M/s City Beautiful Hotels and Resorts Pvt. Ltd., Chandigarh V. Pr. CIT-2, Chandigarh

ITA 554/CHANDI/2017

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 3950 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 27-06-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 30-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N D GUPTA
• Keywords: Revision of order; Opportunity of being heard; Competent authority; Assessment record
• Section: 143(3); 131; 263; 63

Judgement Text

, - , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, A, CHANDIGARH , !' # $ % &' , '( BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO. 554/CHD/2017 # ) / ASSESSMENT YEAR : 2012-13 M/S CITY BEAUTIFUL HOTELS AND RESORTS PVT. LTD., SCO 471-471, SECTOR 35-C, CHANDIGARH *#! PCIT - 2, CHANDIGARH + '( ./ PAN NO: AADCC0461D +./ APPELLANT /0+./ RESPONDENT /ASSESSEE BY : SH. PARIKSHIT AGGARWAL / REVENUE BY : SH. N.D.GUPTA, SR.DR /DATE OF HEARING : 20.07.2018 /DATE OF PRONOUNCEMENT : 04.10.2018 '1/ ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 09.02.2017 OF THE PR. COMMISSIONER OF I NCOME TAX(A)-2, CHANDIGARH [HEREINAFTER REFERRED TO AS PCIT] EXE RCISING HIS REVISION JURISDICTION U/S 263 OF THE ACT, WHEREBY, HE HAS SET ASIDE THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) IN COME-TAX ACT, 1961 (IN SHORT 'THE ACT') DIRECTING THE ASSESSING OFFICER TO PASS THE ASSESSMENT ORDER AFRESH. 2. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT T HE LD. PCIT FROM THE PERUSAL OF THE ASSESSMENT RECORDS FORMED AN OPINION THAT THE ORDER PASSED ITA NO. 554/CHD/2017- M/S CITY BEAUTIFUL HOTELS & RESORTS PVT. LTD., CHA NDIGARH 2 BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDIC IAL TO THE INTEREST OF REVENUE. HE, THEREFORE, ISSUED SHOW CAUSE NOTICE D ATED 7.7.2006 U/S 263 OF THE ACT TO THE ASSESSEE, WHICH READS AS UNDER:- 3. PERUSAL OF THE ASSESSMENT RECORD REVEALS THAT THE COMPANY HAS RECEIVED RS.6,19,71,580/- CLAIMED TO BE ON ACCOUNT OF SHARE PREMIUM [AS REFLECTED IN PART-A(L)(B)(IV) (BALANCE SHEET AS ON 31 ST DAY OF MARCH.2012)]. THE AO VIDE THE QUESTIONNAIRE ISSUED ON 20.01.2014 HAD REQUESTED YOU TO FURNISH A LIST OF SHAREHOLDERS ALONGWITH SHARE PREMIUM PAID BY EACH SHAREHOLDER ALONGWITH DOCUMENTARY EVIDENCE. BUT NO SUCH LIST WAS PROVIDED BY YOU DURING THE ASSESSMENT PROCEEDINGS. WHILE COMPLETING THE ASSESSMENT, THE AO HAS ALSO NOT PROPERLY VERIFIED/EXAMINED THE GENUINENESS OF SOURCES OF THESE AMOUNTS CLAIMED TO BE SHARE PREMIUM BY YOU. 3.1. DURING ASSESSMENT PROCEEDINGS, THE STATEMENT OF ONE SHRI RAJA DEVINDER SINGH WAS RECORDED IN WHICH HE HAS ADMITTED THAT HE HAS INVESTED TOTAL AMOUNT OF RS.L,12,50,000/- DURING THE F.Y. 2011-12 IN M/S CITY BEAUTIFUL HOTELS & RESORTS PVT. LTD. HOWEVER, THE AO HAS NOT MADE DISCREET ENQUIRIES REGARDING GENUINENESS OF THE HUGE PREMIUM PAID (SHARE CAPITAL AMOUNT RS. 1,18,420 WHEREAS SHARE PREMIUM AMOUNT OF RS. 1,11,31,580), SOURCE, OF INVESTMENT AND HUGE TRANSACTIONS REFLECTED IN THE BANK STATEMENT OF SHRI RAJA DEVINDER SINGH IMMEDIATELY BEFORE MAKING PAYMENT OF SHARE PREMIUM TO THE COMPANY. THUS, THE ISSUE OF RECEIPT OF HUGE AMOUNTS ALLEGEDLY ON ACCOUNT OF SHARE PREMIUM REMAINS UNEXAMINED ON THE PART OF THE ASSESSING OFFICER FOR WANT OF APPARENTLY NEEDS INQUIRIES FOR PROPER ASSESSMENT. 4. A PERUSAL OF PART B OF THE AUDIT REPORT REVEALS THAT DURING THE F.Y. 2011-12 THE NEW UNSECURED LOANS TO THE TUNE OF RS.22,81,331/- WERE INTRODUCED IN THE COMPANY. AS PER REPLY DATED 21.11.2014 REGARDING DETAILS OF UNSECURED LOANS, IT WAS STATED THAT NO AMOUNT HAS BEEN RECEIVED DURING ITA NO. 554/CHD/2017- M/S CITY BEAUTIFUL HOTELS & RESORTS PVT. LTD., CHA NDIGARH 3 THE YEAR UNDER CONSIDERATION WHICH IS IN CONTRADICTION TO THE AMOUNT REFLECTED IN-THE BALANCE SHEET. THE AO HAS NOT RAISED/CONDUCTED ANY FURTHER QUERY/ENQUIRY ON THE ISSUE OF INCREASE IN THE AMOUNT OF UNSECURED LOANS. THUS, THE ISSUE OF AMOUNTS CREDITED IN THE BOOKS OF ACCOUNTS OF UNSECURED LOANS REMAINS UNEXAMINED ON THE PART OF THE ASSESSING OFFICER AND UNEXPLAINED ON THE PART OF ASSESSEE. 5. PERUSAL OF THE ASSESSMENT RECORD REVEALS THAT OU T OF TOTAL 11,09,342 SHARES ISSUED BY THE COMPANY TIL L 31.03.2012, MORE THAN 9 LAC SHARE WERE EITHER PURCHASED BY THE DIRECTORS, THEIR HUF AND THE SON OF THE DIRECTOR. THE AO HAS NOT MADE ADEQUATE ENQUIRIES REGARDING SOURCE OF PURCHASE OF THESE SHARES IN THE HANDS OF DIRECTORS AND OTHER PERSONS. THUS, THE ISSUE REMAINS UNEXAMINED ON THE PART OF THE ASSESSING OFFICER AND UNEXPLAINED ON THE PART OF ASSESSES. 