Lexus Motors Ltd., Kolkata V. CIT, KOLKATA-3, KOLKATA, Kolkata

ITA 744/KOL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1657 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 02-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 27-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G MALLIKARJUNA
• Keywords: Corroborative evidences; Accommodation entries; Assessment record; Right to appeal; Revenue expenditure
• Section: 143(3); 133(6); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA C BENCH, KOLKATA [BEFORE SRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER & SRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER] I.T.A. NO. 744/KOL/2015 ASSESSMENT YEAR: 201 0-11 LEXUS MOTORS LIMITED... APPELLANT KARNANI ESTATE 209 A.J.C. BOSE ROAD KOLKATA -700 017 [PAN : AAACL5356K] COMMISSIONER OF INCOME TAX, KOLKATA-3, KOLKATA ..RESPONDENT AAYAKAR BHAWAN P-7, CHOWRINGHEE SQUARE KOLKATA 700 069 APPEARANCES BY: SHRI AKKAL DUDHWEWALA, AR, APPEARED ON BEHALF OF TH E ASSESSEE. SHRI G. MALLIKARJUNA, CIT, DR, APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : AUGUST 08, 2017 DATE OF PRONOUNCING THE ORDER : AUGUST 25, 2017 O R D E R PER J. SUDHAKAR REDDY :- THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. PR. COMMISSIONER OF INCOME TAX-3, KOLKATA (HEREINAF TER THE LD. CIT), PASSED U/S 263 OF THE INCOME TAX ACT, 1961 (THE ACT), DT . 24/03/2015, REVISING THE ORDER PASSED BY THE ASSESSING OFFICER, U/S 143(3) F OR THE ASSESSMENT YEAR 201-11 ON 07/08/2012. 2. BRIEF FACTS OF THE CASE:- THE ASSESSEE COMPANY IS AN AUTHORIZED DEALER OF T HE ENTIRE RANGE OF VEHICLES AND ITS ALLIED ACCESSORIES MANUFACTURED BY TATA MOTORS LTD. THE HEAD 2 I.T.A. NO. 744/KOL/20 15 ASSESSMENT YEAR: 2010 -11 LEXUS MOTORS LIMITED OFFICE AS WELL AS THE PASSENGER CAR SHOWROOM IS AT THE ADDRESS GIVEN ABOVE; APART FROM THAT IT HAS VARIOUS OTHER BRANCHES/SHOWR OOMS/WORKSHOP AT KOLKATA, HOWRAH, 24 PARGANAS (SOUTH) AND 24 PARGANAS (NORTH). THE ASSESSING OFFICER COMPLETED ASSESSMENT UNDER SECTION 143 (3) OF THE ACT, ON 7/8/2012 DETERMINING THE TOTAL INCOME RS.1,67,07,512/- 3. THE LD. CIT, ISSUED A SHOW CAUSE NOTICE UNDER SE CTION 263 OF THE ACT FOR THE FOLLOWING REASONS:- ON PERUSAL OF THE ASSESSMENT RECORDS VIS--VIS THE RETURN AND OTHER DOCUMENT SUBMITTED IT IS SEEN THAT THE INFORM ATION IN RESPECT OF UNVERIFIABLE PAYMENTS OF COMMISSION WORT H RS.9,25,000/-WAS PASSED ON BY ITO WARD 7 (2), KOL W HILE COMPUTING THE ASSESSMENT OF M/S. WISE AGENCIES PVT. LTD. FOUND THAT THE ABOVE MENTIONED ASSESSEE HAS PROVIDED BOGU S ENTRIES TO DIFFERENT PARTIES. THE AO WHILE FINALIZATION THE AS SESSMENT OF THE ABOVE MENTIONED ASSESSEE FAILED TO CAUSE SUFFICIENT ENQUIRIES ON THIS ASPECT REGARDING THE GENUINENESS AND CREDITWOR THINESS OF THE TRANSACTION. THE WRONGFUL ACT ON THE PART OF THE AO ON THE POINTS DISCUSSED ABOVE HAS MADE THE ASSESSMENT ORDER ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 4. THE ASSESSEE REPLIED MAKING DETAILED SUBMISSIONS VIDE REPLY DATED 08/02/2015. THE LD. CIT REJECTED THE SUBMISSIONS AN D PASSED AN ORDER UNDER SECTION 263 OF THE ACT, ON 24/03/2015 BY HOLDING AS FOLLOWS:- THE MATTER UNDER DISPUTE HAS BEEN EXAMINED IN THE BACKGROUND OF FACTUAL MATRIX OF THE CASE. THE BASIC QUESTION H ERE IS WHERE DOES 3 I.T.A. NO. 744/KOL/20 15 ASSESSMENT YEAR: 2010 -11 LEXUS MOTORS LIMITED THE ONUS OF PROOF LIE? IT IS FOR THE ASSESSEE TO DI SCHARGE ITS ONUS OF PROOF TO ESTABLISH HIS CLAIM OF EXPENDITURE ON ACCO UNT OF COMMISSION PAYMENT. MOREOVER, THE MERE FACT (EVEN I F TRUE) THAT THE PAYMENT HAS BEEN MADE BY CHEQUE DOES NOT ESTABL ISH THE ASSESSEE'S CLAIM OF EXPENDITURE ON ACCOUNT OF COMMI SSION FULLY. IT IS NOT A CONCLUSIVE PROOF. LARGE NUMBER OF CASE LAWS E XIST ON THIS ISSUE HOLDING THAT MERE FACT OF PAYMENT HAVING BEEN MADE IS NOT CONCLUSIVE OF GENUINENESS OF THE TRANSACTION. FURTH ER, MERE FACT (EVEN IF IT IS TRUE) THAT TDS HAS BEEN DEDUCTED DOE S NOT PROVE THE CLAIM OF EXPENDITURE. THE AO WAS REQUIRED TO EXAMIN E THE ISSUE IN PROPER PERSPECTIVE AND CALL UPON THE ASSESSEE TO PR OVE ITS CASE BY FILING OTHER SUPPORTING EVIDENCE APART FROM CHEQUE PAYMENT AND TDS. IT APPEARS THAT THE AO HAS NOT EVEN TRIED TO G O BEYOND THE DOCUMENTS SUBMITTED BY THE ASSESSEE BY ISSUING NOTI CE U/S 133(6) AND MAKING INDEPENDENT ENQUIRIES. THE DOCUMENTS FIL ED BY THE ASSESSEE IN THE FORM OF EVIDENCE OF PAYMENT ETC. HA VE BEEN ACCEPTED WITHOUT GETTING CONFIRMATION FROM M/S WISE AGENCIES PVT. LTD AND EXAMINING THE VERACITY OF THE CONTENTI ON OF THE ASSESSEE. HENCE, ASSESSMENT ORDER PASSED BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. ..I HAVE CONSIDERED THE MATTER AND GONE THROUGH T HE RELEVANT RECORDS. I AM OF THE OPINION THAT THE AO HAS FAILED TO MAKE NECESSARY ENQUIRIES IN THIS CASE TO EXAMINE THE GEN UINENESS OF THE CLAIM OF PAYMENT OF COMMISSION. HE HAS MERELY ACCEP TED THE CLAIM OF THE ASSESSEE WITHOUT VERIFICATION OF THE CLAIM A N APPLICATION OF MIND. THE ASSESSMENT IS THEREFORE ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF THE REVENUE. I AM OF THE OPINION THAT T HE CASE HAS TO GO BACK TO THE A.O. FOR FRESH ASSESSMENT. 