Sh. Sukhjeet Singh, Chandigarh V. CIT-II, Chandigarh

ITA 422/CHANDI/2011

• Counselvise Citation: 42221514 RSA 2011
• Duration Of Justice: 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 12-01-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 21-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: ANIL KUMAR BATRA
• Keywords: Revision of order; Principle of natural justice
• Section: 263; 63; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B BEFORE MS SUSHMA CHOWLA, JM AND SHRI MEHAR SINGH, AM ITA NO. 422/CHANDIGARH/2011 ASSESSMENT YEAR 2006-07 SUKHJEET SINGH V. C.I.T. II, CHANDIGARH H NO. 142, SEC 27-A CHANDIGARH PAN: ALKPS 1790 C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANIL KUMAR BATRA RESPONDENT BY: SHRI S.K. MITTAL DATE OF HEARING: 12.01.2012 DATE OF PRONOUNCEMENT: 18.01.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE ASSESSEE FOR ASSES SMENT YEAR 2006- 07, IS DIRECTED AGAINST THE ORDER DATED 28.3.2011 PASSED U/S 263 OF THE INCOME-TAX ACT (IN SHORT THE ACT). 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND OF A PPEAL:- 1 THAT THE LD. CIT, WITHOUT ESTABLISHING THAT THE ASSESSMENT ORDER PASSED BY THE AO U/S 143(3) DATED 22.12.2008 IS ERRONEOUS, AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE, HA S WRONGLY INVOKED THE REVISIONAL JURISDICTION U/S 263 OF THE INCOME-T AX ACT AND ERRED IN CANCELING THE ASSESSMENT. THE ORDER PASSED BY T HE LD. CIT U/S 263 BE CANCELLED. 2. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR DELE TE ANY OF THE GROUND OF APPEAL BEFORE THE SAME IS TAKEN UP FOR FI NAL HEARING. 3. THE BRIEF FACTS OF THE CASE, NECESSARY FOR DISPO SAL OF PRESENT APPEAL, ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME, O N 31.10.2006, DECLARING TOTAL INCOME AT RS. 2,11,630/-. THE AO MADE DISALL OWANCE OF RS. 3 LACS OUT OF EXPENSES, ON AGREED BASIS AND FRAMED ASSESSM ENT U/S 143(3) ON ITA NO.422/CHANDI/2011 SUKHJEET SINGH V CIT 2 22.12.2008 AT AN INCOME OF RS. 5,11,630/-. THE FIN DINGS OF THE AO AS CONTAINED IN PARA 2 OF THE SAID ASSESSMENT ORDER AR E REPRODUCED HEREUNDER, FOR THE PURPOSE OF PROPER APPRECIATION THEREOF. 2 DURING THE ASSESSMENT PROCEEDINGS, IT WAS NOTICE D THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS. 1357400/- TO THE PROFIT AND LOSS ACCOUNT UNDER THE HEAD SUBCONTRACT PAYMENTS. THE ASSESSEE WAS REQUESTED TO GIVE DETAILS OF THESE EXPENSES AND PRODUCE ALL THE VOUCHERS IN SUPPORT OF HIS CLAIM. HE WAS ALSO ASKE D TO EXPLAIN WHETHER TDS WAS DEDUCTED FROM THESE PAYMENTS OR NOT . THE ASSESSEE THROUGH HIS LD. COUNSEL FURNISHED ACCOUNT OF ALL THESE PERSONS. IT WAS FURTHER EXPLAINED THAT THESE PAYME NTS HAVE ACTUALLY ON ACCOUNT OF LABOUR. AS PAYMENT IS MADE