6. VIDE QUESTIONNAIRE DATED 20.01.2014 YOU WERE, INTER-ALIA, REQUESTED TO FURNISH THE FOLLOWIN G INFORMATION:- I) DETAILS OF ALL THE BUSINESS CONCERNS ASSOCIATED WITH YOU ALONGWITH THEIR ADDRESSES, ACTIVITIES, ASSESSMENT DETAILS, BUSINESS RELATIONSHIP AND DETAILS OF TRANSACTIONS MADE WITH THEM DURING THE YEAR UNDER CONSIDERATION. II) THE DETAILS OF SUNDRY DEBTORS AND CREDITORS IN WHOSE ACCOUNT SUMS EXCEEDING RS.50,000/- EACH WAS OUTSTANDING INCLUDING THE ACCOUNT SQUARED UP DURING THE YEAR. YOU WERE ALSO REQUESTED TO STATE WHETHER THE PERSONS IS COVERED U/S 40A(2)(B) OF THE ACT. III) DOCUMENTARY EVIDENCE IN RESPECT OF FOOD COST RATIO SHOWN WITH CORRESPONDING TURNOVER FOR THE CURRENT AND PREVIOUS TWO YEARS ALONGWITH REASONS FOR FLUCTUATION IN THE FOOD COST RATIO. IV) DETAILS OF ANY TAX FREE INCOME-EARNED BY THE COMPANY DURING THE YEAR UNDER CONSIDERATION. V) DETAILS OF TAXES DEDUCTED AT SOURCE AND PROOFS OF HAVING REMITTED THEM TO THE ITA NO. 554/CHD/2017- M/S CITY BEAUTIFUL HOTELS & RESORTS PVT. LTD., CHA NDIGARH 4 GOVERNMENT ACCOUNT WITHIN THE PRESCRIBED TIME. VI) BASIS OF VALUATION OF CLOSING STOCK REFLECTED IN THE BALANCE SHEET. VII) DETAILS OF MOVABLE/IMMOVABLE ASSETS. NO REPLY, TO THE ABOVE QUERIES HAD BEEN FILED BY YO U. EVEN THE ASSESSING OFFICER DID NOT RAISE ANY QUESTI ON REGARDING THESE ISSUES SUBSEQUENTLY DURING THE ASSESSMENT PROCEEDINGS. THUS, THE ABOVE ISSUES REMAIN UNEXAMINED ON THE PART OF THE ASSESSING OFFICER AND UNEXPLAINED ON THE PART OF ASSESSEE. 7. IN VIEW OF THE FACTS STATED ABOVE, IT IS HELD TH AT THE ASSESSMENT FRAMED U/S 143(3) ON 31.03.2015 IS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE IN TERMS OF PROVISIONS OF SECTION 263 O F THE INCOME TAX ACT, 1961 INCLUDING EXPLANATION 2 INSERTED BY THE FINANCE ACT, 2015 W.E.F, 01.06.2015 . YOU ARE, THEREFORE, REQUESTED TO SHOW CAUSE AS TO W HY ASSESSMENT FRAMED VIDE ASSESSMENT ORDER DATED 31.03.2015 U/S 143(3) OF THE INCOME TAX ACT, 1961 SHOULD NOT BE CANCELLED BY INVOKING THE PROVISIONS OF SECTION 263 OF THE INCOME TAX ACT, 1961. 3. IN RESPONSE TO THE NOTICE, THE LD. COUNSEL FOR T HE ASSESSEE FILED THE REQUISITE DETAILED SUBMISSIONS AND VEHEMENTLY CONTE STED THE EXERCISE OF REVISION JURISDICTION BY THE PCIT STATING THAT THE ASSESSING OFFICER WHILE MAKING THE ASSESSMENT HAD MADE THOROUGH AND DETAIL ED ENQUIRIES AND EACH AND EVERY ISSUE RAISED BY THE PCIT WAS DULY EX AMINED BY THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS AND THEREAFTER THE ASSESSING OFFICER HAD PASSED THE IMPUGNED ASSESSMEN T ORDER. THAT THE VIEW TAKEN BY THE ASSESSING OFFICER REGARDING EACH OF THE ISSUE WAS CORRECT AND EVEN OTHERWISE WAS ONE OF THE POSSIBLE VIEWS THAT CAN BE LEGALLY TAKEN. THE LD. PCIT, HOWEVER, HELD THAT THE ASSESSING OFFICER DID NOT MAKE THE NECESSARY VERIFICATION IN RESPECT OF T HE ISSUES RAISED BY THE ITA NO. 554/CHD/2017- M/S CITY BEAUTIFUL HOTELS & RESORTS PVT. LTD., CHA NDIGARH 5 LD. PCIT. TO BRING MORE CLARITY, WE DEEM IT FIT T O REPRODUCE THE FINDINGS OF THE LD. CIT(A) ON EACH OF THE ISSUE AS UNDER:- 3.1 REGARDING SHARE PREMIUM OF RS.6,19,71,580/- OUTSTANDING AS ON 31.03.2012 AND ACCEPTANCE OF SHARE CAPITAL AND SHARE PREMIUM FROM SH. RAJA DEVINDER SINGH (PARA 3 & 3.1 OF THE NOTICE U/S 263) :- 3.1.1 IN HIS REPLY TO QUERY RAISED AT SR. NO. 3 OF THE SHOW-CAUSE-NOTICE, THE AR STATED THAT THE AUDITED BALANCE SHEET OF THE ASSESSEE COMPANY FOR THE YEAR IN QUESTION AND THE SHAREHOLDER WISE LIST OF SHARE PREMIUM ACCEPTED DURING THE YEAR WAS ALREADY ON ASSESSMENT RECORD. THE AR SUBMITTED THAT THE INCREASE IN SHARE PREMIUM DURING THE YEAR WAS ONLY ON ACCOUNT OF ACCEPTANCE OF MONEY FROM RAJA DEVINDER SINGH AND THAT THE AO WAS AWARE ABOUT THE SAME AND HAD ENQUIRED INTO THE MATTER BY RECORDING HIS STATEMENT U/S 131 AND CALLING FOR THE INVESTOR'S BANK STATEMENT. THEREFOR E, AS PER THE AR, REVISIONARY POWERS U/S 263 COULD NOT BE INVOKED. 3.1.2 THE ASSESSEE, IN ITS REPLY DATED 03.02.2017, HAS ALSO RELIED ON THE FOLLOWING JUDGMENTS:- I) MALABAR INDUSTRIAL CO. LTD. VS. CIT, (2000) 243 ITR 83 (SC). II) CIT VS. MAX INDIA LTD., (2007) 295 ITR 282. 3.1.3 REGARDING MAKING FURTHER ENQUIRIES, THE AR OF THE ASSESSEE SUBMITTED THAT REVISIONARY POWER U/S 2 63 CANNOT BE INVOKED FOR DIRECTING FURTHER ENQUIRY WHE RE NECESSARY AND ADEQUATE ENQUIRIES HAVE ALREADY BEEN MADE BY THE AO. THE FOLLOWING JUDGMENTS HAVE BEEN RELIED UPON: I) CIT VS. ASHISH RAJPAL 320 ITR 674 (DEL HC). II) CIT VS. DG HOUSING PROJECT LTD. 343 ITR 329 (DEL HC) III) SH. PAWAN KUMAR VS. CIT, ITA NO. 435/CHD/2012 DATED 19.08.2015 (CHD TRIB). III) CIT VS. NIRAV MODI, ITA NO.119/2014 DATED ITA NO. 554/CHD/2017- M/S CITY BEAUTIFUL HOTELS & RESORTS PVT. LTD., CHA NDIGARH 6 16.06.2014 (BOM HC). 