8 CRORES FOR LEGAL CHARGES BUT NO SPECIAL/SPECIFIC QUERY HAS BEEN RAISED ON THIS I SSUE. AGAIN THE ASSESSING OFFICER SHOULD HAVE VERIFIED WHY THE PAYM ENT UNDER THE ABOVE HEAD OF EXPENSES ARE BEING PAID TO THE SAME P ERSON [YEAR AFTER YEAR]. MERE EXISTENCE OF AN AGREEMENT OR PAYMENT BY CHEQUE IS NOT SUFFICIENT TO JUSTIFY SUCH HUGE PAYMENTS TO MANY PE RSONS EVERY YEAR. THE ASSESSING OFFICER SHOULD HAVE VERIFIED THAT THE EXPENSE WERE INCURRED FOR THE PURPOSE OF BUSINESS AND ALSO WHETH ER ANY NEW SERVICES WERE RENDERED BY SUCH PARTIES. 20. IN PARA 5.(A) LD. COMMISSIONER HAS POINTED OUT THAT NO ENQUIRIES HAVE BEEN CONDUCTED IN RESPECT OF LEGAL AND PROFESSIONAL CHARGES AND PARTICULARLY THE NATURE OF SERVICES, PA YMENTS MADE TO PERSONS REFERRED TO U/S.40A(2) AND TDS. BUT THIS IS NOT CORRECT BECAUSE DETAILS OF LEGAL AND PROFESSIONAL CHARGES WERE FILE D BEFORE THE AO. EVEN BEFORE THE LD. COMMISSIONER DETAILS OF LEGAL AND PR OFESSIONAL CHARGES HAVE BEEN FILED, COPY OF WHICH IS PLACED AT PAGES 9 TO 12 OF THE PAPER BOOK. EVEN COPY OF THE AGREEMENT SHOWING SERVICES P ROVIDED BY RPG GROUP INDS. LTD. HAS BEEN FILED. IN THE DETAILS FIL ED BEFORE THE LD. COMMISSIONER NAMES AND ADDRESS OF THE PARTIES FROM WHOM SUCH SERVICES HAVE BEEN OBTAINED, PAN OF SUCH PARTIES AN D THE PURPOSE OF PAYMENTS I.E. THE NATURE OF SERVICES WERE FILED. DE SPITE ALL THESE DETAILS BEING AVAILABLE BEFORE HIM IF LD. COMMISSIONER HAD ANY OBJECTION HE COULD HAVE AT LEAST POINTED OUT SOME INSTANCES THAT SUCH PAYMENT WAS OUTRIGHTLY WRONGLY CLAIMED, BUT NO SUCH DEFECTS HAV E BEEN POINTED OUT ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 30 AND ONLY GENERAL OBSERVATIONS HAVE BEEN MADE. WE FU RTHER FIND FORCE IN THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESS EE THAT DETAILS REGARDING PAYMENTS MADE TO PERSONS REFERRED TO IN S EC.40A(2) ARE EASILY AVAILABLE IN THE TAX AUDIT REPORT AND IF LD. COMMISSIONER HAD ANY OBJECTION HE SHOULD HAVE POINTED OUT AT LEAST SOME INSTANCES THAT SUCH PAYMENTS ARE NOT JUSTIFIED. IN FACT, THE APPROACH O F THE LD. COMMISSIONER SEEMS TO BE LITTLE CASUAL BECAUSE HE H AS ALSO MADE AN OBSERVATION THAT IT WAS NOT VERIFIED WHETHER ANY TD S WAS DEDUCTED OR NOT. AS POINTED OUT BY THE LD. COUNSEL OF THE ASSES SEE SEC.40[A][IA] WAS AMENDED BY FINANCE ACT, 2004 ONLY W.E.F. 1-4- 2005 PROVISION FOR MAKING DISALLOWANCES FOR FAILURE TO DEDUCT TAX WAS BROUGHT IN. BUT THIS PROVISION IS NOT APPLICABLE TO A.YRS. 1998-99 TO 20 01-02 WHICH WERE BEFORE THE LD. COMMISSIONER. WHEN THE PROVISION ITS ELF IS NOT APPLICABLE, THERE IS NO QUESTION OF DEDUCTION THE T AX. 21. IN PARA 5.B LD. COMMISSIONER HAS POINTED OUT TH AT AO HAS RECEIVED DETAILS OF LEASE AGENTS IN RESPECT OF EXP ENSES INCURRED FOR AIR CRAFT BUT THE PERSONS WHO USED THEM AND THE PURPOS E OF UTILISATION HAS NOT BEEN VERIFIED. AGAIN AS POINTED OUT BY THE LD. COUNSEL OF THE ASSESSEE, VARIOUS DETAILS REGARDING AIR CRAFT WERE FURNISHED ON VARIOUS DATES AND EVEN BEFORE THE LD. COMMISSIONER THE ISSU E WAS CLARIFIED IN THE WRITTEN SUBMISSIONS. WE FURTHER FIND FORCE IN T HE SUBMISSIONS OF THE LD. COUNSEL THAT EVEN UTILISATION WAS VERIFIED BECAUSE A NOTE WAS FURNISHED BEFORE THE AO COPY OF WHICH IS PLACED AT PAGE 277 OF THE PAPER BOOK IN WHICH IT WAS CLARIFIED WHO WERE THE P ERSONS WHO HAD ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 31 USED THE AIR CRAFT AND THE LOCATION OF VARIOUS COMP ANIES. THUS, IT CANNOT BE SAID THAT THIS ISSUE HAS NOT BE VERIFIED. 