TO HEAD O F THE WORKERS FOR FURTHER DISTRIBUTION AMONG THEM. EXPENDITURE W AS BOOKED UNDER THE HEAD SUBCONTRACTS. RECEIPTS / VOUCHERS IN THIS REGARDS WERE PRODUCED BUT SOME PAYMENTS COULD NOT BE ESTABLISHED WITH PROPER EVIDENCE. WHEN THE DISCREPANCY WAS CONFRONTED TO T HE LD. COUNSEL, HE ON BEHALF OF THE ASSESSEE, AGREED FOR A DISALLOW ANCE OF RS. 300000/- OUT OF THESE EXPENSES FOR WASNT OF EVIDEN CE. AS SUCH AN ADDITION OF RS. 300000/- IS MADE TO THE INCOME OF T HE ASSESSEE. 4. THE CIT INVOKED THE PROVISIONS OF SECTION 263 OF THE ACT AND CANCELLED THE IMPUGNED ASSESSMENT ORDER. IN THE SH OW CAUSE NOTICE ISSUED U/S 263 OF THE ACT, THE CIT OBSERVED THAT THE AO FA ILED TO EXAMINE THE RECEIVABLES, AS SHOWN, IN THE BALANCE SHEET AT RS. 8,15,800/-. THE AO HAS ALSO FAILED TO EXAMINE THE ISSUE OF INVESTMENT OF R S. 6,60,000/,- MADE IN THE PURCHASE OF SCF 59, PHASE 9, MOHALI IN RESPECT OF 1/3 RD SHARE OF THE ASSESSEE. THE CIT, FURTHER, POINTED OUT TO THE ASS ESSEE THAT THE AO FAILED TO EXAMINE THE CASH DEPOSITS OF RS. 2.20,000/-, ON 5.9.2005 IN UNION BANK OF INDIA. THE CIT AFTER APPRECIATING THE SUBMISSIO NS MADE BY THE ASSESSEE VIDE LETTER, DATED 20.9.2010 AND 14.3.2011 , PASSED THE ORDER DATED 28.3.2011, FOR ASSESSMENT YEAR 2006-07, U/S 2 63 OF THE ACT AND CANCELLED THE IMPUGNED ASSESSMENT ORDER WITH THE DI RECTIONS TO THE AO TO MAKE THE ASSESSMENT DENOVO. 5. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS B EFORE THE BENCH, THE LD.AR FOR THE ASSESSEE STATED THAT THERE IS A SIN GLE GROUND OF APPEAL ITA NO.422/CHANDI/2011 SUKHJEET SINGH V CIT 3 AGAINST THE ORDER PASSED BY THE CIT U/S 263 OF THE ACT. THE LD. AR FOR THE ASSESSEE REFERRED TO PAGE 21 OF PAPER BOOK, IND ICATING THAT THE RECEIVABLES HAVE BEEN DULY DISCLOSED, IN THE BALANC E SHEET. HE, FURTHER, ARGUED THAT THE BOOKS OF ACCOUNT AND DETAILS WERE F ILED BEFORE THE AO. LD. AR FOR THE ASSESSEE PLACED RELIANCE, ON THE DECIS IONS, REPORTED IN THE CASE OF: CIT V. VIKAS POLYMERS (2010) 194 TAXMAN 57 : CAPITAL ESTATE V. CIT ((2010) 45 DTR (CHD) (TRIB) 84: BALJEES V. A.C. I.T. (2004) 85 TTJ (CHD) 543. 5(A). THE LD. DR , ON THE OTHER HAND, CONTENDED THAT THE AO FAILED TO MAKE INQUIRY ON THE ISSUES RAISED BY THE CIT, IN HI S SHOW CAUSE NOTICE. THEREFORE, THE QUESTION OF APPLICATION OF MIND ON S UCH ISSUES DOES NOT ARISE. IT WAS, FURTHER, CONTENDED BY THE LD. DR THAT THE ISSUE OF RECEIVABLES IS REVENUE NEUTRAL. LD..DR DREW OUR ATTENTION TO THE QUESTIONNAIRE ISSUED BY THE AO, AS ALSO, TO THE REP LIES FILED BY THE ASSESSEE. IT WAS VEHEMENTLY CONTENDED BY THE LD. D R THAT NONE OF THE CASE LAWS IS APPLICABLE TO THE FACT SITUATION OF TH E PRESENT CASE, BEING FACTUALLY DIFFERENT AND DISTINGUISHABLE. THE LD. DR PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. V. CIT (2000) 242 ITR 83 (SC) AND STATED T HAT THE CASE IS SQUARELY COVERED BY THIS DECISION. 