3.1.4 AS MENTIONED IN THE SHOW CAUSE NOTICE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED TO FURNISH CERTAIN DOCUMENTS INCLUDING DETAILS OF SHAREHOLDERS AND PREMIUM PAID ETC., HOWEVER, NO SUCH INFORMATION WAS PROVIDED BY THE ASSESSEE IN A PROPER MANNER FOR MAKING VERIFICATION BY THE AO. EVEN THE AO HAD NOT MADE ANY DISCREET ENQUIRY TO VERIFY THE GENUINENESS AND SOURCE OF INVESTMENT RECEIVED AND THE HUGE TRANSACTIONS REFLECTED IN THE BANK STATEMENT OF SH. DEVINDER SIN GH IMMEDIATELY BEFORE MAKING PAYMENT OF SHARE PREMIUM. HENCE, THE CASE OF THE ASSESSEE FALLS UNDE R EXPLANATION 2(A) OF SECTION 263 INSERTED W.E.F. 01.06.2015 WHICH READS AS UNDER: - 'EXPLANATION 2. FOR THE PURPOSES OF THIS SECTION, IT IS HEREBY DECLARED THAT AN ORDER PASSED BY THE ASSESSING OFFICER SHALL BE DEEMED TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, IF, IN THE OPINION OF THE PRINCIPAL COMMISSIONER OR COMMISSIONER, (A) THE ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE (B) ............. (C) (D) THEREFORE, THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 3.1.5 THE QUERIES RAISED UNDER PARA 3 AND PARA 3.1 OF THE QUESTIONNAIRE ARE CO-RELATED AND THEREFORE, MERGED. THE ISSUE INVOLVED IS REGARDING INVESTMENT OF AN AMOUNT OF RS.1,12,50,000/- DURING F.Y. 2011-12 I N M/S CITY BEAUTIFUL HOTELS AND RESORTS PVT. LTD. BY SH. RAJA DEVINDER SINGH AT A VERY, HIGH PREMIUM. THE REPLY DATED 03.02.2017 SUBMITTED BY THE AR OF THE ASSESSEE HAS BEEN CONSIDERED AND IT HAS BEEN OBSERV ED THAT ALTHOUGH THE AO HAD RECORDED STATEMENT OF SH. RAJA DEVINDER SINGH, THE AO HAD FAILED TO MAKE INQUIRIES AND VERIFICATION WHICH SHOULD HAVE BEEN MADE FOR ESTABLISHING GENUINENESS & SOURCE OF ITA NO. 554/CHD/2017- M/S CITY BEAUTIFUL HOTELS & RESORTS PVT. LTD., CHA NDIGARH 7 INVESTMENTS RECEIVED AND HUGE TRANSACTIONS REFLECTE D IN THE BANK STATEMENTS IMMEDIATELY BEFORE MAKING PAYMENT OF SHARE PREMIUM. SO, THE ISSUE STILL REMAI NS UNEXPLAINED & UNEXAMINED. 3.2 REGARDING INCREASE IN UNSECURED LOANS (PARA 4 OF THE NTOICE U/S 263) 3.2.1 REGARDING THE ISSUE OF INCREASE IN UNSECUR ED LOANS, THE ASSESSEE HAS SUBMITTED THAT THE ISSUE WAS ENQUIRED INTO AND SUBMITTED COPY OF SUBMISSIONS STATED TO BE MADE DURING ASSESSMENT PROCEEDINGS. THOUGH THE AR OF THE ASSESSEE, VIDE LETTER DATED 25.02.2014 HAS FURNISHED THE DETAILS OF UNSECURED LOANS AND CONFIRMATIONS OF ABOVE UNSECURED LOANS BU T PERUSAL OF THE ASSESSMENT RECORD REVEALS THAT THE A O HAD NOT MADE ANY ENQUIRY W.R.T. THE IDENTITY AND CREDITWORTHINESS OF THE LENDER AND GENUINENESS OF T HE TRANSACTION. AS PER THE LATEST (UNDATED) SUBMISSION MADE DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD SUBMITTED THAT NO AMOUNT HAD BEEN RECEIVED DURING THE YEAR UNDER CONSIDERATION WHICH CONTRADICTS THE AMOUNT REFLECTED IN THE BALANCE SHE ET. HENCE, THE CLAIM OF THE ASSESSEE REGARDING THE UNSECURED LOANS RAISED DURING THE YEAR REMAINS UNEXAMINED/ UNVERIFIED. 3.3 REGARADING SOURCE OF PURCHASE OF SHARES BY_DIRECTORS_AND RELATED PERSONS |PARA 5 OF THE NOTICE U/S 263 3.3.1 REGARDING ISSUE OF SOURCE OF PURCHASE OF SHAR ES FROM DIRECTORS AND RELATED PERSONS, THE ASSESSEE HA S EXPLAINED THAT ALL SUCH SHARES WERE ISSUED IN THE PRECEDING YEARS. THE ASSESSEE ADDED THAT ONLY 11842 SHARES HAD BEEN ALLOTTED TO SH. DEVINDER SINGH DURI NG THE YEAR UNDER CONSIDERATION. AS DISCUSSED IN PARA 3.1 .5 ABOVE, THE AO HAD FAILED TO MAKE THE NECESSARY ENQUIRES TO VERIFY THE GENUINENESS AND AUTHENTICITY OF THE SOURCES OF INVESTMENT ETC. THEREFORE, THIS ISSU E ALSO REMAINS UNEXAMINED. 3.4 REGARDING ISSUE OF UNASSESED QUERIES RAISED IN THE QUESTIONNAIRE DATED 20.1.2014 (PARA 6 OF THE NOTICE U/S 263) ITA NO. 554/CHD/2017- M/S CITY BEAUTIFUL HOTELS & RESORTS PVT. LTD., CHA NDIGARH 8 3.4.1 THE REPLY OF THE ASSESSEE DATED 03.02.2 017 ON THE ABOVE ISSUE AND OBSERVATIONS OF THE UNDERSIGNED ARE DISCUSSED AS FOLLOWS :- I) THE ASSESSEE SUBMITTED THAT THERE WAS NOT RELATED BUSINESS CONCERN WITH WHICH THE ASSESSEE HAD CARRIED OUT BUSINESS TRANSACTION AND THAT THIS WAS CONVEYED DURING ASSESSMENT PROCEEDINGS II) THE LIST OF SUNDRY DEBTORS AND CREDITORS WAS PROVIDED BY THE ASSESSEE. THIS NEEDS TO BE VERIFIED TO CHECK GENUINENESS OF THE TRANSACTIONS. III) THE ASSESSEE SUBMITTED THAT THE FOOD COST RATIO FLUCTUATED DUE TO CHANGE IN MARKET TRENDS, CHANGE IN TURNOVER LEVELS, INCREASE IN PRICE OF RAW FOOD ITEMS AND COMPETITIVE RELEVANT MARKET. THE ASSESSEE HAS NOT SUBMITTED ANY DOCUMENTARY EVIDENCE THEREFORE IT CANNOT BE STATED TO BE AN AUTHENTIC EXPLANATION UNLESS DULY