4 I.T.A. NO. 744/KOL/20 15 ASSESSMENT YEAR: 2010 -11 LEXUS MOTORS LIMITED 5. AGGRIEVED, THE ASSESSE IS IN APPEAL BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE, SHRI AKKAL DUD HWEWALA, SUBMITTED THAT THE INFORMATION BASED ON WHICH THE NOTICE UNDE R SECTION 263 OF THE ACT WAS GIVEN, WAS ALLEGEDLY PASSED BY THE ASSESSING OF FICER OF M/S. WISE AGENCIES PVT. LTD., WHEREIN IT WAS ALLEGED THAT M/S . WISE AGENCIES PVT. LTD. HAS PROVIDED BOGUS ENTRIES TO DIFFERENT PARTIES. HE ARGUED THAT A COPY OF THE ASSESSMENT ORDER OF M/S. WISE AGENCIES PVT. LTD., W AS NOT PROVIDED TO THE ASSESSEE AND THAT THE REQUEST OF THE ASSESSEE TO PR OVIDE RELEVANT MATERIAL AND OPPORTUNITY FOR CROSS EXAMINATION OF THE PERSON -IN-CHARGE OF M/S WISE AGENCIES PVT. LTD. HAD NOT BEEN GIVEN. HE SUBMITTED THAT THE ASSESSEE HAD, IN PURSUANCE TO THE QUERY RAISED BY THE ASSESSING OFFICER IN THE REGULAR ASSESSMENT PROCEEDINGS CLARIFIED AND FURNISHED EVIDENCE OF THE FACT OF THE ASSESSEE HAVI NG PAID COMMISSION, ON SALE OF VEHICLES, AMOUNTING TO RS.9,24,075/-, TO M/ S. WISE AGENCIES PVT. LTD. TDS WAS DEDUCTED, AND THEREAFTER, THE NET AMOUNT WAS REMITTED TO BANKING CHANNELS. HE ARGUED THAT INFORMATION AND DOCUMENTS, NORMALLY EXPECTED TO BE MAINTAINED IN THE ORDINARY COURSE OF BUSINESS FOR S UCH TRANSACTIONS WERE PRODUCED BEFORE THE ASSESSING OFFICER BY M/S. WISE AGENCIES PVT. LTD. AND THE ASSESSEE COMPLIED WITH THE NOTICE ISSUED TO IT UNDE R SECTION 133 (6) OF THE ACT. THE ASSESSING OFFICER OF M/S. WISE AGENCIES PV T. LTD. HAD ISSUED A 5 I.T.A. NO. 744/KOL/20 15 ASSESSMENT YEAR: 2010 -11 LEXUS MOTORS LIMITED CERTIFICATE TO THAT ASSESSEE FOR DEDUCTION OF TAX A T A LOWER RATE AND ACCORDINGLY TDS WAS DEDUCTED AT A LOWER RATE. HE SU BMITTED THAT THIS WAS ENQUIRY MADE BY THE ASSESSING OFFICER DURING THE CO URSE OF ASSESSMENT PROCEEDINGS VIDE NOTICE ISSUED UNDER SECTION 142 (1 ) OF THE ACT, DATED 24/03/2012 WHEREIN AT POINT 9, THE DETAILS OF COMMI SSION WAS SOUGHT AND THE ASSESSEE HAD FURNISHED THE SAME. A NOTE ON THE BROKERAGE EXPENSES INCURRED WAS ALSO FURNISHED. HE SUBMITTED THAT THE ASSESSING OFFICER HAD CALLED FOR THE PARTICULAR DETAILS AND ON BEING SATI SFIED, HAS TAKEN A PLAUSIBLE VIEW AND HENCE, THE REVISION IS BAD IN LAW. HE FURT HER SUBMITTED THAT THE ALLEGATION MADE BY THE LD. CIT IN HIS ORDER PASSED UNDER SECTION 263 IS THAT THE AO HAS NOT MADE ADEQUATE ENQUIRIES. IT IS NOT A CASE OF NO ENQUIRY. HE SUBMITTED THAT UNDER THESE CIRCUMSTANCES THE REVISI ON IS BAD IN LAW. FOR THIS PROPOSITION HE RELIED ON THE FOLLOWING CASE LAWS:- CIT VS. J.L. MORRISON (I) LTD. (366 ITR 593) (CAL H C) CIT VS. SOHANA WOLLEN MILLS (296 ITR 238) (P&H HC) CIT VS. SUNBEAM AUTO LTD. (332 ITR 167) (DELHI HC) SPECTRA SHARES & SCRIPS (P) LTD. VS. CIT (354 ITR 3 5) (AP HC) 6.1. HE FURTHER SUBMITTED THAT THE LD. CIT ON EXAMI NATION OF THE SUBMISSIONS OF THE ASSESSEE, HAS NOT COME TO A CONC LUSION THAT THERE IS AN ERROR, OR DISCREPANCY OR FALSITY IN THE SUBMISSIONS . HE ARGUED THAT WITHOUT FORMING AN OPINION THAT THERE IS AN ERROR, THE LD. CIT CANNOT IS SET ASIDE THE 6 I.T.A. NO. 744/KOL/20 15 ASSESSMENT YEAR: 2010 -11 LEXUS MOTORS LIMITED ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FURT HER ENQUIRY ON PRESUMPTIONS AND ASSUMPTIONS. FOR THIS PROPOSITION, HE RELIED ON THE FOLLOWING CASE LAWS:- THE CALCUTTA STOCK EXCHANGE LTD. VS. CIT (ITA NO. 2 68/KOL/2015) (ITAT KOL) DIT VS. JYOTI FOUNDATION (357 ITR 388) (DEL HC) CIT VS. LEISURE WEAR EXPORTS LTD. (341 ITR 166) (DE L HC) ITO VS. D.G. HOUSING PROJECTS LTD. (343 ITR 329) (D EL HC) CRISIL LTD. VS. ADDL. CIT (142 TTJ 62) (ITAT MUM) 6.2. HE FURTHER RELIED ON THE DECISION OF THE HONB LE CALCUTTA HIGH COURT IN THE CASE OF ITAT NO. 225 OF 2013, COMMISSIONER OF INCOME TAX, K OLKATA-I VERSUS M/S. INBUILT MERCHANT PVT LTD, JUDGMENT DT. 14 TH MARCH, 2014, AND SUBMITTED THAT THE PROPOSITION IN THESE CASE LAWS A RE APPLICABLE TO THE FACTS OF THIS CASE. HENCE HE SUBMITTED THAT THE ORDER OF THE LD. CIT, PASSED UNDER SECTION 263 OF THE ACT, IS BAD IN LAW AND HENCE THE SAME BE QUASHED AND APPEAL OF THE ASSESSEE BE ALLOWED. 