22. IN PARA 5.C LD. COMMISSIONER HAS MENTIONED ABOU T THE NON ENQUIRY IN RESPECT OF EXPENSES INCURRED FOR RENT. W E FIND THAT EVEN DETAILS WERE FILED BEFORE THE LD. COMMISSIONER COPY OF WHICH IS AVAILABLE AT PAGES 5 TO 8 OF THE PAPER BOOK. THESE DETAILS CONTAIN NAME AND ADDRESSES OF THE LESSOR, PAN: OF THE LESSO R, HOW THE PROPERTY WAS OCCUPIED AND WHETHER FOR RESIDENTIAL P URPOSES OF SOME EXECUTIVES OR FOR OFFICE PURPOSE. WHEN ALL THESE DE TAILS WERE BEFORE THE LD. COMMISSIONER AND IF HE HAD ANY OBJECTION FOR WR ONGFUL ALLOWANCE MADE IN RESPECT OF RENT, HE COULD HAVE EASILY POINT ED OUT SUCH INSTANCES WHICH HAVE NOT BEEN DONE SO. THEREFORE, I T CANNOT BE SAID THAT AO HAS NOT MADE ANY ENQUIRIES. 23. PARA NOS.5.D AND 5.E ARE OF GENERAL NATURE AND WE HAVE ALREADY OBSERVED THAT SUFFICIENT ENQUIRIES HAVE BEEN MADE B Y THE AO. WE WOULD AGAIN LIKE TO REITERATE THAT IN THIS PARTICUL AR CASE IT HAS TO BE UNDERSTOOD THAT THIS WAS THE THIRD ROUND OF ASSESSM ENT PROCEEDINGS AND EVEN ONE ORDER OF THE CIT(A) WAS ALSO AVAILABLE . MOREOVER, ALL BOOKS OF ACCOUNTS AND VARIOUS DOCUMENTS WERE PRODUC ED AND HENCE ONLY PRESUMPTION WOULD BE THAT THEY WERE VERIFIED B Y THE AO. DESPITE OF ALL THESE ENQUIRIES, IF LD. COMMISSIONER HAD ANY SERIOUS OBJECTIONS HE SHOULD HAVE POINTED OUT IN CLEAR TERMS WITH REFE RENCE TO COGENT MATERIAL THAT HOW THE ASSESSMENT ORDER WAS WRONG. T HE REVISIONARY POWERS U/S.263 CANNOT BE EXERCISED MERELY TO SATISF Y AN INDIVIDUAL ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 32 SUBJECTIVE CRITERIA OF MAKING A PARTICULAR ENQUIRY WITHOUT MENTIONING WHAT SPECIFICALLY IS WRONG WITH THE ASSESSMENT ORDE R. IN THE CASE BEFORE US, LD. COMMISSIONER HAS MADE SWEEPING OBSER VATION THAT NO ENQUIRIES HAVE BEEN CONDUCTED, BUT EVEN FROM THE DE TAILS GIVEN BEFORE HIM, HE HAS NOT POINTED OUT AS TO HOW THERE IS A NO N APPLICATION OF MIND OR HOW AO HAS COMMITTED A GLARING MISTAKE. IN THE CASE BEFORE US, AT BEST IT CAN BE SAID THAT THE LD. COMMISSIONE R HAS NOT MADE ANY CASE OF LACK OF ENQUIRY, BUT HAS MADE A CASE OF INA DEQUATE ENQUIRY. IN OUR OPINION, IF IT IS A CASE OF INADEQUATE ENQUIRY, THEN LD. COMMISSIONER HAD ONEROUS DUTY TO GIVE A SPECIFIC FI NDING AS TO WHICH ITEM OF EXPENDITURE REQUIRED WHICH PARTICULAR ENQUI RY. NO SUCH FINDING HAS BEEN GIVEN AND IN THE ABSENCE OF SUCH FINDING, THE ASSESSMENT ORDER CANNOT BE CALLED TO BE ERRONEOUS AND PREJUDIC IAL TO THE INTERESTS OF THE REVENUE. THEREFORE, IN OUR VIEW, THE ASSESSM ENT ORDERS CANNOT BE CALLED AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE AND ACCORDINGLY WE QUASH THE REVISION ORDER PASSED BY T HE LD. COMMISSIONER. 24. IN THE RESULT, APPEALS FILED BY THE ASSESSEE AR E ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 21/3/2012. SD/- SD/- (VIJAY PAL RAO) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 21/3/2012. P/-* ITA NOS.4115 TO 4118 OF 2011 M/S. RPG ENTERPRISES LTD. 33