VERIFIED. THIS ALSO NEEDS TO BE VERIFIED. IV) ON THE ISSUE OF EARNING TAX FREE INCOME DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SUBMITTED THAT DURING THE YEAR IN QUESTION NO TAX FREE INCOME WAS EARNED BY THE ASSESSEE. IT WAS FURTHER STATED THAT THIS INFORMATION WAS DULY PROVIDED IN THE ASSESSEE'S SUBMISSION DATED 28.01.2014. V) ON THE ISSUE OF TAX DEDUCTED AT SOURCE AND PROOFS OF HAVING PERMITTED THEM TO THE GOVT. ACCOUNT WITHIN THE PRESCRIBED TIME, THE ASSESSEE SUBMITTED A COPY OF THE REQUIRED INFORMATION WHICH WAS STATED TO HAVE BEEN SUBMITTED DURING ASSESSMENT PROCEEDINGS. VI) ON THE ISSUE OF THE BASIS OF VALUATION OF CLOSING STOCK REFLECTED IN THE BALANCE SHEET, THE ASSESSEE SUBMITTED THAT STOCK AT THE END OF EVERY YEAR IS TAKEN ON PHYSICAL BASIS AND THE SAME IS VALUED AT COST. IT WAS ITA NO. 554/CHD/2017- M/S CITY BEAUTIFUL HOTELS & RESORTS PVT. LTD., CHA NDIGARH 9 FURTHER STATED THAT THE SAID INFORMATION WAS ALSO PROVIDED DURING ASSESSMENT PROCEEDINGS. VII) DETAILS OF MOVABLE AND IMMOVABLE ASSETS OWNED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WERE NOT PROVIDED DURING ASSESSMENT PROCEEDINGS BUT WERE PROVIDED NOW. THIS NEEDS VERIFICATION. 3.4.2 THE REPLY OF THE ASSESSEE ON THE ABOVE ISSUES WAS CONSIDERED AND IT WAS OBSERVED THAT THE ASSESSEE HAD NOT SUBMITTED ANY REPLY ON THE ISSUES MENTIONED AT SR.NOS. (II), (III) & (VII) BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS. FAILURE TO MAKE ENQUIRIES TO ARRIVE AT THE CORRECT AND COMPLETE FAC TS AND TO APPLY THE CORRECT LAW MAKES THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 4. IN VIEW OF THE ABOVE, IT IS EVIDENT THAT THE ASSESSING OFFICER HAS FAILED TO EXAMINE COMPLETE DIMENSIONS OF THE FACTS AND HAS ALSO FAILED TO APPL Y CORRECT LAW. IT IS, THEREFORE, HELD THAT THE SAID ASSESSMENT IS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE FOR THE REASONS DISCUSSED ABOVE . ACCORDINGLY, THE ASSESSMENT ORDER U/S 143(3) DATED 31.03.2015 FOR ASSESSMENT YEAR 2012-13 IS CANCELLED WITH A DIRECTION TO THE ASSESSING OFFICER TO PASS A N ORDER AFRESH IN ACCORDANCE WITH LAW KEEPING IN VIEW THE ABOVE OBSERVATIONS AND AFTER ALLOWING OPPORTUNI TY OF BEING HEARD TO THE ASSESSEE. 4. THE LD. COUNSEL FOR THE ASSESSEE POINTING OUT TO THE ABOVE REPRODUCED IMPUGNED ORDER OF THE LD. PCIT HAS SUBM ITTED THAT THE ASSESSEE HAD NOT ONLY BEFORE THE ASSESSING OFFICER BUT ALSO BEFORE THE PCIT FURNISHED ALL THE NECESSARY DETAILS AND EXPLA NATIONS. HOWEVER, THE LD. PCIT WITHOUT SPECIFICALLY POINTING AS TO WHAT F URTHER ENQUIRY WAS REQUIRED BY THE ASSESSING OFFICER TO BE CONDUCTED I N THIS CASE AND EVEN WITHOUT POINTING OUT ANY LACUNA OR DEFECT IN THE DE TAILS FURNISHED BY THE ASSESSEE FROM WHERE HE COULD GATHER THAT THE ASSES SING OFFICER HAD ITA NO. 554/CHD/2017- M/S CITY BEAUTIFUL HOTELS & RESORTS PVT. LTD., CHA NDIGARH 10 COMMITTED THE ERROR WHILE APPRECIATING THE EVIDENC E AND DETAILS FURNISHED BY THE ASSESSEE, WHICH HAS CAUSED PREJUDICE TO THE INTEREST OF REVENUE, HAS WRONGLY SET ASIDE THE ASSESSMENT ORDER PASSED BY TH E ASSESSING OFFICER. THE LD. COUNSEL HAS INVITED OUR ATTENTION TO PAGE 5 0 OF THE PAPER BOOK, WHICH IS COPY OF THE LETTER DATED 25.2.2014, ADDRE SSED TO THE INCOME TAX OFFICER WHEREBY THE ASSESSEE HAS FURNISHED THE DE TAILS OF UNSECURED LOANS ALONGWITH CONFIRMATIONS BY THE PAYERS, COPY OF ACCO UNTS, COPY OF BANK STATEMENT, PAN NUMBER AND ADDRESSES OF THE PARTIES ALONGWITH CERTAIN OTHER DETAILS AS REQUIRED BY THE ASSESSING OFFICER WERE ALSO FURNISHED. THE LD. COUNSEL HAS FURTHER INVITED OUR ATTENTION TO P AGE 79 OF THE PAPER BOOK WHICH IS A COPY OF THE LETTER DATED 14.10.2014, WHE REBY THE ASSESSEE HAD FURNISHED THE STATEMENT OF ACCOUNT, CONFIRMATION OF ROYAL KATTHA INDUSTRIES FROM WHOM THE ASSESSEE HAD TAKEN UNSECUR ED LOANS AND FURTHER THE DETAILS OF THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE AND THE SHARES ISSUED TO ONE RAJA DEVINDER SINGH. PAGE 102 IS A COPY OF THE LETTER ADDRESSED TO THE ASSESSING OFFICER WHEREBY THE ASSE SSEE, AS REQUIRED BY THE ASSESSING OFFICER, HAD FURNISHED YEAR WISE SHAREHOL DING POSITION. THE LD. COUNSEL HAS SHOWN FROM THE DOCUMENTS ON THE FILE TH AT THE COMPLETE DETAILS OF THE PERSONS FROM WHOM THE ASSESSEE DURING THE YE AR HAD ACCEPTED THE UNSECURED LOANS HAVE BEEN FURNISHED. THE ASSESSEE HAD DULY EXPLAINED TO THE PCIT THAT DURING THE YEAR THE ASSESSEE HAD NOT ISSUED SHARES TO ITS DIRECTORS AND THAT THE ASSESSEE HAD NOT DONE ANY TR ANSACTIONS WITH THE RELATED PARTIES. SO FAR AS SHARE PREMIUM RECEIVED F ROM RAJA DEVINDER SINGH WAS CONCERNED, THE LD. COUNSEL FOR THE ASSESS