7. THE LEARNED DR, ON THE OTHER HAND, STRONGLY OPPO SED THE CONTENTIONS OF THE ASSESSEE AND SUBMITTED THAT EACH CASE HAS TO BE EXAMINED ON ITS FACTUAL MATRIX. HE POINTED OUT THAT THE INFORMATION HAS COME TO THE POSSESSION OF THE DEPARTMENT THAT M/S. WISE AGENCIE S PVT. LTD. HAS BEEN PROVIDING ACCOMMODATION ENTRIES TO VARIOUS PARTIES AND BASED ON SUCH SPECIFIC INFORMATION THE LD. CIT HAS EXAMINED THE R ECORDS OF THE ASSESSEE AND COME TO THE CONCLUSION THAT THE ASSESSING OFFICER H AS NOT CONDUCTED ADEQUATE ENQUIRIES ON THIS ISSUE. HE SUBMITTED THAT THE ASSE SSING OFFICER DURING THE 7 I.T.A. NO. 744/KOL/20 15 ASSESSMENT YEAR: 2010 -11 LEXUS MOTORS LIMITED ASSESSMENT PROCEEDINGS MERELY CALLED FOR INFORMATIO N AND PLACED THE REPLIES ON THE RECORD. SUCH AND ACT, AS PER THE LD. DR CANN OT BE THE BASIS TO COME TO A CONCLUSION THAT THE ASSESSING OFFICER HAS TAKEN A P LAUSIBLE VIEW. MERELY THE FACT THAT CERTIFICATE OF LOWER DEDUCTION OF TAX WAS GIVEN BY THE ASSESSING OFFICER, DOES NOT PROVE THE GENUINENESS OF THE PAYM ENT OF COMMISSION. HE RELIED ON THE ORDER OF THE LD. CIT AND THE CASE LAW MENTIONED THEREIN AND THUS, HE SUBMITTED THAT THE APPEAL OF THE ASSESSEE, BE DISMISSED, AND THE ORDER OF THE LD. CIT BE UPHELD. 8. AFTER HEARING RIVAL SUBMISSIONS, I HOLD AS FOLLO WS:- THE LD. CIT BASED HIS ENTIRE DECISION ON THE FACT THAT THE ASSESSING OFFICER HAVING JURISDICTION ON THE ASSESSEE OF M/S. WISE AGENCIES PVT. LTD., COULD NOT LOCATE THAT COMPANY DURING THE COURSE OF ITS ASSESSMENT PROCEEDINGS. THIS ASSESSEE HAD FILED ITS RETURN OF INCOME. IT IS A FACT THAT LOWER DEDUCTION CERTIFICATE UNDER SECTION 197 OF TH E ACT, WAS GIVEN TO M/S. WISE AGENCIES PVT. LTD., BY I.T.O. TDS-DURGAPUR. TH IS, ACCORDING TO THE ASSESSING OFFICER WAS GRANTED BASED ON FALSE INFORM ATION. NOW, ON THESE FACTS, WE HAVE TO EXAMINE THE ISSUE, AS TO WHETHER THE ASS ESSING OFFICER OF THE ASSESSEE COMPANY HAS FAILED TO CONDUCT ENQUIRIES ON THIS ISSUE OF PAYMENT OF COMMISSION. WE FIND FROM THE NOTICE ISSUED UNDER SE CTION 142 (1), ON 23/04/2012 BY THE ASSESSING OFFICER TO THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, HE HAD CALLED FOR DETAILS O F COMMISSION. THE 8 I.T.A. NO. 744/KOL/20 15 ASSESSMENT YEAR: 2010 -11 LEXUS MOTORS LIMITED ASSESSEE HAD FURNISHED THESE DETAILS. A NOTE WAS AL SO GIVEN IN SUPPORT OF THIS EXPENDITURE. MERELY BECAUSE THE ASSESSING OFFICER H AS NOT ISSUED A NOTICE UNDER SECTION 133 (6) OF THE ACT, TO EACH AND EVERY PARTY TO WHOM COMMISSION WAS PAID AND EXPENDITURE CLAIMED. IN THI S CASE, IT CANNOT BE CONCLUDED THAT THIS IS A CASE OF NON-ENQUIRY. THE L D. CIT HOLDS THAT THIS IS A CASE WHERE PROPER ENQUIRY WAS NOT DONE. THE ASSESSE E CLAIMED HUGE EXPENDITURE AND FILED ITS RETURN OF INCOME DECLARIN G TOTAL INCOME OF RS. 1,65,26,376/-. THE TOTAL COMMISSION EXPENDITURE PAID IN EXCESS OF RS. 50,000/- EACH IN AGGREGATE, WAS TO 139 PARTIES AMOU NTING TO RS. 2,79,22,412/-. BROKERAGE PAID OF LESS THAN RS. 50,0 00/- TO EACH PARTY, WAS RS. 60,98,670/-. THE TOTAL BROKERAGE EXPENDITURE WAS RS . 3,40,21,082/-. THE IMPUGNED EXPENDITURE WHICH AS PER THE LD. CIT WAS N OT PROPERLY ENQUIRED WAS ONLY RS. 9,25,000/-. THE ASSESSEE FURNISHED A C OPY OF THE INVOICES RAISED BY THE M/S. WISE AGENCIES PVT. LTD. A COPY OF THE L OWER DEDUCTION OF TAX CERTIFICATE ISSUED IN THE CASE OF M/S. WISE AGENCIE S PVT. LTD. BY THE ITO (TDS) U/S 197 OF THE ACT, WAS ALSO FILED BEFORE THE ASSES SING OFFICER. THE ASSESSING OFFICER DID NOT DRAW ANY ADVERSE INFERENCE AND ACCE PTED THIS INFORMATION AS CORRECT. SIMILAR INFORMATION WAS ALSO GIVEN IN THE C ASES OF ALL OTHER PARTIES, TO WHOM COMMISSION WAS PAID. THE LD. CIT HAS NOT RAISE D ANY OBJECTIONS ON THOSE MATTERS. 9 I.T.A. NO. 744/KOL/20 15 ASSESSMENT YEAR: 2010 -11 LEXUS MOTORS LIMITED 8.1. BE IT AS IT MAY, THE ENTIRE THRUST OF THE LD. CIT IS THAT THE ENQUIRIES MADE BY THE ASSESSING OFFICER ARE INADEQUATE. THERE IS N O ALLEGATION OF NON-ENQUIRY. ON THESE FACTS THE VARIOUS COURTS HAVE LAID DOWN TH E FOLLOWING PROPOSITIONS OF LAW:- THE HONEBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF SPECTRA SHARES AND SCRIPS PVT. LTD. V CIT (AP) 354 ITR 35 HAD CONSIDERE D A NUMBER OF JUDGMENTS ON THIS ISSUE OF EXERCISE OF JURISDICTION U/S 263 O F THE ACT BY THE PRINCIPAL COMMISSIONER OF INCOME TAX AND CULLED THE PRINCIPLE S LAID DOWN IN THE JUDGMENTS AS BELOW : 24. IN MALABAR INDUSTRIAL CO.LTD. ( 2 SUPRA), THE SUPREME COURT HELD THAT A BARE READING OF SEC.263 MAKES IT CLEAR THAT THE PREREQUISITE FOR THE EXERCISE OF JURISDICTION BY THE COMMISSIONER SUOMOT U UNDER IT, IS THE ORDER OF 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 TWIN CONDITIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT IF THE ORDER OF THE INCOME TAX OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IT IS PREJUDICIAL TO THE REVENUE RECOURSE CAN NOT BE HAD TO SEC.263 (1) OF THE ACT. IT ALSO HELD AT PG-88 AS FOLLOWS: 'THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE RE VENUE' HAS TO 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 INTERESTS O F 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. IT HAS BEEN HELD BY THIS COURT THAT WHERE A SUM NOT EARNED BY A PERSON IS ASSESSED AS INCOME IN HIS HANDS ON HIS SO OFFERING, THE ORDER P ASSED BY THE ASSESSING OFFICER ACCEPTING THE SAME AS SUCH WILL BE ERRONEOU S AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. RAMPYARIDEVISARAOGI V . CIT (1968) 67 ITR 84 (SC) AND IN SMT. TARA DEVI AGGARWAL V. CIT (1973 ) 88 ITR 323 (SC)'. 