6. WE HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE, RIVAL SUBMISSIONS, CASE LAWS RELIED UPON BY BOTH THE PART IES AND OTHER RELEVANT MATERIAL PLACED ON RECORD. WE HAVE ALSO CAREFULLY PERUSED THE IMPUGNED ASSESSMENT ORDER PASSED BY THE AO. A BARE PERUSAL OF THE IMPUGNED ASSESSMENT ORDER CLEARLY REVEALS THAT DISALLOWANCE OF RS. 3.00 LAKHS, OUT OF EXPENSES, HAS BEEN MADE BY THE AO ON AGREED BASI S. THE LD. 'DR' STATED THAT THE ISSUE OF RECEIVABLE IS REVENUE NEUT RAL. THEREFORE, ITS ITA NO.422/CHANDI/2011 SUKHJEET SINGH V CIT 4 INCLUSION IN THE IMPUGNED ORDER PASSED U/S 263 OF T HE ACT IS OF NO CONSEQUENCE. THEREFORE, THE ISSUE FALLS BEYOND THE PALE OF SECTION 263 OF THE ACT. 6(1) THE AO FAILED TO MAKE ENQUIRY AND APPLY HIS MI ND TO THE ISSUE OF 1/3 RD INVESTMENT MADE BY THE ASSESSEE, IN THE PURCHASE O F SCF 59, PHASE 9, MOHALI, AS TO THE SOURCE OF SUCH INVESTMENT AND ALSO CASH DEPOSIT OF RS.2,20,000/-. IN SUCH A FACT-SITUATION OF THE CASE , THE APPLICABILITY OF PROVISIONS OF SECTION 263 OF THE ACT IS REQUIRED TO BE CONSIDERED BY US. 6(A) IN THE FACTUAL BACKGROUND OF THE CASE, AS DISC USSED ABOVE, WE TURN TO PROCEED TO ANALYZE THE APPLICABILITY OF CASE LAW S RELIED UPON BY THE ASSESSEE, TO SUPPORT HIS CASE. THE ASSESSEE PLACED RELIANCE, ON THE DECISION CIT V. VIKAS POLYMERS (SUPRA). IN THIS CA SE, THE AO HAD RAISED QUERY, ON A PARTICULAR POINT AND THE ASSESSEE HAD ANSWERED SUCH QUERY. HOWEVER, NO SUCH DISCUSSION WAS MADE IN THE ASSESSM ENT ORDER PASSED BY THE AO. IT WAS DEMONSTRATED BY THE ASSESSEE IN THIS CASE THAT THE ASSESSEE HAD EXPLAINED CAPITAL INVESTMENT MADE BY THE PARTNE RS, WHICH HAD BEEN CALLED IN QUESTION. THE CAPITAL WAS DULY REFLECTED IN THE RESPECTIVE ASSESSMENTS OF THE PARTNERS WHO WERE INCOME TAX ASS ESSEES. SIMILARLY, UNSECURED LOANS WERE DULY REFLECTED IN THE ASSESSME NT ORDER OF THE SAID CREDITORS. IN THAT FACTUAL BACKGROUND, THE HON'BLE HIGH COURT ADJUDICATED THE ISSUE AND RIGHTLY HELD THAT PROVISIONS OF SECTI ON 263 WERE NOT APPLICABLE, TO THAT CASE. IN THE PRESENT CASE, TH E AO HAD NOT MADE ENQUIRY AS WARRANTS IN RESPECT OF ISSUES UNDER REF ERENCE. THEREFORE, THE FACT-SITUATION OF THE PRESENT CASE, IS PATENTLY DIF FERENT AND DISTINGUISHABLE AND, HENCE, THE DECISION RELIED UPON BY THE ASSESSE E IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE CORE RATIO OF TH E CASE SUPPORTS THE CASE OF THE REVENUE. ITA NO.422/CHANDI/2011 SUKHJEET SINGH V CIT 5 (B) THE LD AR FOR THE ASSESSEE PLACED RELIANCE, O N THE DECISION OF CAPITAL ESTATE V. CIT (SUPRA), WHEREIN