EE HAS POINTED OUT TO VARIOUS DOCUMENTS ON THE FILE TO SHOW THAT THE BANK ACCOUNT OF THE INVESTOR WAS ON RECORD AND THAT EVEN THE ASSESSING OFFICER H AD DULY EXAMINED AND VERIFIED THE ABOVE TRANSACTIONS. THE ASSESSING OFFI CER HAD ALSO RECORDED ITA NO. 554/CHD/2017- M/S CITY BEAUTIFUL HOTELS & RESORTS PVT. LTD., CHA NDIGARH 11 THE STATEMENT OF THE INVESTOR RAJA DEVINDER SINGH DURING THE ASSESSMENT PROCEEDINGS. IN HIS STATEMENT, HE PROVIDED HIS PAN NUMBER AND INCOME TAX PARTICULARS, ACCEPTED AND CONFIRMED THE MAKING OF THE INVESTMENT IN THE ASSESSEE COMPANY, DISCLOSED HIS IDENTITY AND EX PLAINED HIS SOURCE OF INCOME, PROVIDED HIS BANK PARTICULARS AND EXPLAINED ABOUT THE RELATION WITH THE DIRECTOR OF THE ASSESSEE COMPANY AND ALSO ANSWE RED THE QUERIES AS TO WHY HE HAD INVESTED IN THE SHARES OF THE ASSESSEE C OMPANY AT A PREMIUM. AFTER EXAMINING THE DOCUMENTS AND ALSO CONSIDERING THE STATEMENT OF THE INVESTOR, THE ASSESSING OFFICER ACCEPTED THE TR ANSACTIONS AS GENUINE. HOWEVER, OUT OF THE ABUNDANT CAUTION, HE ALSO PASSE D ON THE INFORMATION REGARDING THE AFORESAID INVESTMENT TO THE ASSESSING OFFICER OF THE INVESTOR SO THAT THE SOURCE OF INVESTMENT OF THE INVESTOR I F SO REQUIRED, MAY BE FURTHER INVESTIGATED BY THE ASSESSING OFFICER OF TH E INVESTOR SO THAT NOTHING REMAINS UNVERIFIED AND, IN ANY CASE, IF ANY EVIDENC E REGARDING THE NON- CREDITWORTHINESS OF THE INVESTOR IS FOUND, THE INVE STMENT MADE BY THE INVESTOR COULD BE TREATED AS UNDISCLOSED INCOME IN HIS HANDS. 5. A PERUSAL OF THE IMPUGNED ORDER PASSED BY THE LD . CIT(A) SHOWS THAT THE ASSESSEE FURNISHED ALL THE DETAILS AND HAD GIVE N EXPLANATION ON THE ISSUES RAISED TO THE LD. PCIT BUT THE LD. PCIT WIT HOUT POINTING OUT ANY DEFECT IN THE EXPLANATION GIVEN BY THE ASSESSEE HAS SIMPLY OPINED THAT MORE VERIFICATIONS AND DISCREET INQUIRIES WERE REQUIRED TO BE MADE BY THE ASSESSING OFFICER. IN OUR VIEW, THE LD. PCIT, SIMPL Y WRITING THAT THE ASSESSING OFFICER WAS REQUIRED TO MADE MORE INQUIRI ES WITHOUT MAKING OR CAUSING TO MAKE ANY ENQUIRY HIMSELF AND WITHOUT PO INTING OUT AS TO WHAT FURTHER ENQUIRY WHICH THE ASSESSING OFFICER WAS REQ UIRED TO BE MADE AND HOW WITHOUT THOSE INQUIRIES THE ORDER OF THE ASSES SING OFFICER WAS ITA NO. 554/CHD/2017- M/S CITY BEAUTIFUL HOTELS & RESORTS PVT. LTD., CHA NDIGARH 12 ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E, COULD NOT HAVE SIMPLY SET ASIDE THE ORDER OF THE ASSESSING OFFICER. IN T HIS RESPECT, WE DEEM IT FIT TO REPRODUCE THE PROVISIONS OF SECTION 263(1) OF T HE ACT: SECTION 263(1) IN THE INCOME- TAX ACT: (1) THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING] OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, HE, MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. THE SUM AND SUBSTANCE OF THE ABOVE REPRODUCED SECTION 263(1) CAN BE SUMMARIZED IN THE FOLLOWING POINTS: 1) THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THE ACT; 2) IF HE CONSIDERS THAT THE ORDER PASSED BY THE AO IS (I) ERRONEOUS; AND (II) IS PREJUDICIAL TO THE INTEREST OF REVENUE; 3) HE HAS TO GIVE AN OPPORTUNITY OF HEARING IN THIS RESPECT TO THE ASSESSEE; AND 4) HE HAS TO MAKE OR CAUSE TO MAKE SUCH ENQUIRY AS HE DEEMS NECESSARY; 5) HE MAY PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY INCLUDING, (I) AN ORDER ENHANCING OR, (II) MODIFYING THE ASSESSMENT OR ITA NO. 554/CHD/2017- M/S CITY BEAUTIFUL HOTELS & RESORTS PVT. LTD., CHA NDIGARH 13 (III) CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. HENCE, AS PER THE PROVISIONS OF SECTION 263(1), AFT ER GETTING THE EXPLANATION OF THE ASSESSEE, THE LD. PCIT WAS SUP POSED TO EXAMINE THE CONTENTION OF THE ASSESSEE AND BEFORE PASSING AN O RDER OF NULLIFYING / ENHANCING OR CANCELLING THE ASSESSMENT, HE WAS SUP POSED EITHER TO HIMSELF MAKE OR CAUSE TO MAKE SUCH AN INQUIRY AS HE DEEM NE CESSARY. THE WORDS SUCH INQUIRY AS HE DEEMS NECESSARY SUGGESTS THAT THE INQUIRY WHICH IS NECESSARY TO FORM A VIEW AS TO WHETHER THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E OR NOT. RELIANCE IN THIS RESPECT CAN BE PLACED ON THE DECISION OF THE M UMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S A.V. INDUSTRIES, MUMBA I VS. ACIT , ITA NO. 3469/M/2010 DATED 6.11.2015. 6. SO FAR AS REFERENCE BY THE PCIT TO THE EXPLANA TION (2) TO SECTION 263 OF THE ACT WHICH HAS BEEN INSERTED W.E.F. 1.6. 2018 IS CONCERNED, RELIANCE CAN BE PLACED ON THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN AMIRA PURE FOODS PVT LTD. VS. PRINCIPAL CIT (2017 ) 51 CCH 0473 (DELHI TRIBUNAL) , W HEREIN, THE TRIBUNAL WHILE REPLYING UPON THE DECIS ION OF THE DELHI HIGH COURT IN THE CASE OF PCIT VS. DE LHI AIRPORT METRO EXPRESS PVT. LTD [ITA NO. 705/2017] HAS HELD THAT THE EXPLANATION CANNOT SAID TO HAVE OVERRIDDEN THE LAW AS INTERPRETED BY T HE VARIOUS HIGH COURTS, WHERE THE HIGH COURTS HAVE HELD THAT BEFORE REACHIN G A CONCLUSION THAT THE ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, THE COMMISSIONER HIMSELF HAS TO UNDERTAKE SOME ENQUIRY TO ESTABLISH THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO TH E INTEREST OF REVENUE. THE RELEVANT PART OF THE AFORESAID ORDER OF THE TRI BUNAL IS REPRODUCED AS UNDER:- ITA NO. 554/CHD/2017- M/S CITY BEAUTIFUL HOTELS & RESORTS PVT. LTD., CHA NDIGARH 14 30. THE ASSESSEE HAD FILED VARIOUS REPLIES TO THE LD. PCIT IN RESPONSE TO NOTICE U/S 263 OF THE ACT STATI NG THAT ALL THE ISSUES RAISED BY THE LD. PCIT HAVE BEEN EXA MINED BY THE AO DURING THE COURSE OF ASSESSMENT. THE LD. PCIT HAS IGNORED THE REPLIES OF THE ASSESSEE. HE MERELY STATES THAT THE REPLY HAS BEEN FILED BY THE ASSESSEE BUT H E NOWHERE DISCUSSES THE CONTENTIONS RAISED BY THE ASS ESSEE AND WHY HE DOES NOT AGREE WITH THE CONTENTIONS OF T HE ASSESSEE. THE LD. PCIT HAS MERELY REMITTED THE MATT ER BACK TO THE ITA NO. 3205/DEL/2017 AO WITHOUT MAKING ANY ENQUIRY HIMSELF. THE LD. PCIT HAS MENTIONED THA T THE FRESH LOANS HAVE NOT BEEN EXAMINED BY THE AO. THE L D. PCIT HAS NOT CONSIDERED THE CONTENTIONS OF THE ASSE SSEE THAT THERE IS NO FRESH LOAN. SIMILARLY, THE OTHER R EPLIES OF THE ASSESSEE FILED DURING THE COURSE OF ASSESSMENT AND IN RESPONSE TO NOTICE U/S 263 OF THE ACT HAVE BEEN TOT ALLY IGNORED. NO ENQUIRY HAS BEEN MADE BY THE LD. PCIT. IT WAS INCUMBENT FOR THE LD. PCIT TO MAKE SOME MINIMUM INDEPENDENT ENQUIRY TO REACH TO THE CONCLUSION THAT THE ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE RELIANCE IS RIGHTLY PLACED ON THE DECISIONS OF DELHI HIGH COURT IN LD. PCIT V. DELHI AIRPORT METRO EXPRESS PVT. LTD. (SUPRA) AND INCOME TAX OFFICER V. DG HOUSING PROJECTS LIMITED (SUPRA). THE HON'BLE DELHI HIGH COURT IN DELHI AIRPORT METRO EXP RESS PVT. LTD. (SUPRA) HAS MADE THE FOLLOWING OBSERVATIO N: '10. FOR THE PURPOSES OF EXERCISING JURISDICTION UNDER SECTION 263 OF THE ACT, THE CONCLUSION THAT THE ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE HAD TO BE PRECEDED BY SOME MINIMAL INQUIRY. IN FACT, IF THE LD. PCIT IS OF THE VIEW THAT THE AO DID NOT ITA NO. 3205/DEL/2017 UNDERTAKE ANY INQUIRY, IT BECOMES INCUMBENT ON THE LD. PCIT TO CONDUCT SUCH INQUIRY.' 31. THE LD PCIT HAS NOT REFERRED TO EXPLANATION 2 OF SECTION 263 OF THE ACT WHICH HAS BEEN INSERTED W ITH EFFECT FROM 01.06.2015 HOWEVER WE AGREE WITH THE FI NDING OF THE COORDINATE BENCH IN THE CASE OF NARAYAN TATU RANE (SUPRA), WHEREIN IT HAS BEEN HELD THAT EXPLANATION CANNOT SAID TO HAVE OVERRIDDEN THE LAW AS INTERPRETED BY T HE VARIOUS HIGH COURTS, WHERE THE HIGH COURTS HAVE HEL D THAT BEFORE REACHING A CONCLUSION THAT THE ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, THE COMMISSIONER HIMSELF HAS TO UNDERTAKE SOME ITA NO. 554/CHD/2017- M/S CITY BEAUTIFUL HOTELS & RESORTS PVT. LTD., CHA NDIGARH 15 ENQUIRY TO ESTABLISH THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. IN THE CASE OF NARAYAN RANE A DOUBT IS ALSO EXPRESSED REGARDING THE APPLICABILITY OF EXPLANATION 2, WHICH WAS INSERTED BY FINANCE ACT 2015 W.E.F. 01.06.2015, THE BENCH ALSO OBSERVED THAT IF THE EXPLANATION IS INTERPRETE D TO HAVE OVERRIDDEN THE LAW AS LAID DOWN BY VARIOUS HIG H COURTS, THEN THE SAME WOULD EMPOWER THE PR. CIT TO FIND FAULT WITH EACH AND EVERY ASSESSMENT ORDER AND ALSO TO FORCE THE AO TO CONDUCT ENQUIRIES IN THE MANNER PREFERRED BY THE PR. CIT, THUS PREJUDICING ITA NO. 3205/DEL/2017 THE MIND OF THE AO, HOWEVER, THE INTENTION OF THE LEGISLATURE BEHIND THE EXPLANATION COULD NOT HAVE BEEN SO AS THE SAME WOULD LEAD TO UNENDING LITIGATION AND NO FINALITY IN THE LEGAL PROCEEDINGS . 7. RECENTLY, THE COORDINATE BENCH OF THE TRIBUNAL A T AHMEDABAD IN THE CASE OF TORRENT PHARMACEUTICALS LTD. VS. DCIT IT A NO. 165/AHD/2018 REPORTED IN TS-443-ITAT 2018 (AHD) HAS HELD THAT T HE EXPLANATION BEING CLARIFICATORY WOULD NOT LEAD TO DILUTION OF THE BA SIC REQUIREMENTS OF SECTION 263(1) OF THE ACT. THE PROVISIONS OF SECTIO N 263 ALTHOUGH APPEARS TO BE OF VERY WIDE AMPLITUDE AND MORE PARTICULARLY AFTER INSERTION OF EXPLANATION 2, BUT CANNOT POSSIBLY MEAN THAT RECOUR SE TO SECTION 263 OF THE ACT WOULD BE AVAILABLE TO THE REVISIONAL AUTHOR ITY ON EACH AND EVERY INADEQUACY IN THE MATTER OF INQUIRIES AND VERIFICAT ION AS PERCEIVED BY THE REVISIONAL AUTHORITY. THE REVISIONAL ACTION PERCEIV ED ON THE PRETEXT OF INADEQUACY OF ENQUIRY IN A PLANNERY AND BLANKET MAN NER MUST BE DESISTED FROM . THE RELEVANT PART OF THE ORDER OF THE TRIBUNAL IS REPRODUCED AS UNDER:- 9. THE PR. CIT HAS DRAWN SUPPORT FROM NEWLY INSERT ED EXPLANATION 2 BELOW SECTION 263(1) OF THE ACT INTRO DUCED BY THE FINANCE ACT, 2015 W.E.F. 1.6.2015 FOR THIS A CTION. THE EXPLANATION 2 INTER ALIA PROVIDES THAT THE ORDE R PASSED WITHOUT MAKING INQUIRIES OR VERIFICATION WH ICH SHOULD HAVE BEEN MADE WILL BE DEEMED TO BE ERRONEO US IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IT ITA NO. 554/CHD/2017- M/S CITY BEAUTIFUL HOTELS & RESORTS PVT. LTD., CHA NDIGARH 16 IS ON THIS BASIS, THE ASSESSMENT ORDER PASSED BY TH E AO UNDER S.143(3) OF THE ACT HAS BEEN SET ASIDE WITH A DIRECTION TO THE AO TO PASS A FRESH ASSESSMENT ORDE R. IT WILL BE THEREFORE IMPERATIVE TO DWELL UPON THE IMPA CT OF EXPLANATION 2 FOR THE PURPOSES OF SECTION 263 OF TH E ACT. 9.1 THE AIM AND OBJECT OF INTRODUCTION OF AFORESAID EXPLANATION BY FINANCE ACT, 2015 WAS EXPLAINED IN C BDT CIRCULAR NO. 19/2015 [F.NO.142/14/2015-TPL], DATED 27- 11-2015 WHICH IS REPRODUCED HEREUNDER: 53. REVISION OF ORDER THAT IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE. 53.1 THE PROVISIONS CONTAINED IN SUB-SECTION (1) OF SECTION 263 OF THE INCOME-TAX ACT, BEFORE AMENDMENT BY THE ACT, PROVIDED THAT IF THE PRINCIPAL COMMISSIONER OR COMMISSIONER CONSIDERS THAT ANY ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAKING AN ENQUIRY PASS AN ORDER MODIFYING THE ASSESSMENT MADE BY THE ASSESSING OFFICER OR CANCELLING THE ASSESSMENT AND DIRECTING FRESH ASSESSMENT. 53.2 THE INTERPRETATION OF EXPRESSION 'ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE' HAS BEEN A CONTENTIOUS ONE. IN ORDER TO PROVIDE CLARITY ON THE ISSUE, SECTION 263 OF THE INCOME-TAX ACT HAS BEEN AMENDED TO PROVIDE THAT AN ORDER PASSED BY THE ASSESSING OFFICER SHALL BE DEEMED TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICI AL TO THE INTERESTS OF THE REVENUE, IF, IN THE OPINION OF THE PRINCIPAL COMMISSIONER OR COMMISSIONER. (A) THE ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH, SHOULD HAVE BEEN MADE; (B) THE ORDER IS PASSED ALLOWING ANY RELIEF WITHOUT INQUIRI NG INTO THE CLAIM; (C) THE ORDER HAS NOT BEEN MADE IN ACCORDANCE WITH ANY ORDER, DIRECTION OR INSTRUCTION ISSUED BY THE BOARD UNDER SECTION 119; OR (D) THE ORDER HAS NOT BEEN PASSED IN ACCORDANCE WITH ANY DECISION, PREJUDICIAL TO THE ASSESSEE, RENDERED BY THE JURISDICTIONAL HIGH COURT OR SUPREME COURT IN THE CASE OF THE ASSESSEE OR ANY OTHER PERSON. 53.3 APPLICABILITY: THIS AMENDMENT HAS TAKEN EFFECT FROM 1ST DAY OF JUNE, 2015. ITA NO. 554/CHD/2017- M/S CITY BEAUTIFUL HOTELS & RESORTS PVT. LTD., CHA NDIGARH 17 9.2 A BARE READING OF THE CIRCULAR GIVES A SOMEWHAT IMPRESSION THAT THE EXPLANATION 2 WAS INSERTED FOR THE PURPOSE OF PROVIDING CLARITY ON THE EXPRESSION ERR ONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF T HE REVENUE. THE EXPLANATION BEING CLARIFICATORY WOULD NOT LEAD TO DILUTION OF THE BASIC REQUIREMENTS OF SECTI ON 263(1) OF THE ACT. THE PROVISIONS OF SECTION 263 AL THOUGH APPEARS TO BE OF A VERY WIDE AMPLITUDE AND MORE PARTICULARLY AFTER INSERTION OF EXPLANATION 2 BUT C ANNOT POSSIBLY MEAN THAT RECOURSE TO SECTION 263 OF THE A CT WOULD BE AVAILABLE TO THE REVISIONAL AUTHORITY ON E ACH AND EVERY INADEQUACY IN THE MATTER OF INQUIRIES AND VERIFICATION AS PERCEIVED BY THE REVISIONAL AUTHORI TY. THE REVISIONAL ACTION PERCEIVED ON THE PRETEXT OF INADE QUACY OF ENQUIRY IN A PLANNERY AND BLANKET MANNER MUST BE DESISTED FROM. THE OBJECT OF SUCH EXPLANATION IS PROBABLY TO DISSU ADE THE ASSESSING OFFICER FROM PASSING ORDERS IN A ROUTINE AND PERFUNCTORY MANNER AND WHERE HE FAILED TO CARRY OUT THE RELEVANT AND NECESSARY INQUIRIES OR WHERE THE AO HA S NOT APPLIED MIND ON IMPORTANT ASPECTS. HOWEVER, IN THE SAME VAIN WHERE THE PREPONDERANCE OF EVIDENCE INDICATES ABSENCE OF CULPABILITY, AN ONEROUS BURDEN CANNOT OBVIOUSLY BE FASTENED UPON THE AO WHILE MAKING ASSESSMENT IN THE NAME OF INADEQUACY IN INQUIRIES O R VERIFICATION AS PERCEIVED IN THE OPINION OF THE REV ISIONAL AUTHORITY. IT GOES WITHOUT SAYING THAT THE EXERCISE OF STATUTORY POWERS IS DEPENDENT ON EXISTENCE OF OBJEC TIVE FACTS. THE POWERS OUTLINED UNDER S.263 OF THE ACT A RE EXTRAORDINARY AND DRASTIC IN NATURE AND THUS CANNOT BE READ TO HOLD THAT AN UNCONTROLLED, UNGUIDED AND UNCANALISED POWERS ARE VESTED WITH THE COMPETENT AUTHORITY. THE POWERS UNDER S.263 OF THE ACT HOWSOE VER SWEEPING ARE NOT BLANKET NEVERTHELESS. THE AO CANNO T BE EXPECTED TO GO TO THE LAST MILE IN AN ENQUIRY ON TH E ISSUE