10 I.T.A. NO. 744/KOL/20 15 ASSESSMENT YEAR: 2010 -11 LEXUS MOTORS LIMITED 25. IN MAX INDIA LTD. (3 SUPRA) , REITERATED THE VIEW IN MALABAR INDUSTRIAL CO.LTD. (2 SUPRA) AND OBSERVED THAT EVERY LOSS OF REVENUE A S A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CA NNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. FOR EX AMPLE, WHEN AN INCOME TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH TH E COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORD ER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE INCOME TAX OFFICER IS UNSUSTAINABLE IN LAW. ON THE FACTS OF THAT CASE, SEC.80HHC(3) AS IT THEN STOOD WAS INTERPRETED BY THE ASSESSING OFFICER BUT THE REVENUE CONTENDED THAT IN VIEW OF THE 2005 AMENDMENT WHICH IS CLARIFI CATORY AND RETROSPECTIVE IN NATURE, THE VIEW OF THE ASSESSING OFFICER WAS UNSUSTAINABLE IN LAW AND THE COMMISSIONER WAS CORRE CT IN INVOKING SEC.263. BUT THE SUPREME COURT REJECTED THE SAID CO NTENTION AND HELD THAT WHEN THE COMMISSIONER PASSED HIS ORDER DISAGREEING WITH THE VIEW OF THE ASSESSING OFFICER, THERE WERE TWO VIEWS ON THE WORD 'PROFITS' IN THAT SECTION; THAT THE SAID SECTION WAS AMENDED ELEVEN T IMES; THAT DIFFERENT VIEWS EXISTED ON THE DAY WHEN THE COMMISSIONER PASS ED HIS ORDER; THAT THE MECHANICS OF THE SECTION HAD BECOME SO COMPLICA TED OVER THE YEARS THAT TWO VIEWS WERE INHERENTLY POSSIBLE; AND THEREF ORE, THE SUBSEQUENT AMENDMENT IN 2005 EVEN THOUGH RETROSPECTIVE WILL NO T ATTRACT THE PROVISION OF SEC.263. 26. IN VIKAS POLYMERS (4 SUPRA), THE DELHI HIGH COURT HELD THAT THE POWER OF SUOMOTU REVISION EXERCISABLE BY THE COMMIS SIONER UNDER THE PROVISIONS OF SEC.263 IS SUPERVISORY IN NATURE; THA T AN 'ERRONEOUS JUDGMENT' MEANS ONE WHICH IS NOT IN ACCORDANCE WITH LAW; THAT IF AN INCOME TAX OFFICER ACTING IN ACCORDANCE WITH LAW MA KES A CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDED AS 'ERRONEOU S' BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN DIFFERENTLY OR MORE ELABORATELY; THAT THE SECTION DOES NOT VISUALIZE THE SUBSTITUTION OF THE JUDGMENT OF THE C OMMISSIONER FOR THAT OF THE INCOME TAX OFFICER, WHO PASSED THE ORDER UNLESS THE DECISION IS NOT IN ACCORDANCE WITH THE LAW; THAT TO INVOKE SUOMOTU REV ISIONAL POWERS TO REOPEN A CONCLUDED ASSESSMENT UNDER SEC.263, THE CO MMISSIONER MUST GIVE REASONS; THAT A BARE REITERATION BY HIM THAT T HE ORDER OF THE INCOME TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDI CIAL TO THE INTERESTS OF THE REVENUE, WILL NOT SUFFICE; THAT THE REASONS MUST BE SUCH AS TO SHOW THAT THE ENHANCEMENT OR MODIFICATION OF THE ASSESSMENT O R CANCELLATION OF THE ASSESSMENT OR DIRECTIONS ISSUED FOR A FRESH ASSESSM ENT WERE CALLED FOR, AND MUST IRRESISTIBLY LEAD TO THE CONCLUSION THAT T HE ORDER OF THE INCOME TAX OFFICER WAS NOT ONLY ERRONEOUS BUT WAS PREJUDIC IAL TO THE INTERESTS OF THE REVENUE. THUS, WHILE THE INCOME TAX OFFICER IS NOT CALLED UPON TO WRITE AN ELABORATE JUDGMENT GIVING DETAILED REASONS IN RESPECT OF EACH AND EVERY DISALLOWANCE, DEDUCTION, ETC., IT IS INCU MBENT UPON THE COMMISSIONER NOT TO EXERCISE HIS SUOMOTU REVISIONAL POWERS UNLESS SUPPORTED BY ADEQUATE REASONS FOR DOING SO; THAT IF A QUERY IS RAISED DURING THE COURSE OF THE SCRUTINY BY THE ASSESSING OFFICER, WHICH WAS ANSWERED TO THE SATISFACTION OF THE ASSESSING OFFIC ER, BUT NEITHER THE QUERY NOR THE ANSWER WERE REFLECTED IN THE ASSESSMENT ORD ER, THIS WOULD NOT BY 11 I.T.A. NO. 744/KOL/20 15 ASSESSMENT YEAR: 2010 -11 LEXUS MOTORS LIMITED ITSELF LEAD TO THE CONCLUSION THAT THE ORDER OF THE ASSESSING OFFICER CALLED FOR INTERFERENCE AND REVISION. 27. IN SUNBEAM AUTO LTD. ( 5 SUPRA), THE DELHI HIGH COURT HELD THAT THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IS NOT RE QUIRED TO GIVE A DETAILED REASON IN RESPECT OF EACH AND EVERY ITEM OF DEDUCTI ON, ETC.; THAT WHETHER THERE WAS APPLICATION OF MIND BEFORE ALLOWING THE E XPENDITURE IN QUESTION HAS TO BE SEEN; THAT IF THERE WAS AN INQUI RY, EVEN INADEQUATE THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE COMMISSION ER TO PASS ORDERS UNDER SEC.263 MERELY BECAUSE HE HAS A DIFFERENT OPI NION IN THE MATTER; THAT IT IS ONLY IN CASES OF LACK OF INQUIRY THAT SU CH A COURSE OF ACTION WOULD BE OPEN; THAT AN ASSESSMENT ORDER MADE BY THE INCOM E TAX OFFICER CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELA BORATELY; THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT THE TAX WHICH WAS LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSED OR THAT BY T HE APPLICATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTE RPRETATION, A LESSER TAX THAN WHAT WAS JUST, HAS BEEN IMPOSED. IN THAT CASE, THE DELHI HIGH COURT HELD THAT THE COMMISSIONER IN THE EXERCISE OF REVIS IONAL POWER COULD NOT HAVE OBJECTED TO THE FINDING OF THE ASSESSING OFFIC ER THAT EXPENDITURE ON TOOLS AND DIES BY THE ASSESSEE, A MANUFACTURER OF C AR PARTS, IS REVENUE EXPENDITURE WHERE THE SAID CLAIM WAS ALLOWED BY THE LATTER ON BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND WHERE THE SAME ACCOUNTING PRACTICE FOLLOWED BY THE ASSESSEE FOR NU MBER OF YEARS WITH THE APPROVAL OF THE INCOME TAX AUTHORITIES. IT HELD THA T THE ASSESSING OFFICER HAD CALLED FOR EXPLANATION ON THE VERY ITEM FROM TH E ASSESSEE AND THE ASSESSEE HAD FURNISHED ITS EXPLANATION. MERELY BECA USE THE ASSESSING OFFICER IN HIS ORDER DID NOT MAKE AN ELABORATE DISC USSION IN THAT REGARD, HIS ORDER CANNOT BE TERMED AS ERRONEOUS. THE OPINIO N OF THE ASSESSING OFFICER IS ONE OF THE POSSIBLE VIEWS AND THERE WAS NO MATERIAL BEFORE THE COMMISSIONER TO VARY THAT OPINION AND ASK FOR FRESH INQUIRY. 28. IN GABRIEL INDIA LTD. (6 SUPRA), THE BOMBAY HIGH COURT HELD THAT A CONSIDERATION OF THE COMMISSIONER AS TO WHETHER AN ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, MUST BE BASED ON MATERIALS ON THE RECORD OF THE PROCEEDINGS CALLED F OR BY HIM. IF THERE ARE NO MATERIALS ON RECORD ON THE BASIS OF WHICH IT CAN BE SAID THAT THE COMMISSIONER ACTING IN A REASONABLE MANNER COULD HA VE COME TO SUCH A CONCLUSION, THE VERY INITIATION OF PROCEEDINGS BY H IM WILL BE ILLEGAL AND WITHOUT JURISDICTION. IT HELD THAT THE COMMISSIONER CANNOT INITIATE PROCEEDINGS WITH A VIEW TO START FISHING AND ROVING INQUIRIES IN MATTERS OR ORDERS WHICH ARE ALREADY CONCLUDED; THAT THE DEPART MENT CANNOT BE PERMITTED TO BEGIN FRESH LITIGATION BECAUSE OF NEW VIEWS THEY ENTERTAIN ON FACTS OR NEW VERSIONS WHICH THEY PRESENT AS TO WHAT SHOULD BE THE INFERENCE OR PROPER INFERENCE EITHER OF THE FACTS D ISCLOSED OR THE WEIGHT OF THE CIRCUMSTANCE; THAT IF THIS IS PERMITTED, LITIGA TION WOULD HAVE NO END EXCEPT WHEN LEGAL INGENUITY IS EXHAUSTED; THAT TO D O SO IS TO DIVIDE ONE ARGUMENT INTO TWO AND MULTIPLY THE LITIGATION. IT H ELD THAT CASES MAY BE VISUALIZED WHERE THE INCOME TAX OFFICER WHILE MAKIN G AN ASSESSMENT EXAMINES THE ACCOUNTS, MAKES INQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOUNT OR BY MAKING SOME ESTIMATE HIMSELF; THA T THE COMMISSIONER, 12 I.T.A. NO. 744/KOL/20 15 ASSESSMENT YEAR: 2010 -11 LEXUS MOTORS LIMITED ON PERUSAL OF THE RECORD, MAY BE OF THE OPINION THA T THE ESTIMATE MADE BY THE OFFICER CONCERNED WAS ON THE LOWER SIDE AND LEF T TO THE COMMISSIONER HE WOULD HAVE ESTIMATED THE INCOME AT A FIGURE HIGH ER THAN THE ONE DETERMINED BY THE INCOME TAX OFFICER; BUT THAT WOUL D NOT VEST THE COMMISSIONER WITH POWER TO REEXAMINE THE ACCOUNTS A ND DETERMINE THE INCOME HIMSELF AT A HIGHER FIGURE; THERE MUST BE MA TERIAL AVAILABLE ON THE RECORD CALLED FOR BY THE COMMISSIONER TO SATISFY HI M PRIMA FACIE THAT THE ORDER IS BOTH ERRONEOUS AND PREJUDICIAL TO THE INTE RESTS OF THE REVENUE. OTHERWISE, IT WOULD AMOUNT TO GIVING UNBRIDLED AND ARBITRARY POWER TO THE REVISING AUTHORITY TO INITIATE PROCEEDINGS FOR REVISION IN EVERY CASE AND START RE-EXAMINATION AND FRESH INQUIRY IN MATTE RS WHICH HAVE ALREADY BEEN CONCLUDED UNDER LAW. 29. IN M.S. RAJU (15 SUPRA), THIS COURT HAS HELD THAT THE POWER OF T HE COMMISSIONER UNDER SEC.263 (1) IS NOT LIMITED ONLY TO THE MATERIAL WHICH WAS AVAILABLE BEFORE THE ASSESSING OFFICER AND, IN ORDER TO PROTECT THE INTERESTS OF THE REVENUE, THE COMMISSIONER IS ENTIT LED TO EXAMINE ANY OTHER RECORDS WHICH ARE AVAILABLE AT THE TIME OF EX AMINATION BY HIM AND TO TAKE INTO CONSIDERATION EVEN THOSE EVENTS WHICH AROSE SUBSEQUENT TO THE ORDER OF ASSESSMENT. 30. IN RAMPYARI DEVI SARAOGI (21 SUPRA), THE COMMISSIONER IN EXERCISE OF REVISIONAL POWERS CANCELLED ASSESSEES ASSESSMEN T FOR THE YEARS 1952- 1953 TO 1960-61 BECAUSE HE FOUND THAT THE INCOME TA X OFFICER WAS NOT JUSTIFIED IN ACCEPTING THE INITIAL CAPITAL, THE GIF T RECEIVED AND SALE OF JEWELLERY, THE INCOME FROM BUSINESS ETC., WITHOUT A NY ENQUIRY OR EVIDENCE WHATSOEVER . HE DIRECTED THE INCOME TAX OFFICER TO DO FRESH ASSESSMENT AFTER MAKING PROPER ENQUIRY AND INVESTIGATION IN RE GARD TO THE JURISDICTION. THE ASSESSEE COMPLAINED BEFORE THE SU PREME COURT THAT NO FAIR OR REASONABLE OPPORTUNITY WAS GIVEN TO HER. TH E SUPREME COURT HELD THAT THERE WAS AMPLE MATERIAL TO SHOW THAT THE INCO ME TAX OFFICER MADE THE ASSESSMENTS IN UNDUE HURRY; THAT HE HAD PASSED A SHORT STEREO TYPED ASSESSMENT ORDER FOR EACH ASSESSMENT YEAR; THAT ON THE FACE OF THE RECORD, THE ORDERS WERE PRE-JUDICIAL TO THE INTEREST OF THE REVENUE; AND NO PREJUDICE WAS CAUSED TO THE ASSESSEE ON ACCOUNT OF FAILURE OF THE COMMISSIONER TO INDICATE THE RESULTS OF THE ENQUIRY MADE BY HIM, AS SHE WOULD HAVE A FULL OPPORTUNITY FOR SHOWING TO THE IN COME TAX OFFICER WHETHER HE HAD JURISDICTION OR NOT AND WHETHER THE INCOME TAX ASSESSED IN THE ASSESSMENT YEARS WHICH WERE ORIGINALLY PASSE D WERE CORRECT OR NOT' 31. FROM THE ABOVE DECISIONS, THE FOLLOWING PRINCIP LES AS TO EXERCISE OF JURISDICTION BY THE COMMISSIONER U/S.263 OF THE ACT CAN BE CULLED OUT: A) THE COMMISSIONER HAS TO BE SATISFIED OF TWIN CON DITIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOU S BUT IT IS PREJUDICIAL TO THE REVENUE RECOURSE CANNOT BE HAD TO SEC.263 (1) OF THE ACT. B) EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORD ER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INT ERESTS 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 13 I.T.A. NO. 744/KOL/20 15 ASSESSMENT YEAR: 2010 -11 LEXUS MOTORS LIMITED ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINAB LE IN LAW. C) TO INVOKE SUOMOTU REVISIONAL POWERS TO REOPEN A CONCLUDED ASSESSMENT UNDER SEC.263, THE COMMISSIONER MUST GIV E REASONS; THAT A BARE REITERATION BY HIM THAT THE ORDER OF THE INCOM E TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE, WILL NOT SUFFICE; THAT THE REASONS MUST BE SUCH AS TO SH OW THAT THE AND MUST IRRESISTIBLY LEAD TO THE CONCLUSION THAT THE ORDER OF THE INCOME TAX OFFICER WAS NOT ONLY ERRONEOUS BUT WAS PREJUDICIAL TO THE I NTERESTS OF THE REVENUE. THUS, WHILE THE INCOME TAX OFFICER IS NOT CALLED UPON TO WRITE AN ELABORATE JUDGMENT GIVING DETAILED REASONS IN RESPE CT OF EACH AND EVERY DISALLOWANCE, DEDUCTION, ETC., IT IS INCUMBENT UPON THE COMMISSIONER NOT TO EXERCISE HIS SUOMOTU REVISIONAL POWERS UNLESS SU PPORTED BY ADEQUATE REASONS FOR DOING SO; THAT IF A QUERY IS RAISED DUR ING THE COURSE OF THE SCRUTINY BY THE ASSESSING OFFICER, WHICH WAS ANSWER ED TO THE SATISFACTION OF THE ASSESSING OFFICER, BUT NEITHER THE QUERY NOR THE ANSWER WERE REFLECTED IN THE ASSESSMENT ORDER, THIS WOULD NOT B Y ITSELF LEAD TO THE CONCLUSION THAT THE ORDER OF THE ASSESSING OFFICER CALLED FOR INTERFERENCE AND REVISION. E) THE COMMISSIONER CANNOT INITIATE PROCEEDINGS WIT H A VIEW TO START FISHING AND ROVING INQUIRIES IN MATTERS OR ORDERS W HICH ARE ALREADY CONCLUDED; THAT THE DEPARTMENT CANNOT BE PERMITTED TO BEGIN FRESH LITIGATION BECAUSE OF NEW VIEWS THEY ENTERTAIN ON F ACTS OR NEW CIRCUMSTANCE; THAT IF THIS IS PERMITTED, LITIGATION WOULD HAVE NO END EXCEPT WHEN LEGAL INGENUITY IS EXHAUSTED F) WHETHER THERE WAS APPLICATION OF MIND BEFORE ALL OWING THE EXPENDITURE IN QUESTION HAS TO BE SEEN; THAT IF THERE WAS AN IN QUIRY, EVEN INADEQUATE THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE COMMI SSIONER TO PASS ORDERS UNDER SEC.263 MERELY BECAUSE HE HAS A DIFFERENT OPI NION IN THE MATTER; THAT IT IS ONLY IN CASES OF LACK OF INQUIRY THAT SU CH A COURSE OF ACTION WOULD BE OPEN; THAT AN ASSESSMENT ORDER MADE BY THE INCOM E TAX OFFICER CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELA BORATELY; THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT THE TAX WHICH WAS LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSED OR THAT BY T HE APPLICATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTE RPRETATION, A LESSER TAX THAN WHAT WAS JUST, HAS BEEN IMPOSED. G) THE POWER OF THE COMMISSIONER UNDER SEC.263 (1) IS NOT COMMISSIONER IS ENTITLED TO EXAMINE ANY OTHER RECORDS WHICH ARE AVAILABLE AT THE TIME OF EXAMINATION BY HIM AND TO TAKE INTO CONSIDERATION E VEN THOSE EVENTS WHICH AROSE SUBSEQUENT TO THE ORDER OF ASSESSMENT. NOW WE EXAMINE THE FOLLOWING JUDGEMENTS . :- DIRECTOR OF INCOME TAX VS. JYOTI FOUNDATION 357 ITR 388 (DELHI HIGH COURT ) IT WAS HELD THAT REVISIONARY POWER U/S 263 IS CONFE RRED ON THE COMMISSIONER/DIRECTOR OF INCOME TAX WHEN AN ORDER P ASSED BY THE LOWER AUTHORITY IS ERRONEOUS AND PREJUDICIAL TO THE INTER EST OF THE REVENUE. ORDERS WHICH ARE PASSED WITHOUT INQUIRY OR INVESTIG ATION ARE TREATED AS 14 I.T.A. NO. 744/KOL/20 15 ASSESSMENT YEAR: 2010 -11 LEXUS MOTORS LIMITED ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE, BUT ORDERS WHICH ARE PASSED AFTER INQUIRY/INVESTIGATION ON THE QUEST ION/ISSUE ARE NOT PER SE OR NORMALLY TREATED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE BECAUSE THE REVISIONARY AUTHORITY FEELS AND OPINES THAT FURTHER INQUIRY/INVESTIGATION WAS REQUIRED OR DEEPER OR FUR THER SCRUTINY SHOULD BE UNDERTAKEN. INCOME TAX OFFICER VS. DG HOUSING PROJECTS LTD343 I TR 329 (DELHI) REVENUE DOES NOT HAVE ANY RIGHT TO APPEAL TO THE FI RST APPELLATE AUTHORITY AGAINST AN ORDER PASSED BY THE ASSESSING OFFICER. S . 263 HAS BEEN ENACTED TO EMPOWER THE CIT TO EXERCISE POWER OF REVISION AN D REVISE ANY ORDER PASSED BY THE ASSESSING OFFICER, IF TWO CUMULATIVE CONDITIONS ARE SATISFIED. FIRSTLY, THE ORDER SOUGHT TO BE REVISED SHOULD BE E RRONEOUS AND SECONDLY, IT SHOULD BE PREJUDICIAL TO THE INTEREST OF THE REV ENUE. THE EXPRESSION 'PREJUDICIAL TO THE INTEREST OF THE REVENUE' IS OF WIDE IMPORT AND IS NOT CONFINED TO MERELY LOSS OF TAX. THE TERM 'ERRONEOUS ' MEANS A WRONG/INCORRECT DECISION DEVIATING FROM LAW. THIS E XPRESSION POSTULATES AN ERROR WHICH MAKES AN ORDER UNSUSTAINABLE IN LAW. THE ASSESSING OFFICER IS BOTH AN INVESTIGATOR AND A N ADJUDICATOR. IF THE ASSESSING OFFICER AS AN ADJUDICATOR DECIDES A QUEST ION OR ASPECT AND MAKES A WRONG ASSESSMENT WHICH IS UNSUSTAINABLE IN LAW, IT CAN BE CORRECTED BY THE COMMISSIONER IN EXERCISE OF REVISI ONARY POWER. AS AN INVESTIGATOR, IT IS INCUMBENT UPON THE ASSESSING OF FICER TO INVESTIGATE THE FACTS REQUIRED TO BE EXAMINED AND VERIFIED TO COMPU TE THE TAXABLE INCOME. IF THE ASSESSING OFFICER FAILS TO CONDUCT T HE SAID INVESTIGATION, HE COMMITS AN ERROR AND THE WORD 'ERRONEOUS' INCLUDES FAILURE TO MAKE THE ENQUIRY. IN SUCH CASES, THE ORDER BECOMES ERRONEOUS BECAUSE ENQUIRY OR VERIFICATION HAS NOT BEEN MADE AND NOT BECAUSE A WR ONG ORDER HAS BEEN PASSED ON MERITS. THUS, IN CASES OF WRONG OPINION OR FINDING ON MERIT S, THE CIT HAS TO COME TO THE CONCLUSION AND HIMSELF DECIDE THAT THE ORDER IS ERRONEOUS, BY CONDUCTING NECESSARY ENQUIRY, IF REQUIRED AND NECES SARY, BEFORE THE ORDER UNDER S. 263 IS PASSED. IN SUCH CASES, THE ORDER OF THE ASSESSING OFFICER WILL BE ERRONEOUS BECAUSE THE ORDER PASSED IS NOT SUSTAI NABLE IN LAW AND THE SAID FINDING MUST BE RECORDED. CIT CANNOT REMAND TH E MATTER TO THE ASSESSING OFFICER TO DECIDE WHETHER THE FINDINGS RE CORDED ARE ERRONEOUS. IN CASES WHERE THERE IS INADEQUATE ENQUIRY BUT NOT LACK OF ENQUIRY, AGAIN THE CIT MUST GIVE AND RECORD A FINDING THAT THE ORD ER/INQUIRY MADE IS ERRONEOUS. THIS CAN HAPPEN IF AN ENQUIRY AND VERIFI CATION IS CONDUCTED BY THE CIT AND HE IS ABLE TO ESTABLISH AND SHOW THE ER ROR OR MISTAKE MADE BY THE ASSESSING OFFICER, MAKING THE ORDER UNSUSTAINAB LE IN LAW. IN SOME CASES POSSIBLY THOUGH RARELY, THE CIT CAN ALSO SHOW AND ESTABLISH THAT THE FACTS ON RECORD OR INFERENCES DRAWN FROM FACTS ON R ECORD PER SE JUSTIFIED AND MANDATED FURTHER ENQUIRY OR INVESTIGATION BUT T HE ASSESSING OFFICER HAD ERRONEOUSLY NOT UNDERTAKEN THE SAME. HOWEVER, T HE SAID FINDING MUST BE CLEAR, UNAMBIGUOUS AND NOT DEBATABLE. THE MATTER CANNOT BE REMITTED FOR A FRESH DECISION TO THE ASSESSING OFFICER TO CO NDUCT FURTHER ENQUIRIES WITHOUT A FINDING THAT THE ORDER IS ERRONEOUS. FIND ING THAT THE ORDER IS ERRONEOUS IS A CONDITION OR REQUIREMENT WHICH MUST BE SATISFIED FOR 15 I.T.A. NO. 744/KOL/20 15 ASSESSMENT YEAR: 2010 -11 LEXUS MOTORS LIMITED EXERCISE OF JURISDICTION UNDER S. 263 OF THE ACT. I N SUCH MATTERS, TO REMAND THE MATTER/ISSUE TO THE ASSESSING OFFICER WOULD IMP LY AND MEAN THE CIT HAS NOT EXAMINED AND DECIDED WHETHER OR NOT THE ORD ER IS ERRONEOUS BUT HAS DIRECTED THE ASSESSING OFFICER TO DECIDE THE AS PECT/QUESTION. THIS DISTINCTION MUST BE KEPT IN MIND BY THE CIT WH ILE EXERCISING JURISDICTION UNDER S. 263 OF THE ACT AND IN THE ABS ENCE OF THE FINDING THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTER EST OF REVENUE, EXERCISE OF JURISDICTION UNDER THE SAID SECTION IS NOT SUSTA INABLE. IN MOST CASES OF ALLEGED 'INADEQUATE INVESTIGATION', IT WILL BE DIFF ICULT TO HOLD THAT THE ORDER OF THE ASSESSING OFFICER, WHO HAD CONDUCTED E NQUIRIES AND HAD ACTED AS AN INVESTIGATOR, IS ERRONEOUS, WITHOUT CIT CONDUCTING VERIFICATION/INQUIRY. THE ORDER OF THE ASSESSING OF FICER MAY BE OR MAY NOT BE WRONG. CIT CANNOT DIRECT RECONSIDERATION ON THIS GROUND BUT ONLY WHEN THE ORDER IS ERRONEOUS. AN ORDER OF REMIT CANN OT BE PASSED BY THE CIT TO ASK THE ASSESSING OFFICER TO DECIDE WHETHER THE ORDER WAS ERRONEOUS. THIS IS NOT PERMISSIBLE. AN ORDER IS NOT ERRONEOUS, UNLESS THE CIT HOLD AND RECORDS REASONS WHY IT IS ERRONEOUS. A N ORDER WILL NOT BECOME ERRONEOUS BECAUSE ON REMIT, THE ASSESSING OF FICER MAY DECIDE THAT THE ORDER IS ERRONEOUS. THEREFORE CIT MUST AFT ER RECORDING REASONS HOLD THAT THE ORDER IS ERRONEOUS. THE JURISDICTIONA L PRECONDITION STIPULATED IS THAT THE CIT MUST COME TO THE CONCLUS ION THAT THE ORDER IS ERRONEOUS AND IS UNSUSTAINABLE IN LAW. IT MAY BE NO TICED THAT THE MATERIAL WHICH THE CIT CAN RELY INCLUDES NOT ONLY THE RECORD AS IT STANDS AT THE TIME WHEN THE ORDER IN QUESTION WAS PASSED BY THE ASSESS ING OFFICER BUT ALSO THE RECORD AS IT STANDS AT THE TIME OF EXAMINATION BY THE CIT. NOTHING BARS/PROHIBITS THE CIT FROM COLLECTING AND RELYING UPON NEW/ADDITIONAL MATERIAL/EVIDENCE TO SHOW AND STATE THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS. COMMISSIONER OF INCOME TAX VS. J. L. MORRISON (INDI A) LTD. 366 ITR AS REGARD THE SUBMISSION ON BEHALF OF THE REVENUE T HAT POWER UNDER SECTION 263 OF THE ACT CAN BE EXERCISED EVEN IN A C ASE WHERE THE ISSUE IS DEBATABLE, IT WAS HELD THAT THE CASE OF CIT VS. M. M. KHAMBHATWALA WAS NOT APPLICABLE. THE OBSERVATION THAT THE COMMISSION ER CAN EXERCISE POWER UNDER SECTION 263 OF THE ACT EVEN IN A CASE W ERE THE ISSUE IS DEBATABLE WAS A MERE PASSING REMARK WHICH IS AGAIN CONTRARY TO THE VIEW TAKEN BY THE APEX COURT IN THECASE OF MALABAR INDUS TRIAL COMPANY LTD. & MAX INDIA LTD. IF THE ASSESSING OFFICER HAS TAKEN A POSSIBLE VIEW, IT CANNOT BE SAID THAT THE VIEW TAKEN BY HIM IS ERRONEOUS NOR THE ORDER OF THE ASSESSING OFFICER IN THAT CASE CAN BE SET ASIDE IN REVISION. IT HAS TO BE SHOWN UNMISTAKABLY THAT THE ORDER OF THE ASSESSING OFFICER IS UNSUSTAINABLE. ANYTHING SHORT OF THAT WOULD NOT CLO THE THE CIT WITH JURISDICTION TO EXERCISE POWER UNDER SECTION 263 OF THE ACT. CIT VS. M. M. KHAMBHATWALA REPORTED IN 198 ITR 144; CIT VS. RALSO N INDUSTRIES LTD. REPORTED IN 288 ITR 322 (SC), NOT APPLICABLE; MALAB AR INDUSTRIAL CO. LTD. V. CIT REPORTED IN 243 ITR 83, RELIED ON. (PARA 72) 16 I.T.A. NO. 744/KOL/20 15 ASSESSMENT YEAR: 2010 -11 LEXUS MOTORS LIMITED AS REGARD THE THIRD QUESTION AS TO WHETHER THE ASSE SSMENT ORDER WAS PASSED BY THE ASSESSING OFFICER WITHOUT APPLICATION OF MIND, IT WAS HELD THAT THE COURT HAS TO START WITH THE PRESUMPTION TH AT THE ASSESSMENT ORDER WAS REGULARLY PASSED. THERE IS EVIDENCE TO SH OW THAT THE ASSESSING OFFICER HAD REQUIRED THE ASSESSEE TO ANSWER 17 QUES TIONS AND TO FILE DOCUMENTS IN REGARD THERETO. IT IS DIFFICULT TO PRO CEED ON THE BASIS THAT THE 17 QUESTIONS RAISED BY HIM DID NOT REQUIRE APPLICAT ION OF MIND. WITHOUT APPLICATION OF MIND THE QUESTIONS RAISED BY HIM IN THE ANNEXURE TO NOTICE UNDER SECTION 142 (1) OF THE ACT COULD NOT HAVE BEE N FORMULATED. THE ASSESSING OFFICER WAS REQUIRED TO EXAMINE THE RETUR N FILED BY THE ASSESSEE IN ORDER TO ASCERTAIN HIS INCOME AND TO LEVY APPROP RIATE TAX ON THAT BASIS. WHEN THE ASSESSING OFFICER WAS SATISFIED THAT THE R ETURN, FILED BY THE ASSESSEE, WAS IN ACCORDANCE WITH LAW, HE WAS UNDER NO OBLIGATION TO JUSTIFY AS TO WHY WAS HE SATISFIED. ON THE TOP OF T HAT THE ASSESSING OFFICER BY HIS ORDER DATED 28 TH MARCH, 2008 DID NOT ADVERSELY AFFECT ANY RIGHT OF THE ASSESSEE NOR WAS ANY CIVIL RIGHT OF THE ASSESSE E PREJUDICED. HE WAS AS SUCH UNDER NO OBLIGATION IN LAW TO GIVE REASONS. TH E FACT, THAT ALL REQUISITE PAPERS WERE SUMMONED AND THEREAFTER THE M ATTER WAS HEARD FROM TIME TO TIME COUPLED WITH THE FACT THAT THE VI EW TAKEN BY HIM IS NOT SHOWN BY THE REVENUE TO BE ERRONEOUS AND WAS ALSO C ONSIDERED BOTH BY THE TRIBUNAL AS ALSO BY US TO BE A POSSIBLE VIEW, S TRENGTHENS THE PRESUMPTION UNDER CLAUSE (E) OF SECTION 114 OF THE EVIDENCE ACT. A PRIMA FACIE EVIDENCE, ON THE BASIS OF THE AFORESAID PRESU MPTION, IS THUS CONVERTED INTO A CONCLUSIVE PROOF OF THE FACT THAT THE ORDER WAS PASSED BY THE ASSESSING OFFICER AFTER DUE APPLICATION OF MIND . MEERUT ROLLER FLOUR MILLS PVT. LTD. VS. C.I.T., ITA NO. 116 /COCH/ 2012 ; CIT VS. INFOSYS TECHNOLOGIES LTD., 341 ITR 293 (KARNATAKA); S.N. MU KHERJEE VS. UNION OF INDIA, AIR 1990 SC 1984; A. A. DOSHI VS. JCIT, 256 ITR 685; HINDUSTHAN TIN WORKS LTD. VS. CIT, 275 ITR 43 (DEL), DISTINGUISHED . (PARAS 90-92, 102) COMMISSIONER OF INCOME TAX VS. SOHANA WOOLLEN MILLS 296 ITR 238 (P&H HC) A REFERENCE TO THE PROVISIONS OF S. 263 SHOWS THAT JURISDICTION THEREUNDER CAN BE EXERCISED IF THE CIT FINDS THAT THE ORDER OF THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. MERE AU DIT OBJECTION AND MERELY BECAUSE A DIFFERENT VIEW COULD BE TAKEN, WER E NOT ENOUGH TO SAY THAT THE ORDER OF THE AO WAS ERRONEOUS OR PREJUDICI AL TO THE INTEREST OF THE REVENUE. THE JURISDICTION COULD BE EXERCISED IF THE CIT WAS SATISFIED THAT THE BASIS FOR EXERCISE OF JURISDICTION EXISTED. NO RIGID RULE COULD BE LAID DOWN ABOUT THE SITUATION WHEN THE JURISDICTION CAN BE EXERCISED. WHETHER SATISFACTION OF THE CIT FOR EXERCISING JURISDICTION WAS CALLED FOR OR NOT, HAS TO BE DECIDED HAVING REGARD TO A GIVEN FACT SITUATI ON. IN THE PRESENT CASE, THE TRIBUNAL HAS HELD THAT THE ASSESSEE HAD DISCLOS ED THAT OUT OF SALE CONSIDERATION, A SUM OF RS. 1 LAKH WAS TO BE RECEIV ED FOR SALE OF PERMIT. IF THAT IS SO, THERE WAS NO ERROR IN THE VIEW TAKEN BY THE AO AND NO CASE WAS MADE OUT FOR INVOKING JURISDICTION UNDER S. 263. 17 I.T.A. NO. 744/KOL/20 15 ASSESSMENT YEAR: 2010 -11 LEXUS MOTORS LIMITED APPLYING THE PROPOSITIONS OF LAW LAID DOWN IN ALL T HESE CASE LAWS, TO THE FACTS OF THIS CASE, WE UPHOLD THE CONTENTION OF THE ASSESSEE THAT THE EXERCISE OF POWERS BY THE LD. CIT U/S 263 OF THE ACT, IS BAD IN LAW. HENCE, WE CANCEL THIS ORDER PASSED UNDER SECTION 263 OF THE ACT. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. KOLKATA, THE 25 TH DAY OF AUGUST, 2017. SD/- SD/- [S.S. VISWANETHRA RAVI] [ J. SUDHAKAR REDDY ] JUDICIAL MEMBER ACCOUNTANT MEM BER DATED :25.08.2017 {SC SPS} COPY OF THE ORDER FORWARDED TO: 1. LEXUS MOTORS LIMITED KARNANI ESTATE 209 A.J.C. BOSE ROAD KOLKATA -700 017 2. COMMISSIONER OF INCOME TAX, KOLKATA-3, KOLKATA AAYAKAR BHAWAN P-7, CHOWRINGHEE SQUARE KOLKATA 700 069 3. CIT(A)- 4. CIT- , 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE/ D.D.O. ITAT, KOLKATA BENCHES