THE HONBLE TRIBUNAL DECIDED THAT WHEREVER THE AO HAS TAKEN THE POSSIBLE VIEW THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE SAME FALLS BEYOND THE P URVIEW OF SECTION 263 OF THE ACT. IN THE PRESENT CASE, THE AO HAS NOT MAD E INQUIRY AND NOT APPLIED HIS MIND TO THE ISSUE UNDER SECTION 263 OF THE ACT. THEREFORE, THE RATIO OF THIS CASE IS NOT APPLICATION TO THE FACTS OF THE PRESENT CASE. (C) THE LD. AR FOR THE ASSESSEE, FURTHER, RELIED UPON THE DECISION IN THE CASE OF BALJEES V. CIT (SUPRA). IN THAT CASE T HE AO HAD MADE DETAILED ENQUIRIES, AFTER ISSUING DETAILED QUESTIONNAIRE. TH EREFORE, THE BENCH HELD THAT THE PROVISIONS OF SECTION 263 OF THE ACT ARE N OT APPLICABLE TO THIS CASE. IN THE PRESENT CASE, THE AO MERELY PROCEEDED , ON MAKING AGREED DISALLOWANCE, WITHOUT MAKING ANY ENQUIRY AS WARRANT ED, ON THE FACT SITUATION OF THE CASE, AS DISCUSSED EARLIER. THERE FORE, THE CASE LAW IS NOT APPLICABLE TO THE PRESENT CASE. 7. NOW WE PROCEED TO ANALYZE THE RATIO OF THE DECIS ION OF HON'BLE SUPREME COURT, IN THE CASE OF MALABAR INDUSTRIAL CO . LTD V. CIT (2000) 243 ITR 83 (S.C) RELIED UPON BY THE LD. DR . THE RELEVANT AND OPERATIONAL PART OF THE DECISION IS REPRODUCED HERE UNDER FOR THE PURPOSE OF PROPER APPRECIATION OF THE SAME: A BARE READING OF SEC 263 OF THE INCOME-TAX ACT, 1 961 MAKES IT CLEAR THAT THE PREREQUISITE FOR THE EXERCISE OF JUR ISDICTION BY THE COMMISSIONER SUO MOTU UNDER IT, IS THAT THE ORDER OF THE INCOME- TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDI CIAL TO THE INTERESTS OF THE REVENUE. THE COMMISSIONER HAS TO BE SATISFIE D OF TWIN CONDITIONS, NAMELY (I) THE ORDER OF THE AO SOUGHT T O 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 INCO ME-TAX OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUE - RECOU RSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT. THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COM MITTED BY THE ITA NO.422/CHANDI/2011 SUKHJEET SINGH V CIT 6 ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRO NEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUI REMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL ORDERS P ASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHO UT APPLICATION OF MIND . THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE IS NOT AN EXPRESSION OF ART AND IS NOT DEFINED IN THE ACT. UNDERSTOOD IN ITS ORDINARY MEANING IT IS OF WIDE IMPORT AND IS NOT CONFINED TO LOSS OF TAX. THE SCHEME OF THE ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO AN ERRONEOUS ORDER OF TH E INCOME-TAX OFFICER, THE REVENUE IS LOSING TAX LAWFULLY PAYABLE 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 TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY TH E ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER, CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, FOR EXAMPLE, WHEN AN INCOME-TAX OFF ICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RE SULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE IN COME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIO NER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER P REJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY T HE INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW. 8 A BARE PERUSAL OF THE DECISION OF HON'BLE SUPREME COURT CLEARLY REVEALS CUMULATIVE SATISFACTION OF STATUTORY CONDIT IONS, FOR THE APPLICABILITY OF THE PROVISIONS OF SECTION 263 OF T HE ACT. THE CIT HAS TO BE SATISFIED OF TWIN CONDITIONS NAMELY (I) ORDER OF THE AO SOUGHT TO BE REVISED IS ERRONEOUS AND (2) IT IS PREJUDICIAL TO T HE INTEREST OF REVENUE. THE IMPERATIVE SATISFACTION OF SUCH STATUTORY CONDI TIONS PRECEDENT ARE MANDATORY FOR THE PURPOSE OF INVOCATION OF PROVISIO NS OF SECTION 263 OF THE ACT. IT IS CLEARLY HELD BY THE HON'BLE SUPREME COURT THAT THE INCORRECT ASSUMPTION OF FACTS OR INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF SEC 263 OF THE ACT. IT WAS, FURTHER , HELD BY THE HON'BLE SUPREME COURT IN THE SAME CATEGORY FALLS THE ORDER PASSED WITHOUT PRINCIPLE OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. 9. THERE CAN NOT BE ANY PRESUMPTION, AS DRAWN BY TH E ASSESSEE THAT THE AO HAD CONSIDERED AND ADJUDICATED THE ISSUES, RAISE D BY THE CIT U/S 263 OF THE ACT, AS SUCH PRESUMPTION IS CONTRARY TO THE FACTUAL MATRIX AS ITA NO.422/CHANDI/2011 SUKHJEET SINGH V CIT 7 OBTAINING IN THE CASE OF PRESENT CASE. IT IS PERT INENT TO STATE HERE THAT IT IS A MATTER OF COMMON COURSE OF NATURAL EVENTS AND HUMAN CONDUCT THAT HUMAN BEINGS DO OVER LOOK OR COMMIT MISTAKES, DUE T O OVERSIGHT OR BY THE ABSENCE OF DUE-DILIGENCE. SUCH CONDUCT OF HUMAN BE ING WOULD STAND ON HIGHER FOOTING, WHEN THE ASSESSMENT ORDER IS PATENT LY SILENT AND CONTAINS NO DISCUSSIONS, TO INDICATE THAT THE ISSUES INVOLVE D IN THAT CASE HAD BEEN DULY CONCEIVED, EXAMINED AND DECIDED BY THE AO. SU CH NON-CONDUCT OF ANY ENQUIRY IS DISCERNIBLE FROM THE FACTS AND TEXT OF THE ASSESSMENT ORDER, PASSED BY THE AO. IN SUCH A SITUATION, IT IS NOT P OSSIBLE TO DRAW ANY PRESUMPTION, WHERE NO REQUIRED DETAILS HAD BEEN FIL ED BEFORE THE AO THAT HE HAD EXAMINED, CONSIDERED AND ADJUDICATED THE ISS UE OF SOURCE OF INVESTMENT MADE IN THE SCF AND DEPOSIT MADE, IN THE IMPUGNED BANK ACCOUNT. IN THE FACE OF SUCH A FACT SITUATION, IT IS NOT LEGALLY OR FACTUALLY TENABLE TO PRESUME THAT THE AO HAS CONSIDERED THE S AID ISSUE, AS THE DISCERNIBILITY OF CONSIDERATION