M/s Vardhman Polytex Ltd., Ludhiana V. Addl. CIT, Ludhiana

ITA 524/CHANDI/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0122 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 16-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: SUBHASH AGGARWAL
• Section: 143(3); 14A; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.524/CHD/2014 (ASSESSMENT YEAR : 2009-10) M/S VARDHMAN POLYTEX LTD., VS. THE ADDL. C.I.T., 341-K-1, MUNDIAN KHURD, RANGE-1, PO- SAHABAD, CHANDIGARH ROAD, LUDHIANA. LUDHIANA. PAN: AAACV5821H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUBHASH AGGARWAL RESPONDENT BY : SHRI S.K. MITTAL, DR DATE OF HEARING : 09.02.2016 DATE OF PRONOUNCEMENT : 04.04.2016 O R D E R PER RANO JAIN, A.M . : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX- I, LUDHIANA DATED 30.3.2014, RELATING TO ASSESSMENT YEAR 2009-10, PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT IN THIS CASE WAS FRAMED VIDE ORDER DATED 24.11.2011. THEREA FTER A 2 NOTICE UNDER SECTION 263 OF THE ACT DATED 6.3.2014 WAS ISSUED BY THE COMMISSIONER OF INCOME TAX, LUDDHIANA . THE ISSUES RAISED BY THE COMMISSIONER OF INCOME TAX WERE WITH REGARD TO DISALLOWANCE UNDER SECTIONS 14A, 36( 1)(III) OF THE ACT AND WITH REGARD TO UTILIZATION OF SHARE PREMIUM AMOUNT FOR PROVIDING PREMIUM ON REDEMPTION OF 2% FOREIGN CURRENCY CONVERTIBLE BOND (FCCB). THE ASSE SSEE MADE SUBMISSIONS BEFORE THE CIT (APPEALS) CHALLENGI NG THE VALIDITY OF JURISDICTION ASSUMED BY THE COMMISSIONE R OF INCOME TAX UNDER SECTION 263 OF THE ACT AND ALSO ON THE MERITS OF THE ISSUE. THE COMMISSIONER OF INCOME TA X REJECTING ALL THE CONTENTIONS OF THE ASSESSEE PASSE D AN ORDER UNDER SECTION 263 OF THE ACT, DATED 31.3.2014 . 3. AGGRIEVED BY THIS, THE ASSESSEE HAS COME IN APPEAL BEFORE US, RAISING THE FOLLOWING GROUNDS OF APPEAL : 1. THAT THE LEARNED CIT- HAS ERRED IN INITIATING PROCEE DINGS U/S 263 OF THE INCOME TAX ACT AND PASSING THE ORDER ON THE LAST DATE OF I.E. 31.03.2014 WHEN THE SAME WAS TO BECOME TIME BARRED. 2. THAT THE LEARNED CIT HAS FAILED TO POINT OUT HOW TH E ORDER PASSED BY THE ADDLL CIT IS ERRONEOUS IN AS MUCH AS PREJUDI CIAL TO THE INTEREST OF THE REVENUE WHEN THE SAME HAS BEEN PASSED AFTER DUE APPLICATION OF MIND. 3. THAT THE AO HAD PASSED THE ORDER AFTER DUE APPLICAT ION OF MIND AND RATHER THE ORDER PASSED BY THE CIT-I IS WITHOUT APPLICATION OF MIND AND COMPLETELY IGNORING THE SUBMISSIONS MADE B Y THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDIN G AS WELL AS THE SUBMISSIONS MADE IN PROCEEDINGS U/S 263 OF THE INCO ME TAX ACT. 3 4. THAT THE DISALLOWANCE MADE BY THE AO U/S 14A (APPEA L PENDING BEFORE THE CIT(A)-I) WAS BASED ON THE FIGURES AVAIL ABLE IN THE BALANCE SHEET AND DID NOT CALL FOR ANY INTERFERENCE IN PROC EEDING U/S 263 OF THE INCOME TAX ACT. 5. THAT THE DISALLOWANCE MADE BY THE AO U/S 36(1)(III) (APPEAL PENDING BEFORE THE CIT(A)-I) WAS BASED ON THE FACTS OF THE CASE AND DID NOT CALL FOR ANY INTERFERENCE IN PROCEEDING U/S 263 OF THE I NCOME TAX ACT. 6. THAT THE PROVISIONS ON ACCOUNT OF PREMIUM ON REDEMP TION OF 2% FCC BONDS HAS BEEN MADE AS PER THE TERM & CONDITIONS OF ISSUE OF BONDS AND WAS CORRECTLY ALLOWED BY THE AO AND THE CIT HAS WRONGLY HELD THAT THE SAME REQUIRES VERIFICATION AND PROPER DETERMINA TION. 7. THAT IN ANY CASE THE ORDER OF THE CIT PASSED U/S 26 3 IS AGAINST THE LAW AND FACTS AND DESERVES TO BE QUASHED. 8. THAT THE APPELLANT CRAVES LEAVE FOR PERMISSION TO A DD, AMEND OR ALTER ANY GROUND OF APPEAL AT THE TIME OF HEARING. 4. THE LEARNED COUNSEL FOR THE ASSESSEE, AT THE TI ME OF HEARING, STATED THAT THE ADDITIONS ON ACCOUNT OF SECTIONS 14A & 36(1)(III) OF THE ACT WERE MADE BY THE ASSESSING OFFICER IN ORIGINAL ASSESSMENT MADE UNDER SECTION 143(3) OF THE ACT, VIDE HIS ORDER DATED 24. 11.2011. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT (APPEALS ) AGAINST THE SAID DISALLOWANCE AND THE APPEAL OF THE ASSESSEE WAS ALLOWED, VIDE ORDER DATED 22.1.2015, WHEREBY BOTH THE ADDITIONS WERE DELETED. IN THIS M ANNER, THE LEARNED COUNSEL FOR THE ASSESSEE RAISED AN ISSU E THAT THE ORDER OF THE ASSESSING OFFICER HAVING BEEN MERG ED WITH THE ORDER OF THE CIT (APPEALS), THE COMMISSIONER OF INCOME TAX DOES NOT HAVE JURISDICTION UNDER SECT ION 263 4 OF THE ACT TO REASSESS THE SAID ISSUES. RELIANCE W AS PLACED ON A NUMBER OF JUDGMENTS IN THIS REGARD. FU RTHER, IT WAS STATED THAT THE ASSESSING OFFICER HAD ALREAD Y PASSED AN ORDER IN CONSEQUENCE OF THE ORDER OF THE COMMISSIONER OF INCOME TAX UNDER SECTION 263 OF THE ACT, DATED 24.3.2015, WHEREBY HE HAS PREFERRED NOT TO MA KE ADDITION ON ACCOUNT OF SECTIONS 14A AND 36(1)(III) OF THE ACT. THE REASON GIVEN BY HIM IS THAT THE CIT (APPE ALS), IN APPEAL AGAINST ORIGINAL ORDER UNDER SECTION 143(3) OF THE ACT HAS DELETED THESE ADDITIONS AND THE DEPARTMENT IS FILING AN APPEAL AGAINST THE SAID ORDER OF THE CIT (APPEALS) BEFORE THE I.T.A.T. THE ONLY ADDITION MADE BY THE ASSESSING OFFICER IN ORDER PASSED UNDER SECTION 143 (3) R.W.S. 263 OF THE ACT IS WITH REGARD TO FCCB AND 36 (1)(III) OF THE ACT ONLY. ON THE LEGALITY OF SECTION 263 OF THE ACT, IT WAS ARGUED THAT THE ISSUES WERE QUITE OPEN BEFOR E THE ASSESSING OFFICER AND HE HAD MADE SPECIFIC QUERIES IN THIS REGARD, WHICH WERE DULY REPLIED BY THE ASSESSEE. I T IS NOT A CASE OF LACK OF INQUIRY, IN FACT, THE COMMISSIONE R OF INCOME TAX IN THE GARB OF ASSUMING JURISDICTION UND ER SECTION 263 OF THE ACT IS TRYING TO IMPOSE HIS OWN VIEW OVER THE VIEW OF THE ASSESSING OFFICER. OUR ATTENT ION WAS INVITED TO VARIOUS PAGES OF THE PAPER BOOK FILE D, TO SHOW THAT THE ISSUES WERE ENQUIRED INTO BY THE ASSESSING OFFICER. RELIANCE IN THIS REGARD, WAS PL ACED ON A NUMBER OF JUDGMENTS OF VARIOUS HIGH COU RTS 5 AND THE VARIOUS BENCHES OF TRIBUNAL. ANOTHER ARGUM ENT RAISED BY THE LEARNED COUNSEL FOR THE ASSESSEE WAS THAT THE COMMISSIONER OF INCOME TAX COULD NOT REMIT THE MATTER TO THE ASSESSING OFFICER TO CONDUCT FURTHER ENQUIRIES WITHOUT A FINDING THAT THE ORDER OF THE A SSESSING OFFICER IS ERRONEOUS. SUCH A FINDING THAT THE OR DER IS ERRONEOUS IS A CONDITION PRECEDENT FOR ASSUMING JURISDICTION UNDER SECTION 263 OF THE ACT. RELIANC E WAS PLACED ON THE JUDGMENT OF DELHI HIGH COURT IN THE C ASE OF ITO VS D.G. HOUSING PROJECTS LTD. (2012) 343 ITR 32 9 (DEL). IN THIS VIEW, IT WAS PRAYED THAT THE ORDER PASSED UNDER SECTION 263 OF THE ACT MAY BE QUASHED. 5. THE LEARNED D.R. RELYING ON THE ORDER OF THE COMMISSIONER OF INCOME TAX, SUBMITTED THAT EVEN IF THE ISSUES WERE DISCUSSED IN THE ORIGINAL ASSESSMENT, T HE SAME WERE NOT LOOKED UPON IN THE MANNER COMMISSIONE R OF INCOME TAX HAS DISCUSSED IN HIS ORDER UNDER SECT ION 263 OF THE ACT. ON THE ISSUE OF DIRECTION GIVEN TO THE ASSESSING OFFICER BY THE COMMISSIONER OF INCOME TAX , HE SUBMITTED THAT AT THE STAGE OF ISSUING SHOW CAUSE N OTICE, ONLY A PRIMARY SATISFACTION OF COMMISSIONER OF INCO ME TAX IS REQUIRED THAT RELEVANT ASSESSING OFFICERS ORDER IS ERRONEOUS. RELIANCE WAS PLACED ON THE ORDER OF THE I.T.A.T., CHANDIGARH BENCH IN THE CASE OF BASSERA REALTORS (P) LTD. VS. CIT (2015) 55 TAXMANN.COM 327 (CHANDIGARH-TRIB). FURTHER, IT WAS SUBMITTED T HAT AN 6 ORDER OF THE ASSESSING OFFICER CAN BE REVISED UNDER SECTION 263 OF THE ACT IF NONE OF THE ISSUES RAISED BY THE COMMISSIONER OF INCOME TAX WERE NOT DISCUSSED BY TH E ASSESSING OFFICER IN HIS ORDER. RELIANCE WAS PLACE D ON THE JUDGMENT OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. RAJA INDUSTRIES (2011) 15 TAXMANN.COM 40 (P &H). 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. THERE WERE FOUR ISSUES ON THE BASIS OF WHICH THE COMMISSIONER OF INCOME TAX INTENDED TO INVOKE HIS REVISIONERY POWERS. THE CONTENTION OF COMMISSIONER OF INCOME TAX SEEMS THAT THE FIGURES TAKEN BY THE ASSE SSING OFFICER WERE WRONG. THE ASSESSEE GAVE ITS EXPLANAT ION AT EVERY STAGE AND IN THE ORDER OF THE ASSESSING OFFIC ER DATED 24.3.2015, FRAMED IN CONSEQUENCE OF ORDER UNDER SEC TION 263 OF THE ACT, WE OBSERVE THAT THE ASSESSING OFFIC ER HAD NOT MADE ANY ADDITION ON ACCOUNT OF SECTION 14A, ST ATING THAT THE SAID ADDITIONS MADE BY THE ASSESSING OFFIC ER IN ORIGINAL PROCEEDINGS WERE DELETED BY THE CIT (APPEA LS) IN HIS ORDER DATED 22.2.2015, AGAINST WHICH THE DEPART MENT IS IN APPEAL BEFORE THE I.T.A.T. SIMILARLY, ON TH E SECOND ISSUE RAKED UP BY COMMISSIONER OF INCOME TAX IN HIS ORDER UNDER SECTION 263 OF THE ACT IS WITH REGARD T O THE ALLOWANCE OF INTEREST MADE BY THE ASSESSING OFFICER UNDER SECTION 36(1)(III) OF THE ACT IN THE ORIGINAL PROC EEDINGS, STATING THAT HE HAS TAKEN CERTAIN WRONG FIGURES. THE 7 ASSESSING OFFICER IN HIS ORDER FRAMED IN CONSEQ UENCE OF ORDER UNDER SECTION 263 OF THE ACT PRE FERRED NOT TO MAKE ANY ADDITION, AS THE SAME GOT DELETED BY TH E CIT (APPEALS) AND THE DEPARTMENT IS IN APPEAL BEFORE TH E I.T.A.T. AGAINST THE SAID ACTION OF THE CIT (APPEAL S). 7. IN VIEW OF THE ACTION OF THE ASSESSING OFFICER IN PREFERRING TO MAKE NO ADDITION ON THESE TWO ISSUES, THE SAME BECOME ACADEMIC AND WE DO NOT FIND ANY NEED TO ADJUDICATE THESE. NOW, THERE ARE TWO ISSUES LEFT O N WHICH THE COMMISSIONER OF INCOME TAX HAS INVOKED HIS JURISDICTION UNDER SECTION 263 OF THE ACT. 8. THE FIRST ISSUE IS WITH REGARD TO MONEY UTILIZE D FOR PROVIDING FOR THE PREMIUM ON REDEMPTION OF 2% FOREIGN CURRENCY CONVERTIBLE BONDS (FCCB). THE ASS ESSEE HAD REDUCED AN AMOUNT OF RS.326.15 LACS FROM THE SH ARE PREMIUM ACCOUNT ON ACCOUNT OF ISSUE OF AMOUNT OF MO NEY UTILIZED FOR PROVIDING FOR THE PREMIUM ON REDEMPTIO N OF 2% FCCBS. THE CONTENTION OF THE COMMISSIONER OF IN COME TAX IS THAT THESE ISSUES HAVE BEEN OVER LOOKED BY T HE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS AND REQUIRE VERIFICATION AND PROPER DETERMINATION. ON PERUSAL OF THE PAPER BOOK FILED BY THE ASSESSEE, WE SEE THA T WHILE FILING ITS RETURN OF INCOME IN THE COMPUTATION, THE ASSESSEE HAS CLEARLY CLAIMED THE FCCB INTEREST PAID AND CHARGED TO SECURITIES PREMIUM ACCOUNT SEPARATELY. FURTHER, THERE IS A QUERY LETTER DATED 19.1.2011 PL ACED AT 8 PAPER BOOK PAGE 3, WHEREBY AT POINT NO.6, A DETAILE D QUERY WITH REGARD TO UTILIZATION OF SHARE PREMIUM F OR THE PURPOSES OF ISSUE OF 2% FCCBS WAS RAISED. FOR THE CLARITY OF THE ISSUE, WE WOULD LIKE TO REPRODUCE THE SAID Q UERY, WHICH READS AS UNDER : 6. SHARE PREMIUM ACCOUNT: (A) IT IS SEEN THAT THE RESERVES IN THIS ACCOUNT HA VE BEEN UTILIZED FOR WRITE OFF EXPENDITURE AND ISSUE O F 2% FCCBS. KINDLY SPECIFY THE EXACT AMOUNT UTILIZED. AN ADDITION ON THIS ACCOUNT WAS MADE IN ASSESSMENT YEAR 2008-09 BY THE AO VIDE ORDER W/S 143(3) DATED 29.9.2010. THE ISSUE HAS BEEN DISCUSSED IN DETAIL IN THAT ASSESSMENT ORDER IN PARA 3 AND 4. IN THE LIGHT OF THE ARGUMENTS PRESENTED IN DETAIL IN THE SAME, KINDLY SHOW CAUSE AS TO WHY THE EXPENSES RELATED TO THE GIVEN ISSUES OF FCCBS BE NOT DISALLOWED THIS YEAR. (B) IT IS UNDERSTOOD THAT SHARE PREMIUM ACCOUNT IS CREDITED TO THE EXT6ENF OF PREMIUM DERIVED FROM SALE AND ALLOTMENT OF SHARES AND HAS HENCE CREDITED AS A PROFIT TO THE RESERVES. WHY NOT TAXATION HAS BEEN OFFERED ON THE SAME. ALTHOUGH NO SHARE PREMIUM HAS BEEN RECEIVED DURING THIS YEAR, A PERUSAL OF THE ASSESSMENTS IN THE PAST INDICATE THAT THIS ISSUE HAS NOT BEEN RAISED. KINDLY INFORM WHETHER ANY SHARE PREMIUM HAS BEEN RECEIVED IN THE LAST SIX ASSESSMENT YEARS. 9 THERE IS A LETTER DATED 24.11.2011 AT PAPER BOOK PAGE 9, WHERE AT POINT NO.13, THE REPLY TO THE SAID QUERY HAS BEEN GIVEN. 9. IN VIEW OF THE ABOVE, WE OBSERVE THAT THE ASSESSING OFFICER IN THE ORIGINAL PROCEEDINGS WAS A WARE OF THE ISSUE IN QUESTION EVEN TO THE EXTENT THAT CERTA IN DISALLOWANCE IN THIS REGARD WAS MADE IN A PRECEDING ASSESSMENT YEAR. HE RAISED A VERY SPECIFIC QUERY, WHICH WAS DULY REPLIED BY THE ASSESSEE. HE AFTER CONSIDE RING THIS REPLY TOOK A VIEW THAT THERE IS NO OCCASION TO MADE SUCH DISALLOWANCE AND HENCE, DID NOT DISALLOW THE S AME TO HIS SATISFACTION. NOW IN THE GARB OF REVISIONERY P OWERS UNDER SECTION 263 OF THE ACT, THE COMMISSIONER OF I NCOME TAX CANNOT IMPOSE HIS OWN JUDGMENT OVER THE JUDGMEN T OF THE ASSESSING OFFICER. FURTHER WE ALSO OBSERVE THA T THE COMMISSIONER OF INCOME TAX HIMSELF IS NOT SURE AS T O THE EXTENT OF DISALLOWANCE TO BE MADE. HE STARTS WITH THE FACT THAT THE ASSESSING OFFICER HAS OVER LOOKED THIS ISS UE, THEN HE STATES THAT THE FIGURE OF PREMIUM CLAIMED BY THE ASSESSEE HAS A COMPONENT OF INTEREST AS WELL AS FCC B PREMIUM PAYABLE. THEN HE DIRECTS THE ASSESSING OFF ICER TO VERIFY THIS CLAIM AND TAKE APPROPRIATE ACTION. WE DO NOT UNDERSTAND HOW BY THIS PROCESS THE COMMISSIONER OF INCOME TAX HAS BROUGHT ON RECORD THE ERROR IN THE O RDER OF THE ASSESSING OFFICER. AT THE TIME OF ASSUMING JURISDICTION UNDER SECTION 263 OF THE ACT, THE 10 COMMISSIONER OF INCOME TAX HAS TO CLEARLY BRING ON RECORD THE ERROR IN THE ORDER OF THE ASSESSING OFFICER, WH ICH IN THE PRESENT CASE HAS NOT BEEN DONE. THE COMMISSIO NER OF INCOME TAX CANNOT JUST ON THE BASIS OF SUSPICION DIRECT THE ASSESSING OFFICER TO MAKE FURTHER ENQUIRY. THE COMMISSIONER OF INCOME TAX HIMSELF COULD HAVE MADE ANY FURTHER ENQUIRY OR INVESTIGATION TO BRING ON RECORD THE ERROR IN THE ORDER OF THE ASSESSING OFFICER. IN VI EW OF THE ABOVE, WE DO NOT FIND THE JURISDICTION ASSUMED BY T HE COMMISSIONER OF INCOME TAX UNDER SECTION 263 OF THE ACT, ON THIS ISSUE TO BE AS PER LAW. 10. THE LAST ISSUE WITH REGARD TO DISALLOWANCE UND ER SECTION 36(1)(III) OF THE ACT HAS BEEN DEALT WITH B Y THE COMMISSIONER OF INCOME TAX IN HIS ORDER UNDER SECTI ON 263 OF THE ACT AT PAGE 8, PARA 5 ONWARDS. FOR THE SAKE OF CLARITY, WE WOULD LIE TO REPRODUCE THE SAME, WHICH READS AS UNDER : 5.1 IT IS ALSO A MATTER OF FACT THAT THE MAIN BUS INESS OF THE ASSESSEE COMPANY IS THE BUSINESS OF MANUFACTURING OF COTTON, ACRYLIC AND BLENDED YARN. THUS THE INVESTMENT MADE BY THE ASSESSEE IS CERTAINLY NOT A BUSINESS VENTURE. THE ASSESSEE HAS TAKEN SECURED AND UNSECURED LOANS ON WHICH INTEREST IS BEING PAID AND DEBITED IN THE PROFIT & LOSS ACCOUNT OF THE COMPANY. IN VIEW OF THE ABOVE DISCUSSION IT IS AMPLY CLEAR THAT INTEREST, TO THE EXTENT TO WHICH THE FUNDS HAS BEEN UTILIZED FOR NON-BUSINESS PURPOSE IS NOT AN ALLOWABLE EXPENSE U/S 36(1)(III). THEREFORE , 11 DISALLOWANCE U/S 36(L)(III) IS ALSO NEEDS TO BE RE- CONSIDERED IN THIS CASE. 5.2 THE REPLY OF THE ASSESSEE ON THIS ISSUE HAS BEEN CONSIDERED. THE ISSUE IS NOT VERY CLEAR FROM THE 2 63 PROPOSAL SUBMITTED BY THE AO VIDE HIS LETTER DATED 05.03.2014. THE AMOUNTS QUANTIFYING THE ISSUE OF DISALLOWANCE U/S 36(L)(III) HAVE NOT BEEN BROUGHT OUT CLEARLY AND A SIMILAR ISSUE REGARDING ISSUE OF DISALLOWANCE IT IS UNDERSTOOD THAT THE ISSUE RELATE S TO APPORTIONMENT OF EXPENSES IN THE RELEVANT HEADS OF INCOME RELATING TO LONG TERM INVESTMENT WHOSE INCOME IS REFLECTED UNDER THE HEAD 'CAPITAL GAIN' I N THE NORMAL COURSE OF BUSINESS. ON THIS ISSUE THE AO IS DIRECTED TO VERIFY THE DEBT EQUITY RATIO OF THE COMPANY AND TO THE EXTENT OF THE BORROWED FUND (DEBT) THE EXPENSES OF INTEREST CLAIMED PERTAINING TO LONG TERM INVESTMENT SHOULD BE WORKED AND COMPARED WITH THE EXPENSES DISALLOWED U/S 14A. ANY DIFFERENCE BETWEEN THE INTEREST EXPENSES WORKED OUT ON THE DEBT EQUITY RATIO RELATING TO LON G TERM INVESTMENT AND EXPENSES DISALLOWED U/S 14A NEEDS TO BE VERIFIED AND APPROPRIATE ACTION NEEDS TO BE TAKEN ON THIS ISSUE. THE MATTER IS, THEREFORE, RESTORED TO THE FILE OF THE AO. 11. FROM THE PERUSAL OF THE ABOVE, WHAT WE UNDERSTAND IS THAT FOR TAKING UP THIS ISSUE, THE COMMISSIONER OF INCOME TAX IS WHOLLY RELYING ON SOM E PROPOSAL SENT BY THE ASSESSING OFFICER AND HE HIMSE LF IS NOT SURE ABOUT THE ISSUE. WE DO NOT APPRECIATE THE WAY THE COMMISSIONER OF INCOME TAX HAS INVOKED HIS JURISDICTION UNDER SECTION 263 ON THIS ISSUE. UNDE R SECTION 263 OF THE ACT, THE COMMISSIONER OF INCOME TAX HAS TO PERUSE THE RECORD HIMSELF AND CLEARLY BRING OUT ANY 12 ERROR IN THE ORDER SO FAR THE SAME IS PREJUDICIAL T O THE INTEREST OF REVENUE. IT HAS BECOME A TRITE LAW BY NOW THAT WHILE INVOKING JURISDICTION UNDER SECTION 263 OF TH E ACT, THE COMMISSIONER OF INCOME TAX HAS TO CLEARLY BRING ON RECORD BOTH THE CONDITIONS OF THE ORDER BEING ERRON EOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE ON R ECORD. ONCE THE COMMISSIONER OF INCOME TAX HOLDS THAT THE ORDER IS ERRONEOUS, HE HAS TO GIVE A CLEAR FINDING IN THI S REGARD AND CANNOT ASK THE ASSESSING OFFICER TO MAKE FURTHE R INQUIRIES. HE CAN MAKE ANY ENQUIRY OR INVESTIGATIO N TO BRING ON RECORD THE ERROR IN THE ORDER. THIS PROPO SITION HAS BEEN EXPLAINED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF ITO VS. D.G. HOUSING PROJECTS LTD. (2012) 343 ITR 329 (DEL) IN THE FOLLOWING TERMS : 19. IN THE PRESENT CASE, THE FINDINGS RECORDED BY T HE TRIBUNAL ARE CORRECT AS THE CIT HAS NOT GONE INTO AN D HAS NOT GIVEN ANY REASON FOR OBSERVING THAT THE ORDER PASSE D BY THE ASSESSING OFFICER WAS ERRONEOUS. THE FINDING RECORDE D BY THE CIT IS THAT 'ORDER PASSED BY THE ASSESSING OFFICER MAY BE ERRONEOUS'. THE CIT HAD DOUBTS ABOUT THE VALUATION AN D SALE CONSIDERATION RECEIVED BUT THE CIT SHOULD HAVE EXAMI NED THE SAID ASPECT HIMSELF AND GIVEN A FINDING THAT THE ORD ER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS. HE CAME TO T HE CONCLUSION AND FINDING THAT THE ASSESSING OFFICER HA D 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 PROPE RLY EXAMINED AND THEREFORE THE ASSESSMENT ORDER IS 'ERR ONEOUS'. THE SAID FINDING WILL BE CORRECT, IF THE CIT HAD EXAM INED AND VERIFIED THE SAID TRANSACTION HIMSELF AND GIVEN A FI NDING ON MERITS. AS HELD ABOVE, A DISTINCTION MUST BE DRAWN IN THE 13 CASES WHERE THE ASSESSING OFFICER DOES NOT CONDUCT AN ENQUIRY; AS LACK OF ENQUIRY BY ITSELF RENDERS THE ORD ER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVE NUE AND CASES WHERE THE ASSESSING OFFICER CONDUCTS ENQUIRY BUT FINDING RECORDED IS ERRONEOUS AND WHICH IS ALSO PREJ UDICIAL TO THE INTEREST OF THE REVENUE. IN LATTER CASES, THE CIT HAS TO EXAMINE THE ORDER OF THE ASSESSING OFFICER ON MERITS OR THE DECISION TAKEN BY THE ASSESSING OFFICER ON MERITS AN D THEN HOLD AND FORM AN OPINION ON MERITS THAT THE ORDER PAS SED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THE SECOND SET OF CASES, CIT CANNOT DIRECT THE ASSESSING OFFICER TO CONDUCT FURTHER ENQ UIRY TO VERIFY AND FIND OUT WHETHER THE ORDER PASSED IS ERRONEOUS OR N OT. 12. IN THE PRESENT CASE, THE COMMISSIONER OF INCOM E TAX HAS NOT BEEN ABLE TO SATISFY EVEN HIMSELF TO WH AT IS THE ERROR IN THE ORDER OF THE ASSESSING OFFICER IN THIS REGARD AND HAS GIVEN A VERY ELABORATE DIRECTION TO THE ASSESSING OFFICER TO WORK OUT THE DISALLOWANCE. TH IS APPROACH OF THE COMMISSIONER OF INCOME TAX IS NOT A S PER LAW AS HELD BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF D.G. HOUSING PROJECT LTD. (SUPRA). THEREFORE, WE H OLD THE INVOKING OF PROVISIONS OF SECTION 263 OF THE ACT ON THIS ISSUE TO BE ILLEGAL. 13. BEFORE PARTING, WE WOULD LIKE TO DEAL WITH VARIOUS CASE LAWS RELIED ON BY THE LEARNED D.R., CO PIES OF THESE CASE LAWS WERE FILED BEFORE US. 14 (I) BASERA REALTORS (P) LTD. VS. CIT (2015) 55 TAXMANN.COM 327 (CHANDIGIARH-TRIB) : MOST OF THE ARGUMENTS MADE IN THIS CASE RELATED TO THE PROPOSITION THAT REVISIONERY POWERS UNDER SECTION 263 OF THE ACT CANNOT BE INVOKED ON THE BAS IS OF SOME PROPOSAL SENT BY THE ASSESSING OFFICER. WE HAVE NO QUARREL WITH THIS ISSUE THAT THE COMMISSIONER OF INCOME TAX CAN INVOKE JURISDICTION UNDER SECTION 263 OF THE ACT ON THE BASIS OF A PROPOSAL SENT BY THE ASSESSING OFFICER HIMSELF PROVIDED THE COMMISSIONER OF INCOME TAX HIMSELF HAS APPLIED HIS MIND TO THE SAME. THE ISSUE HAS BEEN DEALT WITH BY US AT AN APPROPRIATE PLACE ELSEWHERE IN THE PRESENT ORDER. THE OTHER PROPOSITION IN THE SA ID CASE OF THE I.T.A.T. IS THAT ONLY THSSE MATTERS WHI CH HAVE BEEN APPEALED AGAINST ARE NOT AVAILABLE FOR REVISION. THIS ISSUE IS NOT RELEVANT IN THE PRESEN T CASE, SINCE THE ISSUES WHICH ALL PENDING BEFORE THE I.T.A.T. IN AN APPEAL FILED BY THE REVENUE, THE ASSESSING OFFICER HAS NOT MADE ANY ADDITION, THEREFORE, EVEN WE HAVE NOT CONSIDERED THE SAME. (II) RAJA INDUSTRIES(2011) 15 TAXMANN.COM 40 (P&H) : IN THIS CASE, THE ISSUE WAS THAT NONE OF THE ISSUES RAISED IN THE NOTICE BY THE COMMISSIONER OF INCOME TAX AND INCLUDED IN THE ORDER UNDER SECTION 263 OF THE ACT HAD BEEN CONSIDERED AND ANALYZED BY THE 15 ASSESSING OFFICER AND HE HAD FAILED TO DISCUSS AS T O HOW AND WHY THE RETURNED INCOME WAS ACCEPTED. THE FACTS OF THE CASE ARE QUITE DIFFERENT FROM THE FACT S OF THE PRESENT CASE AND THEREFORE, THIS IS NOT APPLICA BLE. 14. IN THE PRESENT CASE, EVEN FROM THE ORDER OF TH E COMMISSIONER OF INCOME TAX UNDER SECTION 263 OF THE ACT, IT CAN BE INFERRED VERY EASILY THAT ALL THE ISSUES WERE DISCUSSED AND ANALYZED AT THE STAGE OF ASSESSMENT. 15. IN VIEW OF THE ABOVE, WE HOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX UNDER SECTION 263 OF THE ACT TO BE ILLEGAL. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF MARCH, 2016. SD/- SD/- (H.L.KARWA) (RANO JAIN) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 4 TH MARCH, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE D R. ASSISTANT REGISTRAR, ITAT, CHANDIGARH