OR INDULGE IN FLEETING INQUIRIES. THE ACTION OF THE REVISIONAL COMMISSIONER BASED ON SUCH EXPECTATION REQUIRES TO BE STRUCK DOWN. 9.3 THE USE OF EXPRESSION WHICH SHOULD HAVE BEEN M ADE IN CLAUSE (A) TO EXPLANATION 2 TO SECTION 263 OF TH E ACT IS SIGNIFICANT. THIS IMPLIEDLY TESTS THE ACTION OF AO ON THE TOUCHSTONE OF REASONABLENESS AND RATIONALITY IN APP ROACH. IT CLEARLY SUGGESTS THAT CONTEXT ALSO HOLDS THE KEY IN THE ITA NO. 554/CHD/2017- M/S CITY BEAUTIFUL HOTELS & RESORTS PVT. LTD., CHA NDIGARH 18 MATTER OF ENQUIRY. THE ACTION OF THE AO REQUIRES TO BE EVALUATED CONTEXTUALLY. IF THE AFORESAID EXPLANATIO N IS READ IN A ABSTRACT MANNER DE HORSE THE TEST OF REASONABLENESS AND CONTEXT, THE POWERS OF REVISIONA L CIT WOULD BE RENDERED INVINCIBLE AND ALMOST EVERY ASSES SMENT ORDER CAN BE POSSIBLY FRUSTRATED. A NUANCED UNDERST ANDING OF EXPLANATION SUGGESTS THAT INADEQUACY IN INQUIRY OUGHT TO BE OF CARDINAL NATURE TO IGNITE THE POTENT POWER S OF REVIEW. 9.4 AS NOTED, THE ASSESSEE IS A VERY BIG PLAYER IN THE PHARMA SECTOR AND ENORMITY OF OPERATION IS TO BE KE PT IN MIND. THUS WHAT IS RELEVANT IS TO WEIGH AS TO WHAT COUNTERVAILING CIRCUMSTANCES WERE PREVAILING WHICH OUGHT TO HAVE PROVOKED SUCH ENQUIRY BY A REASONABLE PERSO N INSTRUCTED IN LAW. IN THE INSTANT CASE, APART FROM NOTICING THAT EARLIER VIEW TAKEN IS ERRONEOUS PARTICULARLY W HEN A VIEW WAS ALREADY TAKEN AFTER INQUIRY. IF SUCH COURS E OF ACTION AS INTERPRETED BY THE REVISIONAL COMMISSIONE R IN THE LIGHT OF THE EXPLANATION 2 IS PERMITTED, REVISI ONAL COMMISSIONER CAN POSSIBLY FIND FAULT WITH EACH AND EVERY ASSESSMENT ORDER WITHOUT HIMSELF MAKING ANY INQUIRY OR VERIFICATION AND WITHOUT ESTABLISHING THAT ASSESSME NT ORDER IS NOT SUSTAINABLE IN LAW. THIS WOULD INEVITA BLY MEAN THAT VERY ORDER OF THE LOWER AUTHORITY WOULD T HUS BECOME SUSCEPTIBLE TO SECTION 263 OF THE ACT AND, I N TURN, WILL CAUSE SERIOUS UNINTENDED HARDSHIP TO THE TAX P AYER CONCERNED FOR NO FAULT ON HIS PART. APPARENTLY, THI S IS NOT INTENDED BY THE EXPLANATION. HOWSOEVER WIDE THE SCO PE OF EXPLANATION 2(A) MAY BE, ITS LIMITS ARE IMPLICIT IN IT. IT IS ONLY IN A VERY GROSS CASE OF INADEQUACY IN INQUIRY OR WHERE INQUIRY IS PER SE MANDATED ON THE BASIS OF RE CORD AVAILABLE BEFORE THE AO AND SUCH INQUIRY WAS NOT CONDUCTED, THE REVISIONAL POWER SO CONFERRED CAN BE EXERCISED TO INVALIDATE THE ACTION OF AO. THE AO IN THE PRESENT CASE HAS NOT ACCEPTED THE SUBMISSIONS OF TH E ASSESSEE ON VARIOUS ISSUES SUMMARILY BUT HAS SHOWN APPETITE FOR INQUIRY AND VERIFICATIONS. THE AO HAS PASSED THE ORDER IN GREAT DETAIL AFTER MAKING SEVERAL ALLO WANCES AND DISALLOWANCES ON THE ISSUES INVOLVED IMPLIEDLY AFTER DUE APPLICATION OF MIND. THEREFORE, THE EXPLANATION 2 TO SECTION 263 OF THE ACT DO NOT, IN OUR VIEW, THWART THE ASSESSMENT PROCESS IN THE FACTS AND THE CONTEXT OF THE CASE. CONSEQUENTLY, WE FIND THAT THE FOUNDATION FOR EXERCISE OF REVISIONAL JURISDICTION IS SORELY MISSI NG IN THE PRESENT CASE. ITA NO. 554/CHD/2017- M/S CITY BEAUTIFUL HOTELS & RESORTS PVT. LTD., CHA NDIGARH 19 10. RESULTANTLY, THE ORDER OF THE PR.CIT PASSED UND ER S.263 OF THE ACT IS SET ASIDE AND CANCELLED AND THE ORDER OF THE AO UNDER S.143(3) IS RESTORED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. 8. THE COORDINATE MUMBAI BENCH OF THE TRIBUNAL IN T HE CASE OF NARAYAN TATU RANE TS-290-ITAT 2016(MUMBAI) HAS HE LD THAT THE EXPLANATION 2 TO SECTION 263 DOES NOT PROVIDE UNFET TERED RIGHT TO THE PCIT TO REVISE EACH AND EVERY ORDER. IT IS THE RESPONSIB ILITY OF THE PCIT TO SHOW THAT THE ENQUIRY FOR VERIFICATION CONDUCTED BY THE ASSESSING OFFICER WAS NOT IN ACCORDANCE WITH THE ENQUIRES OR VERIFICATION THA T WOULD HAVE BEEN CARRIED OUT BY A PRUDENT OFFICER. 9. IN VIEW OF THIS, WE DO NOT FIND ANY JUSTIFICATIO N ON THE PART OF THE LD. PCIT IN EXERCISING HIS REVISION JURISDICTION U/S 2 63 OF THE ACT AND THEREBY CANCELLING THE ASSESSMENT ORDER PASSED BY THE ASSES SING OFFICER. THE ORDER PASSED BY THE LD. PCIT U/S 263 IS THEREFORE, QUASH ED AND CONSEQUENTIAL ASSESSMENT / ADDITIONS MADE, IF ANY, ARE HEREBY SET ASIDE. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04.10.2018 SD/- SD/- # $ % &' (ANNAPURNA GUPTA) '( / ACCOUNTANT MEMBER (SANJAY GARG ) / JUDICIAL MEMBER DATED : 04.10. 2018 RKK !'# $%' / COPY OF THE ORDER FORWARDED TO : 1. $#!&' / THE APPELLANT 2. ()&' / THE RESPONDENT 3. ) ) * / CIT 4. ) ) * ( $#! )/ THE CIT(A) 5. '+,) - , ) $#!) - , ./0,1 / DR, ITAT, CHANDIGARH 6. ,0 2! / GUARD FILE ITA NO. 554/CHD/2017- M/S CITY BEAUTIFUL HOTELS & RESORTS PVT. LTD., CHA NDIGARH 20 / BY ORDER, 3) #4 / ASSISTANT REGISTRAR