OF SUCH ISSUES, IS CONSPICUOUS BY ITS ABSENCE. THEREFORE, SUCH CONSIDERATION AND ADJUDIC ATION OF ISSUES BY THE AO CANNOT BE PRESUMED. NEEDLESS TO STATE HERE THAT SUCH UNCORROBORATIVE PRESUMPTION RUNS CONTRARY TO THE SCHEME OF THE ACT. 10 IT IS WELL SETTLED PRINCIPLE OF LAW THAT JURISDI CTION MUST BE ASSUMED OR EXERCISED STRICTLY IN ACCORDANCE WITH THE PROVI SIONS OF LAW. THE FACTS, AS ALREADY PLACED ON RECORD, IN THE SHAPE OF QUESTI ONNAIRE AND REPLY THERETO CLEARLY INDICATE THAT THE AO HAS NOT CONSID ERED THE ISSUES RAISED BY THE CIT U/S 263 OF THE ACT. THE MAIN ISSUE IN T HE CASE IS TO ASCERTAIN WHETHER THE AO HAS CONSIDERED SUCH ISSUES WHILE FRA MING THE IMPUGNED ASSESSMENT ORDER. THE CONCLUSION ARRIVED AT BY THE AO, IN HIS MIND, MUST BE EXPRESSED OR STATED IN THE SAID ASSESSMENT ORDER . THE ABSENCE OF CONSIDERATION OR NON-EXPRESSION OF SUCH CONSIDERATI ON OF THE ISSUES IN THE PRESENT CASE, CANNOT BE PRESUMED AS CONSIDERATION O F SUCH ISSUES BY THE ITA NO.422/CHANDI/2011 SUKHJEET SINGH V CIT 8 AO. SUCH PRESUMPTION IS NOT SUPPORTED BY THE FACTS OF THE CASE. IT IS TRITE PRINCIPLE OF LAW THAT A ISSUE CAN BE VALIDLY DETERM INED ONLY UPON APPLICATION OF MIND BY THE AO WHILE CONSIDERING AND ADJUDICATING THE ISSUES, AND SUCH APPLICATION OF MIND, IN THEM IS BE ST DEMONSTRATED BY THE DISCLOSURE OF MIND OF SUCH AUTHORITY. IN THE PRESE NT CASE, THE ASSESSMENT ORDER IS SILENT ABOUT MAKING ENQUIRY, APPLICATION O F MIND AND CONSIDERATION OF SUCH ISSUES. IT IS A CASE, WHEN TH E AO DID NOT APPLY HIS MIND AND FAILED TO MAKE ENQUIRIES. THE CIT HAS RAIS ED SPECIFIC ISSUES, RECORDED FINDINGS THEREON, IN THE LIGHT OF THE PROV ISIONS OF SEC 263 OF THE ACT. 11 IN THE PRESENT CASE, AS IS EVIDENT, FROM THE ABO VE DISCUSSIONS, THE AO FAILED TO MAKE INQUIRY, ON THE ISSUES RAISED BY THE CIT AND, HENCE, THE QUESTION OF APPLICATION OF MIND, DOES NOT ARISE. I T IS SETTLED PROPOSITION THAT IF NO INQUIRY HAS BEEN MADE OR NO PROPER INQUI RY HAS BEEN MADE, THE CASE FALLS U/S 263 OF THE ACT. SIMILARLY, NON APPL ICATION OF MIND IS ALSO COVERED BY THE PROVISIONS OF SECTION 263 OF THE ACT . IN THE PRESENT CASE, THE AO HAS FAILED TO MAKE ENQUIRY AND APPLY HIS MIN D, TO THE SAID ISSUES. SUCH NON APPLICATION OF MIND HAS RESULTED IN LOSS O F REVENUE. THUS, THE IMPERATIVE CONDITIONS AS CONTEMPLATED U/S 263 OF TH E ACT STAND SATISFIED. IN VIEW OF THE ABOVE LEGAL AND FACTUAL DISCUSSIONS, THE FINDINGS OF THE LD. CIT ARE UPHELD, AS INDICATED IN THIS ORDER. 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 18 TH JAN.,2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNANT MEMBER CHANDIGARH, THE 18 TH JAN.,2012. SURESH/POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR